About Project Risk Management
Project Risk Management consists of identifying risks, planning risk management, conducting risk assessments, and controlling risks. Project Risk Management includes the process of conducting risk management planning, identification, analysis, response planning, and controlling risk on a project. The objective is to increase the likelihood of positive risks (opportunities) and decrease the likelihood of negative risks (threats).This knowledge area has six processes in it. The area concentrates on identifying, analyzing, planning responses to both ‘threat risks’ (negative) and ‘opportunity risks’ (positive).
Following are the important points to keep in mind.
- The utility function describes a person’s willingness to tolerate risk.
- When the scope has been changed, the project manager should require risk planning to analyze the additions for risks to the project success.
- Monte Carlo simulations can reveal multiple scenarios and examine the risks and probability of impact.
- Force Majeure Risks, such as Earthquakes, Floods, Acts of Terrorism, Etc., should be covered under Disaster Recovery Procedures instead of Risk Management.
- Monte Carlo Analysis would show you is WHERE SCHEDULE RISK EXISITS (Points of Schedule Risk). It is a Computer-based Analysis & useful for revealing Schedule Risks
- Workaround is what you do if the RISK OCCURS, but it does NOT REDUCE THE RISK.
- A decision tree allows you to make an informed decision today based on probability and impact analysis. You can decide based on the expected monetary value of each of your options.
- The range of estimates with the smallest range is the least risky.
- A risk rating matrix is developed by a department or a company to provide a standard method for evaluating risks. This improves the quality of the rating for all projects. A risk rating matrix is created during the Perform Qualitative Risk Analysis process.
- If you cannot determine an exact cost impact of the event, use qualitative estimates such as Low, Medium, High, etc.
- Prioritized risk ratingsare an input to the Plan Risk Responses process.
- First, you should evaluate the impact of the change. Next, determine options. Then go to management and the customer.
- The Risk Owner should be looking for triggers and implementing the risk response strategy.
- Expected monetary value (EMV) is computed by EMV = Probability x Impact. We need to compute both positive and negative values and then add them. 0.6 x $100,000 = $60,000. 0.4 x ($100,000) = ($40,000). Expected Monetary Value = $60,000 – $40,000 = $20,000 profit.
The expected monetary value takes into account the probability and the impact. The calculation is: (0.05 x 21) + (0.5 x 56) – (0.3 x 28) The last part is subtracted because it represents an opportunity and should be balanced against the threat.”
- The risk response owner is assigned to carry out responses and must keep the project manager informed of any changes.
- Force majeure is a powerful and unexpected event, such as a hurricane or other disaster.
10 Knowledge areas specified by PMI:
This knowledge Area Project Risk Management is covered in PMP Certification Prep course which contains following practice tests:
This course includes practice tests and articles, but it does not cover every exam question. Only the PMI exam team has access to the exam questions for PMP exam, and PMI regularly adds new questions to the exam, making it impossible to cover specific questions. You should consider this course a supplement to your relevant real-world experience