PLAN RISK MANAGEMENT

1. INTRODUCTION

Hi and welcome to the first process of the seven risk management processes plan. Risk management process number one, it’s a part of the planning phase of the project, the planning process group. It relates to the risk management knowledge area. Now it’s the process of defining how to conduct the risk management activities for a project. So in this process we are going to think in advance how we are going to conduct the risk management activities, what are the processes, how we are going to tailor the policies and procedures of the organization to fit into the project. You are managing the key benefit of this process that it ensures the degree, type and visibility of risk management are proportionate to both risks and the importance of the project to the organization and other stakeholders. The efforts you are spending on the risk management should be proportionate to the importance of the project, to the project size, to the complexity of the project, to the priority of the project. For the organization. It’s like a cost benefit analysis. You need to make sure that all the efforts spent on the risk management are bringing the desired benefit for the project.

This process is usually performed once throughout the project life or at predefined point. The aim or the benefit of this process is to develop the overall risk management strategy for the project. Also to decide how the risk management processes will be executed and to integrate the project risk management with all other project management activities. It’s the ultimate responsibility of the project manager to perform the integration and to make sure that all the risk management processes and activities are well integrated with other knowledge areas like the schedules, the course, the quality and so on. Now, what are the key objectives of performing the risk management planning? First of all, you need to create a plan for handling risk management for the project. This plan describes how the risk management processes should be carried out and how they fit in with the other project management processes. This is the first objective of this process.

You need to adopt any policies and procedures for risk to the needs of the project you are managing. You need to tailor the risk management activities to the needs of the project, determining how you will measure the success of your risk efforts, such as creating different matrix as a reference for success measurement. Once the project is completed, you need to determine the risk matrix, the success matrix, how you are going to measure your performance regarding risk management at the end of the project by using such matrix.

Remember the information for the exam, this points, specifically the risk matrix are created during the plan risk management process. Now, who is involved in the risk management planning? Usually it’s the responsibility of the project manager to direct the risk management planning process. The project team as well as the stakeholders should be involved to effectively perform risk management now usually the project management office, the PMO. It’s a department that supports project management within the organization.

Most of the organizations are having a PMO department and the PMO department might participate and have a valuable input to the risk management planning process. The Risk Management Department in some organizations, there is a separate risk management department to address the project risks. The risk Team for large projects, the project manager may require to help others in managing risk. The risk team might be managed by the risk manager or they might report directly to the project manager. Now, we have three critical success factors of the planned risk management process. The first critical success factor is to identify and address barriers to successful project risk management. The senior management of the organization responsible for the project shall recognize and accept the benefits of managing risk and the added value of addressing risks.

You cannot implement the risk management activities. You cannot assign people use resources on the risk management planning and risk management activities in general without having the support of your senior management. The senior management should recognize and accept the benefits of managing the project trust. The second critical success factor you need to involve the project key stakeholders in the project risk management activities. The major objective is to avoid any disagreements between stakeholders in the areas of risk tolerance and the evaluation measures. You need to involve the key stakeholders in the project regarding the risk management activities from the early phases on the project to avoid any disagreements. The third critical success factor you need to comply with organization objectives, policies and procedures.

The visibility of risk management planning is dependent upon the features of the organization in which it’s carried out. These are the three critical success factors for the plant risk management process. Now, what are the ITTOs? The inputs, tools and techniques and outputs for the plant risk management process? At a high level, we have only five inputs the project charter, the project management plan. All components subsidiary plans of the project management plan can be useful as an input for the planet management process.

You will need also the stakeholder registered as a part of the project documents. You will need the enterprise environmental factors and the organizational process assets. The tools and techniques will have three tools and techniques the expert judgment data analysis. Specifically, you’ll need the stakeholders analysis in addition to the meetings. The only output of the plan risk management process is the risk management plan, which will be a component of the project management plan. It’s a subsidiary plan of the project management plan. This is all as an introduction for the planned risk management process. In the following lecture, we will start the inputs of the plant risk management process. Thank you so much. I will see you on the next lecture.

2. INPUTS

Hi and we’ll come back again. So what are the inputs you will need to have before you start the plan risk management process? We will need five inputs. The most important one is the project charter document as it documents the high level project description, the high level project requirements and the high level risks as well. The project charter is an output of the developed project charter process. It’s the first process implemented of the 49 project management processes. The project charter is an important input to the plan risk management process because it contains the high level project description, high level project budget constraints and the high level project risks as well.

The second output or the second input sorry to the plan risk management process would be the project management plan as it contains all the project plans helpful for risk management such as the communications management plan schedule and cost management plan. The project scope statement as well the project management plan, all the components, all the subsidiary plans of the project management plan might be a very useful input to the plan risk management process.

The third input will be the project documents. Specifically we will need the stakeholder register. It will detail the key stakeholders and will provide you with an overview of their project roles and their attitude toward the risk on the project. It’s very important within the plan risk management process to document the risk thresholds and the risk attitudes for all the key stakeholders on the project. The stakeholder register will help you identify all the key stakeholders you need to meet with in order to find out the risk attitude and risk thresholds.

We will need also the enterprise environmental factors and the organizational process assets, the templates, the forms, the reporting formats related to the risk management, the lessons learned as well. All will be found as a part of the organization and process assets. So these are the five inputs you will need in order to start planning for the risk management on your project. Thank you so much, I will see you at the next lecture.

3. TOOLS AND TECHNIQUES

Hi and welcome back again. So what are the tools and techniques you are going to use while planning for the project risk management? First of all, the most commonly used tool in the project management process in general is the expert judgment. Judgment provided upon expertise as an application area, knowledge area of discipline as appropriate for the activity being performed. And the activity being performed right now is to plan for the project risk management so you might benefit from the expertise available within your organization.

The second technique we have the data analysis techniques category. Specifically, we are going to use the stakeholders analysis to determine the risk appetite of each stakeholder. It’s very important technique you need to perform the stakeholders analysis to determine the risk thresholds, the risk appetites and the risk tolerances for the key stakeholders on the project meetings. The risk management plan might be developed as a part of the project kickoff meeting or a specific planning meeting may be held so the risk management plan can be established as a part of the kickoff meeting which is usually performed once the planning efforts on the project are completed. For these meetings performed for the risk management planning, a skilled facilitator can help participants remain focused on the task which is the risk management planning, agree on key aspects of the risk approach, identify and overcome sources of bias and resolve any disagreements that may arise as per the project management body of knowledge.

We have these three tools and techniques for the plan risk management process and additional tools and techniques as per the risk standard practice standard for risk management published by the PMI. We have the planning sessions recommended in order to build a common understanding of the project risk approach between the project stakeholders and to gain agreement on the techniques to be used for managing risk. When the project planning sessions are very similar to the meetings I explained in the previous slide. The second tool will be the use of the templates available as a part of the organizational process assets to benefit from experience and existing best practice risk management planning should take into account relevant existing templates for, as an example, the word products, the risk rates reports, the RBS or the risk breakdown structure or the risk register. A decision should be made as to which templates are relevant to the project and these should then be adopted and a part of the risk management plan. So this is all for the tools and techniques used in the plan risk management process. Thank you so much, I’ll see you at the next lecture.

4. OUTPUTS

Hi and welcome to the outputs of the planned risk management process. Primary, we have only one output of the planned risk management. It will be the risk management plan. What’s the exact definition of the risk management plan? It’s a component of the project management plan that describes how the risk management activities will be structured and performed. This is the high level definition of the risk management plan. It’s a subsidiary plan of the project management plan. It’s a component of the project management plan. Now for the PMI RMP exam, it’s very important to memorize and understand all the sections, all the components of the risk management plan itself, which I’m going to discuss right now. First of all, we will have the section talking about the risk strategy. It defines the general approach to managing risks on the project. The general approach is represented as the strategy for dealing with the project risks. You will have also the risk methodology. It defines the specific approaches, tools, tools and data sources that will be used to perform risk management on the project. You will have the section talking about the roles and responsibilities, simply who will do what when it comes to the risk management. All the responsibilities of the risk management processes and activities would be documented. In this section, you will have the funding section as a part of the risk management plan. This section includes the cost of the risk management process.

What’s the approximate cost of the risk management activities on the project? The timing which defines when and how often the project risk management processes and activities will be performed throughout the project lifecycle. These are the first five sections of the risk management plan. Then we are going to have the risk categories looking on historical records to find lists of areas or sources of risks experienced on similar projects. You can find out the risk categories as a part of your organizational process assets. And a very common and most popular way to find out the risk categories is to look into the risk breakdown structure. It’s a very important term for the exam, the RBS, the risk breakdown structure. It’s a hierarchical representation of potential sources of risk. Here is an example of the RBS or the risk breakdown structure.

RBS level zero is the overall risk resources or sources of the project. The RBS level one might be the risk category of the technical risk. An example of the technical risk category will be the scope definition, the technical processes or the technology. You might have another category like the management risks resources, expertise, the management processes performed on the project, the organization external risks category like the exchange rates in the market, the competition and the legal issues. For example, if we have more sub risks for the legal issues, we can have the RBS level three. So it’s a hierarchy representing the risk categories. It can be very useful in the identify risks process. This is an example of the RBS the Risk PAYGROUND Structure another important section of the risk management plan is the stakeholder risk appetite.

The risk appetites for project key stakeholders are recorded in the risk management plan. Stakeholder risk appetites should be recorded and expressed in measurable risk thresholds around each project objective. It’s very important to define the risk tolerances and risk appetites for the key stakeholders on the project and to document these tolerances and thresholds and appetites in the risk management plan. You will have also the section of the reporting formats. This section describes any reports related to the risk management that will be used and what they will include the tracking section, how the risk process will be audited and the documentation of what happens with risk management activities. An important section will be the definition of probability and impact.

They are specific to the project context and reflect the risk appetite, officials of the organization and key stakeholders. It helps standardize the risk ratings and helps compare risks between projects. It’s very important to have a definition of probability and impact in each project. I will talk in detail about the definitions of probability and impact in the performed qualitative risk analysis process. For now, here is an example of the definition of probability and the impact which will be a section of the risk management plan. Arrest with a scale of very high must have a probability of plus or more than 70%, a time impact of a delay of more than six months and a cost impact of more than 5 million and a quality impact for a very significant impact on overall functionality of the final product of the project. This is a definition of a very high risk.

This is why the definitions of probability and the impact are very important. It will standardize the definitions of a very high scale risk. For example, a medium scale risk will have a 31 to 50 percentage of probability from one to three months plus $500,000 to 1 million as a cost impact and some impact in key functional areas. This is an example of the definition and probability for a project. The last component or the last section of the risk management plan will be the probability and impact matrix. Opportunities and threats are represented in a common probability and impact matrix using positive definitions of impact for the opportunities, the positive risks and negative impact definitions for the threat or the negative risks. Here’s an example of this matrix.

It will connect between the probability and the impact, negative impact for the threat and positive impact for the opportunity. This will be very useful while calculating the risk score in the subjective analysis. For example, a risk with a very high probability and a very low impact will have zero five risk score. This is how we are going to use the Pi matrix, the probability and impact matrix which shall be a part of the risk management plan. This is all as an output of the Risk Management Plan or the plan risk Management process? It’s the risk management plan. The components and sections of the Risk Management Plan are very important for the exam, myself, faith, like four or five questions, testing your knowledge and testing. If you are familiar with the components of the Risk Management Plan, you need to memorize these sections and understand them. Thank you so much. I’ll see you at the next lecture.

5. STEPS TO FOLLOW IN RISK MANAGEMENT PLANNING

Hi and welcome back again. So as a conclusion, what are the ten steps you need to follow in order to perform plan risk management process in a professional way in your practical life in project and risk management? First of all, we need to review the available risk management procedures, processes, practices, historical records and lessons learned within your organization. You don’t need to start from zero. You need to look into the organizational process assets and find out all variable information like the processes, procedures, policies and lessons learned that can be useful while planning for the risk management process.

The second step will be to define what strategy and methodology you will use for the current project in order to identify the project risks. The third step will be to determine who will be involved in risk management roles and responsibilities as a part of the risk management plan. Who will do what when it comes to the risk management activities on your project, determine how much risk efforts will cost and include these costs as a part of the project budget. The fifth step will be to determine the timing of the risk efforts throughout the project. When you are planning to perform the risk management activities on your project lifecycle, establish the definitions of probability and impact. They are very important. They should be decanted as a part of the risk management plan.

Then you need to determine the stakeholders ‘tolerances and thresholds and appetites to consider in determining which risks to act on. Determining the risk thresholds, appetites and tolerances for the key stakeholders on the project is a very important it’s actually a critical success factor for the plan risk management process. Then you need to define which risk categories will be used to identify the project risks. You can rely on the risk breakdown structure. Then you need to define how risks will be documented, analyzed subjectively and objectively and communicated to the project team and other stakeholders. The last step will be that you need to determine how you are going to track and audit and keep records of risks for use on future projects for the organizational process, assets and risk and land documentation. These are the ten steps you need to follow while planning for the risk management process. Thank you so much. I’ll see you at the next lecture.

6. SUMMARY

Hines will come back again. So as a summary of the plan risk Management Process the objective of this risk management process is to decide how to approach risk management on the project. The level, type and visibility of what’s done must be suitable with the complexity of the project, the size of the project team and the the size of the project itself, experience of the project team, perceived amount of project risks and the importance and the priority of the project for the organization implementing this project. It’s a cost versus benefit analysis. Companies should have risk policy standards and procedures so information of all projects can be interpreted properly and risk process can be completed more quickly and effectively.

You don’t need to start from zero when it comes to the risk management.

You need to review the distance learned, the organizational process assets, the current policies and procedures regarding the risk management and for the PMI RMP exam, you need to be familiar with these terms the Plan Risk Management Process the Project Management office which is part of the risk management planning team.

The Risk Management Department the Risk Management Plan document the risk team, the methodology, the strategy, the budget, the timing and the definitions of probability and impact. What are the reporting formats regarding risk management, how we are going to track the risk management efforts on your project and what are the roles responsibilities in addition to the risk breakdown structure? This is all for the plan Risk Management process. In the following lecture, you will have a quest of ten questions. I will see you once you complete this course.