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OCTOBER 7, 2013
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How to manage risk in Primavera P6
Professional
Risk Management in Primavera P6
Release 8.2
Risks are uncertain events/conditions that have the potential to
negatively (or positively) impact project objectives. Primavera P6
Release 8.2 Professional includes an integrated Risk Management
feature that enables you to identify, categorize and prioritize risks,
assign a responsible person for managing the risk, assign risks to
one or more activities that may be impacted by the risk, and
conduct qualitative analysis on each risk. Additionally, you have
the ability to record a risk response.
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HOW TO MANAGE RISK IN PRIMAVERA P6 PROFESSIONAL

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P6 generates a Risk Score based on information that is entered
for each risk. The Risk Score can then be used to help you
evaluate the significance of the risk. This tutorial demonstrates the
process of using the Risk Management functionality in P6 R8.2.
Step 1. We will document a possible risk to our project involving
the Design and Engineering process. We want to document that if
the customer changes the design of our Office Building Addition,
the project may incur additional costs as well as schedule delays.
The image below illustrates the Design and Engineering WBS
element (work breakdown structure). As you can see below, this
portion of the project is currently scheduled to start on Jan. 11 and
finish on Feb. 9, and the total budgeted cost is $3120. We can also
view the activities comprising this WBS element and their
corresponding dates & budgeted cost. Please note that we have
added the Risks tab in our Activity Details.
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Step 2. Access the Risks icon on the directory bar and click the
add icon on the Command Bar to begin the process of
documenting the potential risk. The details pertaining to the risk
are added using the detail tabs. The General tab is used to
identify the risk category, risk type, owner or person responsible
for resolving the risk, and status. The Exposure Start and
Exposure Finish dates correspond to the start and finish of the
activities in the Design and Engineering WBS. These dates
represent the earliest and latest dates this risk may occur. The
Pre-Response Exposure Cost represents the possible cost this
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risk may impose, and the Post-Response Exposure Cost is the
cost the risk may impose based on your risk response. We will
discuss the calculations behind these values shortly. Notice that
you can also provide the date the risk was identified as well as the
resource that identified the risk.

Step 3. The impact tab enables you to identify both pre-response
and post-response parameters. Notice that you can select the
Probability that the risk will occur, the impact that the risk may
have on the schedule, and the monetary impact on the project if
this risk occurs. The Risk Score is calculated based upon the
values selected for the above mentioned parameters. The impact
tab can also be utilized to document a response plan as well as
response impact parameters to arrive at a Post-Response Risk
Score.
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The Help menu indicates how the Risk Score (both Pre-
Response and Post-Response) is calculated:
The overall risk score based on the values you select for three
fields: Probability, Cost, and Schedule. Two of these fields, Cost
and Schedule, are known as the impact fields.
The Probability field and each impact field have these possible
values: Very High, High, Medium, Low, Very Low, and Negligible.
The application uses the highest value selected for the Cost and
Schedule fields as the overall impact value. The application
using resource lag
determines the Score by plotting the overall impact value with the
value entered for Probability, as shown in the table below.
For example, if you enter the value Low for Cost and the value
Medium for Schedule, the application uses Medium, the higher of
the two, as the overall impact value. The application then uses the
table below to determine the Score value by plotting the overall
impact and Probability values. The columns in the table represent
the overall impact values (Negligible through Very High), while the
rows represent the Probability values (Very High through
Negligible). The application determines the Score as the number
that corresponds to the intersection of the applicable Impact
column and Probability row. So, to continue our example, if you
entered a value of High for Probability, the Score would display as
14, the number shown where the Impact Medium column
intersects the Probability High row.
Impact
Negligible
Impact
Very
Low
Impact
Low
Impact
Medium
Impact
High
Impact
Very
High
Probability
Very High
0 5 9 18 36 72
Probability 0 4 7 14 28 56
High
Probability
Medium
0 3 5 10 20 40
Probability
Low
0 2 3 6 12 24
Probability
Very Low
0 1 1 2 4 8
Probability
Negligible
0 0 0 0 0 0
The Help menu identifies how the Pre-Exposure and Post-
Exposure cost values are calculated. These values can be
viewed on the General tab (see the image for Step 2 above):
The application calculates the potential cost of a risk. The potential
cost displays in the Pre-Response Exposure Cost and Post-
Response Exposure Cost fields on the Risks, General tab. (The
Post-Response Exposure Cost field displays only after a response
is made to a risk using the Post-Response fields on the Impact
tab.) The following discussion refers to both the Pre- and Post-
Response Exposure Cost fields generically as Exposure Cost
fields because both are calculated using the same equation.
The value for the Exposure Cost field is based on the values
selected for the Probability and Cost fields, located on the Risks,
Impact tab, and on cost figures associated with the activities
assigned to the Risk or to the project, if no activity assignments
have been made.
The application calculates the Exposure Cost value using this
equation: Exposure Cost = Planned/Budgeted Total Cost *
(Probability Midpoint * Cost Midpoint).
The Planned/Budgeted Total Cost is the sum of the
Planned/Budgeted Cost values for each activity assigned to the
risk (or the planned project cost, if no activities are assigned to the
risk).
The Probability Midpoint is the midpoint of the Probability field
value for the selected risk. The Cost Midpoint is the midpoint of the
Cost field value for the selected risk. The way each is calculated is
discussed below.
Note: The Cost and Probability midpoint for the value Negligible is
always zero, so the value of Negligible is not relevant to the
following discussion.
The equation for the calculation of Probability Midpoint and
Cost Midpoint varies, depending on which values are selected
for the Probability and Cost fields:
When using a value between highest and lowest:
When a value of High (50% to 70%), Medium (30% to
50%), or Low (10% to 30%) is selected for the Probability
field, then the Probability Midpoint is calculated using this
equation: Probability Midpoint = (lower range for selected
value + higher range of selected value)/2. So if the
Probability value is Medium (30% to 50%), then the
Probability Midpoint is calculated as follows: (30+50)/2 =
40%.
When a value of High (20% to 40%), Medium (10% to
20%), or Low (1% to 10%) is selected for the Cost field,
then the Cost Midpoint is calculated using the same
equation as Probability Midpoint. So if the Cost value is
Medium (10% to 20%), then the midpoint is calculated as
follows: (10 + 20)/2 = 15%
For highest values:
When the value Very High (70% or higher) is selected for
the Probability field, then the Probability Midpoint is
calculated as the midpoint between the lower value and
100%. So the Probability Midpoint for the value Very High
(70% or higher) midpoint is calculated as follows: (70 +
100)/2 = 85%.
When the value Very High (40% or higher) is selected for
the Cost field, then the Cost Midpoint is calculated using
this equation: ((the lower range for the selected value * 2) +
the high range for the selected value)/2. So the Cost
Midpoint for the value Very High (40% or higher) is
calculated as follows: ((40 * 2) + 100)/2 = 90%.
For lowest values:
When the value Very Low (<=10%) is selected for the
Probability field, then the Probability Midpoint is calculated
as the midpoint between zero and the upper value. So the
Probability Midpoint for the value Very Low is calculated as
follows: (0 + 10)/2 = 5%.
When the value Very Low (Up to 1%) is selected for the
Cost field, then the Cost Midpoint is calculated as the
midpoint between zero and the upper value. So the Cost
Midpoint for the value Very Low is calculated as follows: (0
+ 1)/2 = .005%.
So if the Planned/Budgeted Total Cost is $700,689.00, and the
Probability Midpoint is Medium (40%), and the Cost Midpoint is
Very High (90%), then the Exposure Cost would be calculated as
follows: $700,689.00 * (.4 * .9) = $252,248.00.

Step 4. You can use the Activities tab to identify activities that may
be impacted by this risk.

Step 5. Use the Description tab to further describe the risk.

Step 6. Use the Cause tab to document the cause of the risk.

Step 7. Document the effect of the risk.
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Step 8. Additional Notes can be entered.

Step 9. In the Activities window, you can view and/or assign risks
to activities using the Risks tab in activity details.

Do you need P6 training?
MSS Inc. is now offering the Oracle University Primavera training
curriculum in a live virtual training environment. The training
courses will be taught in a web-based format where you will have
access to P6 software to use during the course. The curriculum
will be taught by a live instructor. You will no longer have to travel
to get Oracle certificates of completion. No one wants to pay to for
training AND travel & lodging expenses. Visit our project
management training webpage to learn more about the course and
view the next course dates.
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