Project Risks

Sorin Dumitrascu
A free video tutorial from Sorin Dumitrascu
Management trainer
4.3 instructor rating • 118 courses • 252,266 students

Lecture description

Define Project Risk, risk attitudes and risk response. Differentiate between risks, causes and effects.

Learn more from the full course

The Agile Methodology for Project Risk Managers

The Agile Project Management and Risk Management for Project Professionals Full Course

30:49:01 of on-demand video • Updated September 2019

  • 1. get familiar with the agile approach and learn about agile models and methodologies
  • 2. understand agile project management and the adoption of agile practices
  • 3. apply scrum management principles and manage the scrum process in action
  • 4. practice agile planning and integrate the initiation and requirements gathering activities
  • 5. employ activities specific to agile iterations planning and monitoring
  • 6. understand agile teams and manage agile team performance
  • 7. use tools for active stakeholder engagement
  • 8. manage delivery of value and quality
  • 9. understand project risk management
  • 10. identify project risks
  • 11. perform qualitative and quantitative project risk analisys
  • 12. plan project risk response
  • 13. control project risks
English [Auto] You know previous lecture I have already presented a brief definition of project risk in this lesson. You will have more details about what these and what not a project is you will have other examples of definitions and those and some more information about the causes of risk and risk impact. It's very important at this point is to make sure that the difference is between cause effect and risks are clear. Without going into the details of the risk management process as we've discussed the concept of risk exposure risk attitudes and risk response. All these ideas will give you a complete project risk definition and many definitions of risk exist in the common usage. Baby Imbolc 5 project risk is an uncertain event or condition that if it of course has a positive or negative effect on one or more of the project objectives such as Skop schedule cost and quality. In other words project risk is the possibility that something will not happen as that the international standard organization. On the other hand defiance risks very simple risks are by so the effect of uncertainty on objectives. So this is a very simple definition. The Princeton manual and other project management methodology states that the purpose of the risk is to identify assets and control uncertainty and as a result to improve the ability of the project to succeed. Therefore one conclusion can be very obvious. Project managers need to recognize in terms of risk management that all projects entail a certain degree of risk and as a result risk management plans need to be incorporated in project plans. But to go back to the definition the words uncertain and event are key. Another set of keywords is positive or negative on certain events can have a positive or negative impact on the project objectives. This technical use of the word risk differs from the ordinary and from the everyday definition of risk which tends to mean only those events which have a negative impact BMI. In this case is that there is some difference between the technical definition and the ordinary definition of the word risk because in the fifth edition of the beanball there are a lot of instances where they will use reduce risks and enhance opportunities so they acknowledge the difference in terms of opportunities. Of course being the events which impact the project positively and the risk being those which impact the project negative BMI is therefore conceding that the everyday usage of the word risk in order to emphasize the point made that you have to reduce the impact or likelihood of negative risks and the hands dose of positive events. If you are truly doing risk management the key part of the definition is the phrase if it of course is for risk that has been forecasted actually goes. It is no longer a risk it isn't congruent in project management. Risk is an uncertain event or condition that if it occurs has a positive or negative effect on one or more project objectives such as Skop schedule cost and quality risk may have one or more causes and if it occurs it may have one or more impact a cause may be therefore a given or a potential requirement assumption constraint or condition that creates the possibility of the negative or positive outcome. Causes are in this case definite events or set of circumstances which exist in the project or its environment and which give rise to uncertainties. Examples includes the requirement to implement the project in a higher risk country. The need to use an unproven new technology. The lack of skill personnel or the fact that the organization has never done a similar project before calling themselves are not uncertain since they are facts or requirements so they should not be manage. True the risk management process. And please note this for future use. As we said the causes of risk can come from various sources such as the requirement which can be a legal requirement imposed by laws or regulations and assumptions which can be the conditions in the market which may change the cost range which can be the number of personnel available to work on any given phase of the project or a condition such as the maturity of the organizations project management practices for example causes could include the requirement of an environmental permit to work or having limited personnel assigned to design the project here the risk is that the permitting agency may take longer than plans to issue a permit or in the case of an opportunity additional development personnel may become available and this personnel can participate in design and can be assigned to the project. In either of these certain events if this event occurs there may be an impact on the scope on the project on the cost on the schedule on the quality and on the performance. These unplanned variations from objectives either positive or negative arise as a result of risk occurring. Examples include being ready for a milestone exceeding the authorized budget or failing to meet contractually agreed performance targets. These are contingent events unplanned potential future variations which will not cure unless risk happens as they do not yet exist and indeed they may never exist. They cannot again be managed through the risk management process. The point here is that including causes and effects in the list of identified risks obscures Gene genuine risks which may not receive the appropriate degree of attention the attention they actually deserve. So how can we clearly separate risks from the causes and effects. There is one way and this way is to use the risk metalanguage which is a form of description. We require all elements to provide a three part structure risk statement. The structure will be as follows. As a result of and purely define the cause and you present your uncertain event Laocoon which would lead to. And then you present the effect on objective examples. Can include the following as a result of using new hardware which is very clear very defined well-defined requirements and expected system integration Aerosmith. Q Which is the risk the actual and certain risk which will lead to overspend on the budget which is the effect on the budget objectives. Another example can be because our organization has never done a project like this. You have there is a cause we might miss others too the customer requirement you have the least. And our solution will not meet the performance which is the complete risk definition which is the complete risk State risk has its origins in the uncertainty present in all the projects and therefore say that risks are inherent to all projects and there are two main types of roots. Non-nudists which are those that have been identified analyzed and now it's possible to plan who's boss responsible for these risks. There are also known risks that cannot be managed productively and they should be assigned a contingency reserve. We also have the unknown risks which are those that cannot be managed proactively and therefore may be a sign of management reserve. I think the project that has a Q is considered an issue. So identifying as many as possible is very important for effective project risk management. It is not the same. The video project risks are different from overall project risk over a project risk we present the effect of uncertainty on the project as a whole. It is more than the sum of the individual risks within the project since it includes all sources of project uncertainty. It is if you want a result of all recent uncertainty but not a star it represents the exposure of stakeholders to the implications of variations in Project outcome both both positive and negative risk exposure whether individual or for the project as a whole is the same thing as rescore. So it is calculated using the risk probability and the risk impact but we will detail this at a later stage when evaluating risks. The most significant critical success factor for effective risk management is the one most often lacking and appropriate and much to risk culture research and experience both indicate that the attitude of individuals and organizations has a significant influence on whether risk management delivers what it promises to be very clear organizations and individuals perceive risk as the effect of certainty on projects and organizational objectives and organizations and stakeholders are willing to accept varying degrees of risk depending on the risk attitude the risk attitudes of both may be influenced by a number of factors which are broadly classified into three areas. The risk appetite which is the degree of uncertainty an entity is willing to take on in anticipating of reward risk tolerance which is the degree amount of volume of risk that an organization or individual will withstand and the risk threshold which refers to measures along the level of uncertainty of the level of impact at which a stakeholder may have a specific interest below that risk threshold. The organization will accept the risk of both the risk threshold. The organization will not tolerate the risk. For example organizations risk attitude may include its appetite for uncertainty its threshold for risk levels that are unacceptable or it's restored us at which point the organization may select a different risk response. Remember here that risks that the risk has two components the certainty of an event which is measured by his probability and it's plot then shall impact on the project. The amount of uncertainty that the organization can accept is measured by its risk appetite. The amount of impact the organization can accept is measured by its risk tolerance. The combination of the uncertainty and probability can give you the amount that needs to be put aside to handle the risk. Sometimes referred to as the Reserve and the amount of reserves that the organization can accept is measured by its risk threshold. It is this little concept which will determine what kind of risk response the organization may take. Individuals and groups are adopting most of the cases responses to project risks that are influenced by their attitudes. These risk responses are driven by perception or Aransas and other biases which should be made explicit wherever possible. Moreover risk responses reflect on organizations or an individual's perception on the balance between risk taking and risk avoidance risk response is therefore a conscious choice that should be made at all levels of the organization in order to actively identify and pursue effective risk management during the life of the project. There are four possible responses to a negative risk depending on whether there is a low or high probability of this risk to occur and whether the financial impact if it does of course is either high or low. So the options would be to avoid to transfer to mitigate and to accept for opportunities also there are some specific responses we can share we can exploit that we can enhance and we can reject an opportunity but about risk response. We will discuss again in detail and we will learn how to plan and implement risk responses. Please check your resources section of this lesson in order to practice look for practice project risk definition document and follow the instructions. This is all that might be relevant about defining project risk. If you have questions please do not hesitate to ask them in the next lesson. We'll see what these risk management as the knowledge area and how this is operationalized in Project Match.