More Related Content Similar to Lessons in Project Management - 4 - Risk Management (20) More from Habermann Frank (6) Lessons in Project Management - 4 - Risk Management2. © Becota GmbH | www.becota.com | 2010
Which kinds of risk would you take?
What actually is a risk?
The process of risk management
– Identifying
– Prioritizing
– Responding
When does risk management have to happen?
Content
3. © Becota | www.becota.com | 2010
No risk, no fun?
http://www.hosae.ch/blog/wp-content/uploads/2009/08/Desktop-Hintergrund.bmp
4. © Becota | www.becota.com | 2010
Would you take the …
Picture source: http://monkeysjumping.com/wealthy-baker/
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Would you climb a montain?
Picture source: http://www.vorsorgefachmann.info/images/risiko.png
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Would you ride a motorbike?
7. © Becota | www.becota.com | 2010
Would you dive with a shark?
Picture source: National Geographic, Photo by David Doubilet
8. © Becota | www.becota.com | 2010
Would you tease an alligator?
Picture source; pix.motivatedphotos.com/2009/4/9/
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Would you jump?
Picture source: http://farm4.static.flickr.com/3306/3298473550_a9fa13ea33_o.jpg
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With our without risk management?
Without With
Picture source: adapted from www.mattwardman.com/blog/
Gerald preferred the latter!
11. © Becota | www.becota.com | 2010
what
actually is
a
risk?
12. © Becota | www.becota.com | 2010
What is a risk?
Picture source: www.iamthewitness.com/books/img/Benjamin.Franklin.jpg
“The only thing certain
in life is death and taxes”
(Benjamin Franklin)
13. © Becota GmbH | www.becota.com | 2010
What is a project risk?
Life is riskful!
Illness
Accidents
Crime
Loss
etc.
R
R
R
LIFE
14. © Becota GmbH | www.becota.com | 2010
What is a project risk?
Life is riskful!
Business is riskful!
-> it‘s just a special
part of life with
particular risks
R
R
R
R
R
LIFE
BUSINESS
15. © Becota GmbH | www.becota.com | 2010
What is a project risk?
Life is riskful!
Business is riskful!
Business projects are riskful!
R
R
R
R
R
R R
LIFE
BUSINESS PROJECT
16. © Becota GmbH | www.becota.com | 2010
What is a project risk?
Life is riskful!
Business is riskful!
Business projects are riskful!
Projects have to cope
with general risks (of life
and business) as well as
with project-specific risks
R
R
R
R
R
R R
LIFE
BUSINESS
exogenous
project risks
endogenous
project risks
PROJECT
17. © Becota | www.becota.com | 2010
and what
is project
risk
management
?
18. © Becota | www.becota.com | 2010
Mastering the „what happens next“ machine
Source: www.youtube.com/watch?v=cog2a3YeDMM
19. © Becota | www.becota.com | 2010
Project risk management is
systematically dealing with project risks
Picture source: www.schueddekopf-gmbh.de/aktuell/_img/unfall_mensch.jpg
20. © Becota | www.becota.com | 2010
Project risk management is
systematically dealing with project risks
find likely events
and their potential impacts
Picture source: www.schueddekopf-gmbh.de/aktuell/_img/unfall_mensch.jpg
IDENTIFY
21. © Becota | www.becota.com | 2010
Project risk management is
systematically dealing with project risks
find likely events
and their potential impacts
Picture source: www.schueddekopf-gmbh.de/aktuell/_img/unfall_mensch.jpg
analyze probability of events
and severity of potential damage
IDENTIFY
PRIORITIZE
22. © Becota | www.becota.com | 2010
Project risk management is
systematically dealing with project risks
find likely events
and their potential impacts
Picture source: www.schueddekopf-gmbh.de/aktuell/_img/unfall_mensch.jpg
analyze probability of events
and severity of potential damage
develope scenario /action plans
establish reserves and monitor
IDENTIFY
PRIORITIZE
RESPOND
23. © Becota GmbH | www.becota.com | 2010
We differentiate two major types of risks
IDENTIFY
PRIORITIZE
RESPOND
24. © Becota GmbH | www.becota.com | 2010
KNOWN-UNKNOWNS
– Something we know EXISTS but we
don‘t know when it will happen and
how severe the consequences will be
We differentiate two major types of risks
IDENTIFY
PRIORITIZE
RESPOND
25. © Becota GmbH | www.becota.com | 2010
KNOWN-UNKNOWNS
– Something we know EXISTS but we
don‘t know when it will happen and
how severe the consequences will be
We differentiate two major types of risks
IDENTIFY
PRIORITIZE
RESPOND
26. © Becota GmbH | www.becota.com | 2010
KNOWN-UNKNOWNS
– Something we know EXISTS but we
don‘t know when it will happen and
how severe the consequences will be
UNKNOWN-UNKNOWNS
– Something which has NEVER HAPPENED
before and thus cannot be anticipated,
neither qualitatively nor quantitatively
We differentiate two major types of risks
IDENTIFY
PRIORITIZE
RESPOND
27. © Becota GmbH | www.becota.com | 2010
What are the sources of risks?
IDENTIFY
PRIORITIZE
RESPOND
Remember lecture#2: project stakeholders, team and environment
Remember lecture#3: scoping and contracting
Remember endogenous and exogenous risks
28. © Becota GmbH | www.becota.com | 2010
What are the sources of risks?
IDENTIFY
PRIORITIZE
RESPOND
Remember lecture#2: project stakeholders, team and environment
Remember lecture#3: scoping and contracting
Remember endogenous and exogenous risks
Initial checklist for risk management:
- Do you know all major stakeholders?
- Particularly, do you know your customer(s)?
- Have you organized senior management support?
- Are there significant conflicts you are aware of?
- Are all requirements and goals clearly defined?
- Is the project scope realistic and managable?
- Do you have a clear contract undersigned?
- Are all agreed resources in place?
29. © Becota GmbH | www.becota.com | 2010
What are the sources of risks?
IDENTIFY
PRIORITIZE
RESPOND
Remember lecture#2: project stakeholders, team and environment
Remember lecture#3: scoping and contracting
Remember endogenous and exogenous risks
Initial checklist for risk management:
- Do you know all major stakeholders?
- Particularly, do you know your customer(s)?
- Have you organized senior management support?
- Are there significant conflicts you are aware of?
- Are all requirements and goals clearly defined?
- Is the project scope realistic and managable?
- Do you have a clear contract undersigned?
- Are all agreed resources in place?
As long as you answer with a single „no“ or „not sure“,
you better not start the project!
30. © Becota | www.becota.com | 2010
All fields of expertise are sources of risks
IDENTIFY
PRIORITIZE
RESPOND
Management
risks
Social
risks
Domain-specific
risks
Environmental
risks
RISK
PROFILE
31. © Becota | www.becota.com | 2010
All fields of expertise are sources of risks
IDENTIFY
PRIORITIZE
RESPOND
Management
risks
Social
risks
Domain-specific
risks
Environmental
risks
RISK
PROFILE
Budget
Schedule
Org. Structure
Methods & Tools
etc.
Team
Motivation
Communication
Trust
etc.
Region
Industry
Technology
Standards
etc.
Culture
Politics
Economy
Corporation
etc.
32. © Becota GmbH | www.becota.com | 2010
Distributed teams
Various languages
Different measures
Different technical standards
Reliability of infrastructure (technology, transport, etc.)
Ethnical and religious differences
Social violence and instability
Prejudice and nationalism
Different business practices and rules
Different feeling for time and punctuality
Different attitude towards risk in general
Divergent competency profiles and certificates
Government involvement and control
Legal basis (multiple national laws)
Different currencies, levies, and taxes
Intellectual property rights
Corruption
Environmental safety
Climate
Sources of risks which are
immanent to international projects
IDENTIFY
PRIORITIZE
RESPOND
33. © Becota | www.becota.com | 2010
Methods for identifying risks
IDENTIFY
PRIORITIZE
RESPOND
34. © Becota | www.becota.com | 2010
Methods for identifying risks
IDENTIFY
PRIORITIZE
RESPOND
THINK (ALONE)
Look for risk sources
Identify crucial stakeholders
Develop risk categories / profiles
Prepare interviews
35. © Becota | www.becota.com | 2010
Example risk profile questions
Source: Verzuh, E., The Fast Forward MBA in Project Management, p. 102
36. © Becota | www.becota.com | 2010
Methods for identifying risks
IDENTIFY
PRIORITIZE
RESPOND
THINK (ALONE)
INTERVIEW OTHERS (1:1)
Q
A
Consult the key stakeholders
Verify relevance /completeness
Identify further interviewees
Summarize results
37. © Becota | www.becota.com | 2010
Methods for identifying risks
IDENTIFY
PRIORITIZE
RESPOND
THINK (ALONE)
INTERVIEW OTHERS (1:1)
Q
A
ORGANIZE WORKSHOPS
Connect people
Discuss multiple perspectives
Identify individual risk events
Find a common understanding
38. © Becota | www.becota.com | 2010
Now that you‘ve spotted a risk – how dangerous is it?
IDENTIFY
PRIORITIZE
RESPOND
39. © Becota | www.becota.com | 2010
Now that you‘ve spotted a risk – how dangerous is it?
IDENTIFY
PRIORITIZE
RESPOND
Picture source: www.dirjournal.com
40. © Becota | www.becota.com | 2010
The IPRA* matrix for analyzing risks
IDENTIFY
PRIORITIZE
RESPOND
Probability
(likelyhood of
occurence of the event)
Impact
(severity of
the damage)
low risk
high risk
*IPRA = International Project Risk Assessment
41. © Becota | www.becota.com | 2010
The IPRA matrix for analyzing risks
IDENTIFY
PRIORITIZE
RESPOND
Probability
(likelyhood of
occurence of the event)
Impact
(severity of
the damage)
You can work
with a scaled
approach (here
3 categories)!
low
medium
high
low medium high
42. © Becota | www.becota.com | 2010
The IPRA matrix for analyzing risks
IDENTIFY
PRIORITIZE
RESPOND
Probability
(likelyhood of
occurence of the event)
Impact
(severity of
the damage)
1 3 5
3 9 15
5 15 25
You can even
apply weights
and quantify
risks
low
medium
high
low medium high
43. © Becota | www.becota.com | 2010
Example risk analysis
Source: Verzuh, E., The Fast Forward MBA in Project Management, p. 106
IDENTIFY
PRIORITIZE
RESPOND
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Now that you know the risk … what will you do?
IDENTIFY
PRIORITIZE
RESPOND
45. © Becota | www.becota.com | 2010
Now that you know the risk … what will you do?
IDENTIFY
PRIORITIZE
RESPOND
Picture source: http://i.dailymail.co.uk/i/pix/2010/01/07/
46. © Becota | www.becota.com | 2010
Your attitude determines your action
IDENTIFY
PRIORITIZE
RESPOND
Whatever I do,
I will always
survive!
Picture sources: www.beaconmultimedia.com/images
47. © Becota | www.becota.com | 2010
Your attitude determines your action
IDENTIFY
PRIORITIZE
RESPOND
Whatever I do,
I will always
survive!
Whatever I do,
This project
will kill us!
Picture sources: www.beaconmultimedia.com/images http://revnyou.files.wordpress.com/2008/11/
48. © Becota | www.becota.com | 2010
thinking in
worst-scenarios
ignoring chances
neither efficient
nor effective
thinking in
best-scenarios
ignoring risks
naive and/or
irresponsible
Your attitude determines your action
IDENTIFY
PRIORITIZE
RESPOND
Picture sources: www.beaconmultimedia.com/images http://revnyou.files.wordpress.com/2008/11/
too optimistic too pessimistic
49. © Becota | www.becota.com | 2010
thinking in
worst-scenarios
ignoring chances
neither efficient
nor effective
thinking in
best-scenarios
ignoring risks
naive and/or
irresponsible
Your attitude determines your action
IDENTIFY
PRIORITIZE
RESPOND
Picture sources: www.beaconmultimedia.com/images http://revnyou.files.wordpress.com/2008/11/
too optimistic too pessimistic
be
REALISTIC
CONFIDENT
MEASURED
50. © Becota GmbH | www.becota.com | 2010
TO BE KEPT IN MIND:
Sometimes financial interests are
stronger than honest risk assessment,
particularly in politics, i.e.
big money determines action, e.g.
- Genetic research
- Nuclear energy
- Global warming, etc.
In other cases people are guided by
strong social, cultural and other values, e.g.
- Daily routines and work habits
- Equal rights for men and women, etc.
… and what determines our attitude?
IDENTIFY
PRIORITIZE
RESPOND
51. © Becota | www.becota.com | 2010
Major strategies of responding to risk
Picture source: http://wilderdom.com/images/RiskPeanuts2.jpg
52. © Becota | www.becota.com | 2010
Five major response strategies
1- Accept
IDENTIFY
PRIORITIZE
RESPOND
Understand the risk but take no preparations
React, if it occurs (if costs are small, solve the problem)
Alternatively, just live with the damage
Applicable only for minor risks!
http://www.onlinemalerei.de/scherbenhaufen3.jpg
53. © Becota | www.becota.com | 2010
Five major response strategies
2- Exclude
IDENTIFY
PRIORITIZE
RESPOND
Avoid major risks by excluding those from your project
Hand the riskful task over to another project
Has to happen in the scoping phase
Down-scaling a project has limitations!
http://www.allseasonstentrental.com/fence.jpg
54. © Becota | www.becota.com | 2010
Discussion:
What are the limits of down-scaling your project?
Picture source: http://wilderdom.com/images/RiskNotTakingRisksCartoon.jpg
„We‘ve considered every potential risk except
the risk of avoiding all risks“
55. © Becota | www.becota.com | 2010
Five major response strategies
3- Transfer
IDENTIFY
PRIORITIZE
RESPOND
Externalize responsibility for potential damages by
purchasing insurance, external consultants/experts, etc.
Hiring externals has it‘s own risks (legal stuff, liability, etc.)
Transferring risks is expensive!
http://pmstudent.com/wp-content/uploads/hand-over-keys.jpg
56. © Becota | www.becota.com | 2010
Five major response strategies
4- Prepare alternative action
IDENTIFY
PRIORITIZE
RESPOND
Consider alternative courses and remedy
Have a plan B for important risks (contingency plan)
Install project buffer (extra time and money)
Continuously monitor the project‘s main risks!
Picture source: http://picture.funnycorner.net/funny-pictures/5179/In-case-of-fire.jpg
57. © Becota | www.becota.com | 2010
Five major response strategies
5- Mitigate
IDENTIFY
PRIORITIZE
RESPOND
Any feasible action to minimize or eliminate the risk,
intensively involving all available technological,
human and organizational resources
Reasonable for highly critical solutions!
Picture source: http://desktopwallpaper-s.com/wallpapers/19/Rain_Umbrellas.jpg
58. © Becota | www.becota.com | 2010
When
does
risk management
have to happen?
59. © Becota | www.becota.com | 2010
Risk management takes place during the entire projectRISKMANAGEMENTEFFORT
TIME
Pre-Project Main Project
60. © Becota | www.becota.com | 2010
Risk management takes place during the entire projectRISKMANAGEMENTEFFORT
TIME
Pre-Project Main Project
Kick-off Plan approved
Testing/Piloting
completed
3 crucial situations
(points of no return …
-> or „expensive“ return)
61. © Becota | www.becota.com | 2010
Risk management takes place during the entire projectRISKMANAGEMENTEFFORT
TIME
Pre-Project Main Project
Kick-off
Testing/Piloting
completed
Plan approved
62. © Becota | www.becota.com | 2010
Risk management takes place during the entire projectRISKMANAGEMENTEFFORT
TIME
Pre-Project Main Project
Kick-off
Testing/Piloting
completed
continuous project risk management
extra
effort
(planning)
extra
effort
(releasing)
extra
effort
(shaping
the
business
case)
Plan approved
63. © Becota | www.becota.com | 2010
Why do we spend these extra efforts?
COST/EFFORT
TIME
Crucial decision
(„point of no return“)
effort put in
risk management
Cost of changes /
corrections
64. © Becota GmbH | www.becota.com | 2010
Estimating means forecasting
the project future (time & money)
„Projects are unique –
uniqueness means
entering unknown fields“
Questions you should ask yourself:
Do you, as the project manager, know all the
team members?
Have you worked with them before?
Do they know each other and have they
worked together before?
Which project risks have you identified and to which
extent do these risks impact your estimates regarding
project time and resources?
65. © Becota | www.becota.com | 2010
Over the time estimating becomes easier …
TIME
Pre-Project Main Project
KNOWLDGE GAINED
66. © Becota | www.becota.com | 2010
Over the time estimating becomes easier …
TIME
Pre-Project Main Project
KNOWLDGE GAINED
ballpark
figures
67. © Becota | www.becota.com | 2010
Over the time estimating becomes easier …
TIME
Pre-Project Main Project
KNOWLDGE GAINEDRFI/RFP
figures
ballpark
figures
68. © Becota | www.becota.com | 2010
Over the time estimating becomes easier …
TIME
Pre-Project Main Project
KNOWLDGE GAINED
Planning
details
ballpark
figures
RFI/RFP
figures
69. © Becota | www.becota.com | 2010
Finally, even risk management is riskful…
Picture source: http://wilderdom.com/images/RiskSharpEdgesSign.jpg
70. © Becota | www.becota.com | 2010
… but your project is your baby …
and timely precautions are better than late therapies
Picture source: www.siloah.de/siloah/content/kliniken_und_institute/frauenklinik/
71. Thank you very much!
presentation by
Frank Habermann
founder of Becota and Professor of Business
http://de.linkedin.com/in/frankhabermann/en
72. If you have enjoyed this presentation,
please let us know!
You can download this file from the
Berlin Consulting Forum
-> join the forum at http://consultingforum.becota.org
-> visit our corporate website at http://www.becota.com