Risk+Mgmt

** 1- Management Support ** ** 2- Empowerment **  ** 3- Involvement ** Presentation from the author, - Project Risk Definition - Risk Mgmt a four-stage process. Stage 1. Risk Identification Stage 2. Risk Prioritization Stage 3. Risk Strategies Stage 4. Risk Monitoring
 * Strategic Guide lines for Successful Projects: **
 * http://www.trusterra.com/our-commitment/risk-mitigation**

- Primary causes of project risks - Integrated approach to risk identification. - Risk Mitigation Strategies. - PRAM Project Risk Analysis & Management.

RISK VERSUS AMOUNT AT STAKE . Project risk has its origins in the uncertainty present in all projects. Known risks are those that have been identified and analyzed, making it possible to plan responses for those risks. Known risks that cannot be managed proactively, should be assigned a contingency reserve. Unknown risks cannot be managed proactively and therefore may be assigned a management reserve.

Definition of 'Risk Management'

 * The process of identification, analysis and either acceptance or mitigation of uncertainty in investment decision-making. **

= How to Develop a Risk Management Plan ? =

1 event or series of events that take place in one or several locations. It is computed from the probability of the event becoming an issue and the impact it would have (See Risk = Probability X Impact). Various factors should be identified in order to analyze risk, including:
 * Understand how Risk Management works. ** Risk is the effect (positive or negative) of an


 * **Event:** What could happen?
 * **Probability:** How likely is it to happen?
 * **Impact:** How bad will it be if it happens?
 * **Mitigation:** How can you reduce the Probability (and by how much)?
 * **Contingency:** How can you reduce the Impact (and by how much)?
 * **Reduction** = Mitigation X Contingency
 * **Exposure** = Risk – Reduction
 * After you identify the above, the result will be what’s called Exposure. This is the amount of risk you simply can’t avoid. Exposure may also be referred to as Threat, Liability or Severity, but they pretty much mean the same thing. It will be used to help determine if the planned activity [[image:670px-Develop-a-Risk-Management-Plan-Step-1Bullet2.jpg width="277" height="209" align="right"]]should take place.

2 Define your project. ** In this article, let's pretend you are responsible for a <span style="color: #336633; font-family: Helvetica,arial,sans-serif; font-size: 16px; text-decoration: none;">computer system <span style="background-color: #ffffff; color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;"> that provides important (but not life-critical) information to some large population. The main computer on ** **<span style="background-color: #ffffff; color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;">which this system resides is old and needs to be replaced. Your task is to develop a Risk Management Plan for the migration. This will be a simplified model where Risk and Impact are listed as High, Medium or Low (that is very common especially in Project Management). **
 * This is often a simple cost vs. benefits formula. You might use these elements to determine if the risk of implementing the change is higher or lower than the risk of not implementing the change.
 * Assumed Risk: **If you decide to proceed then your Exposure becomes what is known as Assumed Risk. In some environments, Assumed Risk is reduced to a dollar value which is then used to calculate the profitability of the end product.**

**<span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 43px; line-height: 1.5;">3 ** <span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;">Get input from others. **<span style="color: #336633; font-family: Helvetica,arial,sans-serif; font-size: 16px; text-decoration: none;">Brainstorm <span style="background-color: #ffffff; color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;"> on risks. Get several people together that are familiar with the project and ask for input on what could happen, how to help prevent it, and what to do if it does happen. Take a //<span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;">lot //<span style="background-color: #ffffff; color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;"> of notes! You will use the output of this very important session several times during the following steps. Try to keep an open mind about ideas. "Out of the box" thinking is good, but do keep control of the session. It needs to stay focused and on target. **

<span style="color: #545454; display: block; font-family: Helvetica,arial,sans-serif; font-size: 43px;">4 <span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;">Identify the consequences of each risk. **<span style="background-color: #ffffff; color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;"> From your brainstorming session, you gathered information about what would happen if risks materialized. Associate each risk with the consequences arrived at during that session. Be as specific as possible with each one. "Project Delay" is not as desirable as "Project will be delayed by 13 days." If there is a dollar value, list it; just saying "Over Budget" is too general. **

**<span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 43px; line-height: 1.5;">5 ** <span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;">Eliminate irrelevant issues. **<span style="background-color: #ffffff; color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;"> If you’re moving, for example, a car dealership’s computer system, then threats such as nuclear war, plague pandemic or killer asteroids are pretty much things that will disrupt the project. There’s nothing you can do to plan for them or to lessen the impact. You might keep them in mind, but don’t put that kind of thing on your risk plan. **



<span style="color: #545454; display: block; font-family: Helvetica,arial,sans-serif; font-size: 43px;">6 List all identified risk elements <span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px; line-height: 1.5;">. **<span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;"> You don’t need to put them in any order just yet. Just list them one-by-one. **



<span style="color: #545454; display: block; font-family: Helvetica,arial,sans-serif; font-size: 43px;">7 Assign probability <span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px; line-height: 1.5;">. **<span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;"> For each risk element on your list, determine if the likelihood of it actually materializing is High, Medium or Low. If you absolutely have to use numbers, then figure Probability on a scale from 0.00 to 1.00. **
 * <span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px; line-height: 1.5;">- 0.01 to 0.33 = **Low**,**
 * <span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px; line-height: 1.5;">- 0.34 to 0.66 = **Medium**,**
 * <span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px; line-height: 1.5;">- 0.67 to 1.00 = **High**.


 * <span style="background-color: #ffffff; color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;">Note: If the probability of an event occurring is zero, then it will be removed from consideration. There’s no reason to consider things that simply cannot happen (enraged T-Rex eats the computer).

<span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 43px; line-height: 1.5;"> 8 Assign impact **<span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;">. **<span style="background-color: #ffffff; color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;"> In general, assign Impact as High, Medium or Low based on some pre-established guidelines. If you absolutely have to use numbers, then figure Impact on a scale from 0.00 to 1.00 as follows: 0.01 to 0.33 = Low, 0.34 – 066 = Medium, 0.67 – 1.00 = High.
 * <span style="background-color: #ffffff; color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;">Note: If the impact of an event is zero, it should not be listed. There’s no reason to consider things that are irrelevant, regardless of the probability (my dog ate dinner).

<span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 43px; line-height: 1.5;"> 9 Determine risk for the element. <span style="background-color: #ffffff; color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px; line-height: 1.5;"> Often, a table is used for this. If you have used the Low, Medium and High values for Probability and Impact, the top table is most useful. If you have used numeric values, you will need to consider a bit more complex rating system similar to the second table here. It is important to note that there is no universal formula for combining Probability and Impact; that will vary between people and projects. This is only an example (albeit a real-life one): <span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 43px; line-height: 1.5;"> 10 Rank the risks: <span style="background-color: #ffffff; color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px; line-height: 1.5;"> List all the elements you have identified from the highest risk to the lowest risk.
 * <span style="background-color: #ffffff; color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;">**Be flexible in analysis.** Sometimes it may be appropriate to switch back and forth between the L-M-H designations and numeric designations. You might use a table similar to the one below.



<span style="color: #545454; display: block; font-family: Helvetica,arial,sans-serif; font-size: 43px;">11 Compute the total risk: <span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px; line-height: 1.5;">Here is where numbers will help you. In Table 6, you have 7 risks assigned as H, H, M, M, M, L, and L. This can translate to 0.8, 0.8, 0.5, 0.5, 0.5, 0.2 and 0.2, from Table 5. The average of the total risk is then 0.5 and this translates to Medium.

<span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 43px; line-height: 1.5;"> 12 **<span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;">Develop mitigation strategies. **<span style="background-color: #ffffff; color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;"> Mitigation is designed to reduce the probability that a risk will materialize. Normally you will only do this for High and Medium elements. You might want to mitigate low risk items, but certainly address the other ones first. For example, if one of your risk elements is that there could be a delay in delivery of critical parts, you might mitigate the risk by ordering early in the project.

<span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 43px; line-height: 1.5;"> 13 **<span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;">Develop contingency plans. **<span style="background-color: #ffffff; color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;"> Contingency is designed to reduce the impact if a risk does materialize. Again, you will usually only develop contingencies for High and Medium elements. For example, if the critical parts you need do not arrive on time, you might have to use old, existing parts while you’re waiting for the new ones.



<span style="color: #545454; display: block; font-family: Helvetica,arial,sans-serif; font-size: 43px;">14 **<span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;">Analyze the effectiveness of strategies. **<span style="background-color: #ffffff; color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;"> How much have you reduced the Probability and Impact? Evaluate your Contingency and Mitigation strategies and reassign Effective Ratings to your risks.

<span style="color: #545454; display: block; font-family: Helvetica,arial,sans-serif; font-size: 43px;">15 **<span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;">Compute your effective risk. **<span style="background-color: #ffffff; color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;"> Now your 7 risks are M, M, M, L, L, L and L, which translate to 0.5, 0.5, 0.5, 0.2, 0.2, 0.2 and 0.2. This gives an average risk of 0.329. Looking at Table 5, we see that the overall risk is now categorized as Low. **<span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;">//Originally the Risk was Medium (0.5). After management strategies have been added, your Exposure is Low (0.329). That means you have achieved a 34.2% reduction in Risk through Mitigation and Contingency. Not bad!// **

<span style="color: #545454; display: block; font-family: Helvetica,arial,sans-serif; font-size: 43px;"> <span style="color: #545454; display: block; font-family: Helvetica,arial,sans-serif; font-size: 43px;">16 **<span style="color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;">Monitor your risks. **<span style="background-color: #ffffff; color: #545454; font-family: Helvetica,arial,sans-serif; font-size: 16px;"> Now that you know what your risks are, you need to determine how you’ll know if they materialize so you’ll know when and if you should put your contingencies in place. This is done by identifying Risk Cues. Do this for each one of your High and Medium risk elements. Then, as your project progresses, you will be able to determine if a risk element has become an issue. If you don’t know these cues, it is very possible a risk could silently materialize and affect the project, even if you have good contingencies in place.