In this next series of posts, we move onto step 5, which is memorizing the TOOLS & TECHNIQUES associated with each process. In order to breakdown the memorizing into more bite-size chunks, I am going to break down this topic into at least 9 posts, one for each knowledge area. (There may be some knowledge areas that require more than one post.)
This post covers chapter 11 of the PMBOK® Guide, which covers the Risk Knowledge Area. This knowledge area contains 6 processes, 5 of which are in the Planning Process Group and the last of which is in the Monitoring & Controlling Process Group.
Since there are 6 processes, most of which contain multiple Tools & Techniques, I am splitting the discussion of the Tools & Techniques into two different posts. This post will cover processes 11.4 through 11.6.
Number & Name
|Process Description||Tools & Techniques|
|11.1 Plan Risk Management||Defining how to conduct risk management activities for a project.
|1. Planning meetings and analysis|
|11.2 Identify Risks||Determining which risks may affect the project objectives and documenting their characteristics.||1. Documentation reviews
2. Information gathering interviews.
3. Checklist analysis
4. Assumptions analysis
5. Diagramming techniques
6. SWOT analysis
7. Expert judgment
|11.3 Perform Qualitative Risk Analysis||Prioritizing risks for further analysis by assessing likelihood & impact.||1. Risk probability and impact assessment
2. Probability and impact matrix
3. Risk data quality assessment
4. Risk categorization
5. Risk urgency assessment
6. Expert judgment
|11.4 Perform Quantitative Risk Analysis||Numerically analyzing the effect of risks on project objectives.||1. Data gathering and representation techniques
2. Quantitative risk analysis and modeling techniques
3. Expert judgment
|11.5 Plan Risk Responses||Developing options and actions to enhance opportunities and reduce risk.||1. Strategies for negative risks or threats
2. Strategies for positive risks or opportunities
3. Contingent response strategies
4. Expert judgment
|11.6 Monitor and Control Risks||Tracking identified risks, implementing risk response plans if risks occur, and evaluating risk process effectiveness.||1. Risk reassessment
2. Risk audits
3. Variance and trend analysis
4. Technical performance measurement
5. Reserve analysis
6. Status meetings
Let’s take a look at the tools & techniques for the processes 11.4 through 11.6 in the Risk Knowledge Area.
11.4 PERFORM QUANTITATIVE RISK ANALYSIS
The previous process did a qualitative risk analysis, identifying risks and then ranking them with regards to their probability and/or impact. In this process, a quantitative risk analysis is done to estimate the cost impact of these risks on the project.
11.4.1. Data gathering and representation techniques
One source of information on the impact of risks on a project is historical experience on previous projects. This information can be obtained through interviewing those participants on previous projects.
Another source of information is probability distributions, which can assist in obtaining an estimate of the most likely risk outcome, as well as the pessimistic and optimistic estimates.
11.4.2. Quantitative risk analysis and modeling techniques
Sensitivity analysis takes one uncertain element that may affect a project and examines how changes in this element would affect the project, with all other uncertain elements being held at their normal, baseline value. This shows the variation associated with each uncertain element. Sometimes these variations are put into something called a tornado diagram, which is simply a bar chart with the elements listed in a vertical manner so that the element with the largest variation is on top, followed by the next-largest, and so on, tapering down to the smallest variation on the bottom. (The name of the diagram comes from the upper-tapering profile of the bars in the chart, similar to the profile of a tornado.)
Expected monetary value analysis is a way of taking probabilities of certain risks happening and quantifying their impact on the project. For example, let’s say that at a certain point in the project, there are two possible outcomes. One, outcome A, has a probability of 25% and costs $100K, whereas outcome B has a probability of 75% and costs 75K. Then the EMV is equal to the sum of the products of the probability of each occurrence times its monetary value. In this case, the EMV = (25% x $100,000) + (75% x $75,000) = $25,000 + $25,000 = $50,000.
Modeling through Monte Carlo analysis is a way of doing a calculation using various combinations of probabilities of outcomes for the various risks that impact a project. It can generate a cost estimate of the overall project doing a cost estimate similar to the monetary value analysis described in the last paragraph, or for estimating the impact of risks on a schedule, can is an analysis that would generate an estimate of the duration of a project.
11.4.3. Expert judgment
As usual, asking those who have worked on a similar project before, either within the organization (team members) or outside the organization (subject matter experts).
11.5 PLAN RISK RESPONSES
11.5.1. Strategies for negative risks or threats
As can be seen, if the risk is low, you can simply accept it. However, if the risk is moderate, you may try to mitigate or transfer the risk. If the risk is high, you may try to simply avoid it altogether.
11.5.2. Strategies for positive risks or opportunities
As can be seen, if the opportunity is a good one, you should try to exploit it. If it is of lesser probability, you can either enhance it or share it. If the probability is low, you can essentially accept it, and if it does occur, you can allocate the unused reserve to the project.
11.5.3. Contingent response strategies
This is a list of responses to be used if certain risks occur. Therefore a list of events that trigger these contingency responses needs to be created and tracked through the course of the project. If the events end up not occurring, then the reserves to be used for the contingency responses should be returned to the budget.
11.5.4. Expert judgment
Those who have worked on similar projects before, either within the organization (team members) or outside the organization (consultants) can assist in creating a set of appropriate risk responses.
11.6 MONITOR AND CONTROL RISKS
11.6.1. Risk reassessment
New risks are identified, current risks are reassessed as to their probability and impact, and risks that are outdated are closed (risk reserves returned to the budget).
11.6.2. Risk audits
This is an audit of the effectiveness of risk responses to make sure they are updated to reflect the new risks and current risks that were reassessed in the tool & technique mentioned in the previous paragraph.
11.6.3. Variance and trend analysis
Variance and trend analysis can reveal deviation from the baseline, which in turn may indicate the potential impact of threats or opportunities.
11.6.4. Technical performance measurement
This compares technical accomplishments such as number of defects, etc., that may help forecast the degree of technical risk faced by the project.
11.6.5. Reserve analysis
When risks occur, they have positive or negative impacts on the budget or schedule, and these are added to or subtracted from the contingency reserves. Reserve analysis compares the amount of the contingency reserves remaining to the amount of risk remaining in order to determine whether the amount of reserves is adequate.
11.6.6. Status meetings
Periodic status meetings are places where periodic risk management should take place. It is frequent discussions in a group that makes it more likely that risks and opportunities will be properly identified.
The next post will be on the Tools & Techniques associated with chapter 12 of the PMBOK® Guide covering the Procurements Knowledge Area.
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