What risks for a project have the highest priority

© 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Managing Risk

8

(Premium)

Teaching Strategies

The two vignettes in this chapter reinforce the necessity of identifying, assessing, and managing risks in projects.
The first vignette communicates that risk management starts early and continues through the project.
The second vignette examines the purpose and risks associated with the implementation of a clinical information system in a health care system.
Risk assessment should be completed for every project. Have students identify risks associated with an activity of their choice. This could be a concert that want to attend, or some other weekend plans. Have students evaluate the likelihood of occurrence. Have other students offer techniques for managing the risk.
Have students examine a project that has been presented recently in the news. Have them identify the risks that have caused the project to be delayed or to fail. Have students suggest how those risks could have been mitigated.
Optional Supplemental Activities

Have students read the real-world vignettes.
Have them read the chapter and answer all of the Reinforce Your Learning questions and the questions at the end of the chapter.
Have students research the lessons learned or any of the articles on the SPMN website then present their findings to the class.
Have students contact an author of the materials on the SPMN website and present what they learned from the author.
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Chapter Concepts

Identifying risks and their potential impact

Assessing the likelihood of occurrence and degree of impact of risks

Risk response planning

Monitoring risks

Chapter Concepts

As mentioned in Chapter 1, one attribute of a project is that it involves a degree of uncertainty. Such uncertainty can impact the outcome of a project.
Risk involves an uncertain event that, if it occurs, can jeopardize accomplishing the project objective.
Risk management involves identifying, assessing, and responding to project risks in order to minimize the likelihood of occurrence and/or potential impact of adverse events on the accomplishment of the project objective. Addressing risks proactively will increase the chances of accomplishing the project objective. Waiting for unfavorable events to occur and then reacting to them can result in panic and costly responses. Managing risk includes taking action to prevent or minimize the likelihood of occurrence or the impact of unfavorable events.
A project manager cannot be risk averse. He or she must accept that risk is a part of project management and has to address it head-on. Furthermore, the project manager needs to set the tone for encouraging open and timely discussion of risks among the project team.

Based on what they learn in this chapter, students will become familiar with:

Identifying risks and their potential impact
Assessing the likelihood of occurrence and degree of impact of risks
Risk response planning
Monitoring risks
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Learning Outcomes

Discuss what is involved in managing risks

Identify and categorize risks

Assess and prioritize risks

Prepare a risk response plan

Develop a risk assessment matrix

Monitor risks

Learning Outcomes

After studying this chapter, the student should be able to:

Discuss what is involved in managing risks
Identify and categorize risks
Assess and prioritize risks
Prepare a risk response plan
Develop a risk assessment matrix
Monitor risks
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Project Risk Management

Project Management Knowledge Areas from PMBOK® Guide

Project Management Knowledge Areas from PMBOK® Guide

Concepts in this chapter support the following Project Management Knowledge Areas of the PMI Guide to the Project Management Body of Knowledge (PMBOK® Guide):

Project Risk Management

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Managing Risk

Risk Management Process

Problem seeking
Proactive
Start in early stages
Continue through project
Use lesson learned
Compare checklist for every project
Key Point

“The key point is that risk management is less about process and communication, and more about the depth and rigor of risk identification and remediation strategy at the outset of a project,”

Vignette A: Managing Risk

CVS Health provides support to millions of people through its retail drugstores, medical clinics, pharmacy benefits management system, and specialty pharmacy services. The company’s senior technology executive is Stephen Gold. As the chief information officer, he is responsible for all projects within CVS Health’s information systems and technology operations.

Views risk management as problem seeking and as a means of being proactive and anticipating problems.
We tend to assume the positive, even when we develop software.
Formal risk management process
Starts in the early stages of portfolio planning and continues through to project execution and post-project review
Five-step process—planning, identification, quantification, response, and monitoring and control
Use their lessons learned from their projects.
Have created a checklist for every project from analysis of the risks and responses in their lessons learned inventory
“The key point is that risk management is less about process and communication, and more about the depth and rigor of risk identification and remediation strategy at the outset of a project,” cautioned Gold
Some project managers might want to skip risk management or only look at risks at the outset. Gold and his team continue to look at risks and risk responses throughout the project and record them in their lessons learned to avoid project failure due to a risk they did not seek to identify, quantify, develop a response to, or monitor and control.

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Risks when Implementing a Clinical Information System

Requirements of CIS

Data Elements -- vital signs, admission information, diagnosis, treatment prescription, progress notes, equipment outputs, or test results
Decisions by the doctors
Financial information for billing
Associated Risks

Lack of a project champion
Lack of commitment from management
Poor perceived system usefulness
Project ambiguity
Misalignment of the system with local practices and processes
Vignette B: Risks when Implementing a Clinical Information System

Clinicians treating patients in an intensive care unit generate a number of data elements. Some of the elements are collected manually and others are collected by systems attached to a clinical information system (CIS). Entries into the CIS could include data elements such as vital signs, admission information, diagnosis, treatment prescription, progress notes, equipment outputs, or test results. Health care professionals would use this data to make decisions about the patient. Others, such as the financial systems, would use this data for billing purposes. Interaction with the CIS might occur through the use of computers, smartphones, tablets, or other portable devices.

Risks associated with the adoption of the system for patient care support
Lack of a project champion
Lack of commitment from management
Poor perceived system usefulness
Project ambiguity
Misalignment of the system with local practices and processes
Remember that the health care professionals are the ones who must use the system and need to be represented on the project team to give the discussions the perspective of the user. This will help avoid excess time to make decisions about features as these project members could interact with vendors and designers about how they would use the system, interact with the data inputs, and their needs for processing and outputs of the data.

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Identify Risks

Can jeopardize accomplishing the project objective

Brainstorm sources of risks

Establish categories for risks and evaluate

Use historical information

Progressively elaborate and identify new risks as more information becomes available

Identify Risks

A risk is an uncertain event that, if it occurs, can jeopardize accomplishing the project objective.

Risk identification includes determining which risks may adversely affect the project objective and what the impact of each risk might be if it occurs.
Sometimes a sponsor identifies major risks in the project charter when the project is authorized.
A common approach to identifying the sources of risks is brainstorming.
Risks that are accounted for should be somewhat likely to occur and/or can have a significant negative impact on accomplishing the project objective.
Establishing risk categories may help to identify and evaluate risks.
Some possible categories are technical, schedule, cost, human resources, external, or sponsor/customer.
Historical information from past projects is another source that can be helpful in identifying possible risks.
The project team can progressively elaborate and identify new risks, as well as the estimated impacts of previously identified risks as more information becomes available.
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Assess Risks

Determine the likelihood the risk event will occur

Evaluate degree of impact on the project objective

Prioritize

Likelihood of occurrence and degree of impact

Position relative to the critical path

Assess Risks

Risk assessment involves determining the likelihood that the risk event will occur and the degree of impact the event will have on the project objective.
Risks can then be prioritized based on the likelihood of occurrence and degree of impact
Risks on the critical path should be given higher priority because, if the risk occurs, it would have a greater impact on the schedule than if it was associated with activities on a path that has a large positive value of total slack.
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Risk Assessment Matrix

Risk Assessment Matrix

This figure depicts a risk assessment matrix, a tool for assessing and managing risks.
It helps to:
List the impact of the risk
Evaluate the likelihood of occurrence
Determine the degree of impact
Identify the action trigger
Name a person responsible
Create a response plan to avoid, mitigate, or accept the risk
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Plan Risk Responses

Set of actions

Prevent or reduce the likelihood of occurrence or the impact of a risk

Implement if the risk event occurs

Establishes a trigger point for implementing an action

Assigns responsibility for implementation

Avoid, mitigate, or accept the risk

Include a contingency fund to cover implementation cost

Plan Risk Responses

A risk response plan is a defined set of actions that seek to prevent or reduce the likelihood of occurrence or the impact of a risk.
The risk response plan is implemented if the risk event occurs.
Risk response planning involves establishing a trigger point for when to implement the actions to address each risk
It assigns responsibility to specific individuals for implementing the response plan.
A risk response plan can be helpful in avoiding, mitigating, or accepting the risk.
Project prices and budgets should include a contingency or management reserve to pay for additional costs associated with implementing response plans.
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List ways to control and monitor risks for a project.

Student Discussion

Have students brainstorm a list of ways to monitor the risks associated with a project.

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Possible responses to Student Discussion

Implement a risk response plan

Regularly review the risk assessment matrix

Evaluate all risks to determine if any changes

Identify new risks

Discuss during project meetings

Track and document risks that occurred and their impact

List ways to control and monitor risks for a project.

Risk controlling and monitoring involves:

Monitoring risk includes implementing risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating the risk response process. Risk response plans should be implemented as appropriate when their trigger point is reached.
Risk monitoring involves:
Regularly reviewing the risk management matrix throughout the duration of the project
Regularly reviewing and evaluating all risks to determine if there are any changes to the likelihood of occurrence or the potential impact of any of the risks
Seeking to identify new risks
Regularly reviewing, updating, and addressing risks in project meetings
Tracking and documenting which risks actually occurred and the impact of those risks
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Managing Risks
for Information Systems Development

Risks can be categorized into seven types

Technological risk

Human risk

Usability risk

Project team risk

Project risk

Organizational risk

Strategic and political risk

Managing Risks for Information Systems Development

Risks for information systems (IS) development are inherent in all aspects of an IS project. The risks can be categorized into seven types:
Technological risk
Human risk
Usability risk
Project team risk
Project risk
Organizational risk
Strategic and political risk
These categories help to explain the risks associated with developing systems that accept data inputs, process those inputs, and produce information for users.
Chapters 4, 5, 6, and 7 provided foundation information about the definition, scheduling, resources, and costs associated with IS development projects.
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IS Example: Risk Assessment Matrix

IS Example: Internet Applications Development for ABC Office Designs

This is a continuation of the web-based reporting system project that we have used as an example in previous chapters.
Beth wants to prepare for potential project risks so that the team can address them early enough that they do not impact the delivery date for the system.
Beth planned for the team to determine the impact of the risk, the likelihood of occurrence, the degree of impact if it does occur, the action trigger that will serve as a warning flag for the risk, who is responsible for the risk, and the response plan to avoid, mitigate, or accept the risk.
Beth reviewed the lessons learned from other projects to make sure that the project team discussed the risks from the other projects.
This figure depicts the Risk Assessment Matrix for Web-based Reporting System Project.
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Critical Success Factors

Identify risks and their potential impacts before the project starts.

Involve the project team or experts in assessing risks.

Assign high priority to managing risks that have a high likelihood of occurrence and a high potential impact on the project outcome.

Develop response plans for addressing high priority risks.

Critical Success Factors

Identify risks and their potential impacts before the project starts.
Involve the project team or experts in assessing risks.
Assign high priority to managing risks that have a high likelihood of occurrence and a high potential impact on the project outcome.
Develop response plans for addressing high priority risks.
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Summary

Risk is an uncertain event that, if it occurs, can jeopardize accomplishing the project objective.

Risk management includes identification, assessment, monitoring, and response to project risks in order to minimize the likelihood of occurrence and/or the potential impact of adverse events on the accomplishment of the project objective.

Risk identification includes determining which risks may adversely affect the project objective and estimating what the potential impacts of each risk might be if it occurs.

Assessing each risk involves determining the likelihood that the risk event will occur and the degree of impact the event will have on the project objective, and then prioritizing the risks.

A risk response plan is a defined set of actions to prevent or reduce the likelihood of occurrence or the impact of a risk, or to implement if the risk event occurs.

Regularly review and evaluate all risks to determine if there are any changes to the likelihood of occurrence or the potential impact of any of the risks, or if any new risks have been identified.

Summary

Risk is an uncertain event that, if it occurs, can jeopardize accomplishing the project objective.
Risk management involves identification, assessment, monitoring, and response to project risks in order to minimize the likelihood of occurrence and/or potential impact of adverse events on the accomplishment of the project objective.
Risk identification includes determining which risks may adversely affect the project objective and estimating what the potential impacts of each risk might be if it occurs.
Assessing each risk involves determining the likelihood that the risk event will occur and the degree of impact the event will have on the project objective, and then prioritizing the risks.
A risk response plan is a defined set of actions to prevent or reduce the likelihood of occurrence or the impact of a risk, or to implement if the risk event occurs.
Regularly review and evaluate all risks to determine if there are any changes to the likelihood of occurrence or the potential impact of any of the risks, or if any new risks have been identified.
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Chapter Questions

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Question 1

To manage risk on a project, the risks need identified and assessed to determine the impact and likelihood of the risk's occurrence.

Identification and assessment of risk occurs throughout the project.

Project team meetings are good times to review risks and the risk management plan. The risk assessment matrix helps the process by organizing the identified risks and assessing the risks' impact, likelihood, degree of impact, and the action trigger for the risk. It also identifies who is responsible and the response plan.

Describe what needs to be done to manage risk on a project.

When should this be done?

How can a risk assessment matrix help in this process?

1. Describe what needs to be done to manage risk on a project. When should this be done? How can a risk assessment matrix help in this process?

To manage risk on a project, the risks need identified and assessed to determine the impact and likelihood of the risk's occurrence.
Identification and assessment of risk occurs throughout the project.
Project team meetings are good times to review risks and the risk management plan. The risk assessment matrix helps the process by organizing the identified risks and assessing the risks' impact, likelihood, degree of impact, and the action trigger for the risk. It also identifies who is responsible and the response plan.
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Question 2

Risk categories could include technical, schedule, cost, human resources, external, or sponsor/customer. Answers could also include other categories.

Answers should include an evaluation of the response plan for the risks and how the risk could have been mitigated if they had been adequately addressed.

Answers should include the definition of a trigger point and a risk response plan for addressing the risks.

From your experience working on projects, list and categorize three risks.

Was the response plan for those projects adequate to mitigate these risks?

How would you respond to these risks now?

2. From your experience working on projects, list and categorize three risks. Was the response plan for those projects adequate to mitigate these risks? How would you respond to these risks now?

Risk categories could include technical, schedule, cost, human resources, external, or sponsor/customer. Answers could also include other categories.
Answers should include an evaluation of the response plan for the risks and how the risk could have been mitigated if they had been adequately addressed.
Answers should include the definition of a trigger point and a risk response plan for addressing the risks.
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Question 3

Risks that have the highest priority are those on the critical path and those that have high degree of impact and high likelihood of occurrence.

Yes, the priority of a risk can change as the project progresses by increasing in priority or decreasing in priority due to project changes related to the risk.

What risks for a project have the highest priority?

Does the priority for a risk change as the project progresses?

3. What risks for a project have the highest priority? Does the priority for a risk change as the project progresses?

Risks that have the highest priority are those on the critical path and those that have high degree of impact and high likelihood of occurrence.
Yes, the priority of a risk can change as the project progresses by increasing in priority or decreasing in priority due to project changes related to the risk.
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Question 4

As the project progresses, some risks at the start of the project may no longer be a factor and other risks crop up that need addressed.

The risk assessment matrix is updated in response to changes in order to accurately reflect the likelihood of occurrence, the degree or impact, the action trigger, the responsibility, and the response plan.

How does project risk change as a project progresses?

What changes are made to the risk assessment matrix as the changes occur?

4. How does project risk change as a project progresses? What changes are made to the risk assessment matrix as the changes occur?

As the project progresses, some risks at the start of the project may no longer be a factor and other risks crop up that need addressed.
The risk assessment matrix is updated in response to changes in order to accurately reflect the likelihood of occurrence, the degree or impact, the action trigger, the responsibility, and the response plan.
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Project Risk Management
Software Program Managers Network

Internet Exercises

Internet Exercises

Assign the Internet Exercises to your students as homework or complete them together in a computer lab.

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Internet Exercises

The search for "project risk management" results in a number of sites that define project risk management and offers tools and suggestions for how to perform project risk management.

The Software Program Managers Network website contains a number of articles related to project management.

The “16 Critical Software Practices” are categorized into project integrity, construction integrity, and product stability and integrity.

The Lessons Learned section of the site has lists of lessons learned by experienced project managers to help managers of new projects avoid the mistakes and pitfalls experienced by their predecessors.

The Web Links page shows a listing of resources.

Using your favorite Web search engine, perform a search for project risk management and describe what you found.

Visit the Software Program Managers Network website.

Explore the site.

Click on the “16 Critical Software Practices” link.

Click on the “Lessons Learned” link.

Do a search for risk management.

Click on the “Web Links” link.

Internet Exercises

The search for "project risk management" results in a number of sites that define project risk management and offers tools and suggestions for how to perform project risk management.
Have students compare the tools in the websites with the risk assessment matrix presented in the chapter.
The website for the Software Program Managers Network identifies proven industry and government software best practices and contains a number of resources that can convey the best practices to managers of large-scale software-intensive acquisition programs.
The 16 Critical Success Factors, which you can link to on the site, are categorized into project integrity, construction integrity, and product stability and integrity.
The Lessons Learned section of the site has lists of lessons learned by experienced project managers to help managers of new projects avoid the mistakes and pitfalls experienced by their predecessors.
The Web Links page is an alphabetical listing of resources to help in project management of the large-scale software-intensive projects.
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A Not-For-Profit Medical Research Center

Case Study 1

Case Study #1: A Not-For-Profit Medical Research Center

This is an open-ended case study. Encourage students to use their creativity on this exercise. This case began in chapter 4 and has continued through chapter 8. Each chapter has questions to reinforce the concepts presented.
As the director of external affairs for a national not-for-profit medical research center you are tasked with producing a shorter, simpler, easy-to-read annual report to show the benefits of the center's research and the impact on people's lives in an effort to help raise funds for the center.
Group Activity

Divide the course participants into the same groups as for the previous chapter’s group activity and answer the questions listed on the slides.

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Case Study 1
Question 1

The four risks could include those related to the technical, schedule, cost, human resources, external, or sponsor/customer aspects, or other identified categories of the project.

Identify at least four risks that could jeopardize the project.

1. Identify at least four risks that could jeopardize the project.

The four risks could include those related to the technical, schedule, cost, human resources, external, or sponsor/customer aspects, or other identified categories of the project.

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Case Study 1
Question 2

The risk assessment matrix includes the likelihood of occurrence, the degree or impact, the action trigger, the responsibility, and the response plan for each of the four risks.

Create a risk assessment matrix including a response plan for each of the risks.

2. Create a risk assessment matrix including a response plan for each of the risks.

The risk assessment matrix includes the likelihood of occurrence, the degree or impact, the action trigger, the responsibility, and the response plan for each of the four risks.

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The Wedding

Case Study 2

Case Study #2: The Wedding

This is an open-ended case study. Encourage the students use their creativity on this one. This case began in chapter 4 and continued through chapter 8. Each chapter has questions to reinforce the concepts presented.
Tony and Peggy Sue want to get married and have family that want to plan the wedding for them without considering what Tony or Peggy Sue would want.
Group Activity

Divide the course participants into the same groups as for the previous chapter’s group activity and answer the questions listed above.

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Case Study 2
Question 1

The four risks could include risks that are related to the technical, schedule, cost, human resources, external, or sponsor/customer aspects, or other identified categories of the wedding.

Identify at least four risks that could jeopardize the wedding.

1. Identify at least four risks that could jeopardize the wedding.

The four risks could include risks that are related to the technical, schedule, cost, human resources, external, or sponsor/customer aspects, or other identified categories of the wedding.

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Case Study 2
Question 2

The risk assessment matrix includes the likelihood of occurrence, the degree or impact, the action trigger, the responsibility, and the response plan for each of the four risks.

Create a risk assessment matrix including a response plan for each of the risks.

2. Create a risk assessment matrix including a response plan for each of the risks.

The risk assessment matrix includes the likelihood of occurrence, the degree or impact, the action trigger, the responsibility, and the response plan for each of the four risks.

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Student Fund-Raising Project

Case Study 3

Case Study #3: Student Fund-Raising Project

This case study involves a project by students to help raise funds to upgrade the pediatric intensive care unit at a local hospital. A team of 15 representatives from fraternities and sororities voiced concerns and formed a planning committee to help develop a plan.

Group Activity

Divide the course participants into teams of three or four. Have them:

Brainstorm a list of eight possible projects to raise funds for the hospital
Agree on one of the eight projects
For the selected project, identify six risks that could jeopardize the success of the project
Develop a response plan for how each of the six risks can be either avoided or mitigated
Have each team select a spokesperson to present their responses to the entire class
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Case Study 3
Question 1

A baseline plan needs to be established – identifying the objective, defining specific activities, establishing time estimates and a budget, and determining how the project can be accomplished.

The students must identify all risks associated with the project, assess these, and create a response plan— including a contingency plan.

The subdivided tasks must then be executed and the progress should be tracked, monitored, and controlled.

What would you recommend for the next possible steps?

1. What would you recommend for the next possible steps?

A baseline plan needs to be established – identifying the objective, defining specific activities, establishing time estimates and a budget, and determining how the project can be accomplished.
The students must identify all risks associated with the project, assess these, and create a response plan— including a contingency plan.
Finally, the subdivided tasks must be executed and the progress should be tracked, monitored, and controlled.
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Case Study 3
Question 2

Projects should include a description of the activity, the amount of funds to be raised, and the amount of resources necessary to raise the funds.

Identify three potential projects to raise funds for the hospital pediatric intensive care unit.

2. Identify three potential projects to raise funds for the hospital pediatric intensive care unit.

Answers will vary from student to student.
Projects should include a description of the activity, the amount of funds to be raised, and the amount of resources necessary to raise the funds.
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© 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Case Study 3
Question 3

The four risks could include those that are related to the technical, schedule, cost, human resources, external, or sponsor/customer aspects, or other identified categories of the project.

Select one of the three projects and identify four risks that could jeopardize the success of the project.

3. Select one of the three projects and identify four risks that could jeopardize the success of the project.

Answers will vary from student to student.
The four risks could include those that are related to the technical, schedule, cost, human resources, external, or sponsor/customer aspects, or other identified categories of the project.
*

© 2018 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Case Study 3
Question 4

A response plan can focus on avoiding, mitigating, or accepting the risk.

Responses should include a description of how the risk will be avoided, mitigated, or accepted and who is the person responsible for handling the risk.

Develop a response plan for how each of the four risks can be either avoided or mitigated.

4. Develop a response plan for how each of the four risks can be either avoided or mitigated.

A response plan can focus on avoiding, mitigating, or accepting the risk.
Responses should include a description of how the risk will be avoided, mitigated, or accepted and who is the person responsible for handling the risk.
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Teaching Strategies

The two vignettes in this chapter reinforce the necessity of identifying, assessing, and managing risks in projects.
The first vignette communicates that risk management starts early and continues through the project.
The second vignette examines the purpose and risks associated with the implementation of a clinical information system in a health care system.
Risk assessment should be completed for every project. Have students identify risks associated with an activity of their choice. This could be a concert that want to attend, or some other weekend plans. Have students evaluate the likelihood of occurrence. Have other students offer techniques for managing the risk.
Have students examine a project that has been presented recently in the news. Have them identify the risks that have caused the project to be delayed or to fail. Have students suggest how those risks could have been mitigated.