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Quotation
 There is nothing more difficult to plan, more
doubtful of success, nor more dangerous to
manage than the creation of a new system.”
Machiavelli

Clearly the great Italian philosopher and political

strategist was not talking about our latest
development project but his wisdom is clear ----
change begets risk and the risk needs to be
managed.
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What is Risk?
 “Risk is an uncertain potential condition or event
that, if it occurs and is not mitigated, may have
negative impact on the project objectives.”

 “A measure of the inability to achieve project

objectives with defined cost and schedule
constraints.”

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What is Risk?
 A probability that something will go wrong

 An uncertain event or condition that, if it occurs,

has a positive or negative effect on a project
objective

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What are Project Risks?
 Project Risks are adverse factors that have the
potential to influence:
 Process
 Technology (hardware and software)
 Organization
 Deliverables
 Schedule
 Costs or
 Business units
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Levels of Risks
There are arguably four levels of risk:
 Strategic----risksinvolved in ensuring business
survival and long-term security or stability of the
organization
 Program----risks involved in managing
interdependencies between individual projects and
the wider business environment.
 Projects----risks involved in making progress against
project plans
 Operational----risks involved in technical problems,
supplier management and so on
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Types of Risks
 Different organizations will face different types of
risk.
 Some types of risk are:
 Strategic / Commercial Risks
 Economic / Financial / Market Risks
 Legal and Regulatory Risks
 Organizational Management / People Issues
 Political / Societal Factors
 Environment Factors
 Technical / Operational / Infrastructure Risks
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Customer Perspectives of Risk
 Customers want the best possibility of a successful
development (products that meet requirements within the
available resources)
 Quality & predictability
 Customers can feel threatened by the lack of insight
 Less day-to day awareness of status, “hidden” problems
 Generally less technical knowledge
 Adversarial nature of sponsor/contract environment
 Customers also have to answer to their sponsors
 May be reluctant to identify “risks”

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Project Perspectives of Risk
 Project personnel are also concerned about producing a
quality project to predictable budgets and schedules
 Pride in work, sense of accomplishment
 Satisfying work environment (minimize overtime &
stress)
 Project personnel may see risk management as outside
their responsibility and/or beyond their control
 Project personnel may fear customer/management
involvement and awareness
 “Shoot the messenger”
 Micro-management & Perceived technical inability
 Risk abatement may involve selecting lower risk, less
technically exciting solutions
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Why Manage Risks?
 Any project is subject to risks. A project which finds
itself in a state of perpetual crisis, is failing to manage
risks properly. Failure to manage risks is usually
characterized by the inability to decide:
 what to do;

 when to do it;

 whether enough has been done.

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Risk Management
 Practices and procedures that enable managers to
identify, assess, categorize, monitor, control, and
mitigate risk before or while it is transitioning to a
problem.”

 Risk Management is a methodology that helps

managers make best use of their available
resources

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Who uses Risk Management?
 Risk Management  Finance and
practices are widely Investment
used in public and  Insurance
private sectors,  Health Care
covering a wide range
 Public Institutions
of activities or
operations. These  Governments
include:

Risk Management is an integral part of business

planning.
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Who is involved in Risk
Management?
 Business managers, process owners, strategic
planners, project and procurement teams and key
suppliers are all involved in risk management.

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Why Risk Management is
Important?
 Effective risk management helps us to improve
performance by contributing to:
1.Better service delivery
2.More effective management of change
3.More efficient use of resources
4.Better project management
5.Minimizing waste, fraud and poor value of
money
6.Supporting innovation
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Risk, Cause and Effect

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How is Risk Management used?
 The Risk Management process steps are a generic
guide for any organization, regardless of the type
of business, activity or function.

 There are certain steps in the RM process

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Steps involved in Risk Management
 Risk Management Planning
 deciding how to approach and plan risk management
activities
 Risk identification (Qualitative & Quantitative)
 Identify project, product and business risks;
 Qualitative risk analysis
 Performing a qualitative analysis of risks and conditions
to prioritize their effects on project objectives;
 Quantitative risk analysis
 Measuring the probability and consequences of risks
and estimating their implications for project objectives

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Steps involved in Risk Management
 Risk Planning
 Draw up plans to avoid or minimize the effects
of the risk;
 Risk Monitoring & Control
 Monitor the risks throughout the project;

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Risk Management

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Risk Management
 Plan made for purpose of control, distinguishing between
different categories of change to fully investigate the
monitoring and formal aspects of the project

 Main categories are:

 Adapted

 Fixed ( e.g mobilisation)

 Time related (e.g for resources and overheads)

 Quantity proportional (e.g materials)

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Risk Management Process

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Risk Management Layout

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Risk & Project Life cycle

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Risk Assessment

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Risk Assessment
Risk Assessment is the first of two stages in Project
Risk Management and includes three main steps
as follows:
 Identify
 Review all the project plans and identify areas of
uncertainty
 Analyze
 Define how the identified areas of uncertainty
could affect the performance and success of the
project in terms of scope, quality, duration and
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Risk Assessment
 Prioritize: Prioritize the risks in terms of those
risks that
 1) must be eliminated (resolved) completely due
to their extreme Impact to the project;
 2) are important enough to demand regular
monitoring and reviewing;
 3) are deemed to have a minor impact and will
not require detailed monitoring; and
 4) should not be totally ignored but demand
less attention.

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What are Project Impacts
 All steps of the Risk Assessment are to be
addressed in terms of the impact to the project's
scope, quality, time and budget.
SCOPE
 Project Scope can be defined as the identified tasks
and activities that need to be performed in order
to deliver the required features and functions of a
product. This refers to anything that will result in
the project scope being altered. Such as:
 change in business requirements;
 increased/reduced functionality; and
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What are Project Impacts
QUALITY
 Quality can be defined as the defined or accepted
standard of performance or deliverable that satisfy
the expectations. This refers to anything that will
result in a project deliverable not conforming to
the expected quality, standard or performance.
Lesser quality may impact Time and Budget as the
deliverable may have to be re-done or extra time
(and money) may have to be spent to bring the
deliverable upto the acceptable quality level.

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What are Project Impacts
QUALITY
 Depending on the type of deliverable and contract,
reduced quality may infact reduce the cost of the
project, if the reduced quality is accepted. This
may be caused by:
 the level of quality not being clearly defined at
the start;
 standards not being in place or clearly
identified; or
 the performance of the deliverable( e.g.: system
response time) is not identified at the start.
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What are Project Impacts
TIME
 Time can be defined as either the elapsed period of
the project or the amount of effort budgeted or
assigned to each project task and activity. This
refers to anything that will result in a project
activity or deliverable being completed later than
planned or requiring more effort.

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What are Project Impacts
TIME
 There is usually a direct relationship between time
and budget risks. This may be caused by:
 staff not being available for their assigned
scheduled tasks;
 task estimates not accurate or taking longer; or
 changes in scope.

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What are Project Impacts
BUDGET
 Budget can be defined as the agreed or contracted
amount of the project. This refers to anything that
will result in the project costing more than was
budgeted. This may be caused by:
 direct cost or cost to purchase (eg: hardware or
software) being greater than budgeted;
 scheduled tasks taking longer than originally
estimated (this will not be an issue with fixed
price contracts); or
 changes in scope.
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