Hi All
Here is some useful concise information on various Tools and Techniques
used for Risk Management...........
regards
Sameer
Risk Management – Useful Tools and Techniques
In this section, the tools and methodologies that you can use during
various phases of managing a risk are briefly described.
Risk Identification
There are many tools and techniques for Risk identification. Documentation
Reviews
- Information gathering techniques
- Brainstorming
-
Delphi technique – here a facilitator distributes a questionnaire
to experts, responses are summarized (anonymously) & re-circulated among
the experts for comments. This technique is used to achieve a
consensus of
experts and helps to receive unbiased data, ensuring that no one person
will have undue influence on the outcome
- Interviewing
-
Root cause analysis – for identifying a problem, discovering the
causes that led to it and developing preventive action.
-
Assumption analysis -this technique may reveal an inconsistency of
assumptions, or uncover problematic assumptions.
- Diagramming techniques
- Cause and effect diagrams
- System or process flow charts
- Influence diagrams – graphical representation of situations,
showing the casual influences or relationships among variables
and outcomes
- SWOT analysis
- *Expert judgment *– individuals who have experience with similar
project in the not too distant past may use their judgment through
interviews or risk facilitation workshops
Risk Analysis
*Tools and Techniques for Qualitative Risk Analysis *
-
Risk probability and impact assessment – investigating the
likelihood that each specific risk will occur and the potential effect on a
project objective such as schedule, cost, quality or performance (negative
effects for threats and positive effects for opportunities), defining it in
levels, through interview or meeting with relevant stakeholders and
documenting the results.
- *Probability and impact matrix *– rating risks for further
quantitative analysis using a probability and impact matrix, rating rules
should be specified by the organization in advance. See example in appendix
B.
-
Risk categorization – in order to determine the areas of the project
most exposed to the effects of uncertainty. Grouping risks by common root
causes can help us to develop effective risk responses.
- *Risk urgency assessment *– In some qualitative analyses the
assessment of risk urgency can be combined with the risk ranking determined
from the probability and impact matrix to give a final risk sensitivity
rating. Example- a risk requiring a near-term responses may be considered
more urgent to address.
- *Expert judgment *– individuals who have experience with similar
project in the not too distant past may use their judgment through
interviews or risk facilitation workshops.
*Tools and Techniques for Quantities Risk Analysis *
- Data gathering & representation techniques
-
Interviewing–You can carry out interviews in order to gather an
optimistic (low), pessimistic (high), and most likely scenarios.
-
Probability distributions– Continuous probability distributions
are used extensively in modeling and simulations and represent the
uncertainty in values such as tasks durations or cost of project
components\ work packages. These distributions may help us perform
quantitative analysis. Discrete distributions can be used to represent
uncertain events (an outcome of a test or possible scenario in
a decision
tree)
-
Quantitative risk analysis & modeling techniques– commonly used for
event-oriented as well as project-oriented analysis:
-
Sensitivity analysis – For determining which risks may have the
most potential impact on the project. In sensitivity analysis
one looks at
the effect of varying the inputs of a mathematical model on the output of
the model itself. Examining the effect of the uncertainty of each project
element to a specific project objective, when all other
uncertain elements
are held at their baseline values. There may be presented
through a tornado
diagram.
-
Expected Monetary Value analysis (EMV) – A statistical concept
that calculates the average outcome when the future includes
scenarios that
may or may not happen (generally: opportunities are positive
values, risks
are negative values). These are commonly used in a decision tree analysis.
-
Modeling & simulation – A project simulation, which uses a model
that translates the specific detailed uncertainties of the project into
their potential impact on project objectives, usually iterative. Monte
Carlo is an example for a iterative simulation.
-
Cost risk analysis – cost estimates are used as input values, chosen
randomly for each iteration (according to probability distributions of
these values), total cost will be calculated.
-
Schedule risk analysis – duration estimates & network diagrams are
used as input values, chosen at random for each iteration (according to
probability distributions of these values), completion date will be
calculated. One can check the probability of completing the project by a
certain date or within a certain cost constraint.
-
- Expert judgment *– used for identifying potential cost & schedule
impacts, evaluate probabilities, interpretation of data, identify
weaknesses of the tools, as well as their strengths, defining when is a
specific tool more appropriate, considering organization’s capabilities &
structure, and more.
*Risk Response Planning *
-
Risk reassessment – project risk reassessments should be regularly
scheduled for reassessment of current risks and closing of risks.
Monitoring and controlling Risks may also result in identification of new
risks.
- *Risk audits *– examining and documenting the effectiveness of risk
responses in dealing with identified risks and their root causes, as well
as the effectiveness of the risk management process. Project Manager’s
responsibility is to ensure the risk audits are performed at an appropriate
frequency, as defined in the risk management plan. The format for the audit
and its objectives should be clearly defined before the audit is conducted.
-
Variance and trend analysis – using performance information for
comparing planned results to the actual results, in order to control and
monitor risk events and to identify trends in the project’s execution.
Outcomes from this analysis may forecast potential deviation (at
completion) from cost and schedule targets.
- *Technical performance measurement *– Comparing technical
accomplishments during project execution to the project management plan’s
schedule. It is required that objectives will be defined through
quantifiable measures of technical performance, in order to compare actual
results against targets.
-
Reserve analysis – compares the amount of remaining contingency
reserves (time and cost) to the amount of remaining risks in order to
determine if the amount of remaining reserves is enough.
-
Status meetings – Project risk management should be an agenda item
at periodic status meetings, as frequent discussion about risk makes it
more likely that people will identify risks and opportunities or advice
regarding responses. “