Risk Management

Assignment 2: Risk Management

Table of Contents

1 Introduction 2

2 Aspect 1: Risk Analysis 2

3 Aspect 2: Risk Monitoring and Control Stage 3

4 Conclusion 5

5 Reference 6

1 Introduction

In our attempt to cover all areas of the Risk Management process within such a small time frame, some areas of this Project Management principal were briefly covered or overlooked. In my opinion the following two key aspects could have been better managed by our group towards the contribution of the final presentation:

Ð'* Risk Analysis Stage within the Risk Management Cycle (Refer to Figure 1 and 2) and,

Ð'* Risk Monitoring and Control Stage (Refer to Figure 1 and 2).

2 Aspect 1: Risk Analysis

In our final video submission we specifically focused on one of the two methods used to undertake Risk Analysis, which was qualitative. The qualitative approach is the most used method due to its usually rapid and cost effective means of establishing priorities for Risk Response Planning (PMBOK,2004), thus the reason for our focus. But there are two problems with this approach first their meaning can be widely interpreted and secondly you cannot do much with them except to have biased rules about combining them and taking this as an indicator of the overall significance of the risk.(Department of Commerce, 2004)

The Quantitative method is the other technique used in Risk Analysis which was only briefly mentioned in the final presentation due to reasons discussed above. In my belief this method should have got more focus as it gains more ground as a preferred risk assessment as outlined in the Project Risk Management guideline by the Department of Commerce, 2004.

The shift away from using the qualitative approach is the use of ratio scales so that numbers can be directly applied to the other numeric data such as dollars, days and lines of code rather than classifying Likelihood by being High, Medium and Low and Consequences being Moderate, Severe or Catastrophic. The significance of this is that appropriately used quantitative methods enable some risks to be costed with a useful degree of assurance. This process uses techniques such as Monte Carlo simulation and decision tree analysis to:

Ð'* Quantify the possible outcomes for the project and their probabilities

Ð'* Assess the probability of achieving specific project objectives

Ð'* Identify Risks requiring the most attention by quantifying their relative contribution to overall project risk.

Ð'* Identify realistic and achievable cost, schedule, or scope targets, given the project risks.

Ð'* Determine the best project management decision when some conditions or outcomes are uncertain.

Quantitative Risk Analysis generally follows the Qualitative Risk Analysis process, although experienced risk managers sometimes perform it directly after Risk Identification. Although another deciding factor upon which method is to be used on any particular project is the availability of time and money.

In conclusion the significance of the quantitative approach over the qualitative to risk Analysis was overlooked by the group but perhaps may have not properly be understood by our intended audience whom as understood by our client, will have no prior knowledge to Project Management but that is left to a concept of assumption. Thus there is no reason why we should not have at least defined the alternative method briefly to give the audience a concept of the two approaches to Risk Analysis.

3 Aspect 2: Risk Monitoring and Control Stage

This final stage of the Risk Management Plan was not properly covered as we attempted to see the feasibility of defining this aspect of Risk Management. It was our final decision as a group to briefly discuss this stage as a final round up of what the Risk Management Plan consisted of as we anticipated the audience would be satisfied with the discussion brought forward.

But as I analyze the stance taken regarding this matter I believe the group underestimated the crucial importance of this aspect of the Risk Management Plan. The audience would probably not comprehend that this stage of the Plan is what dictates the overall life cycle of the project but should have been an important point to bring across in at a more reflective level.

As an outline planned risk responses that are included in the project management plan are executed during the life cycle of the project, but the project work should be continuously monitored for new and changing risks. Risk Monitoring and Control is the process of identifying, analyzing, and planning for newly arising risks, keeping track of the identified risks and those on the watch list, reanalyzing existing risks, monitoring trigger conditions for contingency plans, monitoring residual risks, and reviewing the execution of risk responses while evaluating their effectiveness. The Risk Monitoring and Control process applies techniques, such as variance and trend analysis, which require the use of performance data generated during project execution.

Risk Monitoring and Control, as well as the other risk management processes, is an ongoing process for the life of the project. Other purposes of Risk Monitoring and Control are to determine if:

Ð'* Project Assumptions are still valid

Ð'* Risk, as assessed, has changed from its prior state, with analysis of trends

Ð'* Proper Risk management policies and procedures are being followed

Ð'* Contingency reserves of cost or schedule should be modified in