Risk Analysis & Risk Management in Project Management

 

What is Risk Analysis?

Risk Analysis is defined as the sequence of processes of risk management planning, analysis of risks, identification and controlling risk on a project.

Proper risk management is control of possible future events that may have a negative effect on the overall project. It is more of pro-active then reactive process.

How to Manage Risk?

Risk Management Process primarily involves following activities

1. Plan risk management

It is the procedure of defining how to perform risk management activities for a project.

1. Risk Identification

It is the procedure of determining which risk may affect the project most. This process involves documentation of existing risks.

The input for identifying risk will be

• Risk management plan
• Project scope statement
• Cost management plan
• Schedule management plan
• Human resource management plan
• Scope baseline
• Activity cost estimates
• Activity duration estimates
• Stakeholder register
• Project documents
• Procurement documents
• Communication management plan
• Enterprise environmental factor
• Organizational process assets
• Perform qualitative risk analysis
• Perform quantitative risk analysis
• Plan risk responses
• Monitor and control risks

The output of the process will be a

• Risk register

1. Perform qualitative risk analysis

It is the process of prioritizing risks for further analysis or action by combining and assessing their probability of occurrence and impact. It helps managers to lessen the uncertainty level and concentrate on high priority risks.

Plan risk management should take place early in the project, it can impact on various aspects for example: cost, time, scope, quality and procurement.

The inputs for qualitative risk analysis includes

• Risk management plan
• Scope baseline
• Risk register
• Enterprise environmental factors
• Organizational process assets

The output of this stage would be

• Project documents updates

1. Quantitative risk analysis

It is the procedure of numerically analyzing the effect of identified risks on overall project objectives. In order to minimize the project uncertainty, this kind of analysis are quite helpful for decision making.

Risk Management Matrix

The input of this stage is

• Risk management plan
• Cost management plan
• Schedule management plan
• Risk register
• Enterprise environmental factors
• Organizational process assets

While the output will be

• Project documents updates

1. Plan risk responses

To enhance opportunities and to minimize threats to project objectives plan risk response is helpful. It addresses the risks by their priority, activities into the budget, schedule, and project management plan.

The inputs for plan risk responses are

• Risk management plan
• Risk register

While the output are

• Project management plan updates
• Project documents updates

1. Control Risks

Control risk is the procedure of tracking identified risks, identifying new risks, monitoring residual risks and evaluating risk.

The inputs for this stage includes

• Software Project management plan
• Risk register
• Work performance data
• Work performance reports

The output of this stage would be

• Work performance information
• Change requests
• Project management plan updates
• Project documents updates
• Organizational process assets updates

Project Procurement Management

Project Procurement Management includes the processes of purchasing or acquiring products needed to run a business. The organization can be a seller, buyer or service provider.

Project Procurement Management also includes controlling any contract issued by an outside organization and get work done outside the project team.

Plan Procurement Management includes four stages like

• Plan Procurement Management
• Conduct Procurements
• Control Procurements
• Close Procurements

The input in the plan procurement management are

• Requirements documentation
• Teaming agreements
• Risk register
• Scope baseline
• Project schedule
• Activity cost estimates
• Cost performance baseline
• Risk related contract decisions
• Enterprise environmental factors
• Organizational process assets

Conduct Procurement process

Conduct Procurement process involves activities like

• Selecting a seller
• Receiving seller responses
• Awarding a contract

The benefit of conducting procurement process is that it provides alignment of external and internal stakeholder expectations through established agreements.

The input of the conduct procurement process includes

• Project management plan
• Documents for procurement
• Source selection criteria
• Qualified seller list
• Seller proposals
• Project documents
• Make or buy decisions
• Teaming agreements
• Organizational process assets

Control Procurements

It is the process of monitoring contract performance and correction to the contract as per the guidelines. It will ensure that buyers and sellers both meet the procurement requirement according to the terms of the legal agreement.

The input of the Control Procurements include

• Project management plan
• Procurement documents
• Agreements
• Approved change requests
• Work performance reports
• Work performance data

The output includes

• Work performance information
• Change requests
• Project management plan updates
• Project documents updates
• Organizational process assets updates

Close procurements

This step involves documenting agreements and other documents for future reference.

The input of this tool includes

• Project management plan
• Procurement documents

The output of this tool includes

• Closed procurements
• Organizational process assets updates

Manage Stakeholder Engagement

A stakeholder is an integral part of any project; their decision can leave a deep impact on project deliverables. In this process, the first part is to identify people, groups or organizations that could impact on the project while the second part is to analyze stakeholder expectations.

It also focusses on continuous communication with stakeholders to understand their needs and expectations.

Identifying Stakeholders

It is the process of identifying the groups, people or organization that can influence project outcomes. It allows the project manager to identify appropriate stakeholders.

Plan Stakeholder Management

It is the process of preparing a strategy to involve stakeholders throughout the project life cycle. It defines clear, actionable plan to interact with project Stakeholders.

The input for Plan Stakeholder Management includes

• Project management plan
• Stakeholder register
• Enterprise environmental factors
• Organizational process assets

The output of this

• Stakeholder management plan
• Project documents updates

Manage Stakeholder Engagement

In this stage, stakeholder are communicated to understand their expectations, address issues and foster appropriate stakeholder engagement in project activities. It allows the project manager to achieve project success without conflicting with stakeholder's decision.

The input of this stage is

• Stakeholder management plan
• Communication management plan
• Change log
• Organization process assets

While the output of this stage is

• Issue log
• Change request
• Project management plan updates
• Project documents updates
• Organizational process assets updates

Control Stakeholder Engagement

It is the process of monitoring stakeholder engagement in the project and adjusting strategies as per requirements. It will increase the stakeholder engagement activities as the project evolves and progresses.

The input for this stage include

• Project management plan
• Issue log
• Work performance data
• Project documents

The output of this stage include

• Work performance information
• Change requests
• Project management plan updates
• Project documents updates
• Organizational process assets updates

 

Summary

In this tutorial, you learned:

Risk Management includes the processes of conducting risk management planning, analysis of risks, identification and controlling risk on a project.

These steps can be used to manage risk in an organization

• Risk identification
• Risk Qualification
• Risk Response
• Risk Monitoring and Controlling

Procurement Management, includes the processes of purchasing or acquiring products needed to run a business. It is the process of monitoring contract performance and correction to the contract as per the guidelines

Stakeholder engagement focusses on continuous communication throughout the project lifecycle. The decision of stakeholder can leave a deep impact on project deliverables.