CompTIA Project+ PK0-003

Project Risk Management

by Steve Caseley

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What is Project Management

Project+ and how to prepare for the exam

Pre-Project Setup

Project Planning

Prepare Scope Statement

Create WBS and WBS Dictionary

Define Change Management Process

Develop Project Schedule and Resources and Roles

PERT/GANTT/CPM and Schedule Compression

Communications Management Plan

Risk Management Plan

Quality Management Plan

Cost Management Plan

Procurement Management Plan

Transition and Project Management Plan

Human Resource Management

Project Governance

Project Tracking

Project Change Management

Project Risk Management

00:00:00 - The next stop in 4.0 Change, Control and Communications is 4.3
00:00:06 - risk management or the full definition from ComTIA is 4.3
00:00:11 - using the risk management plan determine an appropriate response
00:00:16 - to potential risk/opportunity
00:00:19 - events. In my humble opinion an acting risk management is one
00:00:25 - of the most vital things we as project managers can do to insure
00:00:31 - project success. In our planning exercise and our planning nuggets,
00:00:36 - we discussed the importance of doing appropriate risk identification
00:00:40 - and risk response planning and determining the appropriate contingency
00:00:44 - for our project to insure that we are covered should risk events
00:00:47 - happen. This nugget is focused on putting all of that planning
00:00:52 - work into action dealing with the risks on a day in day out basis.
00:01:00 - Project risk management can be summarized into 4 key steps.
00:01:05 - Identify strategize.
00:01:08 - Manage the risks and manage the contingency that we have set
00:01:13 - aside for the risks. Now you may be saying Steve why is identify
00:01:18 - in this chapter on project management when I did all of my identification
00:01:25 - back in planning.
00:01:27 - The answer is we need to identify risks at all points in time
00:01:32 - in our project. We need to spend significant time up front in
00:01:37 - planning to identify the risks,
00:01:41 - but we need to continue to identify risks on an ongoing basis
00:01:47 - throughout the life of our project new information is going to
00:01:50 - be at hand project dynamics are going to change, project environment
00:01:54 - is going to change, new risks are going to be identified I am
00:01:58 - going to say daily routinely on the project. It is our job as
00:02:03 - project managers to insure that as new risks are identified they
00:02:07 - are treated in exactly the same way that we did risk identification
00:02:12 - risk planning
00:02:15 - response planning in the planning process so I am not going to
00:02:20 - spend anymore time on this nugget talking about the identification
00:02:24 - and planning process for risk identification because we have
00:02:27 - already covered it. The key message here is we need to repeat
00:02:32 - those steps on a routine daily, weekly, monthly basis as we are
00:02:38 - delivering our project. The unique aspects for project risk management
00:02:43 - during the delivery execution of our project is the strategization. How
00:02:48 - are we going to deal with risks on an ongoing basis on our project?
00:02:53 - How are we going to manage those risks and the all important
00:02:57 - I think how are we going to manage the contingency? We have got
00:03:00 - contingency set aside for risks. It is our job as managers to
00:03:05 - very carefully manage that so let's roll up our sleeves and let's
00:03:09 - look at risk management strategies.
00:03:13 - There is a lot art, there is some science. There is also a lot
00:03:17 - of art to risk management and that is what our execution of or
00:03:22 - the strategization around risk management is all about is examining
00:03:26 - some of the art aspects to do an effective risk management. It
00:03:31 - may sound like science but there is a lot of subjectivity. There
00:03:34 - is a lot of management discretion if I can say that and if we
00:03:38 - can go through these risk management strategies on an ongoing
00:03:42 - basis we need to evaluate the risk responses. So when we identified
00:03:47 - risks we developed a response.
00:03:53 - How are we going to deal with this risk are we going to avoid
00:03:56 - or are we going to mitigate or are we going to transfer or are
00:03:58 - we going to accept. Once we have developed our strategy we then
00:04:02 - put together a plan. I am going to avoid this by doing such and
00:04:06 - such, well then it becomes not a risk, but if it is going to
00:04:09 - be a mitigate, if it is going to be accept,
00:04:13 - we put together plans, we have allocated contingency we have
00:04:18 - identified the potential steps that we would enact that risk
00:04:22 - event happens. Now that we are 2 weeks, 2 months, 6 months into
00:04:27 - our project we need to on a regular basis go back and evaluate
00:04:31 - those risk responses is the response still relevant.
00:04:38 - What would we change? And
00:04:43 - just as what is important to develop these proactive risk responses
00:04:49 - in planning it is equally important to review and evaluate and
00:04:55 - update these risk responses now that we know -more about the
00:05:00 - project. Maybe we would take a different strategy for the training
00:05:05 - curve or the learning curve scenarios that we discussed in planning
00:05:08 - now that we know more about the project, now that we know more
00:05:11 - about the project teams. So we need to on a regular basis evaluate
00:05:16 - and update the risk responses so that we can still be proactive.
00:05:21 - It is not going to do us any good to have a proactive risk response
00:05:26 - if the project dynamics have changed and that proactive risk
00:05:30 - response is no longer relevant. So keep the risk responses relevant.
00:05:35 - Similarly we need to reexamine the open risks are they still
00:05:40 - risks. Is it time to close a risk? We had this concern about
00:05:46 - the learning curve for our project team. Now that we are 3 weeks
00:05:50 - in the development is that risk coming to fruition in which case
00:05:54 - I need to enact my response plan or has the team picked up the
00:06:00 - new programming language quicker than expected
00:06:03 - and I can actually close
00:06:06 - the risk or reexamine the open risks and say, "Hmm,
00:06:13 - much the same as we should- what should we change about a risk
00:06:17 - response?" Maybe we need to examine and we need to change the
00:06:22 - risk itself.
00:06:24 - We have more information that were further into the project. We
00:06:28 - have more intelligence to truly reassess the nature of the type
00:06:34 - of the strategies for each risk that remains open on our risk
00:06:39 - register. One that is often forgotten is to monitor for residual
00:06:45 - risks to going back to that proverbial
00:06:49 - learning curve issue that we have discussed many times already
00:06:52 - in this series. We had a concern. We had a risk that the learning
00:06:57 - curve was going to be steep. We are 3 weeks in. We have determined
00:07:01 - that yes the learning curve was steep and we have enacted risk
00:07:06 - response number 1 by bringing in the qualified
00:07:10 - support, the trainer on site. It is now 6 weeks into the project,
00:07:17 - we need to go back and monitor for a residual risk. We had a
00:07:21 - concern, learning curve; we had a response bring in the coach
00:07:27 - on site with the project team. Risk is now "closed,"
00:07:33 - but is it? We need to monitor. We need to go back and check
00:07:38 - has in fact bringing the on site coach resolve the risk, the
00:07:43 - learning curve issues or is there some residual or is there a
00:07:46 - secondary risk that still needs to be considered and dealt with
00:07:50 - by alternate risk response strategies or other risk response
00:07:57 - approaches that you have identified. Proactively,
00:08:00 - and most important for our risk management strategy is actively
00:08:06 - put into play are risk responses. We have concerned about risk.
00:08:12 - We have a risk response, we have identified that the risk is
00:08:16 - happening. Don't just assume, oh the risk is happening but if
00:08:20 - ignore it for 3 weeks it is going to go away. Something is going
00:08:24 - to change in and it is going to match like go away. We had a
00:08:26 - concern about a risk if we had a risk response strategy prepared
00:08:31 - enacted very quickly and get that risk dealt with, get that risk
00:08:36 - put to bed and allow your projects to move on and activating
00:08:41 - the risk response quickly is all part about managing our identified
00:08:45 - risks. And managing the identified risks is relatively straight
00:08:50 - forward, critical is already expressed in this nugget but relatively
00:08:53 - trade forward. We need to keep the current risks on our radar.
00:09:00 - What relevant,
00:09:04 - now what is relevant soon, what is relevant in the near future
00:09:13 - and what is further away. And
00:09:17 - again using the proverbial development learning curve we have
00:09:21 - a risk of a development learning curve, but we are still in the
00:09:25 - analysis phase of our systems development life cycle. There
00:09:29 - is not a lot of sense worrying about monitoring developers learning
00:09:33 - curve when we are still in analysis. So I am saying that is farther
00:09:37 - away. That is not in our risk radar. We are not going to worry
00:09:40 - about. We are not going to actively manage that risk but we are
00:09:44 - going to absolutely actively manage the risks that are in the
00:09:47 - now and the soon
00:09:49 - and we do that through
00:09:53 - what I call the risk greater and I will show you a graphical
00:09:56 - representation of the risk radar in just a second and we actively
00:10:00 - manage our risks through the risk register that we developed
00:10:04 - in planning in risk identification and we are going to actively
00:10:08 - maintain that risk register throughout project monitoring and
00:10:14 - control. And here is a graphical representation that I call the
00:10:19 - risk radar, which is really again just a graphical representation
00:10:23 - of what I just discussed. Monitor the risks that are relevant
00:10:27 - now, monitor the risk that are going to happen soon, monitor
00:10:31 - the risk that are in the near future and then monitor the risk
00:10:35 - that are further out. Now I am not necessarily suggesting that
00:10:38 - you draw a formal risk radar and put risk one, risk 5
00:10:45 - on the now and risk 3 and risk 7 on the soon and risks 8 and
00:10:53 - risks 10 on the next quarter and the risks 2, risk 4, risk 6
00:11:02 - and so on, on the. I will worry about later, but we need to maintain
00:11:09 - that mindset. We need to continually review our risk radar. Look
00:11:14 - for the triggers, look for the timeframes, look for the events
00:11:20 - that could potentially
00:11:22 - tell us that a risk is happening and focus on the ones that are
00:11:28 - in the immediate timeframe. Keep a very close eye on the ones
00:11:32 - that are a little further out. Keep a less close eye on the ones
00:11:36 - that are going to happen some time in the next quarter and literally
00:11:40 - at this point in time ignore the risks that are highly unlikely
00:11:46 - or guaranteed not to happen any time in the next 3 months of
00:11:52 - our project execution. So just the way that the air traffic
00:11:55 - controllers look at the planes that are about to land most importantly
00:11:59 - and pass them off actually to another traffic control group,
00:12:02 - actively monitor the planes that are in there immediate landing
00:12:06 - area. Look at the planes that are in the approach and literally
00:12:11 - somebody else is worrying about the planes that are 5,000 miles
00:12:15 - away from here, probably another risk radar in a traffic control
00:12:20 - scenario is looking at these from a project view point we don't
00:12:23 - even need to look at these at all. As I said, I don't know that
00:12:27 - you necessarily need to draw a risk radar, but having said that
00:12:31 - I am not sure that having a risk radar as part of a status report
00:12:36 - where you are graphically telling the business in senior management
00:12:40 - that I am focused on risk one and risk 5 immediately, I am staying
00:12:44 - awake at night worrying about those. I am also very concerned
00:12:48 - about 3 and 7. These are the guys that are going to hit us so
00:12:52 - it is a very good management communications tool. I have used
00:12:56 - it effectively at sometimes, but I wouldn't say it is necessarily
00:12:59 - a mandatory graphic that you are going to use often the more
00:13:03 - common approach is simply to maintain that same information in
00:13:07 - our risk register. Whether or not we use that risk radar as a
00:13:11 - communication tool or not is up to your own personal communications
00:13:15 - style but maintaining your risk register in my humble opinion
00:13:19 - is critical to overall success for risk management. You recall
00:13:24 - we started the risk radar back in planning and we will continue
00:13:28 - to maintain the risk radar throughout project delivery. We will
00:13:32 - maintain the risk register and we will say new risk
00:13:38 - today and its impact is medium and our strategy is going to be
00:13:45 - to accept. The
00:13:48 - critical date is next month
00:13:52 - and need to monitor.
00:14:00 - So new risks will be actively added to the risk register as they
00:14:04 - are identified and new risks will go through the full planning
00:14:09 - process. We will categorize them. We will develop risk responses
00:14:14 - for them and we will develop a full risk plan for all of the
00:14:19 - risks using the identical processes that we have discussed already
00:14:23 - in the planning process, but we will do this actively on a day
00:14:27 - in, day out project, on our project as the team members as we
00:14:32 - the project managers as the business users identify a potential
00:14:37 - risk events for our project,
00:14:40 - but the more important aspect to the risk register is the active
00:14:43 - maintenance of the identified risks as well so we have this risk
00:14:48 - inadequate training during planning we said it was a medium probability
00:14:53 - impact anti risk mitigation strategy was to mitigate. But
00:14:58 - here we are putting it on the risk radar and we are saying it
00:15:01 - is critical this week i.e. it is a now and we are actively monitoring
00:15:07 - the risk saying at this point in time it is not a risk, it is
00:15:11 - not an issue. I have been talking to the team. They are feeling
00:15:15 - comfortable with the development language. I have been looking
00:15:17 - at their ETC's their actual results against the estimates and
00:15:23 - you know generally speaking those task are being completed according
00:15:27 - to the original estimate so therefore I am feeling comfortable.
00:15:33 - I am not ready to close it yet, but I am feeling comfortable
00:15:36 - and I am going to keep it on my risk register for the near future,
00:15:41 - if we move down and look at another risk the staff availability.
00:15:44 - It had probably impact of high that risk communication was transfer
00:15:50 - and again it is in that now. It is in that center circle of our
00:15:54 - radar and it is active. 3
00:15:58 - programmers that I wanted for my project are not available so
00:16:03 - I as a project manager need to be actively dealing with that.
00:16:06 - I need to be talking to human resource. I need to be talking
00:16:09 - to my project management office. I need to be talking to my senior
00:16:13 - manager and I need to be creating a big stink that says my project
00:16:18 - is in jeopardy if I don't get these 3 new programmers now
00:16:23 - and if I am not able to get those 3 new programmers now then
00:16:27 - I need to start to take the appropriate actions of issuing a
00:16:31 - project change request that says the project team has originally
00:16:34 - planned is not available therefore the schedule impact for this
00:16:39 - project is going to be 3 programmers x 12 weeks of development
00:16:45 - and therefore my implementation data is going to be extended
00:16:48 - by you know 4 weeks or whatever the appropriate math is going
00:16:52 - to be on the overall project. But again the key is the active
00:16:57 - management of all of those risks that are in the critical now.
00:17:03 - The very near future this month, the network capacity at this
00:17:08 - point in time the risk hasn't come to fruition but I am going
00:17:12 - to continue to review it. It is certainly worrying me. Next month,
00:17:17 - yeah, I am gong to provide some increased scrutiny instead of
00:17:21 - reviewing it on a regular basis daily basis as I am doing with
00:17:25 - these. I will be probably touching base on the increasing competition
00:17:29 - on a weekly basis and so on. The other aspect to actively managing
00:17:35 - risks is closing them, reviewing the open risk in determining
00:17:40 - if in fact the risk event has now expired.
00:17:45 - So 3 more weeks has passed on our project. We are not 6 weeks
00:17:50 - into development. We had our concern about inadequate training.
00:17:55 - We are now 6 weeks into development now I should be able to make
00:17:59 - a definitive call as a project manager that says, "Team feels
00:18:04 - comfortable in the programming language, team is happy with the
00:18:07 - programming language and as a project manager. I am reviewing
00:18:11 - their actuals and I am reviewing their ETC's and they are absolutely
00:18:15 - consistent with where I want the team to be so I can say critical
00:18:18 - date is closed
00:18:21 - and say no,
00:18:24 - longer a risk, and go through and update each and everyone of
00:18:30 - my risks on a continual basis and again I know a them for up
00:18:34 - record but that is the key to effective risk management is watch
00:18:39 - your risk radar, review every risk, determine if you need to
00:18:44 - act on it and as soon as we need to act on it you go to that
00:18:48 - risk response plan that you had proactively developed and you
00:18:53 - immediately bring the risk response strategies into play and
00:18:59 - you start doing exactly what it was you said you were going to
00:19:02 - do in the calm and quiet of planning and that is the key. These
00:19:07 - risk response strategies were put together in the calm and quiet
00:19:10 - of planning as opposed to the panic of
00:19:14 - I am missing three developers, my project is going to be late,
00:19:18 - what am I going to do.
00:19:20 - The first thing we are going to do is calmly go back to our risk
00:19:23 - response strategy and we are going to enact that risk response
00:19:27 - strategy and then we are going to continue to monitor the risk
00:19:32 - for whether there is any residual, whether there is any secondary
00:19:35 - risks that is going to be followed from taking the action in
00:19:40 - our risk response plan.
00:19:42 - Aggressive proactive risk response planning through our risk
00:19:49 - register monitoring the open risks and adding new risks as they
00:19:55 - become known to the project is what
00:19:59 - project risk management is all about. And a final consideration
00:20:03 - for effective project risk management is managing the project
00:20:07 - contingency, as you will recall we had to contingencies for risks
00:20:12 - on our project. We had risk specific contingencies so for risk
00:20:17 - number one we had a contingency of $5,000 and one week of schedule.
00:20:24 - For risk number 3 we had $10,000 and 3 weeks of schedule, for
00:20:32 - risk number 5 we had 0 cost but we had a 1.5 week of schedule
00:20:38 - and for risk number 7 we had the opposite scenario where we had
00:20:43 - $10,000, but 0 schedule impact.
00:20:47 - We also have a generic project contingency of 10%
00:20:53 - or whatever the percentage was that we felt the project deserved
00:20:57 - based on the risk profile for their project and based on the
00:21:01 - degree of unknowns that remain for our project so we have an
00:21:05 - additional bucket of 10% or whatever the number is that you picked
00:21:09 - which may consist of $25,000. When
00:21:14 - do you take money at a project contingency to deal with project
00:21:18 - risks and how do you deal with
00:21:22 - individual assigned risk components because again you recall
00:21:27 - from planning although we had $25,000
00:21:32 - of potential risk events identified for our project.
00:21:37 - We probably didn't set aside a full $25,000
00:21:41 - because again based on our risk profile based on the assumption
00:21:45 - that Murphy is not going to visit our project on every risk that
00:21:48 - some of these risk will not come to fruition, some will simply
00:21:52 - disappear and only some of these risks will be realized we probably
00:21:57 - didn't set aside a full project risk specific contingency of
00:22:01 - $25,000. We probably set aside some reduced component of that.
00:22:07 - So now is a project manager. I am managing my project and risk
00:22:13 - number one comes along and risk number one is realized
00:22:18 - our worst fears came through and we had to enact our risk response
00:22:24 - strategy so we had to spend an additional $5,000 of our risk
00:22:30 - contingency and we had to change a project schedule by a week
00:22:35 - or basically consume a week of the schedule contingency that
00:22:39 - was already built into our project
00:22:42 - so what do we do. Well the first thing we do is say, "Okay,
00:22:45 - I now only have $10,000 of specific risk contingency left form
00:22:50 - my project because I spent $5,000 and I had 2-1/2 weeks of schedule
00:22:56 - contingency again. I have consumed a week of that schedule contingency
00:23:02 - so that is knocked down by 1-1/2 and really that is all there
00:23:06 - is to it is keeping that running log of risk number one happen.
00:23:13 - Darn, but I thought it might and I have planned for it and I
00:23:17 - have consumed it.
00:23:21 - My risk reserve is down to $10,000 and during it happened and
00:23:26 - I had schedule reserved built in so again I have consumed it. Now
00:23:32 - again based on the laws of average not all risks are going to
00:23:35 - happen. Does big bad one risk number 3 doesn't happen. So I have
00:23:40 - 10,000 of contingency reserved to risk number 3 and I had 3 weeks
00:23:46 - of schedule. Well good thing it didn't happen because I have
00:23:50 - already got less than that amount of schedule of contingency
00:23:53 - left so the good news is that risk is transpired. What do I do
00:23:58 - with these numbers?
00:24:01 - Short answer is, probably absolutely nothing. We were expecting
00:24:06 - some risks to expire and not happen, we built our total available
00:24:12 - contingency based on that assumption so we simply say, "Few,
00:24:16 - I am glad this one didn't happen. Now
00:24:19 - I still have adequate risk left or contingency left for my project.
00:24:26 - Risk number 5 may happen in which case we consume our last 1-1/2
00:24:33 - week of scheduled contingency and now we are left with zero schedule
00:24:37 - contingency for identified risk events.
00:24:41 - Hopefully you are nearing the end of your project and hopefully
00:24:45 - there aren't a lot of risk events left to happen, but that is
00:24:48 - the scenario and as it turns out there is only one risk left
00:24:53 - to happen and that is risk number 7, needed 0 contingency so
00:24:58 - we are probably okay, but if we had a risk 8 that needed another
00:25:03 - 2.5 weeks and a risk 9 that need 1.5 weeks. Now
00:25:09 - is the time for us to start to get nervous as project managers
00:25:13 - are saying I am only half way through all of my identified risks.
00:25:18 - I have already consumed 100% of my schedule of contingency. I
00:25:23 - still have a little bit of budget contingency left maybe it is
00:25:26 - time to start to alert management to the fact that my schedule
00:25:30 - of contingency has been consumed
00:25:33 - and start to prepare them for consuming the additional 3 weeks
00:25:39 - of project contingency that has been there for the on known unknowns
00:25:43 - or prepare the business that says this project is incurring more
00:25:48 - risks than really anticipated. I did some proactive planning
00:25:52 - for risks, but you know what, it wasn't adequate. It is now time
00:25:58 - to again consider a change control to consider changing the project
00:26:02 - schedule to give us more room for absorbing at the additional
00:26:08 - risk events. What
00:26:12 - is the right approach, again it is going to be based on where
00:26:15 - you are in the project, are you near done, how many risks are
00:26:19 - left to be potentially realized, what is the overall impact of
00:26:23 - those risks and what is the overall risk profile for your project
00:26:27 - so again I am repeating that same story. Risk
00:26:30 - management is all about dealing in unknowns, the same as we had
00:26:34 - for risk identification. We are dealing with unknowns. We are
00:26:38 - still dealing with the unknowns of what impact these remaining
00:26:42 - risks have, how concerned do I need to be. The key is that we
00:26:45 - are being proactive about it and where learning management to
00:26:49 - the scenarios early.
00:26:53 - Let's assume that we felt comfortable that we are not going to
00:26:57 - alert management. We still believe we are going to make it through
00:27:00 - a long comes risk number 7 and good news it doesn't happen
00:27:05 - so this $10,000 is not needed and
00:27:10 - at risk register and there are no remaining risks that need budget
00:27:14 - contingency. So now we have
00:27:18 - $10,000 of budget contingency that
00:27:23 - doesn't look like we need, what do we do with it, again my recommendation
00:27:28 - if we take that budget contingency on expected budget contingency
00:27:33 - and simply take it over and added into our overall project contingency
00:27:39 - because all we are saying at this point in time is all of the
00:27:42 - risks that I thought were going to happen had been dealt with
00:27:47 - and I have $10,000 still in reserve, but there is still this
00:27:50 - huge possibility that some unknown unidentified unplanned risk
00:27:56 - could still come along so we need to keep that contingency in
00:28:00 - reserve at all times. The
00:28:03 - key is we are keeping those risk contingencies in reserve for
00:28:08 - risk events and we are not consuming risk contingency for simple
00:28:14 - project estimation overruns.
00:28:17 - If we estimated a task in our project we should take 5 days and
00:28:23 - it took 7 days because the estimate was bad, we don't start eating
00:28:28 - u the cost for those extra 2 days and we don't start eating up
00:28:33 - the schedule of contingency for bad estimates, we simply hope
00:28:38 - and assume that there is going to be enough good estimates where
00:28:41 - we have got short falls on our estimates that is going to allow
00:28:44 - that to balance out or if after observing our project actually
00:28:49 - for a period of time we realize their estimates are light. We
00:28:52 - can either say I have an unknown risk that is happening that
00:28:58 - is called bad estimation and planning and begin to consume this
00:29:04 - or we write a change request to the business that says bad estimates,
00:29:10 - project is going to take longer, be prepared for an extended
00:29:14 - increase in the schedule and be prepared for an increase in the
00:29:18 - budget. Is it better to take it out of contingency or is it better
00:29:23 - to write the change request again is going to be based on where
00:29:25 - you are in the project,
00:29:28 - but if you make the decision to take it out of contingency it
00:29:31 - needs to be a conscious
00:29:34 - documented decision that says unknown risk realized bad estimates
00:29:42 - as a result of the bad estimates I am going to consume project
00:29:46 - contingency. You need to track the consumption of all contingency
00:29:51 - and be able to report back to management on contingency. The
00:29:56 - message I am trying to deliver and I hope it is coming through
00:29:59 - clearly is contingency is not through to be used to just routine
00:30:05 - day in day out or more appropriately week in week out to consume
00:30:10 - contingency to keep the schedule looking rosy and to keep the
00:30:15 - budget looking rosy if you have overruns. If you have short falls
00:30:19 - on the projects you need to own up to it you need to communicate
00:30:23 - that you had estimation challenges and you are consuming contingency
00:30:27 - to deal with it. Otherwise
00:30:29 - if you have simply pedaled this way and you took $2,000 out for
00:30:34 - week 1 and you took $1,500
00:30:37 - out for week to and you took another $2,000 out for week 5 all
00:30:42 - of a sudden all of our risk contingency has been consumed along
00:30:46 - comes one of those big bad unknown risk events and you are forced
00:30:51 - to admit to management that says I got nothing left.
00:30:55 - This is a risk even that has happened. My project in its trouble,
00:30:58 - I need more budget. The first thing management is going to say
00:31:01 - Steve didn't you plan for contingency, didn't you plan for risk
00:31:05 - and that is an answer I would never want to give to management
00:31:08 - says, "Yeah I planned for it but I consumed t routinely as part
00:31:12 - of weekly project delivery. No, never consume contingency as
00:31:17 - part of weekly project delivery trying to keep your project looking
00:31:21 - green if you have estimation own up to it documented and take
00:31:26 - the appropriate actions, reserve contingency,
00:31:30 - whether it is project specific contingency or project over head
00:31:35 - contingency, reserve contingency for risk events.
00:31:41 - So to conclude this nugget on project risk management risk management
00:31:44 - is 4 key components. Identify which is identical
00:31:52 - to identify
00:31:55 - risks and planning.
00:31:59 - We didn't focus on the identification be on the statement that
00:32:04 - said we need to routinely sit back, dream and worry and identify
00:32:09 - new risks based on the new information we have about project
00:32:13 - deliver on an ongoing consistent basis on our project. This
00:32:17 - nugget focused on the true management aspects where we strategize.
00:32:23 - Making sure that our risk response plans are still relevant taking
00:32:27 - advantage of the new information that we have to update our risk
00:32:31 - response plans taking the advantage that we now have to determine
00:32:35 - whether risks are still relevant and be closed taking advantage
00:32:39 - of the new information that we have to insure that we are effectively
00:32:44 - ready to mobilize a risk response plans should they happen,
00:32:50 - which is the next step, which is managing the risks, putting
00:32:53 - the steps in place to deal with risks. We tracked about having
00:32:57 - a risk radar,
00:33:00 - where we are focused on the rest that are happening now very
00:33:04 - concerned about the risks that are about to happen, less concerned
00:33:08 - about the risks that are farther out potentially in the next
00:33:10 - quarter and literally ignoring the risks that are farther away. Once
00:33:15 - we have a risk in our bull's-eye in our center of risk radar
00:33:20 - we are going to actively review the risk. Is it happening? Do
00:33:24 - we need to continue to monitor, do we need to put a risk response
00:33:28 - strategy into action now and deal with the risk and we routinely
00:33:34 - weekly continue to review and monitor all of the risks in our
00:33:39 - risk register and maintained the risk register show the current
00:33:43 - actions that we are taking and finally we talked about managing
00:33:47 - the risk contingency
00:33:49 - and we talked about managing the project contingency where the
00:33:54 - key message is preserve risk contingency for risk events and
00:33:59 - don't allow your risk contingency to be consumed by regular day-to-day,
00:34:05 - week-by-week, project delivery issues. If you have a significant
00:34:11 - reoccurring project issue, make it a risk, communicate and consume
00:34:16 - contingency based on that communication, but if you consume your
00:34:20 - contingency for routine delivery challenges you will have no
00:34:24 - contingency left to enact your risk response plans when risk
00:34:30 - events happen. This
00:34:33 - concludes our nugget on project risk management. I hope this
00:34:36 - module has been informative for you and thank you very much for viewing.

Project Quality Management

Project Delivery Management

Earned Value Management

Project Communication Management

Project Closure

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Steve Caseley

Steve Caseley

CBT Nuggets Trainer

Certifications:
PMI-PMP, PMI-ACP, PMI-SP, Project+

Area Of Expertise:
Project Management, MS Project, Development Methodologies, Agile Development


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