Homework Assignment

Description

Plan Risk Responses for your project risks and then update your project risk register accordingly.

INFO 580
Project Risk Analysis & Management
Module 6a: Plan Risk Responses
Continuous Process Improvement
for Risk Management
• Identification
▪ Discovery of a potential risk
• Assessment
▪ Review, analysis, and prioritization
• Response Planning
▪ To mitigate, avoid, transfer or assume assessed
risks
• Execution
▪ Of response strategies, as determined in
response planning
• Monitoring
▪ New and existing risks and the
progress of risk response
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Risk Response Planning
• Since risks have not yet occurred, project managers can plan risk responses to reduce
the likelihood and/ or impact of risks occurring.
▪ If a risk materializes, then it is no longer a risk. It’s an issue.
• The goal of Risk Response Planning is to decrease the probability and/ or impact of
identified threat risks and increase the probability and/ or impact of identified
opportunity risks.
• If we simply identify risks and do not plan responses, we are accepting the risk. We
have done nothing.
• What planning for a risk response does is helps us to reduce the number of and the
impact of project risks which become project issues.
• We don’t want to simply mitigate all risks, because:
▪ Mitigation is a threat risk response and is not use for opportunity risks.
▪ Mitigation is 1 of 4 threat risk response strategies. The other 3 will be discuss in this lecture.
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PMBOK 11.5 Plan Risk
Response
Inputs
Tools &
Techniques
Outputs
Data gathering
Project management plan
Expert judgment
Change requests
Interpersonal and team skills
Project documents
Strategies for threats
Strategies for opportunities
Enterprise environmental factors
Organizational process assets
Contingent response
strategies
Strategies for overall project
risk
Data analysis
Decision making
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Project management
plan updates
Project documents
updates
INFO 580
Project Risk Analysis &
Management
Module 6b: Risk Responses Strategies
Risk Response Strategies Threats
Threat Risk Response Strategies (pre-event actions):
• Mitigate: Actions to reduce the probability or impact of a threat risk
• Avoid: Eliminate the risk-producing activity entirely by choosing an
alternate approach.
• Transfer: Take actions that redistribute risk to another area (This
does not relieve the responsibility of tracking and closing the risk).
• Accept: Accept the risk as stated with no other action.
• Escalate: Escalate the risk to the management level where they
can be resolved. This may be the program, portfolio or
organizational level.
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Risk Response Strategies Opportunities
Opportunity Risk Response Strategies (pre-event actions):
• Enhance: Actions to increase the probability or impact of an
opportunity risk
• Exploit: Drive the risk event to occur by changing its probability to
100%, or as close as possible.
• Share: Share risk ownership with an individual or group to influence
the opportunity occurrence.
• Accept: Accept the risk as stated with no other action.
• Escalate: Escalate the risk to the management level where they can
be resolved. This may be the program, portfolio or organizational
level.
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INFO 580
Project Risk Analysis &
Management
Module 6c: Contingency Planning
Contingency Planning
• Another type of risk response is contingency planning.
• The Risk Contingency Plan is planned prior to the risk event, but is
executed after the risk event occurs
• A Risk Trigger is an event which, when it occurs, is a warning that the risk
event will soon occur.
• Risk Trigger are critical to identify particularly for a risk which has a
contingency plan. When the risk trigger occurs, it signals the execution of
the contingency plan.
• When:
▪ There is no way to further reduce a high risk within reasonable cost.
▪ The risk has a very high probability of occurring.
▪ The risk has a very high impact but a low probability.
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Contingency Planning
When is contingency planning done?
• The Risk Contingency Plan is planned prior to
the risk event, but is executed after the risk
event occurs
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INFO 580
Project Risk Analysis &
Management
Module 6d: Monetary Reserves
Monetary Reserves
What are they?
Management Reserves
• For unknown unknowns
(unidentified Risks)
• Part of Overall Project Funding
and Overall Budget, not part of the
baseline project
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Contingency Reserves
• For known unknowns (identified
Risks)
• Are included in Cost Estimates
• Part of the Cost Baseline
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Management Reserves
What are project management reserves and why are they
valuable?
• For unknown unknowns (unidentified Risks)
• Part of Overall Project Funding and Overall Budget, NOT part
of the baseline project
• Why…?
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Contingency Reserves
What are project contingency reserves and why are they
valuable?
• For known unknowns (identified Risks)
• Are included in Cost Estimates
• Part of the Cost Baseline
• Why?
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INFO 580
Project Risk Analysis &
Management
Module 6e: Challenges of Risk Management
Purpose/ Importance of Risk
Response Planning
• Decrease threat (Negative) risks
above the tolerance
• Increase opportunity (Positive) risks
• Focus resources on the highest risks
• Plan contingencies for threat risks,
in the event they occur
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Common Risk Management
Challenges
• How to create and use the risk register effectively?
• What is the purpose of contingency planning?
▪ When is it appropriate and valuable to do contingency planning?
• What are Management Reserves and Why are they Valuable
• How to execute on the selected planned strategies
• How and when to report on risk
• Documentation and Communication
What risk management challenges do you have…?
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INFO 580
Project Risk Analysis &
Management
Module 6f: Breaking the Barriers of
Implementing Risk Management
Barriers to Project RM
What stops us from doing RM?
• No buy in from others:
▪ Our boss
▪ Our project sponsor
▪ Our company
• No time
• No $
• No requirements
• No plan
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The 4 P’s of Project Risk Mgmt.
…The PAIN
(or the Possibility…)
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The Pain!
• What is the pain that your organization/ project
has?
▪ Why do something if it doesn’t solve a problem?
• The Pain point will drive change…
• $$$ Potential Financial Loss  drives change…
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The Possibility…
• What is the possibility that your organization/
project has?
• What might be the benefit of implementing risk
management?
▪ Why do something if there is no benefit?
• The Potential Benefit(s) drive change…
• $$$ Potential Revenue ☺ drives change…
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INFO 580
Project Risk Analysis &
Management
Module 6g: Breaking the Barriers of
Implementing Risk Management (Part 2)
The 4 P’s of Project Risk Mgmt.
The PLAN
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The Plan
• Establish the process for managing project
risks?
• Develop a Risk Management Plan
▪ And use it!
• Generate a culture of risk management
▪ Start with me!
• Update the Plan for each new project…
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The 4 P’s of Project Risk Mgmt.
PARTICIPATION
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Participation
• Participation starts with Communication
• Shift the Culture
▪ ‘Start with Why: How great leaders inspire action’ by
Simon Sinek
▪ Why? (Purpose, Cause, Believe)
• Training on Risk Management
▪ How? (Process)
▪ What? (Templates)
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Participation
• Start small: Do RM on your projects, don’t wait for
sponsor or senior management approval.
• Create an environment of Risk Awareness with your
Team
• Generate Leadership, so Risk Management occurs
when you are not there…
• Make it safe to bring up risks and reward people for
doing it!!! …really…
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Participation
• Any and all personnel on a project are responsible for
identifying risks – it’s an everyday part of the job
• It is not necessary to resolve the risk at this stage – simply
capture the potential problem
• Everyone Identifies Project Risks through:





Brainstorming
Checklists
Cost/Schedule Analysis
Functional/Failure analysis
Interviewing Subject Matter Experts, etc.
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INFO 580
Project Risk Analysis &
Management
Module 6h: Breaking the Barriers of
Implementing Risk Management (Part 3)
The 4 P’s of Project Risk Mgmt.
PROOF!
Pixabay, Retrieved from: https://pixabay.com/en/woman-happy-girl-lady-hands-raised-294286/
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Proof!
• As they say, “It in the pudding!”
• Demonstrate the ROI
• Your best Proof is:
▪ On Time
▪ Within Budget
▪ Within Scope
▪ With Customer Satisfaction!
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The 4 P’s of Project Risk Mgmt.
Start with…The PAIN
(or possibility)
Use… The PLAN
Generate… PARTICIPATION
Demonstrate… PROOF!
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INFO 580 – Module 6
Homework Assignment #5: Plan Risk Response
Introduction
Use the risk register you developed and updated in this course. Plan Risk Responses for your project risks and then update your project risk
register accordingly. Following the best practices outlined in the PBMOK Guide and the example Risk Register (Risk Log) provided in the Bryne
book to plan risk responses for your project risks. These may be both threat (negative) and opportunity (positive) risks.
Below are questions to assist you with planning risk response for your project risks.
Question 1:
Which project risks (positive and negative) will you plan risk responses for?
You will need to consider your project risk tolerance when determining how to manage each project risk. Also, remember that risk responses may
address the probability and/ or the impact of the risk defined, which is why it is important for the risk statement to be properly formed.
Question 2:
What are the 4 possible threat risk responses?
Make sure you use each of the 4 threat risk responses at least once in your project risk register.
Question 3:
What are the 4 possible opportunity risk responses?
Use the answers to these questions to plan risk responses for all identified project risks (both threat and opportunity risks) and update the
project risk register accordingly.
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Grading Rubric:
M5 Risk Register Rubric
Criteria
Planning Risk
Responses
Risk Register
Fields follow best
practices
Format,
Grammar,
Presentation
Pts
Ratings
Risk Response Plans following best
practices and demonstrating an excellent
understand of the process.
Risk responses planned well,
demonstrating a good
understanding of the process.
Some risks responses
planned well, some could
be improved.
Risk response planning
does not meet
requirements.
40 pts
34 pts
24 pts
0 pts
Excellent development of
assignment, following best
practices for risk tracking
40 pts
Good development of
assignment, following best
practices for risk tracking
34 pts
Some best practices were
not followed, making the
risk register less effective in
tracking risks.
Critical fields
were missing
from the risk
register.
28 pts
20 pts
The assignment has
significant flaws and
not fit for function.
40 pts
40 pts
0 pts
Excellent presentation,
professionally
formatted/presented, and free of
grammatical errors
Good presentation,
nicely formatted, but
with a few minor
errors
Fair presentation,
adequately
formatted, with
some errors
Somewhat poorly
presentation, lacking
professionalism, and
many errors
Very poorly
presented and/or
formatted; unfit for
professional use
20 pts
18 pts
15 pts
10 pts
0 pts
20 pts
Total Points: 100
Page 2
Assignment #4: Quantitative Risk Analysis
Introduction
After qualitative risk analysis of project risks, quantitative risk analysis is used for risk of high priority (either high threat or
opportunity risks). This assignment focuses on some common quantitative risk analysis tools/ techniques.
Decision Tree Analysis is one of the tools and techniques of quantitative risk analysis. Decision trees use Expected Monetary Value
(EMV) which is another tool/ technique of quantitative risk analysis. Program Evaluation and Review Technique (PERT) is another
tool which uses estimation to complete quantitative risk analysis.
Remember:
The Impact used in EMV is in days or dollars.
PERT is a particular type of 3 point estimation, where the Most Likely estimate is weighted 4 times the optimistic or pessimistic
estimates. All 3 estimates are used to calculate PERT.
Below are exercises in both decision tree analysis and PERT estimation.
Exercise 1:
Scenario: You are the PM on a project and you are developing the project schedule, this includes estimating the duration of activities
for the project. You ask one of your team members how long it will take them to complete development of a feature in a web
application. You want to provide the best numerical estimate possible so you employ the tool/ technique of PERT estimation.
Your team member provides the following estimates for this activity:
Optimistic= 5 days
Pessimistic= 20 days
Most likely= 12 days
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What is the equation used for the PERT estimate?
PERT is a network analysis technique used to estimate project duration when there is a high degree of uncertainty about the individual
activity duration estimates PERT uses probabilistic time estimates–Duration estimates based on using optimistic, most likely, and
pessimistic estimates of activity durations, or a three – point estimate.
Formula: PERT weighted average=(optimistic time + 4X most likely time + pessimistic time) /6
What is the PERT estimate for this activity?
PERT weighted average = (5 + 4 x 12 + 20)/ 6
PERT =10.83333333
Exercise 2:
Given the following Decision Tree, perform decision tree analysis to determine which is best to do, make or buy a software
application as part of a development project? Remember that this requires the use of EMV.
Page 2
Profit
90%
Make
30%
[$50,000]
Simple
[$23,000]
70%
Difficult
[$34,000]
System
Minor Changes
35%
Buy
[$17,000]
65% Major Changes
[$35,000]
90%
Profit
[$35,000]
What is the EMV equation?
Expected monetary value (EMV) is a ballpark figure that shows how much money a party can reasonably expect.
EMV= Probability x probable outcome
Should you make or buy the system?
Make decision
Profit (0.9 X 50000) =
Simple (0.3 X 23000) =
Difficult = (0.7 x 34,000) =
Total Outcome
45,000
6,900
23,800
75,700
Page 3
Buy Decision
Minor Changes (0.35 x 17,000) =
5,950
Major Changes (0.65 x 35,000) =
22,750
Profit (0.9 x 35,000) =
31,500
60,200
It’s more profitable to make the system rather than purchasing since the outcome of making the system is more profitable by (75,500 –
60 200) = $ 15, 300.Therefore, the company should make the system.
Note: When calculating the EMV, make sure profits are calculated as positive (+) values and losses are calculated as negative (-)
values.
Decision Tree Outline

System
o Make



o Buy



90% – Profit [$50,000]
30% – Simple [$23,000]
70% – Difficult [$34,000]
35% – Minor Changes [$17,000]
65% – Major Changes [$35,000]
90% – Profit [$35,000]
Page 4
Question 1
Decisions involved:
Merge 125-300 units to one
Outcomes:
Production increases from 250-600 units
Completion Time: 2021
Project Requirements/Conditions:
Human Resources
Financial resources
Capital resources
Implementation:
Phase 1

Purchase of capital equipment

Installation of critical facilities
Phase 2
Recruitment and training of staff
Testing of the new facility
Distribution network needs.
Page 5
Key Risks
High-level timeline
Start Date: 1st of June in 2019 ends in 1st of October in 2021
Total Project Time: 1st June 2019 -31st December 2019
= 7 months
1st January 2020 – 31st December 2020 = 1 year
1st January 2021 – 1st October 2021
Total Time Taken
=9 months
2 years, 4 months
Phase 1: 1 year 6 months
Phase 2: 10 months
High-level budget
Total Cost: $5 million
$3.5 Million will finance construction and purchase and or lease of critical equipment
$1 million-Second phase of the project -human resources and setting up a distribution network
$0.5 million will be budgeted towards the initial marketing campaign
Page 6
Decision Tree
Phase 1
Phase 2
0.15
Customer risk
0.25
Capital R risk
0.09
Budget risk
Increase (250-600)
0.15
People risk
Merge
0.01Requirement risk
High level Timeline
0.25
Decisions:
Schedule risk
O.o5 Human Resource Risk
Merge Units
High level budget
Don’t merge
0.25 operational risks
Don’t merge
No change (250-300)
0.15 Product Risk
0.15 Finance Risk
Page 7
Activities
High-level timeline
Customer Risk
Probability
High-level budget
Operational Risk
25% =0.25
25% = 0.25
Product Risk
15% = 0.15
Budget Risk
9% = 0.09
Finance Risk
15% = 0.15
People Risk
15% = 0.15
Capital Resource Risk
Requirement Risk
15% = 0.15
Probability
0.55
1%= 0.01
Schedule Risk
25%= 0.25
Human resource Risk
5% =0.05
Total Probability
Total Probability
0.95
Total probability = 0.95 -0.55 =1.5
PERT and EMV COMPUTATIONS
$3.5 Million will finance construction and purchase
$3.5 m x 0.55 =$1.925 m
$1 million-Second phase of the project -human resources and setting up a distribution network
$1 m x 0.95 = $ 9.5 m
$0.5 million will be budgeted towards the initial marketing campaign
$0.5 million x 0.55 =$2.75 m
Total Outcome = High-level timeline =$ 9.5 m
Page 8
$ 9.5 m + Initial project cost
$ 9.5 m + $5 m = $ 14.5 m
Total Outcome =High-level budget =
$1.925 +
$2.75 m
$ 4.675 + Initial project cost
$ 4.675 + 5 m =$ 9.675
Merge the products it will be more profitable
Page 9
PROJECT; IMPACT OF MERGING TWO 125-130 UNITS IN EIPaso
PROJECT RISK REGISTER
RISK IDENTIFICATION PHASE
Risk ID
Date identified
Risk category
opportunity/threat
1 25th June 2019
risk
customer risk
Diseconomies of scale
2 29th June 2019
operational risk
reduction of layoff dilemma
3 3rd July 2019
capital resource risk
rice in prices of equipments
4 6th July 2019
Budget risk
implementation deficit
5 8th July 2019
people risk
reaction of internal and
externalenvironment
6 11th July 2019
requirement risk
Strict government policies
7 14th July 2019
product risk
boost development and
research
8 15th July2019
schedule risk
Time taken to complete the
project
9 25th July 2019
human resource risk
overworking the HR with
critical project functions
finance risk
increased profit margin
10 2rd August 2019
Risk statement
if the company combine the two units, then the new bigger firm will incur add
result to price increase which will disadvantage the customers of the product
eduction of layoff dilemma
if the company merge the two units then,they will have opportunities to layo
workers in the two units.
ce in prices of equipments
if the company procure capital equipment that have high prices than budge
losing a lot of financial resources.
trict government policies
If the company set ou specific budget of $5million for implementation of th
might failto accomplish it project due to price flactuations
if the company merge the two units,then what will be its implication to the
and the environment it will be operating
if the company merge the two units,then which are the government policies
to it that may adverse negatively to its operation
if the two units 125-130 merge, then the company will boost its developme
because of increased return that will sponsor research and development
ime taken to complete the
if the company set the completion date at Oct 2021, then willit have compl
the setback experienced during the transition process.
verworking the HR with
if the HR is left to handle all the project functions alone, then the company
object because of lack of pooling of ideas.
if the company units merge effectively,then the company profit marginof
the units is now single business that dominate the sale which will increase
0

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