IT Project management Topic: Project Risk Management INSTRUCTOR: SHU LIU HIT SCHOOL OF SOFTWARE Fall 2005 All rights reserved
Topic: Project Risk Management IT Project Management INSTRUCTOR: SHU LIU HIT SCHOOL OF SOFTWARE Fall 2005 All rights reserved
IT Projectmanagement Outline a What is Risk? What is Project Risk Management? Project risk management Processes Risk management planning Risk identification Qualitative risk analysis Quantitative risk analysis Risk response planning Risk monitoring and control Project Integration Management 2
Project Integration Management 2 Outline ◼ What is Risk? ◼ What is Project Risk Management? ◼ Project Risk Management Processes: ◼ Risk management planning ◼ Risk identification ◼ Qualitative risk analysis ◼ Quantitative risk analysis ◼ Risk response planning ◼ Risk monitoring and control IT Project Management
IT Projectmanagement What is risk? aa dictionary definition of risk is “ the possibility of loss or injury” The question is how to minimize the possibility of loss or injury a Risk Management Project Integration Management 3
Project Integration Management 3 What is Risk? ◼ A dictionary definition of risk is ◼ “the possibility of loss or injury” ◼ The question is how to minimize “the possibility of loss or injury” ◼ Risk Management IT Project Management
IT Projectmanagement Risk Management a Risk management is an investment There are costs associated with identifying risks analyzing those risks, and establishing plans to mitigate those risks Those costs must be included in cost, schedule, and resource planning a Organizations take risks to benefit from potential opportunities Project Integration Management
Project Integration Management 4 Risk Management ◼ Risk management is an investment ◼ There are costs associated with identifying risks, analyzing those risks, and establishing plans to mitigate those risks. ◼ Those costs must be included in cost, schedule, and resource planning. ◼ Organizations take risks to benefit from potential opportunities IT Project Management
IT Projectmanagement Risk Utility a Risk utility or risk tolerance is the amount of satisfaction or pleasure received from a potential payoff Risk-averse people do not like to take risks Risk-seekers 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 Project Integration Management
Project Integration Management 5 Risk Utility ◼ Risk utility or risk tolerance is the amount of satisfaction or pleasure received from a potential payoff ◼ Risk-averse people do not like to take risks. ◼ Risk-seekers 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 IT Project Management
IT Projectmanagement Risk Utility function and risk preference Risk-Averse Risk-Neutral Risk-Seeking utill utili potential payoff potential payoff potential payoff Project Integration Management
Project Integration Management 6 Risk Utility Function and Risk Preference IT Project Management
IT Projectmanagement The Importance of 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 Project Integration Management
Project Integration Management 7 The Importance of 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 IT Project Management
IT Projectmanagement The Importance of Project Risk Management Risk management is often overlooked on projects but it can help improve project success by helping select good projects determining project scope developing realistic estimates KPMG Study found that 55 percent of runaway projects did no risk management at all Project Integration Management
Project Integration Management 8 The Importance of Project Risk Management ◼ Risk management is often overlooked on projects, but it can help improve project success by ◼ helping select good projects ◼ determining project scope ◼ developing realistic estimates ◼ KPMG study found that 55 percent of runaway projects did no risk management at all IT Project Management
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 Managenent Journal(March 2000) Project Integration Management
Project Integration Management 9 Project Management Maturity by Industry Group and Knowledge Area
IT Projectmanagement Project Risk Management The goal of project risk management is to minimize potential risks while maximizing potential opportunities Major processes include Risk management planning Risk identification Qualitative risk analysis Quantitative risk analysis Risk response planning Risk monitoring and control Project Integration Management
Project Integration Management 10 Project Risk Management The goal of project risk management is to minimize potential risks while maximizing potential opportunities. Major processes include: ◼ Risk management planning ◼ Risk identification ◼ Qualitative risk analysis ◼ Quantitative risk analysis ◼ Risk response planning ◼ Risk monitoring and control IT Project Management
