Consider the diagram below and list the top five risks in order of severity.
List and describe four responses to risks or opportunities.
Four responses to risks and opportunities are:
1. Avoid the risk
2. Transfer the risk
3. Enhance the opportunity
4. Share the opportunity
To avoid the risk the scope of the project must be changed or reduced, thereby removing the potential for the risk to delay the project. For example, if the delivery of a particular component is at risk of being delayed which, in turn risks delaying the project as a whole, the product specification can be altered to mean a different component, without the potential for delay in delivery, is specified.
Transferring a risk is the process by which a risk is transferred on to someone else’s risk register. This means that the risk becomes someone else’s concern which minimises its potential impact on the project. This is normally achieved either by means of insurance or some form of contract.
When an opportunity is considered the project manager can take the opportunity to enhance it. This means taking the potential benefit or value of the opportunity and seeking to maximise this thereby increasing, or enhancing the value of the opportunity to the project. The project manager seeks to make the opportunity more likely and increases the value of it to the project when enhancing it.
It is also possible to look to share the value of an opportunity, for example by entering into a joint venture with another party. In this case both parties actively capitalise on the opportunity and the value it offers.
List and describe five steps in a risk management process.
Five steps in a risk management process are:
4. Plan response
5. Implement response
The initial step in a risk management process is to formulate a risk management plan. This forms part of the project management plan and details the processes by which risks will be managed throughout the project. Any risk management plan will be iterative as risks change and develop throughout a project’s life cycle. It provides a framework for the project manager and project team to work in to ensure risks are managed in a consistent and proactive manner.
The next step is to identify the risks which may affect a project and log them on a risk register. There are several methods to use to identify potential risks such as brainstorming, interviews, checklists, assumption analysis and prompt lists. A combination of these methods is probably the most effective way to identify all relevant risks, depending on the nature of the project. At this stage the output is the risk log which will detail the following information in relation to a risk:
description, including cause and effectively
potential impact in terms of cost and time
The last two above can only be completed following the assessment of the risk and the response planning.
Once identified, risks should be analysed. The output at this stage is a probability impact grid which plots the probability of a risk together with the impact it may have on the project. Using numerical scales for probability and impact allows you to multiply them together and therefore arrive at a numerical value for the severity of the risk – the higher the number the more severe the risk.
The next step in managing risk is to plan a response to any potential risk. It is important to note that risks can be both negative or positive (opportunities) and that a project manager must seek to mitigate risks and maximise opportunities. There are several ways to deal with both risk and opportunities. Risks can be accepted, avoided, transferred or reduced. Opportunities can be rejected, enhanced, exploited or shared. The planned action for a risk should be entered on to the risk log. It is important to bear secondary risks in mid, where the planned action in relation to a risk causes a further risk.
Finally, the planned action for the risk must be implemented if the risk becomes an actual event. At this point the planned action becomes part of the project and should be included in all the relevant documentation as required. This will also potentially involve drawing down on a contingency identified for a risk.
Explain the purpose of managing issues on a project.
List and describe four stages in an issue management process.
It is important to manage issues on a project as they are events which have happened which can have a serious impact on a project and its potential for success. Ignoring issues allows them to mount up, which could ultimately lead to the the failure of a project.
Four stages in an issue management process are:
2. Identify and record
4. Plan implementation
As with many aspects of project management an issue management plan should be written as part of the project management plan. This should detail the escalation process for issues so the project manager knows who to go to when with issues.
Issues are distinct from risks as they have already happened, but may evolve from risks previously identified. A project manager should keep track of risks so that one becoming an issue can be identified as such quickly. Once identified the issue should be recorded on an issue log, giving it an ID, description, date, cost and time, impact, owner, status and agreed action.
Issues, by their definition, are problems which exceed the tolerance the project manager can work within. They therefore need escalating as early as possible to ensure they are dealt with promptly in minimise their impact. Generally, they will be escalated to the sponsor, who can then work with the person most able to deal with them to resolve them.
Once an action for the resolution of an issue is agreed it must be implemented. The project manager must ensure the action becomes included within the project plan and that everyone is aware of the changes requried.