Identify and briefly describe the five ways to respond to identified risks in management

The things that might go wrong are called project risks, and a wise project manager identifies them early at the beginning of the project so that he or she can do something about them.

Identify and briefly describe the five ways to respond to identified risks in management

Methods for dealing with such risks include Provision for adequate contingencies safety factors for budget and schedule contingencies are discussed in Chapter 6. Improvement in the work processes in order to reduce the uncertainties. Prefabrication of major components to avoid the uncertainties of construction at a job site is one example of changing the normal process to reduce risks although in this example the change may also introduce new risks, such as transportation of the components to the job site; thus the resolution of one risk may give rise to another.

High Impact, Low Probability By definition, high-impact, low-probability events are rare occurrences, and therefore it is very difficult to assign probabilities to them based on historical records. Data do not exist and so subjective estimates of probabilities are necessary.

However, the objective is not the scientific determination of accurate probabilities of rare events but the determination of what management actions should be taken to monitor, mitigate, and manage the risks.

For example, if a certain risk is identified and management determines that some specific mitigation actions should be taken if the risk has a likelihood of more than 1 in of occurring, then a precise characterization of the probability is unnecessary; the only issue is whether it is assessed to be more than 1 in or less than 1 in Pareto Diagrams One of the important uses of a good risk analysis is to determine where to apply management resources and what to leave alone, as management resources are not unlimited.

One approach is to break down the uncertainties into manageable parts. Pareto diagrams are one way to show the sources of uncertainty or impact in descending order. This form of presentation makes explicit those activities that have the greatest effect on the project completion date or cost and that therefore require the greatest management attention.

The project director or manager must then determine whether the high-ranking events are 1 truly root causes or 2 simply work packages or activities that may reflect underlying causes but are themselves symptoms.

The resulting analysis can provide guidance for managers to reduce, mitigate, buffer, or otherwise manage these sources of uncertainty.

Page 28 Share Cite Suggested Citation: The National Academies Press. First, we estimate the uncertainty, or variance, in the cost of each individual work package.

Second, we estimate the correlations or associations between each pair of work packages. Then, by elementary second-moment theory Benjamin and Cornell,1 the sensitivity of the uncertainty in the total project cost with respect to each work package is proportional to the combination of the activity uncertainties and the correlations between activities.

That is, the uncertainty in the total cost is affected not only by the uncertainty in each work package but also by how much each work package affects, and is affected by, the others.

As an elementary example, the uncertainty in the cost of a construction project may be more sensitive to outdoor activities than to indoor activities because unusually bad weather can cause a number of outdoor activities to run over budget and over schedule simultaneously, whereas indoor activities are typically not linked so tightly to the weather.

By tabulating these values for all work packages, and sorting them from largest to smallest, we can identify those work packages with the largest sensitivities, which are those to which the project manager should give the highest priority.

If we do this for a project of, say, 20 work packages and sort them according to the largest values of the sensitivities, we can then plot a Pareto diagram, as shown in Figure The absolute values of the sensitivities have no importance; the only concern is the relative values.

Failure Modes and Effects Analysis In project risk assessment, a failure can be any significant event that the sponsor does not want to happen—a budget overrun, a schedule overrun, or a failure to meet scope, quality, or mission performance objectives.

While risks may arise from specific causes, they may also be the result of general environmental conditions that are not limited to specific times and places but are pervasive throughout the project.

The objective of failure modes and effects analysis is the identification of root or common causes, which may affect the project as a whole. Often this identification is facilitated by methodically considering the project function by function, 1 All probability distributions may be characterized by their moments.

Second-moment theory is the use of the second moments of probability distributions—that is, means, variances, and covariances or correlation coefficientsinstead of full probability distribution functions. As probability distributions are subjective and therefore not capable of precise definition, this approximate method can greatly simplify many calculations and, more importantly, provide the risk analyst with insight into the effects of uncertainty on project outcomes.

Page 29 Share Cite Suggested Citation: Identification of potential risks that turn out, upon further assessment, to be negligible is a waste of time; however, failure to identify potential risks that turn out to be serious is a threat to the project. Therefore, the project director should err on the side of caution when identifying possible risks.

Failure modes and effects analysis FMEA is a discipline or methodology to assist in identifying and assessing risks qualitatively. It is a method for ranking risks for further investigation; however, it is not a method for quantifying risks on a probabilistic basis Breyfogle, FMEA is typically based on a subjective assessment of the relative magnitudes of the impacts of the risk events on the project often on a scale from 1 to 10multiplied by the relative likelihood that the risk event will occur also on a scale from 1 to In addition, a third parameter may be included to assess the degree of warning that the project will have regarding the actual occurrence of the risk event again on a scale from 1 to This third parameter may give some management support by establishing early warning indicators for specific serious risks, which might not otherwise have been established.

Page 30 Share Cite Suggested Citation: In the absence of more quantitative factors, such as sensitivity analysis, the failure modes, or better, all root causes, can be used to rank the risks. One can prepare a Pareto chart that shows the risks ordered by possible impact or by the combination of impact and likelihood of occurrence.

Then risk mitigation efforts can first address the failure mode or root cause with the highest impact and work from there. The three factors—severity, likelihood, and leading indicators—interact.

For example, if the project is the construction of a facility in a flood plain or an area with poor drainage, then a failure mode could be flooding of the work site.

Identify and briefly describe the five ways to respond to identified risks in management

Project management cannot affect the frequency of floods, so risk management must focus on trying to reduce the severity of the impact of a flood.Because the owner may lack the specific expertise and experience to identify all the risks of a project without assistance, it is the responsibility of DOE’s project directors to ensure that all significant risks are identified by the integrated project team (IPT).

Budget reserves are setup to cover identified risks associated with specific segments of a project while management reserves are set up to cover unidentified risks associated with the total project. Identify and briefly describe the four steps in risk management. Identify and briefly describe the five ways to respond to identified risks%(10).

Definition: Risk identification is the process of determining risks that could potentially prevent the program, enterprise, or investment from achieving its objectives.

It includes documenting and communicating the concern. Keywords: risk, risk identification, risk management MITRE SE Roles & Expectations: MITRE systems engineers (SEs) working on government programs are expected to identify.

Identify project risks and develop strategies to manage them I’ve found that applying a risk management strategy to building upgrades forces you to plan well. You have to think about how confident you are in your assumptions, what you will do to reduce the chance of unforeseen things happening and consider how you will manage them if they do.

Identify and briefly describe the parts of a Risk Response Matrix and explain how one would be used. The parts are: the risk event, the response, contingency plan, trigger, and who is responsible. It is used for summarizing how the project team plans to manage risks that have been identified.

Risk management includes front-end planning of how major risks will be mitigated and managed once identified. Therefore, risk mitigation strategies and specific action plans should be incorporated in the project execution plan, or risk analyses are just so much wallpaper.

What are the 5 Risk Management Process Steps?