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Title: Chapter 7 Notes - Managing Risk
Description: Chapter 7 Notes - Managing Risk BUSI 2550 Business and IT Project Management
Description: Chapter 7 Notes - Managing Risk BUSI 2550 Business and IT Project Management
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FA - Chapter 7
BUSI 2550
10/31/2018
Managing Risk
Risk Management Process
As project progresses toward completion, risk declines (since critical issues are
solved) and cost impact of a risk increases
Proactive process (not reactive) to ensure surprises are reduced and negative
consequences are minimized
External risks/threats such as inflation, market acceptance, exchange rates, gov
...
Risk breakdown structure – hierarchal depiction
of project risks by risk category/subcategory that
identifies areas and causes of potential risks
Risk Profile – questions that address traditional
areas of uncertainty
o Recognize strengths and weaknesses of
firm
o Address both technical and management
risks
Input from customers, sponsors, subcontractors, vendors and other stakeholders is solicited in
risk identification
Step 2 - Risk Assessment
Scenario Analysis – technique for analyzing risks where team assess significance of each risk in
terms of:
o Probability
o Impact
Impact scales need to be assessed in terms of project priorities
1
FA - Chapter 7
BUSI 2550
10/31/2018
Documentation for risk assessment:
Risk severity matrix – basis for prioritizing which risks to assess
o FMEA equation (using a five-point grading scale for all 3 dimensions)
Impact X Probability X Detection = Risk Value
Probability Analysis
o PERT (program evaluation and review technique) provides a macro perspective by
looking at overall cost and schedule risks
Focus on likelihood of timely project completion instead of individual events
Assumes statistical distribution for each activity duration, stimulates network
using random number generator
...
Projects use parallel processes in case
one fails
Risk avoidance – changing project plan to eliminate risk/condition
EX: moving a concert indoors to eliminate threat of inclement weather
Transferring Risk – passes risk to another party
...
Contractors must
be capable of absorbing risk
...
Useful for low-probability, high-consequence
risks such as acts of god
BOOT (Build-Own-Operate-Transfer) is when host countries transfer financial
risk of ownership until project is complete and capabilities proven
Title: Chapter 7 Notes - Managing Risk
Description: Chapter 7 Notes - Managing Risk BUSI 2550 Business and IT Project Management
Description: Chapter 7 Notes - Managing Risk BUSI 2550 Business and IT Project Management