7/4 Chapter 5 Ideas

Chapter 5:  Risk Management:  Minimize the Threats to Your Project

Plan for Ongoing Risk Control. It is smart to plan for risk during the project because new risks usually appear. So, planning for ongoing risk management is part of risk control.  (1) Identify the Risks:

a)     asking the stakeholders;

b)     making a list of possible risks;

c)     learning from past, similar projects; and

d)     focusing on the risks in the schedule and budget.

(2) Analyze and Prioritize the Risks:

a)     by defining the risk by including the seriousness of the negative impact;

b)     by assigning the probability to the risk; and

c)     by ranking the risks according to probability and impact.

(3) Develop Response Plans. This is the difficult one because there are many ways to reduce risks and so as ways to deal with potential risks. The five categories are:  accept the risk, avoid the risk, contingency plans, transfer the risk and mitigate the risk. Identify Which Risks You can Control. The project team should determine a response to a possible problem to identify the risks within their control/not their control. For example:  federal laws and regulations that affect the project are beyond the project teams’ control. Consider Risk Strategies. There are times that when a risk problem is solved a new risk happens. For example, contracting a specialized work is reducing risk because the work is being transferred to others. However, the control over the project is reduced and the communication problem is high. So develop a strategy to weigh the advantages and disadvantages for each risk. (4) Establish Contingency and Reserve. On a regular basis things can go wrong that unpredictable malady happens. There should be funds available to pay for emergencies, these are called contingency funds or reserve funds. It is the project manager and the sponsor’s responsibility to establish these funds. There are four steps to come up with contingency budget: (1) Identify all the risks to monitor the risk and prepare a contingency plan; (2) For each risk, estimate the additional cost of the contingency plan; (3) Sum the expected value of contingency for each risk; and (4) All parties should have the same goal in mine—to prepare for the known risks. For identified risks, know the unknowns. Management should reserve an account for the unknown unknowns. There are events that we don’t see coming. If prepared, the unknown unknowns will be avoided. (5) Continuous Risk Management. Once the project begins, new information appears—some favorable and some unfavorable.