Project Risk Management

 

Risk and Project Risk

Risk

- Risk is an uncertainty which is associated with a future and may or may not occur and a corresponding potential for loss.

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Types of Risk in Software Projects

1. Schedule related planning risk
- It involves risks related to running behind schedule.
- The causes are as follows:
a) incorrect time estimation
b) improper resource allocation and utilization
c) unexpected scope expansion

2. Financial risk
- It is the monetary risk associated with budget overruns.
- The causes are as follows:
a) improper budget estimation
b) scope expansion
c) improper finance tracking

3. Operational risk
- It is the risk associated with operational activities of the project.
- The causes are as follows:
a) improper process implementation
b) conflict in team
c) lack of clarity in responsibility
d) communication breakdown
e) lack of training

4. Functional risk
- It is the technical risk related to the functionality of the software.

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Risk Management

- It is the knowledge area that include process concerned with conducting risk management planning, identification, analysis, response and control on a project.
- It follows pattern of plan, execute and control.

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Steps in risk management

1. Plan the risk management
2. Identify the risks
3. Analyze risk qualitatively
4. Analyze risk quantitatively
5. Develop risk response options and actions
6. Monitor whether risks become facts

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Risk Management Planning Process; Risk Management Plan

- It is the process of deciding how to plan and execute risk management activities for a project.

 

Input	Tools and techniques	Output
Project scope statement Project management plan Enterprise environmental factors Organizational process assets	Planning meetings and analysis	Risk management plans

 

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Risk Identification Techniques

- It is the process of determining the risks that may hamper the project and documenting their effects.
- It is an iterative process as risk can not be foreseen at once.

 

Input	Tools and techniques	Output
Project scope statement Project management plan Risk management plan Enterprise environmental factors Organizational process asset	Documentation reviews Information gathering technique Checklist analysis Assumption analysis Diagramming technique	Risk register

 

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Qualitative Risk Analysis Process

- It is the process for prioritizing risks for further analysis by assessing and combining their probability of occurrence and impact.

 

Input	Tools and techniques	Output
Project scope statement Risk management plan Risk register Organizational process asset	Risk probability and impact assessment Probability and impact matrix Risk categorization Risk urgency assessment	Updated risk register

 

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Quantitative Risk Analysis Process

- It is the process of numerically analyzing the effect on overall project objectives of identified risk.
- It is performed on prioritized risks obtained after qualitative risk analysis.

 

Input	Tools and techniques	Output
Project scope statement Project management plan Risk management plan Risk register Organizational process asset	Sensitivity analysis EVM analysis Decision tree analysis Simulation and modeling	Updated risk register

 

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Sensitivity Analysis / Tornado Diagram

- It helps to view which variables have most impact on a project objective.
- It is a bar chart showing comparative sensitivity analysis output.
- The longer the bar, more sensitive the project objective is to the risk.
- Risk are presented in descending order.

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Decision Tree Analysis

- It helps to visualize uncertainty and various decision option.
- It is a tree that shows comparative analysis of various decisions for project risks.
- It helps in determining the best alternatives to minimize impacts of risks.

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Risk Response Planning

- It is the process of developing options and actions to enhance opportunities and to reduce impacts of risk on project goals.

 

Input	Tools and techniques	Output
Risk management plan Risk register	Strategies for negative risks (Avoidance, Transfer risk effects to third party, Mitigation) Strategies for positive risks (Exploit, Share, Enhance)	Updated risk register Updated project management plan Risk related contractual agreements

 

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Risk Monitoring and Control Process

- It is the process of tracking identified risks, monitoring residual risks, identifying new risks and executing risk response plans.

 

Input	Tools and techniques	Output
Risk management plan Risk register Work performance information Performance reports	Risk reassessment Risk audit Variance and trend analysis Reserve analysis Status meeting	Updated risk register Recommended corrective actions Recommended preventive actions Updated project management plan