University of Pretoria

February 2014

4. Risk Management Planning

4.1 4.2 4.3 4.4 4.5 4.6 Overview Inputs to risk management planning Tools and techniques in planning Outputs of risk management planning Risk criteria ALARP Approach

Feb-14

Slide 1 of 21

4.1 Overview
Smith & Merritt accept that planning for PRM has been completed and start directly with Identification PMBoK starts the PRM process with a Planning step or phase Careful planning increases the probability of success of the other steps of the PRM process The output of the 'Planning' step is a 'Risk

Management Plan'
This step should be completed as part of the project planning phase
Feb-14 Slide 2 of 21

IRM 801

4.1

University of Pretoria

February 2014

Objective for RM Planning

Create a plan for handling risk management for a specific project Adapt any policies and procedures for risk to the requirements of the project Tailor risk management activities to the needs of the project Establish risk criteria for the project

(Source: Mulcahy, Risk Management: Tricks of the Trade, 2003)

Feb-14

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Risk Management Planning

"Risk management planning is the process of deciding how to approach and plan the risk management activities for a project. It is important to plan for the risk management processes that follow to ensure that the level, type, and visibility of risk management is commensurate with both the risk and importance of the project to the organisation"
(Source: Guide to the PMBoK, Ch 11, 2000)

Feb-14

Slide 4 of 21

IRM 801

4.2

University of Pretoria

February 2014

PMBoK Structure for RM Planning

Inputs
1. 2. 3. 4. Enterprise factors Process assets Scope statement Project management plan

Tools & Techniques

1. Planning meetings & analysis

Outputs
1. Risk management plan

5. Laws and regulations (*)

(Source: PMBoK, Chapter 11 2004) (* From Government extension to 'A Guide to the PMBoK')

Feb-14

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4.2 Inputs to RM Planning

Enterprise environmental factors
Attitudes towards risk and risk tolerance of organisations and people involved in the project will influence the project management plan

Organizational process assets

Organisations may have predefined approaches to risk management, e.g. risk categories, definitions and terminology, templates, roles and responsibilities

Project scope statement Project management plan Laws and regulations (extension to PMBoK)
Feb-14 Slide 6 of 21

IRM 801

4.3

University of Pretoria

February 2014

4.3 Tools and Techniques

Planning meetings are used to make decisions, plan activities and define a schedule Stakeholders that could attend these meetings are:
Project manager Sub-project managers Project planners Risk manager

Responsibilities for various risk management activities should be assigned

Feb-14

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4.4 Outputs of RM Planning

The basic output of the risk management planning step is a Risk Management Plan The risk management plan describes how risk management will be structured and performed on the project It is a subset of the Project Management Plan An important aspect that should be addressed during the planning phase is risk criteria, i.e. what level of risk is 'acceptable'

Feb-14

Slide 8 of 21

IRM 801

4.4

University of Pretoria

February 2014

Risk Management Plan

Scope statement for PRM
Deliverables of the risk management element Constraints

Responsibility assignment matrix

Who is responsible for risk management tasks

Work breakdown structure for risk activities Cost breakdown structure Gantt chart schedule Network schedule (for larger projects)
(Refer PMBoK, section 11.1.3)
Feb-14 Slide 9 of 21

Content of RM Plan
Methodology how risk will be handled Roles and responsibilities who does what Budget for risk management process Timing how often RM process will be repeated Scoring and interpretation consistent approach Thresholds which risks will be acted upon Reporting formats how results will be

documented Tracking monitoring risk status

(Source: Mulcahy, Risk Management: Tricks of the Trade, 2003)
Feb-14 Slide 10 of 21

IRM 801

4.5

University of Pretoria

February 2014

Example: PRM Scope Statement

Apply the ISO 31000 RM process to identify, analyse and treat risk events for the project. A full quantitative risk analysis will be performed. Cost for risk management activities should not exceed X Rand. Treatment cost is excluded. Initial risk identification, analysis and resolution will be done during the planning phase of the project and should be completed in Y weeks.

Feb-14

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Typical WBS for PRM

Project Risk Management

Identify
Compose risk panel Collect documents Brainstorming meeting Document risks in Excel Feedback to project team

Analyse & Evaluate

Obtain data Develop spreadsheet Panel meeting Data in Excel Feedback to project team

Treat Risks
Obtain data Define options Document risk plan Panel meeting Feedback to project team

Monitor
Develop graphs Update graphs New plans Review meetings

Feb-14

Slide 12 of 21

IRM 801

4.6

University of Pretoria

February 2014

Example - Sliding Gate Project

Project Scope
Build and install sliding gate at residence in Centurion Size: 3,8m1,9m Small emergency gate to be included Material of construction: Mild steel Electric motor for opening and closing included Duration: 2 weeks from 17 31 December 2005 Cost: ~ R5 000

Project Outcome
Fully functional remote controlled sliding gate that is reliable, safe to use and provides security
15 February 2014 Slide 13 of 21

Sliding Gate: WBS

Project Sliding Gate

Gate
Main frame Small gate Wheels Rack Locks Paint Rollers

Motor
Fix base plate Anti-theft bracket Connect

Electricity
Cable Pipe Connect

Rail
Dig trench Install rail Pour concrete

PRM
Identify risks Analyse risks Treat risks Monitor risks

Feb-14

Slide 14 of 21

IRM 801

4.7

University of Pretoria

February 2014

Sliding Gate: Project Schedule

Nr 1 2 3 4 5 6 7 8 9 10 11 12 Activity Steel delivery Cut and weld frame Cut and weld small gate Insert locks Weld rack Paint gate Rollers Dig trench Foundation and rail Build retaining wall Connect electricity Risk Assessment
Slide 15 of 21

17

18

20

21

22

23

24

27

28

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31

15-Feb-14

4.5 Risk Criteria

Risk Criteria are: "terms of reference against

which the significance of risk is assessed"

(Source: AS/NZS 4360)

Risk criteria are based on internal and external context and should be reviewed regularly Risk criteria can be affected by the perceptions of stakeholders and regulatory requirements Risk criteria can be derived from standards, policies, laws and regulations
15-Feb-14 Slide 16 of 21

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4.8

University of Pretoria

February 2014

Examples of Risk Criteria

Financial Risk < 2% of project budget Duration Expected delay < 5% of total project duration Performance Reduction < 4% of design performance Safety No fatalities for duration of project Safety Number of disabling injuries < 10 per year/1000 workers Production Reduction in output < 4% of annual output
Feb-14 Slide 17 of 20

4.6 The ALARP Approach

Various regulatory frameworks for risk have been established ALARP = As Low As Reasonably Practicable The ALARP approach is about the setting of tolerable risk levels It defines an upper limit of risk that is tolerable under any circumstances It also defines a lower limit below which risk is of no practical interest Risks in between these two limits should be reduced to as low as reasonably practical
15-Feb-14 Slide 18 of 21

IRM 801

4.9

University of Pretoria

February 2014

As Low as is Reasonably Practicable

Intolerable Risk is tolerable only if it can be justified that all reasonable and practicable measures have been taken

Tolerable Risk

ALARP

Negligible

15-Feb-14

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Societal Risk Criteria - FN Curves

15-Feb-14

Slide 20 of 21

IRM 801

4.10

University of Pretoria

February 2014

FN Curves for Environmental Risk

Frequency of Release Event (/y)

0.1

EHI measures the relative environmental impact of the materials release during an event

0.01

0.001

0.0001

0.1

10

100

1000

10000
Slide 21 of 21

Environmental Hazard Index (EHI)

15-Feb-14

IRM 801

4.11