Chapter 10
Risk Management
Proactively managing the positive and negative
effects of uncertainty
Hartley, Project Management: Integrating Strategy, Operations and Change, 3e
Tilde Publishing
Chapter overview
1.
2.
3.
4.
5.
6.
Planning for risk management
Identifying the risks
Qualitative and quantitative analysis
Planning risk responses
Assigning accountability
Controlling project risk
© 2014 Hartley, Project Management: Integrating Strategy, Operations and Change, 3e
Tilde Publishing
2
Planning for risk management
 Effect of uncertainty on (project) objectives
 Often a singular reliance on standard operating
procedures
 Explicit, thorough and documented risk management
planning activities will work towards not only evaluating
and controlling project risks, but (and equally important)
also delivering a successful project
 Begins with clearly understanding and agreeing exactly
how the risk management activities for the project
will be structured and performed
© 2014 Hartley, Project Management: Integrating Strategy, Operations and Change, 3e
Tilde Publishing
3
Identifying the risks
 Involves stakeholders (project manager, team
members, clients, subject matter experts…)
 Anticipating and identifying risks that may affect the
project
 May be internal or external
 Competition, political, environmental, social, financial,
economic…
 The challenge is to identify the true source of the risk
© 2014 Hartley, Project Management: Integrating Strategy, Operations and Change, 3e
Tilde Publishing
4
Qualitative and quantitative analysis
 Reduce the level of uncertainty and/or impact and
enable everyone to focus on the high-priority risks
o the probability of the risk occurring
• numeric value, descriptive label and explanation
o the impact of the risk occurring
• numeric value, descriptive label and explanation
o the priority (or ranking) of the risk
• probability x impact
 low: 1 to 6 treated by existing standard operating procedures
 medium: 8 to 12 require direct intervention by the project manager
 high: 16 to 25 require immediate escalation and intervention by
senior management
© 2014 Hartley, Project Management: Integrating Strategy, Operations and Change, 3e
Tilde Publishing
5
Planning risk responses
 Acceptance: passive/active acceptance and the impact it may
have on the project’s outcome
 Mitigation: taking specific action to reduce either the probability
and/or impact of the risk event.
 Avoid: eliminating the threat to protect the project from the impact
altogether.
 Transfer: relocate the impact of the threat, together with the
ownership of the response, to a third party.
 Exploit: ensure that the identified opportunity is realised by
eliminating the uncertainty around it altogether so that the
opportunity definitely happens
 Enhance: actively increase the probability and/or positive impacts
of an opportunity
 Share: split between partnerships, consortiums and/or mergers,
where each party is contracted for their particular expertise
© 2014 Hartley, Project Management: Integrating Strategy, Operations and Change, 3e
Tilde Publishing
6
Assigning accountability
 Clearly, risk response strategies have to be assigned to
the most appropriate stakeholder available to carryout
out the required response
 If no one is assigned responsibility, there is a very high
chance that no one will take any interest in the risk or its
treatment
 As a shared responsibility, everyone on the project takes
an active role in not only identifying and analysing risk
but also in ensuring that capable resources are actually
assigned to action and monitor the response strategy
© 2014 Hartley, Project Management: Integrating Strategy, Operations and Change, 3e
Tilde Publishing
7
Controlling project risk
 Identifying, assessing, analysing and responding to
tentative risks at the start of the project does not mean
that you are free from also constantly reviewing and
controlling your risk assessment processes throughout
the project
 Risk is not a static concept
 Ongoing control is what is needed to ensure that the
challenges in managing risk are not squandered and
that the many lessons presented throughout the
project are, in fact, learned.
© 2014 Hartley, Project Management: Integrating Strategy, Operations and Change, 3e
Tilde Publishing
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Review questions
1. Why is risk management crucial to project planning
and delivery?
2. Summarise the steps in managing project risk and
identify the role each plays in proactive risk
management.
3. Explain the application of the probability and impact
matrix and the benefits it delivers.
4. What are the common risk response strategies for both
threats and opportunities throughout the project?
5. What are the individual actions required to be
performed under risk control?
© 2014 Hartley, Project Management: Integrating Strategy, Operations and Change, 3e
Tilde Publishing
9
Group learning activities
 Discuss why risk management can be a difficult process
to implement
 Brainstorm potential sources of risk for a project
 Debate whether both probability and impact can be
treated through response strategies, or only impact
 Discuss the notion that all risk should not be treated
equally
 Workshop examples of both positive and negative risk
 Discuss why risk management should be a shared
ownership
 Discuss the differences between risks and issues
© 2014 Hartley, Project Management: Integrating Strategy, Operations and Change, 3e
Tilde Publishing
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Assessment options
 Create a risk management plan that conveys how the
risk management activities will be structured and
performed
 Critique and report on useful approaches, tools or
techniques commonly used to identify risk
 Develop a probability and impact table that facilitates
both quantitative and qualitative analysis
 Develop a risk register template that aligns to the risk
management process
 Short answer questions
 Multiple choice questions
© 2014 Hartley, Project Management: Integrating Strategy, Operations and Change, 3e
Tilde Publishing
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