Shared Flashcard Set


Risk Management Final Exam
UCLA Extension Project Risk Management

Additional Management Flashcards




Two Methods of Root-Cause Analysis
Brainstorming; Fishikawa
Root-Cause Analysis Goal
To determine and analyze the Cause/s and Effect/s of each Risk: generally ONE effect at a time

Select risks considered significant based on Risk Register
what do you do with the identified Root Causes
You create a plan of action to deal with them, or you record the analysis for lessons learned
Risk Response Planning
Dealing with EFFECT
Contingency Planning
(Contingent Response) Planning – when done in advance
best for unacceptable residual risks and for serious problems where all other approaches are too expensive, impractical, unknown, ...
A Contingency Plan is Planned in advance of the occurrence of the risk event
Calculation using P & I
to create a contingency for time or money
Contingency Plan - How/ Application
Develop Recovery Plan
Develop Fallback Plan (plan “B”)
Assign Risk Owner
Monitor Risk Trigger
Respond Quickly
Continual Sensible Evaluation: Progressive Elaboration
Contingency Application/ Action Plan
-Who – Owner of the risk: person assigned to deal with it.
-What –Specific actions/activities to achieve the Action Plan.
-When – Target completion / deadline for the Action Plan activities.
-How – resources (people, tools, equipment, money...) needed
-Why – Eliminate/mitigate/transfer/Exploit, Accept… the risk
how can you use contractual agreement to respond to a risk
Develop Risk Contractual Agreements --- examples

A Major Risk Transfer Strategy: Contracts – auto insurance, etc.
Pay contractors to perform high-risk activities: experts!
RBS – what is it and where do you include it and why?
RBS= a heirarchical representation of risks according to their risk categories, you use it during project planning and you can produce a go or no go from the results, and also determine which risks to create contingencies for and which risks just to monitor.
Workaround Vs Contingency
Workaround: A response to a threat that has occurred, for which a prior response had not been planned or was not effective. Contingency: An event or occurrance that could affect the execution of the project that may be accounted for with a reserve
Project Level Risk v. Activity Level Risk
Activity Risks – WBS-level (work package) risks: trench, nuts-&-bolts, micro-view
Project Risks – Overall (holistic) project risks: looking at the entire project (macro-view), global view
Sources of Project Risks: See the Standish Report
(a) Lack of User Involvement
(b)Unrealistic Constraints. E.g. Top-Down estimates
(c) Limited or Inaccurate Metrics Used for Estimates
(d) Lack of Competent PMs
(e) Inadequate Requirements: Scope Gap
(f) Poor or Insufficient Change Management: Scope Creep
(g) Oversized Projects
(h) Poor or No Support / Sponsorship
STANDISH REPORT: They are actually impossible, they are overconstrained (challenged); they are poorly managed
Aggregating Risk Responses
Risk Responses are the planned actions to be taken to deal with risks. These actions need to be aggregated for combined result.
-Assess and Prioritize all Project Risks.
-Select the top (most severe) X risks.
-Determine the required response for each risk.
-Accumulate Consequences of Contingency Plans in Cost -and/or Schedule and Multiply by Probability.
-Compare with PERT estimates minus the Most likely Activity Estimates (i.e.. te – tm; Ce-Cm).
-Aggregate the responses to get total Contingency.
NOTE: Aggregation of activity risks to obtain project risks is inaccurate due to non-consideration of the correlation between project risks.
Management Reserve Vs Contingency Reserve
Contingency Reserve: Budget within a cost baseline or performance measurement baseline that is allocated for identified risks that are accepted and for which contingent or mitigating responses are developed.

Management Reserve: An amount of the project budget witheld for management control purposes. These are budgets reserved for unforeseen work that is within the scope of the project. THe management reserve is not included in the project measurement baseline.
Negotiating constraints: Fact Based negotiation
Provide Definition & Planning Documents
Provide High-level Objectives Summary, Milestones Project Schedule, High-level WBS, Project Appraisal, Summary of Major Risks & Assumptions, & other summary supporting documents based on WBS and Historical Information, Quotes,…
Schedule Meeting w/Sponsor
Present a Summary of Bottom-up Planning Results (WBS, etc)
Negotiate Deviations from Original Requested Project Constraints (objectives)
Request “Anything” and Provide Justification
Present Data /Hard Facts /Studies /History Docs
Know the Work, take SME, or Get Prep from SME.
Negotiate…”Getting to Yes”…use win-win Concepts.
Know your sponsor: should you ask for 50% more?
Include all contingencies and reserves and be firm.
Consider & Present Alternatives w/Pros and Cons using Bottom-up Plan
Are the Objectives (Constraints) Realistic
Consequences of Each Decision – effect/s on the other constraints
Do not Accept Additional Unanalyzed Work
Result of Fact Based Negotiation
Results of Negotiations
Choose objectives at or Close to Planning Results
Abandon the Project Based on Realistic Analysis of the Work and Risks
Postpone decision to when compelling data is available-postponing decision may be due to on-the-spot Scope Change
If forced to take as demanded (rejection of fact based negotiation)
Document Situation and Your Recommendations.
Work Hard to Make it Happen or Look for Another Job.
Remind the Sponsor of this Challenge: be constructive.
Refuse to do the project --- PMBOK
Unknown Risks and Risks of lowest priority…what to do with them
- create a management reserve
- assign a team member to monitor the determined risk trigger for low priority risks
Analysis of Project Scale: what it is, its goal, what is used for
Goal of this analysis: to weigh overall anticipated EFFORT in the project plan in order to:
Classify each project on three levels of risk (low, normal, medium) based on its anticipated effort in comparison with earlier (previous) SUCCESSFUL (or failed) projects
Analysis of Project Scale: How is it done
(1) Determine total EFFORT from Bottom-up project plan (e.g. WBS, schedule, cost, Quality,…)
(2) Compare this scale with several, recent, similar projects (their efforts)
Adjust data using staffing levels, project duration (schedule), overtime,…
Calculate the Average (Mean)
Determine the Risk level based on 3 Criteria:
Low Risk if <60%
Normal Risk if between 60% and 120%
High Risk if >120%
Adjust the Results: Raise the Risk Level to the next higher level if:
Schedule is significantly compressed in the new project
Project must use NEW technology
40% of the resources are either External or Unknown
Project Appraisal: what it is, its goal, what is used for
Same principle used in interview-rating and in car, jewelry, home, art,…appraisal.
Goal is to determine (calculate) the EFFORT required to get the project completed successfully.
Project Appraisal: How is it down
Start with previously completed SUCCESSFUL (or failed) Project
Evaluate and/or Convert Features to Effort-months, Effort-years, Effort-days, Effort-hours. Features used must be relevant to new project and must relate to Triple Constraints.
Adjust Efforts up or down: based on available or missing feature/s.
Find and use similar projects that mirror the new project as much as possible in order to only make minor adjustments in Effort value.
(Adjustments: small differences: use +- 2 to 5%; Larger Differences: +- 7 to 10%)
Project Metrics: Predictive
Predictive – use of current information to provide insight into future conditions. Least reliable – based on speculative data. (stock market). E.g. ROI
Used for Early Warning Sign of Potential Project Risk
Helps you anticipate problems: compare metrics with past success
Can reveal enough correlations among various projects, helping the prediction of risks
Not reliable: 80% of work is in 20% of time near project end
Use of Project Appraisal Results
Determine if your Preliminary Plan is REALISTIC (the R in BARF): used for plan validation.
If Appraised Value is Greater than Bottom-up Value by over 10%, find out WHY?
New Project Efforts Estimate must be higher than average appraised value or Gap(s) exist(s)
Provides early warning of possible budget over-run
***Risks accounted for in the new project from the old projects make Efforts in new Greater than Efforts in Old. These risks include UNKNOWS that became Known and were dealt with. These include Contingency plans and other risk recovery efforts.
**Project Risk Management: helps achieve objectives
Discussions with Sponsor for options, trade-offs, changes to over-constrained project: supports .
Project Metrics; Diagnostic
assess state of ongoing process and may detect anomalies or forecast future problems
EVM is an example of Diagnostic Metrics. EVM is used to determine whether the project is progressing as planned.
Project Metrics: Retrospective
after the fact on HOW the process worked.
Looks backward.
Tracks trends.
Validates Methods used for Predictive Metrics
Identifies Recurring Sources of Risk
Sets Standard for Reserves (schedule &/or Budget)…Management Reserves
Determines Empirical Expectations for “Unknown” Project Risk
Decides when to Improve or Replace Current Project Processes
Output: Lessons Learned.
Project Metrics: Financial
ROI – based on the Time-Value of Money. i.e. money today is worth more than the SAME quantity of money in the future. Interest rate and Time are main factors.

Payback Analysis (break-even time, payback period, ...)

NPV – net present value
Another method to measure ROI
Includes all the costs and all the anticipated benefits throughout the expected life of the project deliverable(s): determine costs and benefits separately over various points in time.

IRR – internal rate of return
Kick-off Meeting: definition and benefits
Get-Acquainted Workshop/s: by conference; Best face-to-face
Build Team Cohesion
Introduce people & Rolls: Escalation & Updates
Important especially for long projects
Common project understanding at high level
Key outputs: communications chain; escalation path;…
Management Reserve – Budget and Schedule. Use in reporting
One help we need is Management Reserve
Management Reserve: Time, Budget or BOTH are based on unexpected risk
Required for credit budget and schedule.
Project-level risk is used to define the size of the management reserve (a project-level item).
***Project objectives (constraints) are set with ranges determined by project-level risk assessment.
Schedule Reserve for Known Risks - based on Contingency
Simplest Approach:
-Determine Required Completion Date; e.g. 40 months
-Determine Expected Schedule Reserve Risk Exposure; e.g. 10 months
-Develop a Schedule to Finish Earlier; e.g. 30 months
(“DUMMY Activity” = Allowance for Risk) = 10 months

B) Use PERT Values Tp and Tm:
Schedule Reserve = Schedule Using Tp – Schedule Using Tm

Your Project will Use Tm to Manage the Project.
If You Need the Reserve, Request it FORMALLY with Justification!!!

C)Use Data from Contingency Plans.
Aggregate (accumulate) Activity Risk Effects on Schedule.
Use Project Plans (WBS, Bottom-up,…) as Target Completion Date.
Communicated Schedule Deadline is the date with Contingency Data (Risk Data) INCLUDED. Use the cumulative expected contingency of having to use the Contingency Plan.
Communicated Deadline = (Risk) Schedule based on Contingency-Plan-Data
Target Completion Date = Project-Plan-Based Schedule (WBS, Bottom-up,…)

(D) Schedule Reserve Amount for UNKNOWN Risks:
PERT based on Previous “Unknown” Risks Typical to Type of Project
Monte Carlo Simulations
Expected Distributions
Use Tm for early end date
Use Tp for late end date based on Stakeholder Risk Tolerance
Budget Reserve for Known Risks- based on Contingency
Part of Resource Reserve
Determined and Set Using Resource Analysis & Risk Data
Amount Estimated Similarly Like Schedule Reserve (i.e. from analysis of known risks using worst cases, contingency plant, or budget analysis)
Estimate for UNKNOW Risks uses Metrics derived from Previous projects
Strictly for Risks
Easier to Manage than Schedule Reserve: time elapses compared to just asking for more money
How to guard against Parkinsons Law
Set a window of time when project activity MUST be completed
Apply Discipline to Achieve this
Have other(s) Help You Enforce this: Accountability!!!
Set up a REWARD: Appropriate and Commensurate
Plan a Celebration for EACH Milestone
Plan to Celebrate Unused Schedule Reserve at Project End
PMO to Monitor Project Manager’s Use of Reserve: Accountability
Regular Report Just like Budget
Change Request Management/Steps: to avoid Scope Creep
Justify the Change (based on what information you have even if you DISAGREE): Help Make Their Case IF…
Best if Requestor Submits the Change: justification and resultant denial may not look good for PM
Estimate Benefits / Cost from the Change
Determine Impact on Triple Constraints

Strive to PREVENT Change Unless:
Has Credible Business Basis
Cannot be Limited
Cannot be Deferred to ANOTHER/Separate Project
Communicate/Show Specific Resources and ACTION Required for the Change.

Analyze Impact: Triple Constraints, Subjective Consequences & Unquantifiable Impacts
Rate Impact of the Change: small, medium, major….based on your company’s standard, e.g. if over 10%...major, etc.
Update and present “Final” picture.
Why Monitor and Control a Project?
(Similar to Driving a Car)
Proactive capturing of project problems in their infancy (small and easily manageable)
Anticipation of potential problems—avoid most of them, transfer some, accept as few as possible, mitigate,…
Makes for effective response such as workaround: if you are alert and watchful...
Allows time for additional planning/plan modification.
Allows more efficient gathering of lessons learned.
Good reference data for long duration risk management planning.
Early warning signals are more noticeable.
Good, reliable, understandable info: reduces stress and anxiety due to less speculation.
Detailed status provides recovery info
Factual info—minimizes excessive optimism or exaggerated info.
Detailed status provides recovery info.
Factual info—minimizes excessive optimism or exaggerated pessimism.
Helps guard against reporting “safe so far”.
Metrics and Trend Analysis
After collecting status look for problems by analyzing variances. Variance analysis involves comparing the status information collected with the project baseline plan to identify any differences.

Trend Analysis: Periodically determine status data trends.
Early trend detection preferred.
If adverse trend:
Adjust project end date
Increase budget
Add resources
Renegotiate contract(s)
Modify project scope (deliverables); ETC.
Project Close-Out
Formal Acceptance, FInal Project Report (accomplishments), Contract and Document Closeout, Acknowledging Contributions, Celebration, Project Retrospective Analysis
Avoid Rejection of Deliverables:
SCOPE VERIFICATION (define) / Formal Acceptance of Deliverables (Successful Projects)
Nightmare to have deliverable rejected
Validate Initial Specifications (BARF)
Prudent Change Management (BARF)
Define ALL Final Acceptance Criteria / Requirements (Scope Definitions & Planning)
Perform Testing & Acceptance Requirements (EARLY and Often).
Pilot tests
Frequent Communications with Approvers/Customers/Stakeholders: Updates
Proof-of-Concept(s) – prototype, model, ...
Scope-Verify Interim Results (for PMI, note that Scope Verification belongs to Closeout ONLY!!!)
Sign-offs on SH Expectations and Expected Results.
Supporting users have an ad free experience!