Monday, December 1, 2008

Identifying Risks that Require an Immediate Risk Response

Bruce, a project manager for Precision Technologies, performed a qualitative and a quantitative risk analysis on his last project. He found these analyses very useful because they helped him identify project risks that had the potential to adversely affect his project's success.

As a project manager, you will find that the outputs from other risk management processes can be extremely useful when performing risk response planning. Two such processes include qualitative risk analysis and quantitative risk analysis. Both of these processes attempt to assess and analyze the probability and impact of potential project risks. As a result, qualitative and quantitative risk analysis outputs can serve as effective inputs to a project's risk response planning process.

A qualitative risk analysis attempts to assess the impact and likelihood of identified project risks. It also prioritizes risks according to their potential effect on project objectives and overall project outcomes. A quantitative risk analysis aims to numerically analyze the probability of each risk and its consequences on project objectives, as well as the extent of overall project risk.

As a result of both a qualitative and a quantitative risk analysis, you will receive a list of risks, together with a measure of their potential impact, that will need to be addressed in the risk response planning process.

The qualitative and quantitative risk analysis outputs that may be useful as inputs to risk response planning include:
  • list of prioritized risks
  • risk ranking of the project
  • prioritized list of quantified risks
  • probabilistic analysis of the project
  • probability of achieving project objectives
  • qualitative and quantitative risk analysis trend results
One qualitative risk analysis output that acts as a valuable input to risk response planning is a list of prioritized risks. During the qualitative risk analysis process, risks are prioritized using a number of criteria. Risks may be assigned a rank of high, medium or low, depending on their potential severity of impact. Risks may also be grouped by those that require an immediate response and those that can be handled at a later date. Prioritized risks usually include risks that affect project cost, schedule, scope, and quality.

As a project manager, you can use this list of prioritized risks during risk response planning to help you decide which risks require your immediate attention. This list will also help you formulate responses for those risks that have the potential to negatively impact critical project objectives.

Another qualitative risk analysis output that you can use as an effective input to risk response planning is a risk ranking of the project. This ranking will indicate the overall risk position of a project relative to other projects by comparing the risk scores.

A risk ranking can also be used to assign resources to projects with different risk rankings, make a benefit-cost analysis decision about the project, or support a recommendation for project initiation, continuation or cancellation.

A risk ranking will help you decide which projects have the greatest needs and which projects will produce the greatest overall benefit. This will allow you to plan effectively for those projects that require immediate risk responses.

As a project manager, you can also use quantitative risk analysis outputs when preparing for risk response planning. These outputs can help you identify sensitive risk areas and formulate potential responses to threatening project risks.

A prioritized list of quantified risks will detail which risks pose the greatest threat or present the greatest opportunity to your project, together with a measure of their impact. This will help you identify risks that require an immediate risk response.

A probabilistic analysis of the project will forecast potential project costs and completion dates. This analysis will help you determine the type of risk response that is required to address threatening cost and scheduling risks.

An estimate of the probability of achieving project objectives under the current plan will indicate whether the project is progressing as planned, or whether it requires immediate risk response action in order to be completed successfully.

The last qualitative and quantitative risk analysis output that is useful as a risk response planning input is qualitative and quantitative risk analysis trend results. Trends can be defined as patterns of results that track in a particular direction. Once you've performed multiple risk analyses on your project, a trend of results may become apparent. This trend of results will indicate the level of urgency and the importance of the risk response.

As a project manager, you can use qualitative and quantitative risk analysis trend results to help you focus on those areas that would benefit from an immediate risk response the most.

Qualitative and quantitative risk analysis outputs will help you identify risks that require an immediate risk response so that you can reduce or eliminate their impact on project objectives and increase your project's chance of success.

No comments: