What is risk?

• Uncertainty

• Risk versus issue

• Risk versus reward

• Margins versus contingency

• Will a project succeed?

• Key areas of concern...

6 basic questions to answer

• Who?

• Why?

• What?

• How?

• Resource?

• When?...

Why carry out a risk assessment?

• Is the project it too risky?

• The threat intensity

• Decision making

• Helpful documentation...

What should risk analysis provide?

• Time factor

• Prioritization

• Summary of risk

• Decision making

• Realism...

How does risk management integrate with project management?

• Risk management is key?

• Permeates all projects?

• Supporting role?...

Accountability

• Sharing of risk

• Who is accountable?...

Stakeholders

• Identification

• Customer and supplier

• User priorities...

Success measures

• How do you measure it?

• Assumptions

• Clarify objectives

• Suppliers versus customers...

Basic steps

• What are the core process steps to assess a risk?

  • Identification

  • Proactive planning

  • Reactive planning

  • Monitoring and control

  • Triggers

• A simple process outline

• What are the basic overall process steps?

  • Identifying stakeholders

  • Success criteria

  • Plan preparation

  • Identify and assess risks

  • Ownership and planning

  • Aggregation, monitoring and review...

Human relations

• Pressure

• Timing

• Bid and budget control

• Risk focus

• Planning confidence

• Price versus cost

• Client versus stakeholder driven...

The Project Life Cycle

• Overview

• Concept

• Design

• Plan

• Allocate

• Execute

• Deliver

• Review

• Support

• Different areas

• Working in parallel

• Milestones

• Contracting

• Decision points...

Cost terminology

• Expected cost

• Target cost

• Provision

• Contingency

• Commitment...

Statistical terminology

• Mean or average

• Median

• Mode

• Variance

• Standard deviation...

The risk management process

• Overview

• Timing

• Defining the project

• Defining the risk management process...

• Identifying risks and responses

• Organizing the risks and responses

• Ownership (risks, responsibilities and contractors)

• Estimating technique...

• Evaluating the estimates

• Planning (integrating risk and project management)

• Managing (the risk management process)...

Estimating detail

• Overview

• Simple estimating of risk

• Cumulative probability graphs

• Simple estimating of risk detail...

• Simple estimating problems

• Obtaining the estimates

• Breakdown of variables...

Evaluating detail

• Overview

• Independent correlation

• Cumulative probability graph

• Positive correlation

• Cumulative probability graph...

• Negative correlation

• Conditional correlation

• Cumulative probability graphs...

Planning detail

• Types of plan

  • Initial

  • Reference

  • Base

  • Contingency

  • Horizon

  • Action

• Ways to modify plans

• General comments...

General points to consider

• Resource level

• Control

• Contractors

• Customer...

Managing the risk process

• Overview

• Identifying risk issues

• Other issues and the project life cycle

• Other aspects

• Cost and resources

• Effectiveness of risk management

• Modeling

• Managing the process...

The contractor

• Overview

• Risk assessment positioning

• The contract

• Cost plus fixed fee

• Fixed price

• Screening

• Transferring risk...

Risk combination

• The issues involved...

Common methods of risk assessment

• Overview

• The timing, prioritizing, summarizing and decision making virtues

• Issue based

• Checklists

• Qualitative

• Quantitative...

Quantitative risk assessment

• Overview

• Simple example and detail

• Simple cost model

• Cost model including uncertainty

• Cost model including likelihood...

Monte Carlo distribution

• Overview

• Monte Carlo simulation

• Monte Carlo simulation output

• Monte Carlo distribution

• Monte Carlo risk distribution

• How do we carry out the simulations?

• Probability Density Function (PDF)

• Triangular Probability Density Function (PDF)...

Uncertain events

• Overview

• Simple pathway likelihood and frequency versus cost graph

• Detailed calculations

• A basic risk assessment

• Probability versus total cost graph...

Correlated events

• Overview

• Ranges of correlation

• Process summary

• Risk assessment versus a traditional approach

• How will the level of breakdown structure influence the result?

• How do we estimate probability simply?...

General points

• Collecting task information

• Documentation

• Other areas to consider when reviewing risk...

Data handling

• Overview

• Monte Carlo risk distribution

• Multiple variables...

Budget versus contingency

• Overview and setting the contingency

• Alternative setting of contingency...

Schedule risk assessment

• Detailed planning, 4 basic types

• Detailed planning, in software...

Simple network

• Simple network (no lag) duration calculations

• Simple network (with lag) duration calculations...

Branching

• Overview (simple branching)

• Complex branching

• Complex branching duration calculations

• Multiple branching

• Multiple branching duration calculations

• Multiple probability branching

• Multiple probability branching duration calculations

• Production example

• Production example, one step further

• Production model output interpretation graph

• Nodes and branching networks

• Nodes and branching networks graphical output...

Markov chain

• Events and transitions

• Benefits

• When do you use it?

Business forecast

• Overview (types of operation, activity, timing and correlation)

• Business schedule risk

• Business revenue and profit risk distribution

• Business profit yearly forecast

• Business profit simulation graphical output...