Project Risk Assessment
Conduct a preliminary risk analysis of your project. Use two techniques, one qualitative and one quantitative, in supporting your evaluation of project risk. To do this, you will need to:
• Generate a set of likely risk factors.
• Discuss them in terms of probability and consequences.
• Develop preliminary strategies for risk mitigation.
An effective risk analysis will demonstrate a clear understanding of relevant project risks, their potential impact (probability and consequences), and preliminary plans for minimizing the negative effects.
Sample Risk Analysis-ABC UPS, Inc.
Among the potential threats or uncertainties contained in this project, the following have been
identified:
1. Plant reorganization could take longer than anticipated. Process engineering may be more
complicated or unexpected difficulties could arise while the process alterations are underway.
2. A key project team member could be reassigned or no longer be able to work on the project. Due
to other requirements or top management reshuffling of resources, the project could lose one of its key core team members.
3. The project budget could be cut because of budget cutbacks in other parts of the company. The project budget could be trimmed in the middle of the development cycle.
4. Suppliers might be unable to fulfill contracts. After qualifying vendors and entering contracts
with them, it might be discovered that they cannot fulfill their contractual obligations, requiring the project team and organization to rebid contracts or accept lower-quality supplies.
5. New process designs could be found not to be technically feasible. The process engineers
might determine mid-project that the project’s technical objectives cannot be achieved in the
manner planned.
6. New products might not pass QA assessment testing. The project team might discover that
the equipment purchased and/or the training that plant personnel received are insufficient to allow for proper quality levels in output.
7. Vendors could discover our intentions and cut deliveries. Current vendors might determine
our intent to eliminate their work and slow down or stop deliveries in anticipation of our company canceling contracts.
8. Marketing might not approve the prototype cups produced. The sales and marketing department might determine that the quality or “presence” of the products we produce is inferior and the products are therefore unlikely to sell in the market.
9. The new factory design might not be approved during government safety inspections. The
factory might not meet OSHA requirements.
QUALITATIVE RISK ASSESSMENT
Probability
Low Med High
High 5 8
Med 3, 9 2 1
Low 4 6, 7
QUANTITATIVE RISK ASSESSMENT
Probability of Failure
• Maturity (Moderate) = .50
• Complexity (Minor) = .30
• Dependency (Moderate) = .50
Consequences of Failure
• Cost (Significant) = .70
• Schedule (Moderate) = .50
• Reliability (Minor) = .30
• Performance (Moderate) = .50
Pm Pc Pd Pf
.50 .30 .50 .43
Cc Cs Cr Cp Cf
.70 .50 .30 .50 .50
Risk Factor = (.43) + (.50) – (.43)(.50) = .715 (High Risk)
Risk Mitigation Strategies
High-Risk Mitigation Strategy
1. Plant reorganization takes longer than anticipated.
1. Develop a comprehensive project tracking program to maintain a schedule.
2. Marketing does not approve the prototype cups produced.
2. Maintain close ties to the sales department—keep them in the loop throughout the project development and quality control cycles.
Moderate Risk
3. New process designs are found to not be technically feasible.
3. Assign sufficient time for quality assessment during the prototype stage.
4. A key project team member could be reassigned or no longer be able to work on the project.
4. Develop a strategy for cross-training personnel on elements of one another’s job or identify suitable
replacement resources within the organization.
Low Risk
5. The project budget could be cut. 5. Maintain close contact with top management regarding project status, including earned value and other control documentation.
6. Factory does not pass OSHA inspections. 6. Schedule preliminary inspection midway through
project to defuse any concerns.
7. Suppliers are unable to fulfill contracts. 7. Qualify multiple suppliers at the prototyping stage.
8. New products do not pass QA assessment testing. 8. Assign a team member to work with QA department on the interim inspection schedule.
9. Vendors discover our intentions and cut deliveries. 9. Maintain secrecy surrounding project
development!
Notes
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2. Wideman, M. (1998). “Project risk management,” in Pinto, J. K. (Ed.), The Project Management Institute’s Project Management Handbook. San Francisco, CA: Jossey-Bass, pp. 138–58.
3. Chapman, C. B., and Ward, S. C. (1997). Project Risk Management: Process, Techniques, and Insights. Chichester, UK: John Wiley; Kahkonen, K., and Artto, K. A. (1997). Managing Risks in Projects. London: E & FN Spon.
4. Chapman, R. J. (1998). “The effectiveness of working group risk identification and assessment techniques,” International Journal of Project Management, 16(6): 333–44.
5. Martin, P., and Tate, K. (1998). “Team-based risk assessment: Turning naysayers and saboteurs into supporters,” PMNetwork, 12(2): 35–38.
6. Japan Times, (2016), “Monju prototype reactor, once a key cog in Japan’s nuclear energy policy, to be scrapped,” Japan Times, Dec 21, retrieved at: http://www.japantimes.co.jp/ news/2016/12/21/national/monju-prototype-reactorkey-cog-japans-nuclear-energy-policy-scrapped/#. WNPPs2_ysuU; Takeishi, R., (2016), “Plug pulled on costly Monju fast breeder reactor project,” Le Blog de Fukushimais-still-news, Dec 21, retrieved at: http://www.fukushimais-still-news.com/2016/12/scrapping-monju-2.html
7. Hillson, D. (2002a, June). “The risk breakdown structure (RBS) as an aid to effective risk management.” Proceedings of the 5th European Project Management Conference (PMI Europe 2002), Cannes, France.
8. Viswanathan, B. (2012, June 14). “Understanding the risk breakdown structure (RBS),” Project Management.com. http://project-management.com/understanding-the-riskbreakdown-structure-rbs/; Hillson, D. (2002b, October). “Use a risk breakdown structure (RBS) to understand your
risks,” Proceedings of the 33rd Project Management Institute Annual Seminars & Symposium, San Antonio, TX.
9. Graves, R. (2000). “Qualitative risk assessment,” PMNetwork, 14(10): 61–66; Pascale, S., Troilo, L., and Lorenz, C. (1998). “Risk analysis: How good are your decisions?” PMNetwork, 12(2): 25–28.
10. “MCA spent millions on Carly Hennessy—Haven’t heard of her?” (2002, February 26). Wall Street Journal, pp. A1, A10.
11. Hamburger, D. H. (1990). “The project manager: Risk taker and contingency planner,” Project Management Journal, 21(4): 11–16; Levine, H. A. (1995). “Risk management for dummies: Managing schedule, cost and technical risk, and contingency,” PMNetwork, 9(10): 31–33.
12. Project Management Institute Body of Knowledge, 5th Edition; Alter, S. (2014), “Theory of workarounds,” Communications of the Association of Information Systems, 34, 1041-1066; Charette, R., (2014), “F-35 software: DoD’s chief tester remains unimpressed,” IEEE Spectrum, Feb 3, retrieved
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13. http://blogs.wsj.com/chinarealtime/2009/06/29/ shanghai-building-collapses-nearly-intact/; http://news. bbc.co.uk/2/hi/8123559.stm; Peter Foster (2009, 29 Jun) Nine held over Shanghai building collapse www.telegraph.co.uk/news/worldnews/asia/china/5685963/ Nine-held-over-Shanghai-building-collapse.html.© Telegraph Media Group Limited 2009.
14. Chapman, C. B. (1997). “Project risk analysis and management—The PRAM generic process,” International Journal of Project Management, 15(5): 273–81; Chapman, C. B., and Ward, S. (2003). Project Risk Management: Processes, Techniques and Insights, 2nd ed. Chichester, UK: John Wiley.
15. Artto, K. A. (1997). “Fifteen years of project risk management applications—Where are we going?” in Kahkonen, K., and Artto, K. A. (Eds.), Managing Risks in Projects. London: E & FN Spon, pp. 3–14; Williams, T. M. (1995). “A classified bibliography of recent research relating to project risk management,” European Journal of Operations Research, 85: 18–38.
16. The Tragedy of Macbeth: Act I Scene VII: The same. A room in Macbeth’s castle. by William Shakespeare.
17. “Fatigue blamed in Comet crashes.” (1954, October 25). Aviation Week, 61: 17–18; “Comet verdict upholds RAE findings.” (1955, February 21). Aviation Week, 62: 16–17; Hull, S. (1954, November 1). “Comet findings may upset design concepts,” Aviation Week, 61: 16–18; “Fall of a Comet.” (1953, May 11). Newsweek, 41: 49; “A column of smoke.” (1954, January 18). Time, 63: 35–36; “Death of the
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18. Lallanilla, M. (2013, September 3). “This London skyscraper can melt cars and set buildings on fire.” www. nbcnews.com/science/science-news/london-skyscraper-can-melt-cars-set-buildings-fire-f8C11069092; Smith-Spark, L. (2013, September 3). “Reflected light from London skyscraper melts car,” CNN. www.cnn. com/2013/09/03/world/europe/uk-london-buildingmelts-car/; Gower, P. (2014, February 12). “London walkie talkie owners to shield car-melting beam,” Bloomberg.
www.bloomberg.com/news/2014-02-12/london-walkietalkie-owners-to-shield-tower-s-car-melting-beam.html; BBC News Magazine. (2014, September 3). Chris Shepherd, BBC News Magazine, (2014, Sept. 3). “Who, what, why: How does a skyscraper melt a car?” http://www.bbc.com/news/magazine-23944679. Reprinted by permission from BBC Worldwide Americas Inc; Wainwright, O., (2015), “Carbuncle Cup: Walkie Talkie wins prize for worst building of the year,” The Guardian, Sept 2, retrieved at: https://www.theguardian.com/artanddesign/architecture-design blog/2015/sep/02/walkie-talkie-londonwins-carbuncle-cup-worst-building-of-year; News.com.
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19. “Big Tacoma Bridge crashes 190 feet into Puget Sound.” (1940, November 8). New York Times, pp. 1, 3.
20. Kharbanda, O. P., and Pinto, J. K. (1996). What Made Gertie Gallop? New York: Van Nostrand Reinhold.
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