Risky Business

Essentials of Risk Management

Avneet Mathur (PMP)

avneet_mathur@hotmail.com

What is a Project?
A project is a temporary endeavor undertaken

to produce a unique product or service

Temporary

Characteristics of
Projects

Unique

Temporary Definitive beginning and end

Unique New undertaking, unfamiliar ground

Risk
RISK can be defined as the threat or

probability that an action or event, will

adversely or beneficially affect an
organization's ability to achieve its
objectives*.
In simple terms risk is Uncertainty of

Outcome, either from pursuing a future

positive opportunity, or an existing negative
threat in trying to achieve a current objective.
* Luhmann 1996:3

Issue vs. Risk

ISSUE

TODAY

RISK

FUTURE

Issue vs. Risk

ISSUE

If not fixed today, task stops

Issue already impacting
the cost, time or quality

RISK

If not identified, may become issue later

Risk POTENTIAL negative
impact to project

Whats the Plan?

Identification

Quantification

Response

Monitoring
and Control

Identification
Risk Types
Business (risk to overall business)
Delivery (risk to project delivery)
Technical (specific to particular technology)

Vendor not meeting deadline

Cause

Budget will be exceeded

Impact

"The vendor not meeting deadline will mean that budget will be exceeded"

Quantification
Risk

Impact

Likelihood

Quantification
LIKELIHOOD

Title
Very low

20

20 Highly unlikely to occur based on current information, as the circumstances

likely to trigger the risk are also unlikely to occur.

Low

40

Unlikely to occur. However needs to be monitored as certain circumstances could

result in this risk becoming more likely to occur during the project.

Medium

60

Likely to occur as it is clear that the risk may eventuate.

High

80

Very likely to occur, based on the circumstances of the project.

Highly likely to occur as the circumstances that will cause this risk to eventuate
are also very likely to eventuate

Very High

IMPACT

Score Description

100

Impact
*
Score Description
Insignificant impact on the
Very low
20 project.
Low
40 Minor impact on the project.
< 5%
Medium
60 Measurable impact on the project. 5 - 10 %
10 - 25
High
80 Significant impact on the project. %
Very
high
100scheduled
Majorend-date
impact
on the
project.
> 25%
* Deviation in scope,
or project
budget
Title

Quantification
Priority = [Likelihood + Impact]
-----------------------------2

Risk
ID
1.1
1.2
1.3
2.1
2.2
2.3

Likeliho Impa
od
ct
20
80
80
60
100
40
40
20
90
100
20
80

Priority Score
Priority Rating
Priority Color
---------------------------------------------------------------------020
Very Low
Black
2140
Low
Green
4160
Medium
Yellow
6180
High
Orange
81100
Very High
Red

Priority
50
70
70
30
95
50

Rating
Medium
High
High
Low
Very High
Medium

Response
Address risks rated based on severity . Very-High-rated risks warrant

the highest priority, and should be addressed before the less severe
classes of risks, and should be tracked until they can be downgraded.
Create a Risk Schedule to address these risks.
In a risk schedule, for every risk identified, preventive actions are
listed that are required to reduce the likelihood of the risk occurring,
as well as the contingent actions needed to reduce the impact to the
project should the risk occur.
Preventive
Risk ID
Rating
Actions
2.2
Very High Clearly identify
the
expected
business
benefits
2.3
High
All requirements
need to be well
defined.

Action
Resource
Project
sponsor

Action
Contingent
Action
Action
Date
Actions
Resource Date
DDMMYY Measure the
Project DDMMYY
actual business
Manager
benefits achieved
by the project

Project
sponsor

DDMMYY Stakeholders
need to sign-off
on the
requirements.

Project DDMMYY
Manager

Monitoring and
Control
Continually monitor risks to identify any change
in the status, or if they turn into an issue.

Hold regular risk reviews

To identify actions outstanding, risk probability and
impact
Remove risks that have passed
Identify new risks

Case Study Buying a Used

Car online
Requirements
Buy a car over the internet
Price less than $15,000
Reliable
Specific make and model
Mileage

Case Study Buying a Used

Car online
Sample Risks
Buy a car over the internet
Most people would say dont! to eliminate the risk, but this is a
requirement
Websites that do not have good ratings
Price less than $15,000

Owner may increase price or add additional cost after finalizing the
deal.
Hidden cost

Reliable
Does not need frequent repairs
Does not breakdown
Good brand
Specific make and model

Not getting the same model after finalizing the car

Mileage
Odometer rollback

Case Study Buying a Used

Car online
Risk Quantification
Buy a car over the internet
Websites that do not have good ratings
ID

Likelihoo
d

Impact

Priority

1.1

40

60

(40+60)/2 = 50

Medium

Price less than $15,000

Owner may increase price or add additional cost after finalizing
the deal.
Hidden cost
ID

Likelihood

Impact

Priority

2.1

20

40

(20+40)/2 = 30

Low

Case Study Buying a Used

Car online
Risk Quantification
Reliable
Does not need frequent repairs
Does not breakdown
Good brand
ID

Likelihood

Impact

Priority

3.1

60

100

(60+100)/2 = 80

High

3.2

20

80

(20+80)/2 = 50

Medium

3.3

40

80

(40+80) /2 = 60

Medium

Specific make and model

Not getting the same model after finalizing the car
ID

Likelihood

Impact

Priority

4.1

20

40

(20+40)/2 = 30

Low

Case Study Buying a Used

Car online
Risk Quantification
Mileage
Odometer rollback
ID

Likelihood

Impact

Priority

5.1

80

80

(80+80)/2 = 80

High

Case Study Buying a Used

Car online
Risk Response

Risk ID
5.1

Rating
High

1.1

Medium

Preventive
Actions
Get a Car Fax
report and check
mileage history
Check website
rating before
initiating a
purchase

Action
Resource
Project
sponsor

Action
Contingent
Action
Action
Date
Actions
Resource Date
DDMMYY Avoid cars with no Project DDMMYY
car fax history.
Manager

Project
sponsor

DDMMYY Avoid suspicious

websites or too
good to be true
deals.

Project DDMMYY
Manager

Summary
Risk management is a project management tool for

handling events that might adversely impact the project,

thereby increasing the likelihood of success.
A sound process like this removes the uncertainty and
empowers the project manager to complete their project
within schedule and within budget.
Mitigate Risk

Control Risk

Measure Risk

Control Risk
Identify Risk

Analyze Risk
Asses Risk

Prioritize Risk

About the Author

Avneet Mathur is a Certified Project Management Professional,
as awarded by the Project Management Institute, USA and has
been involved in IT for more than a decade.
He holds an MBA in General Business Administration, with an
additional Master's Degree in Computer Science and
Networking from University of Missouri, Kansas City. He also
has a Bachelor's Degree in Computer Science from the
Aurangabad University, India. He can be reached at
avneet_mathur@hotmail.com

About Project Perfect

Project Perfect is a project management software
consulting and training organisation based in Sydney
Australia. Their focus is to provide organisations with
the project infrastructure they need to successfully
manage projects.
Project Perfect sell Project Administrator software, which
is a tool to assist organisations better manage project
risks, issues, budgets, scope, documentation planning
and scheduling. They also created a technique for
gathering requirements called Method H , and sell
software to support the technique. For more information
on Project tools or Project Management visit
www.projectperfect.com.au