A Guide to the Project Management Body of Knowledge (PMBOK ® Guide 6 th Edition) Project Risk Management Dr. Mohammad Ichsan, PMP, PMI-SP Yudha Perdana Damiat, PMP, PMI-SP

 5 Project management process groups  10 Project management knowledge areas  49 Project management processes PMBOK® Guide 6 TH Edition ©2017 Project Management Institute, Inc. Table 1-4, Page. 25 PROCESS GROUPS & KNOWLEDGE AREAS Fundamental Project Management2

 Please refer to your PMBOK 6 th pages 395 – 457  Objective:  Increase the probability & impact of positive (+) risk  Decrease the probability & impact of negative (-) risk  All project have risks due to conflicts, changes and constraints.  Unmanaged risk may cause deviation from project plan.  Project risks must be taken in a controlled manner while balancing risk and reward.  There are 7 processes in Project risk management PROJECT RISK MANAGEMENT Fundamental Project Management3

Non-Event Risk Project Resilience Integrated Risk Management TRENDS IN PROJECT RISK MANAGEMENT Fundamental Project Management4

Plan Risk Management Identify Risks Perform Qualitative Risk Analysis Perform Quantitative Risk Analysis Plan Risk Responses Implement Risk Responses PROJECT RISK MANAGEMENT Planning Process Group Monitoring and Controlling Process Group Monitor Risks Executing Process Group Fundamental Project Management5

 Includes process of defining how to conduct risk management activities  Risk management process should begin when a project is authorized and completed early in the project  If project scope changes significantly, risk management plan must be reviewed for its effectiveness and relevance PMBOK® Guide 6 TH Edition ©2017 Project Management Institute, Inc. Figure 11-3, Page. 402 PLAN PROJECT RISK MANAGEMENT Fundamental Project Management6

11.1 Plan Risk Management Inputs Project charter Project management plan Project documents EEF OPA Tools & Techniques Expert judgment Data analysis Meetings Outputs Risk management plan PROJECT RISK MANAGEMENT Fundamental Project Management7

 Risk management plan includes, but not limited to:  Risk Strategy  Methodology  Roles and responsibilities  Funding  Timing  Risk categories → usually expressed in RBS  Stakeholder risk appetite → expressed as measureable risks  Probability and impact matrix  Refer to pages 405 to 408 PROJECT RISK MANAGEMENT Fundamental Project Management8

PMBOK® Guide 6 TH Edition ©2017 Project Management Institute, Inc. Figure 11-4, Page. 406 RISK BREAKDOWN STRUCTURE Fundamental Project Management9

PMBOK® Guide 6 TH Edition ©2017 Project Management Institute, Inc. Table 11-1, Page. 407 PROBABILITY & IMPACT DEFINITIONS Fundamental Project Management10

 Brings together information so project team can respond appropriately to the identified risk  Considers both individual risks and sources of overall project risks  Participants in identifying risk includes PM, PM team, risk specialist, customers, end-users etc.  Involvement of PM team will bring a sense of ownership and responsibility  This process is iterative PMBOK® Guide 6 TH Edition ©2017 Project Management Institute, Inc. Figure 11-7,Page. 410 IDENTIFY RISK Fundamental Project Management11

11.2 Identify Risks Inputs Project management plan Project documents Agreements Procurement documentation EEF OPA Tools & Techniques Expert judgment Data gathering Data analysis Interpersonal and team skills Prompt lists Meetings Output Risk register Risk report Project documents updates PROJECT RISK MANAGEMENT Fundamental Project Management12

 Content of risk register may include but not limited to:  List of identified risk  Each risk must have unique ID  Must be described in details  Potential risk owners  Each risk must be assigned to a risk owner  List of potential risk response  If a risk has a potential risk response, it must be recorded and confirmed.  Risk register must be reviewed throughout the project  Refer to pages 417 PROJECT RISK MANAGEMENT Fundamental Project Management13

 Assess individual risk based on their probability to occur  Assessment is done subjectively using the perception of risks by the team and other stakeholders  It helps to focus on high- priority risks PMBOK® Guide 6 TH Edition ©2017 Project Management Institute, Inc. Figure 11-9, Page. 410 PERFORM QUALITATIVE RISK ANALYSIS Fundamental Project Management14

11.3 Perform Qualitative Risk Analysis Inputs Project management plan Project documents Agreements Procurement documentations EEF OPA Tools & Techniques Expert judgment Data gathering Data analysis Interpersonal and team skills Risk categorization Data representation Meetings Outputs Risk register Risk report Project documents updates PROJECT RISK MANAGEMENT Fundamental Project Management15

PMBOK® Guide 6 TH Edition ©2017 Project Management Institute, Inc. Figure 11-5, Page. 408 PROBABILITY & IMPACT MATRIX Fundamental Project Management16

PMBOK® Guide 6 TH Edition ©2017 Project Management Institute, Inc. Figure 11-10, Page. 426  Bubble chart is a representation of a hierarchical chart with MORE than 2 parameters  A bubble chart displays 3 dimensional data:  Bubble → a risk  X-axis → a value (“detectability”)  Y-axis → a value (“proximity)  A bubble chart has a control limit set where it shows a risk is acceptable or NOT DATA REPRESENTATION TECHNIQUE Fundamental Project Management17

 Numerically analyze the effect/impact of risk  Usually requires a software or expert for analysis  It uses information from “Perform Qualitative Risk Analysis”  This process is not mandatory for all project. PMBOK® Guide 6 TH Edition ©2017 Project Management Institute, Inc. Figure 11-12, Page. 429 PERFORM QUANTITATIVE RISK ANALYSIS Fundamental Project Management18

11.4 Perform Quantitative Risk Analysis Inputs Project management plan Project documents EEF OPA Tools & Techniques Expert judgment Data gathering Interpersonal and team skills Representation of uncertainty Data analysis Outputs Project documents updates PROJECT RISK MANAGEMENT Fundamental Project Management19

PMBOK® Guide 6 TH Edition ©2017 Project Management Institute, Inc. Figure 11-10, Page. 426  Simulation technique uses a model to simulate risk effect/impact  Usually uses Monte Carlo analysis that uses a computer software  It can analyze project cost, schedule or both  Typical outputs include histogram and S-curve  Refer to page for more details DATA ANALYSIS TECHNIQUE Fundamental Project Management20

MONTE CARLO ANALYSIS – SAMPLE 1 Fundamental Project Management21

MONTE CARLO ANALYSIS – SAMPLE 2 Fundamental Project Management22

MONTE CARLO ANALYSIS – SAMPLE 3 Fundamental Project Management23

~ 30% ~ 87,23 days MONTE CARLO ANALYSIS – SAMPLE 1 Cumulative Distributed Function using Fundamental Project Management24

PMBOK® Guide 6 TH Edition ©2017 Project Management Institute, Inc. Figure 11-14, Page. 434  Sensitivity analysis is also called “Tornado Diagram”  Useful to determine which risk have the most potential impact  Represents the calculated correlation coefficient of the quantitative risk elements  Items are arranged by descending strength of correlation  Refer to page 434 for more details DATA ANALYSIS TECHNIQUE Fundamental Project Management25

DATA ANALYSIS TECHNIQUE Change in Output Statistic for Construction / Cost RankNameLowerUpper 1Task2 Cost / Cost/Use$2,742,338.03$2,994, Task5 Cost / Cost/Use$2,803,892.99$2,902, Task7 Cost / Cost/Use$2,819,224.63$2,887, Task3 Cost / Cost/Use$2,823,206.05$2,882, Task8 Cost / Cost/Use$2,825,789.50$2,873, Task4 Cost / Cost/Use$2,829,046.81$2,874, Task 7 / Duration$2,834,509.98$2,873, Task6 Cost / Cost/Use$2,831,475.75$2,867, Task1 Cost / Cost/Use$2,836,288.06$2,868, Task 4 / Duration$2,832,407.43$2,862, SENSITIVITY ANALYSIS - TORNADO DIAGRAM USING Fundamental Project Management26

PMBOK® Guide 6 TH Edition ©2017 Project Management Institute, Inc. Figure 11-15, Page. 435  Decision tree is used to support the best selection of several actions  Each path is associated with cost and individual risk  Each end-points represents the outcome of a particular path  Usually the largest number at end-point is chosen  Refer to page 435 for more details DATA ANALYSIS TECHNIQUE Fundamental Project Management27

DECISION TREE ANALYSIS – QUANTITATIVE RISK ANALYSIS DECISION TREE ANALYSIS - USING Fundamental Project Management28

DECISION TREE ANALYSIS – QUANTITATIVE RISK ANALYSIS DECISION TREE ANALYSIS - USING Fundamental Project Management29

Develop options & strategies for a course of action to address project risk Each risk response must have “owner” Each risk response is often allocated for “time” and “cost” → contingency reserve Risk response must be realistic, cost-effective and agreed by all Refer to page 437 to 439 PMBOK® Guide 6 TH Edition ©2017 Project Management Institute, Inc. Figure 11-7, Page. 438 PLAN RISK RESPONSES Fundamental Project Management30

11.5 Plan Risk Responses Inputs Project management plan Project documents EEF OPA Tools & Techniques Expert judgment Data gathering Interpersonal and team skills Strategies for threats Strategies for opportunities Contingency response strategies Strategies for overall project risk Data analysis Decision making Outputs Change request Project management plan updates Project documents updates PROJECT RISK MANAGEMENT Fundamental Project Management31

EscalateAvoidTransfer Mitigate Accept See pages WAYS DEALING WITH THREATS Fundamental Project Management32

EscalateExploitShare Enhance Accept See pages WAYS DEALING WITH OPPORTUNITIES Fundamental Project Management33

The same risk response strategies used for “individual” project risk can be used for “overall” project risk Opportunity Exploit Share Enhance Accept Threat Avoid Transfer Mitigate Accept See pages STRATEGIES FOR OVERALL RISK Fundamental Project Management34

 Process of implementing risk response plan  Risk response plan must be agreed by all  Implementing risk response is the most common problem → risk are monitored but no action is taken.  Therefore, risk owner must give the required effort  Refer to pages 449 and 450 PMBOK® Guide 6 TH Edition ©2017 Project Management Institute, Inc. Figure 11-19, Page. 449 IMPLEMENT RISK RESPONSE Fundamental Project Management35

11.6 Implement Risk Responses Inputs Project management plan Project documents OPA Tools & Techniques Expert judgment Interpersonal and team skills PMIS Outputs Change requests Project documents updates PROJECT RISK MANAGEMENT Fundamental Project Management36

 Monitor the implementation of agreed-upon response plan  Monitor identified and new risks  Continuous monitoring of risks in the risk register are crucial  Risk audits are useful to determine the effectiveness of risk response plan PMBOK® Guide 6 TH Edition ©2017 Project Management Institute, Inc. Figure 11-21, Page. 454 MONITOR RISKS Fundamental Project Management37

11.7 Monitor Risks Inputs Project management plan Project documents Work performance data Work performance reports Tools and Techniques Data analysis Audits Meetings Outputs Work performance information Change requests Project management plan updates Project documents updates Organizational process assets updates PROJECT RISK MANAGEMENT Fundamental Project Management38

QUIZ TIME!!! 10 Questions Quiz 10 minutes Fundamental Project Management39