Chapter Review: chapter 11

Chapter 11
Project Risk Management
Positive risks are risks that result in good things happening; sometimes called opportunities.
A general definition of project risk is an uncertainty that can have a negative or positive effect on meeting project objectives.
The goal of project risk management is to minimize potential negative risks while maximizing potential positive risks.
• Risk utility or risk tolerance is the amount of satisfaction or pleasure received from a potential payoff
– Utility rises at a decreasing rate for a person who is risk-averse
– Those who are risk-seeking have a higher tolerance for risk and their satisfaction increases when more payoff is at stake
– The risk-neutral approach achieves a balance between risk and payoff
Processes
1. Risk Management Planning - How to manage risk management activities
2. Risk Identification - identify risks and document their characteristics
3. Qualitative Risk Analysis - prioritize by assessing probability of occurance and impact
4. Quantitative Risk Analysis - numerically analyzing the impact
5. Risk Response Planning -develope actions to reduce threat and enhance opportunities
6. Risk Montitoring and Control - tracking, monitoring risks, executing risk response plan and evaluating their effectiveness throughout project life cycle.
Each process occurs at least once in every project and occurs in one or more phases.
Project Risk:
• Uncertain event
• Impacts at least one project objective (time, cost, scope, quality)
• Can have positive or negative impact
• One or more causes (e.g. delay in getting permit, insufficient manpower, dependency on external vendor)