EME 09 Risk management

Risk management

• Identify the risks that might affect the project’s success.
• Assess the risks based on cost-effective principal.
• Select appropriate methods to mitigate project’s risks.
• Estimate risks to the schedule using PERT & Critical
  Chain technique

Risk

involves “cause vs effects”.
The key role of risk management is considering uncertainty remaining after a plan has been formulated.

Risk Management Process

compare loss & the cost of defraying

• risk identification
• risk assessment
• risk plan
• risk monitoring & control

Risk Identification

• Technical risks
• Project management risks
• Organizational risks
• External risks

Risk Identification Matrix Template

scope triangle elements:

• scope
• time
• cost
• quality
• resources
  

Risk Assessment

risk exposure = (potential damage) × (probability of occurrence)
e.g. 500k*0.1%=500 yuan
level: high>significant>moderate>low

Risk Plan

Contingency planning

• risk accept
• risk avoidance
• risk reduction/mitigation
• transfer

Risk monitoring & control

Risk reduction leverage = (RE_before-RE_after)/ cost of risk reduction

• RE_before is the risk exposure, as explained in above, before risk reduction actions have been taken.
• RE_after is the risk exposure after taking the risk reduction action.

PERT (Program Evaluation and Review Technique)

Expected duration: 𝑡_𝑒 = (𝑎 + 4𝑚 + 𝑏)/6

• Most likely time (a)
• Optimistic time (m)
• Pessimistic time (b)

Case: PERT Application
Activity standard deviations s=(b-a)/6

• Step 1: calculate the standard deviation of each project event

  two possible paths: the greater of the two

• Step 2: calculate the z value for each event that has a target date

  z=(T-𝑡_𝑒)/s

• Step 3: Converting z values to probabilities