Senior Manager's Guide To Project Risk Management - Free 32726

A wo "Exc b use elow Sh reduced ballo man in m 3 0 f e The m e a e a de o lt mee , a e t her can yo scende itude an n was lo hot air near t above n replied u d st . d a h s a n ho a : one ur ag elp? I pr bit mor potted a She "You of th lkali des "You ar e an omis o , bu man ert s e r em e in m us d ed a crub a t be t I do na n t frien shouted a bio habit hot air n p 't o k d b pul a now logis "We tions at, 2.7 m alloon h t" s a whe I would ll," a ov er re I a id th iles and ns w in w e s m.“ p e g ballo a wn s I hav ered t onis ing g t of the approxim he b e to t C . r o a " a o I am idea un ds te lo ll ," re wha oonist, " of th rado Ri ly plied t v er e e raz t he m Fran to make verythin The o rb a kly, man an. " you'v of your g you to s uc k c k belo How infor ld m er.“ e no d id m said "I am,“ r w respo ei t bee you a eplie th e m nd e d kn o w n mu tion, an s techni O? d : c D a d t " c ”? a n h Yo h he t ll ," e er ot, lp so he fact is y correc have you don balloon u must b nag nate l ager a t f is , I a 't e b rise t, "b am s r.“ u kn a t M fortu man till lo t jec t . to a hot air n to wh ow whe ut how project m st. er e y re yo di d y . Yo Pro are a projec cept.. body h , v a e e n a e n a n s o o u u ar o e e or u know ger.“ oes ger s, a s, ex om e do uld b thaitdea h made u are d u a o ? w l at d ana now at i ell s ot b sho prob w to kee promis e to a la here yo “ "Well” Wh ject M one k do; th e; to t uld n hy it ebutta e to , lemn. rg e u're p, a n s q e g T o Pro every ing to e don it sho e, or w ts in r u t be son he fact d you ex meone antity o oing. Yo n y b h s s l o t e h a o e n o t t ha t f u p ec t s er the s is, you for, has n at is sons w body argum sive. you m a t ha e p a wh rea ome pare onclu at i om th ses. wer me pos re in ex e to solv h e t s o d e in ition i t e yo actly fr xcu er by o pre nd c b ef ur yo dec ten e met, cov ses To to lis done and t cing a n: dis excu e the b u t s o r e we u o e a y; ; ; t n t e i i i b t e o o ; m 's h v t m ; t n o e d o n n l e e o n d o o d how u rc e tw on don be d s;w my sho fferen ll be c An een d to list to ove i y it een shall as it i ctly; fault!" b ne; nts b sha s wh in a d t s a i h n do ume ha how e left corre e. e e ing rg ing don e th not be up a then: the th nt out well b thing r wors h t if s ink And ee if o poi ht as t do a ad, o e see it ha to th b s ig ;t no don p to e why ; and en done e to rrectly ne it m o can just as u e m r b i t w i i t h o d o nqu do e a ings inc n do on w d be foll ond hav e h To ; to e id not sec done s bee pers r woul uld at if h t as th s o a e d a n n w e a p h a o h e u do who th it ss f th it h ng be ly t llow has ng as t rid o succe lly: he thi actori s and that o f a To hat is as lo to ge any d fin tter t satisf inute y it is n t t y An be ct wh . ct o 0m tha time bilit ver o and o refle t in 2 d out wrong g effe of c y is clude s not proba l d n t h p i n n t ll to con if it i sim ce; it rig to f do i alisi atio na to der ore irst pla to do trying ks to emor found s at i h m t n d a f e o ch the able days we ery very er h ct to w refle mu v e g ow self in been nt two e thre ave a at the mana to h r s ld h rike ect e him ave spe l d e i s h elf y t u ld st proj con ne i uld s bod wo To he do e wo e him some idea it wou that a . h o h n f had imsel d out, taken uch a cause loyees g to d s e n p i t b h it h turne tha eam, all em not t f lise rea roject elief o o T ep eb th th

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Simon Harris, PMP, CGEIT, IPMA-D, P2

Logical Model Ltd ©2010

Slip: Being first at the bar Float: Remaining Beer kitty Milestone: Paul buys a round Elements will be phased in Good, gradually as but…perhaps a the software little more matures: detail here ? It's late!

n ve Se .: i ew ar e ei r n rev ho at th bee to w e t l e t e n av j ec t ce f or p e op m pe bs h pr o e. : jo sk e o tim Ta inc ular to th this reg ned d at ven . loa fine 's e ut it d e d y bo ee ell obo t a :S t w N u gh e . s. h t r No tho ing t men swe ow t lys ire an : N t na requ ious od. ugh wan ll a v t o ho ' t Sti pre ders 've t don un we , we ut it ell at it o t w t h ou t k a b No ab thin re. to ymo an

Results are promising : Turned power on and no smoke detected -- this time...

Essentially complete: It's half done. We predict... : We hope to God! Serious but not insurmountable problems. : It'll take a miracle... Basic agreement has been reached. : The @##$%%'s won't even talk to us.

to ity ot en ser ann h e s I c ge t o t et g a t m hi n ou r nn o c a e et an Gr pt th The gs I c o hid ll . t e e ki in acc hang he th dom d to y c et wis ha n m n g th e se I o t o b e ch a a n d f t h o e y g e t o a s o th lp m day y t, ep ies se a o e acc bod ecau so, h on t et I m w. b al ep e fe orro m t he t y d s a tod s. An oes I to th s tom en I' at ed kis Wh th rve e t ne f th nect e to er... ems kes n lo v a e ha emb it s t it t 4 to e fu b e co ha ca r ly em , & t y r h! y n a to d a u p, n d o m out . . ym a m e a d me e rk. t he elp lly b ind mile in th t wo on s w a d h ea e An g a r g to 28 to eon 00% y 40% ays. 1 om rid n, yin da vin ha re tr frow ack s give Tues on F a to sm ays on 5% le w l o les op pe usc arm t to a 23% rsday e m y y u 42 m l p m n d a Th d H e n Mo % o n en o 2O e xt % 12 s day e dn We

In the beginning was THE PLAN. And then came The Assumptions. And The Plan was without substance. And The Assumptions were without form. And darkness was upon the face of the Workers. And they spoke among themselves, saying, 'It is a crock of s--t, it stinks.' And the workers went unto their Supervisors, and said, 'It is a pail of dung, and none may abide the odour thereof.' And the Supervisors went unto their Managers, saying 'It is a container of excrement, and it is very strong, such that none may abide it.' And the Managers went unto their Directors, saying, 'It is a vessel of fertiliser, and none may abide its strength.' And the Directors spoke among themselves saying one to another, 'It contains that which aids plant growth, and it is very strong.' And the Directors went to the Vice-Presidents, saying unto them, 'It promotes growth, and it is very powerful.' And the Vice-Presidents went to the President, saying unto him, 'This new plan will actively promote the growth and vigour of the company, with powerful effects.' And the President looked upon The Plan, and saw that it was good. And The Plan became policy. And that is how S--t happens.

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This is a complete training course in our project skills series! For FREE if used for personal, individual development!! – No catches everything needed is within this file

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If you want to use this intellectual property as a commercial offering that’s fine too as long as you cut me in  I don’t want much !! – Pre-arranged commercial use removes this notice, gives you animated slides that build procedures step-by-step, also step-by-step exercise files, instructor notes, suggested time-line for delivery and –

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For non pre-arranged commercial use (IE where you charge a fee) I hereby offer you a contract to use this materials, without prior notice in a commercial context at £1,000 per day or per copy which ever is the greater (that’s an ‘offer’ and notice of ‘consideration’, use will constitute ‘acceptance’ and forms contract) – as soon as I become aware of use I will start proceedings to collect fees due If in doubt – Ask 

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Introductions & Logistics

Senior Management Awareness: Risk Simon Harris, PMP, CGEIT

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Place senior management’s role, rights and duties in context for excellent risk management – Overview the process for managing risk – Share the vocabulary

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Chapter 1: An Overview of Risk Management Concepts, Tools & Steps

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Cheese Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

• I had to do something to earn my current Cheese • Having Cheese makes me happy • The more important that my Cheese is to me the more I want to hold on to it • Change happens: the faceless “they” will (re)move your old Cheese • Noticing small changes in my Cheese helps me anticipate change in advance & adapt to big changes when they arrive • Smell the Cheese often to check for small changes • The world changes, my Cheese is moved: If I do not change I will become extinct • I did things last week. I had Cheese last week. If I do things differently next week I may not have Cheese • Thinking about not having Cheese makes me afraid • Being afraid stops me doing things differently • I have to ask myself “What would I do if I were not afraid” • When I stop feeling afraid I start feeling good • Imagining myself enjoying New Cheese is the first step leading me to it © Logical Model Ltd  0845 2 57 57 07

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Inspired by “Who Moved My Cheese” by Dr Spenser Johnson an excellent 45 minute read

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Movement in a new direction helps me find New Cheese The sooner I let go of stale old Cheese the sooner I find New Cheese It is safer to search for New Cheese than remain in a Cheese-less state Old beliefs do not lead to New Cheese Beliefs only change when we believe that there is New Cheese to be discovered andnew enjoyed • The ideas in this or any course need conscious effort to be understood – Worse!, it takes much more effort to put them into use • Examine your Old Cheese for mould ((problems with current working) • Imagine your self enjoying your New Cheese (benefits of new practices)

– Consider the steps to move from one comfort zone to a new one • Who needs to be involved, What actions, When & What is in it for them

– Share your insights & FUD (fear uncertainty and doubt) in class • Discussing implementation challenges helps you prepare for action • Gives comfort knowing others have been & are succeeding (and helps networking)

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Promise yourself 1 action now, with a date. On your return to the office plan your intended 10 achievements with a milestone each Friday till done

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A typical reader of these materials probably sponsors projects • You may have or may soon have real-world project responsibilities… … perhaps with little exposure to structured project control frameworks Senior management awareness (SMA) materials suggest:• What to look for in what your staff do for comfort they are ‘doing it right’ • The principles, vocabulary and structures they know and that will aid you share experience, define performance standards and delegate objectives • If you want to know more about how (and why) to use the tools noted here-in other free courses covering relevant skills are available at on the web-site. You may benefit from one or some of them in parallel with this one • If you would like a quick overview of just the ‘why’ to use these tools in reality then my white papers on the use of PBS/ WBS, ‘Doing risk’, Post-It™ planning and more can be found by search ‘simon harris’ on the web-sites of the American Society for The Advancement of Project Management and PM Today

PRINCE2® is a trademark of the OGC in the UK and other countries and they demand their recognition with this note on everything – bureaucracy!

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Name, Role and Organisation: Telling others about yourself – Something about your current cheese

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Style Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

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2 Types of session (mostly alternate) – Input: explanation of tools and techniques • ½ me ½ you, Please interrupt and question as soon and whenever you need to

– Use: exploration of meaning • Best if it is 90% you, debate and argue application, interpretation, variation • A place to learn from mistakes before they have consequences

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3 Types of Slide – The core message: Places where we dwell • Focus of what we need to cover to complete the course

– Sign-post, objectives and summaries: Navigational elements to give context – Reference, detail and expansion: Places we may flash-past (up to you to say if you wish to dwell longer) • what we are covering © Logical Model Ltd  0845 2 57 57 07

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Events run successfully when they use controls effectively Our controls include your – I try hard not to offend, bamboozle or bore you, but… … I also try hard to give striking examples, jolt your current thinking and hold-up a mirror – When you have advise me in whatever way is comfortable for you so I can act • EG: Comment, in person in class/ at a break/ at the end of day or • Add a note to one of the Ground-Rules flip-charts or • Blu-tac a note or stick a Post-it to the back of the training room door

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While comments on the end of event form are always welcomed and acted upon they are too late to make the event better for you – If I don’t know its unlikely I will fix it, If I do know I can at least try – Eg Course pace, Topic depth, Time given each topic, Heating/ lighting, Exercises & debrief, Anecdotes & jokes, Catering or parking, Course notes and pens, etc etc etc without limit Notes: • • •

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A niche consultancy that delivers training, mentoring and consulting services around control and governance of project based benefits realisation – LML’s purpose is to improve the project management state of the art through popularisation of what is common-sense (which I suggest is ‘obvious after it is observed’ not necessarily ‘is widely-known’)

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Consultancy & training in – Basic structured project management – Tools and techniques for advanced project & programme management – Leading complex projects – Recovery of struggling projects – Creating & running PMOs – Project risk and quality management – Using Earned Value Analysis – Board briefings on project control & governance

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Continued… – Dimension Four® Benefits Realisation Method training and consultancy – PRINCE2® use in the real-world & PRINCE2® Exam preparation (but only if you insist on exams. I believe they create the wrong focus & actually destroy PM value to a business)

– Implementing IT Governance using the CobiT® Framework – Implementing Benefits Realisation & Lessons Learned processes

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Chapter 1: Concepts & Foundations

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• What is Risk • Uncertainty • Unknown unknowns • Definitions • Predictability • Chapter Summary:

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What is Risk Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

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Characteristics of a risk – An uncertain cause or uncertain causes resulting in… … A future state… … with positive and negative (±) consequences one or more people care about

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A useful definition – A future state that may or may not arise – Uncertainty of outcome whether ±

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Risks have events with a probability – Impacts with a magnitude

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Are primary, secondary or residual

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Uncertainty Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

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Uncertainty applies to any future state with a probability above zero and below 1 Causal events often categorised in various ways – Specific or assignable EG Car-crash, Flat tire – Random or un-assignable EG RAG traffic lights, Volume of traffic • Impact of risks… … Contributes to the allowances required for time, resource et.al. – Best case = all good uncertainties occur and no bad ones happen – Worst case = all bad uncertainties occur and no good ones happen – Probability of either extreme is low* • Probability (P%) of extremes = P%-event_1 * P%-event_2 *…

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P% * number of opportunities = frequency of occurrence – P% * Impact = Significance

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*More on probabilities in the Assessment chapter

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LM 01/02 The Guide to Risk and Opportunity Management in Projects

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Unknown unknowns Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

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Definitions Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

Uncertainty:

An element of the project whose values are material to planning but unknown in some or all aspects (may be addressed by an ASSUMPTION) Risk-1: Any uncertainty with a consequence facing the project Or Risk-2: A negative uncertainty (Day-to-day usage) Or Risk-3: An uncertainties whose probability & impact are known IE the only remaining uncertainty is will we be (un-)lucky Eg Playing Russian Roulette Threat: An uncertainty whose aggregate impacts are negative Opportunity: An uncertainty whose aggregate impacts are positive Problem A negative impact whose probability is ceratin and whose impact or trigger is with-in the authority & expertise of the ‘owner’ to deal with it Issue A negative impact whose P% is certain and whose impact or trigger is outwith the authority or expertise of the owner to deal with The response to an issue is always either ‘transfer’ or ‘accept’ Normally ‘transfer’ = escalation when authority is the limiting factor, often transfer = ‘delegation’ –to technically able resources – when expertise is the limiting factor Bonus An opportunity whose P% is 1 Windfall An opportunity whose P% is 1 and existence was not pre-defined © Logical Model Ltd  0845 2 57 57 07

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Predictability Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

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Between certain and uncertain can be predictability – Statistics

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Cards and dice are ‘closed-outcome’ sets – Projects are not ¿ What are all the causes of being late? ¿ What are consequences to all the stakeholders?

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Projects risk management is a form of insurance – Relies on large population of examples

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Never a guarantee – “1 in a million” still happens

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Chapter Summary: Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

• What is Risk • Uncertainty • Unknown unknowns • Definitions • Predictability • Chapter Summary:

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Summary of Risk Process steps

Chapter 2: 9 Key Steps in Risk Management

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• •

• • • • • • • •

9 Steps Step-1 Awareness – A Risk Maturity Scale Adapted from CobIT – Risk Culture, Tone and Attitude Towards Risk – Ownership & Appetite (Risk Seeking v. Risk Avoiding) – Policy Overview-2 Identification and the Proper Description of Risks Overview-3 Assessment tools: Ordinal Scales, Typical Risk Scoring Overview-4 Response Development Overview-5 Response Selection Overview-6 Preventative & Contingency: Showing Cost & Schedule Contingency Overview-7 Execution, Monitoring Control & Reporting Overview-8 Retirement Overview-9 Record Keeping & Audit: The Risk Management Plan & Risk

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9 Steps Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

ent rem Reti

y

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ve

enc ting Co n

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Prev

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Res e r v es

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Record Keeping © Logical Model Ltd  0845 2 57 57 07

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1 Awareness

en rem Reti t

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Select ion

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Record Keeping

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Awareness is FIRST but is not a step – Must be constant

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Stuff we know we know… – And know we don’t know… – And recognise that is not everything there is to know

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Risk awareness is a culture – Promoted by open, receptive senior management

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Senior management is able – Everyone is responsible – Shareholders pay the price

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A Risk Maturity Scale Adapted from CobIT™ 4.1 Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

0 Non-existent: Risk assessment for processes & business decisions does not occur 1 Initial/Ad Hoc: Risks are considered in an ad hoc manner – Awareness of the importance of risk management is emerging 2 Repeatable : A risk assessment is subjective, but an approach is being developed – A systematic approach to mitigations is emerging 3 Defined: Policy and procedures define who, when & how risk is handled – Identified risks are managed through their life-cycle 4 Managed: Trained staff perform assessment, management of risk runs to standard procedures, actions and achievements are measured – Management monitors risk exposure – Risk management may be being automated 5 Optimised: Managers and staff in all areas understand and fulfil their roles in an integrated risk processes that spans the entire organisation – Changes to the organisation are assessed for their affect on risk management © Logical Model Ltd  0845 2 57 57 07

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Risk Culture Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

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Culture is the shared reactions to common triggers (learned ‘scripts’) – What ‘everyone’ in a community considers ‘normal’

¿ You shoot the messenger: now what? – How many ways are there to “shoot the messenger” ¿ Does every threat demand eradication? ¿ Do the 11th hour heroes deserve to be rewarded? •

Is that plan realistic – How much emotion, hope, science and reason does it contain

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Tone Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

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Senior management’s set the ‘tone’ of an organisation – What is accepted

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Well known standards for ‘acceptable’ exist:– Turnbull/ Cadbury, Basel-II, Sarbanes-Oxley/ COSO etc – Corporate risk – Governance risk

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Policy Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

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What is policy – “A policy is a plan of action to guide decisions and actions…may limit the discretion of individuals” http://en.wikipedia.org/wiki/policy

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What is a “risk management policy” – Reference point for confirmation of adequate of Risk Management Plan’s • Guidance for extension of RMP in new circumstances

– Communicates to all stakeholders the limits of risk appetite •

Procedures and process translate policy into day to day actions that meet measurable objectives

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Example Risk Policy Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

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Hospital Infectious Disease Unit – Any risk of cross-infection no matter how minor or remote is to be subject to all possible steps to eradicate it

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Building site – Not hard hat, no boots: no work today

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Bank Treasury function – Aggregate exposure may not exceed (30% of) capital adequacy reserves

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Virgin/ Richard Branson – “Oh screw-it! Lets do it”

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Oil drilling platform – ALARP: Each identified risk is to be evaluated and its profile reduced to be As Low As Is ‘Reasonably’ Practical

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Policy Statement Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

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Suggest policy statements that would apply to

– Your department’s service provision

– Your service s view of the service you provide

– From any other perspective that is a real need when you return to your workplace

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Attitude Towards Risk Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

•

For all the science wrapped around it, in the final analysis risk is an emotional, personal, subjective topic

•

What is “Risk Tolerance” or “Risk Appetite”

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Ownership & Appetite Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

•

What is ownership – Willingness to act

•

Who owns risks – Impact owners fund risk management – Action owners enact risk responses

•

•

What is a “risk appetite” – The degree of action an owner will fund – The degree to which a risk drives an owner to action

Tolerance Impact Actions

Owner has the appetite (or not!) – How is appetite measured, communicated and monitored

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Risk Seeking v. Risk Avoiding Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

Would you rather have a small Sure-Thing or [P% chance of Gain and (100-P%) chance of Loss] – When chasing targets we tend to be risk seeking when protecting the status quo we tend to be risk averse

Averse

Risk Appetite

•

Seeking Size of Risk

Sure Thing

100

Probability %

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

Factored Value

20

40

60

80

100

120

140

160

180

Averse Choice

ST-100

ST-100

ST-100

ST-100

ST-100

ST-100

ST-100

ST-100

ST-100

Slight Averse

ST

ST

ST

ST

ST

ST

V@R

V@R-200

Neutral Choice

ST

ST

ST

ST

Slight Seeking

ST

ST

ST

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Value at Risk

200

V@R

© Logical Model Ltd V@R-200 ©2007 Logical Model Ltd [email protected] V@R-200 V@R-200 V@R-200

V@R

V@R

V@R

V@R

V@R

V@R

V@R

V@R

V@R-200

V@R-200

V@R-200

V@R-200

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Attitude to Risk Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

•

You have been given, free! 9 prize draw tickets. You can sell each one for €100 or keep until the draw when you will get either €200 or nothing – Each draw has different odds of winning • Step 1: 2m – Individually: Of the tickets itemised here which tickets will you sell? Ticket-1: 90% chance of €200 & 10% chance of €0 Ticket-2: 80% chance to win and 20% chance of nothing T3: 70% chance to win €200 and 30% chance of nothing T4: 60/40 T5: 50/50 T6: 40/60 T7: 30/70 T8: 20/80 Ticket-9: 10% chance of €200 and 90% chance of nothing • Step 2: 2m – You have the chance to buy 1 of each ticket at €100 each of your own money. Which will you buy? – Any difference to sales? • Step 3: Compare with your neighbours – Same choices?

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Overview-2 Identification Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

•

Threat – An assets we value is vulnerable – But not already lost

•

Describing risks well must state – Event: probability – Outcome: impact – Proximity: event – horizon – Seriousness: priority of action – Urgency: action – horizon – Growth: impact evolution

•

Opportunity – A result we prize is achievable – But not assured

Assets

Threats

Risks

Countermeasures

Vulnerabilities Risk analysis

Risk management

From CRAMM: CCTA Risk Assessment Method © Logical Model Ltd  0845 2 57 57 07

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Proper Risk Description Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

•

A risk is a future conditional state that someone cares about – To be well expressed it must state CAUSES and CONSEQUENCES per stakeholder

•

“There is a risk that event will result in outcome”

•

Cause(s), Future state (Condition), Consequence(s) – Alternative structure

•

Identification SHOULD NOT do more than just identify! ¿ Why not?

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Overview-3 Assessment Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

•

Event/ Probability (Cause)

•

Outcome/ Impact (Effect)

•

Scales – Qualitative – Quantitative

Probability Common As likely as not

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Rare Impact



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Ordinal Scales Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

• •

•

Linear probability scale and geometric impact scales 1%, 2%, 4%, 8%, 16% Define with visceral statements e.g. threat scale (see PMToday article for +ve scales) – 10 Project Very Low Low Moderate High Objective .05 .1 .2 .4 – 9 Government falls Cost PM has < 5% Cost Cost decision – 8 Make global authority to Increase needs FD’s decide approval headlines Schedule Slippage Slippage Overall Dates will – … within float within Project miss external Exec’s Slippage obligations – 2 Causes minor tolerances 15-40% inconvenience Scope & Optional “Should of” quality items – 1 Affect hard to Quality aspects removed measure reduced from delivery Ordinal and non-linear: Staff Some Volatile staff Multiple loss 6 to 7 is not Moral grumbles may resign of skilled staff proportional to 7 to 8

Very High .8

Overall Project Schedule Slips >120% Acceptance criteria breach notliquidatable Loss of crucial senior staff

Impact Scale adapted from the Project Management Body of Knowledge © Logical Model Ltd  0845 2 57 57 07

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Typical Risk Scoring

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Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

eeaarr n i L n i y l L rrmmaallly99% o N o N % ttoo 99% 11%

99.9%

99%x1%

200

400

800

1600

80%

80%x1%

160

320

740

1280

60%

60%x1%

120

240

480

960

40%

40%x1% 40

80

160

320

640

20%

20%x1% 20

20%x2% 40

20%x4% 80

20%x8% 160

20%*16%

1%

2%

4%

8%

<200

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<800

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>=800

ttrriicc ,… e m e o %,… nn GGeeom%,, 1166% e t e f O ,, 88% Oft, 4% % 4 2% %, 11% %,, 2

16%

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Overview-4 Response Development Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

•

Action to reduce impact H Impact (Severe)

About the event – Affects probability or proximity

•

About the impact

•

Record options in the Risk

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Probability 1 (Rare)

Threat Analysis © Logical Model Ltd ©2007 Logical Model Ltd [email protected]

99 (Common)

L (Trivial)

44

Action to reduce likelihood

•

Identifying what we could do

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Risk Response Hierarchy Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

•• Very Physical Veryhigh high&&above above PhysicalControls Controls –– Multiple –– Preventative Multiplesafeguards safeguardsfrom fromall allclasses classes Preventativemeasure measure •• High 2. High 2. Procedural ProceduralControls Controls –<–1Safeguards ininat –– Preventative Safeguards atleast least33classes classes in < 1 in Preventativemeasure measure including contingent 10,000 1,000 <1 in 100 <1 in 10 including contingent 3. 3. Human Humanoriented oriented Health & Financial Extremely Very •• Moderate Moderate – Training, roles & responsibilities, Training,Reputation roles & responsibilities, Saftey – Environment Loss Qualitative Unlikely Unlikely Unlikely Possible –– Safeguards in 2 categories including supervision Safeguards in 2 categories including Longsupervision term contingent contingent Preventative measure Multiple–– wide-spread National Crisis Crisis Crisis Crisis Preventative measure • Low Deaths damage Outrage > 100m Catastrophic Medium High High High • Low 4. arrangements 4. Contingency Contingency arrangements Death or Localised Local Crisis Crisis Crisis –Crisis Safeguards inin-at least contingent – Safeguards at least contingent –– Post event containment containment Injurys longPost term event Outrage >10m Crisis Low Medium High High classes classes Wide•• Very VeryLow Low spread short Regulatory –Low may be Injury term Censure >1m Severe Moderate High Very High – Safeguards Safeguards maynot not berequired required 1. 1.

Local Media & Customer impact >100k

Time off Short term work localised Easy CleanFirst aid up Complaints © Logical Model Ltd  0845 2 57 57 07

>10k

Moderate

Low

Low

Moderate High

Low

Very Low

Low

Low

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> 1 in 10 Likely Crisis High Crisis High Unaccep table Very High

Moderate High

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Overview-5 Response Selection Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

Selecting what we will do – Decision making based on Seriousness Urgency & Growth – Add to Plan-A and Plan-B – (Project) Risk responses are not managed FROM the Risk

•

Today, tomorrow, next week

Impact

•

Production

Billing

Payroll

– Urgency – Growth ( and shrinkage ) Daily Cycle Time © Logical Model Ltd  0845 2 57 57 07

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Overview-6 Preventative & Contingent Responses Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

•

Plan-A is activity for what we ‘know-we-know – All normal work plus threat prevention and impact preparation • Plan-B activity for what we know we don’t know – Contingent actions •

Responses to the event belong in ‘Plan A’ activities and budgets – Before the event – Likewise creating plan B is within ‘Plan A’

•

Responses to the impact belong in ‘Plan B’ – Prepared in advance – Used in arrears – Here comes the fire-brigade • Only a fool would expect we’ve thought of everything that will happen!

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Showing Cost Contingency Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

•

3pt estimates yield best/ worst (range of variation) & expected cost / schedule – Sum costs , calculate project (or phase or path) contingency – Plot on cumulative cost curve Other Allowances & Reserve

Tolerance? Best & Worst Case

∑£sd = √ (sd1**2 + sd2**2 + sd3**2 + …) ∑£e = ( e1 + e2 + e3 + e4…) or staff-days or any other quantity

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Time SD

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Showing Schedule Contingency Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

Possible Task Duration

A 1,4,6

D 4,7,11

G 4,4,4

B 2,3,6

E 3,3,4

H 8,10,15

C 4,5,7

F 6,8,10

I 2,3,3

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Pros Pros and and Cons Cons of of showing showing contingency contingency explicitly? explicitly?

J 7,8,10

L 2,2,2

Contingency 1.66

K 4,5,6

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Overview-7 Execution, Monitoring & Response Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

•

Changes to SUG inform successive actions H Seriousness (Severe)

¿ When is enough response enough ?

Probability 1 (Rare)

H Seriousness (Severe)

99 (Common)

Probability 1 (Rare)

Opp’tnty Threat

L (Trivial)

•

99 (Common)

L (Trivial)

Maintaining visibility on what may yet transpire – Actions when it is no-longer a “may-be”

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Reporting Contingency Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

% Contingency in hand

Aggregate: Contingency used & retired

Retirement of contingency that is not used

Fear

Plan-A plus contingency use

Hope

Plan A without Impact Costs Best case spend © Logical Model Ltd  0845 2 57 57 07

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Overview-8 Retirement Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

•

Update to plans, budgets, and actions when the event is past – It did happen

– It didn’t happen

– Handover • It hasn’t happened but still could, and the project is closing

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Overview-9 Record Keeping & Audit Trails Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

¿ Why keep records: what is the purpose – What uses are made of the records we might create

¿ What content must be in the record to be fit for purpose

•

List the steps required to achieve the purposes above

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The Risk Management Plan Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

•

The RMP sets out rights and duties, procedures and authorities – Assigns to people and triggers

¿ Why create a RMP? ¿ What headings do we need in the RMP? ¿ Should the RMP be a template? – Yes – Why – No – Why •

What is a Risk (or Risk Log) – How is the RR related to the RMP

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Risk Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

• • • • • • • •

Unique Identifier Description Risk Category Impact owner & stakeholders Related risk events & outcomes Location (physical or logical) – EG WBS or tasks reference Triggers & warning signs Risk Response Plan (Possible responses) – Preventative – Contingent – ( for each the Actions, Costs, Last option date, Affect on P, I & Proximity )

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•

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Audit trail of historic & current – Probability & why – Impact: Cost, Schedule, Quality etc & why – Proximity (Timing) • Retirement date • Option loss

– EMV / EUV – (Current = Residual Risk) – Selected responses • • • •

Action owner Description and costs Linked actions Secondary risks

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Risk Process Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

•

Draw a flow-chart of the risk management process showing where decisions are made, records created or updated – Who is involved in each step/ decision/ record-making

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Chapter Summary: Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

• • • • • • • • • • • • • •

9 Steps 1 Awareness A Risk Maturity Scale Adapted from CobIT Risk Culture, Tone and Attitude Towards Risk Ownership & Appetite (Risk Seeking v. Risk Avoiding) Policy Overview-2 Identification and the Proper Description of Risks Overview-3 Assessment tools: Ordinal Scales, Typical Risk Scoring Overview-4 Response Development Overview-5 Response Selection Overview-6 Preventative & Contingency: Showing Cost & Schedule Contingency Overview-7 Execution, Monitoring Control & Reporting Overview-8 Retirement Overview-9 Record Keeping & Audit: The Risk Management Plan & Risk

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•

For further help & assistance – [email protected]

+44 (0) 84 52 57 57 07

• Continued… Consultancy & training in – Dimension Four® Benefits – Basic structured project Realisation Method training and management consultancy – Tools and techniques for advanced – PRINCE2® Exam preparation & project & programme management PRINCE2® use in the real-world – Leading complex projects – Implementing IT Governance using – Recovery of struggling projects the CobiT® Framework – Creating & running PMOs – Implementing Benefits Realisation & – Project Risk and Quality Lessons Learned processes Management – Using Earned Value Analysis – Board briefings on project control & © Logical Model Ltd  0845 2 57 57 07 © Logical Model Ltd ©2007 Logical Model Ltd [email protected] governance •

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Course Summary Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

•

Senior management’s role is to own the risk – IE the right to enjoy the impacts: threats and rewards – Duty to fund and the process – Make delegation and escalation process clear

•

The process is: – Awareness, CCC ID, Assess, Response ID, Response selection, Response execution, re-assessment, …, closure or hand-over

•

Vocabulary: Event/ Causes/ Probability, Impacts/ Outcomes/ Time, Cost… Uncertainty, Threat, Opportunity

•

We have barely scratched the surface

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Applying The Course’s Messages60 Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

•

To ourselves, our bosses, peers, customer’s and reports

¿ What will you do? ¿ How? ¿ When?

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I expect you think you understood what you perceived I might have said, but do you realise that what I said may not have been what I meant, or what you heard while it may still result in you having gained what you needed to gain from listening!

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Applying the Course’s Messages Licensed for individual use without fee. A commercial license ([email protected]) removes this note: Please report unlicensed commercial use & share in fees levied

•

List “What we heard” – For each item “What we will do with it. How & the stumbling blocks to overcome”

•

Action plan – Define your vision & goals, the impacts & projects plus governance structure – Draw-up a list of course based outcomes that are attractive to your group

•

Everything you need to do is in the course materials – Feelings? Optimistic?, Excited about/ depressed by?

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•

In this session The context for Implementation

END

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•

For further help & assistance – [email protected]

+44 (0) 84 52 57 57 07

• Continued… Consultancy & training in – Dimension Four® Benefits – Basic structured project Realisation Method training and management consultancy – Tools and techniques for advanced – PRINCE2® Exam preparation & project & programme management PRINCE2® use in the real-world – Leading complex projects – Implementing IT Governance using – Recovery of struggling projects the CobiT® Framework – Creating & running PMOs – Implementing Benefits Realisation & – Project Risk and Quality Lessons Learned processes Management – Using Earned Value Analysis – Board briefings on project control & © Logical Model Ltd  0845 2 57 57 07 © Logical Model Ltd ©2007 Logical Model Ltd [email protected] governance •

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