Chapter 10 Project Risk Management IP
Chapter 10: Project Risk Management
Learning Objectives Understand the importance of good project risk management Understand what risk is and describe different tolerances for risk Describe each of the processes involved in project risk management Identify common sources of risk on It projects and develop strategies for reducing them Describe common risk conditions that occur in each project management knowledge area and techniques for identifying potential risks on specific projects Use tools and techniques for qualitative and quantitative risk analySIS Describe can assist in project risk management Explain the results of good project risk management 2021/2/21 IP
2021/2/21 2 Learning Objectives ◼ Understand the importance of good project risk management ◼ Understand what risk is and describe different tolerances for risk ◼ Describe each of the processes involved in project risk management. ◼ Identify common sources of risk on IT projects and develop strategies for reducing them ◼ Describe common risk conditions that occur in each project management knowledge area and techniques for identifying potential risks on specific projects ◼ Use tools and techniques for qualitative and quantitative risk analysis. ◼ Describe can assist in project risk management ◼ Explain the results of good project risk management
Chapter outline The Importance of project risk management Risk management planning Common Sources of risk on Information Technology Projects Risk Identification Qualitative risk analysis Quantitative Risk Analysis Risk Response planning Risk Monitoring and control Using Software to Assist in Project risk management Results of good project risk management 2021/2/21 △|P
2021/2/21 3 Chapter Outline ◼ The Importance of Project Risk Management ◼ Risk Management Planning ◼ Common Sources of Risk on Information Technology Projects ◼ Risk Identification ◼ Qualitative Risk Analysis ◼ Quantitative Risk Analysis ◼ Risk Response Planning ◼ Risk Monitoring and Control ◼ Using Software to Assist in Project Risk Management ◼ Results of Good Project Risk Management
10.1 The Importance of Project Risk Management IP
10.1 The Importance of Project Risk Management
Project risk Management Project risk management is the art and science of identifying assigning and responding to risk throughout the life of a roject and in the best interests of meeting project objectives Risk management is often overlooked on projects, but it can help improve project success by helping select good projects, determining project scope, and developing realistic estimates 2021/2/21 AP
2021/2/21 5 Project Risk Management ◼ Project risk management is the art and science of identifying, assigning, and responding to risk throughout the life of a project and in the best interests of meeting project objectives ◼ Risk management is often overlooked on projects, but it can help improve project success by helping select good projects, determining project scope, and developing realistic estimates
Project Management Maturity by Industry Group and Knowledge Area KEY: 1= LOWEST MATURITY RATING, 5= HIGHEST MATURITY RATING KNOWLEDGE AREA ENGINEERING/ TELECOMMUNICATIONs INFORMATION HI-TECH CONSTRUCTION SYSTEMS MANUFACTURING Scope 3.52 3.45 3.25 3.37 Time 3.55 3.41 3.03 3.50 Cost 3.74 3.22 3.20 3.97 Quality 2.91 3.22 2.88 3,26 Human Resources 3.18 3.20 2.93 3.18 Communications 3.53 3.53 3.21 3.48 Risk 2.93 2.87 2.75 2.76 Procurement 3.33 3.01 2.91 3.33 Ibbs, C. william and Young Hoon Kwak. Assessing Project Management Maturity, Project Management Journal (March 2000) 2021/2/21 IP
2021/2/21 6 Project Management Maturity by Industry Group and Knowledge Area
What is Risk? a dictionary definition of risk is the possibility of loss or injur Project risk involves understanding potential problems that might occur on the project and how they might impede project success Risk management is like a form of insurance it is an investment 2021/2/21 IP
2021/2/21 7 What is Risk? ◼ A dictionary definition of risk is “the possibility of loss or injury” ◼ Project risk involves understanding potential problems that might occur on the project and how they might impede project success ◼ Risk management is like a form of insurance; it is an investment
Why Take Risks? Because of Opportunities Try to balance risks and opportunities Risks Opportunities 2021/2/21 s△|P
2021/2/21 8 Why Take Risks? Because of Opportunities! Risks Opportunities Try to balance risks and opportunities
Risk Utility a Risk utility or risk tolerance is the amount of satisfaction or pleasure received from a potential payoff Utility rises at a decreasing rate for a person who is risk-averse Those who are risk-seeking have a higher tolerance for risk and their satisfaction increases when more payoff is at stake The risk neutral approach achieves a balance between risk and payoff 2021/2/21 △|P
2021/2/21 9 Risk Utility ◼ Risk utility or risk tolerance is the amount of satisfaction or pleasure received from a potential payoff ◼ Utility rises at a decreasing rate for a person who is risk-averse ◼ Those who are risk-seeking have a higher tolerance for risk and their satisfaction increases when more payoff is at stake ◼ The risk neutral approach achieves a balance between risk and payoff
Risk Utility Function and Risk Preference Risk-Averse Risk-Neutral Risk-Seeking utility utility utility potential payoff potential payoff potential payoff 2021/2/21 sOAP
2021/2/21 10 Risk Utility Function and Risk Preference
