Key Concepts we learned from Chapter 5

Chapter 5 Risk Management: Minimize the Threats to Your Project

1.       Risk management goal is to systematically manage the uncertainty so as to increase the likelihood of meeting project objectives. It is the key for the project management and it directly tied to project definition, planning, and control of the project.

2.       Risk management has its own framework and standard process.  They include five key steps: (a) identify risks, (b) analyze and prioritize different risks, (c) develop response to each risk, (d) establish reserves preparing for unknown risks, and (e)continuous risk management.

3.       To better identify risks, four techniques can be helpful: (a)getting risk info directly from stakeholders; (b) generating a risk profile with a list of all possible risks; (c) learn from past, similar projects since history is the best predictor of the future; and (d) focusing on the risks in the schedule and budget.

4.       Risk management should treat different risks differently. We need to analyze and prioritize the risks with three key strategies: (a) define the risks with its severity and the negative impact through its condition and consequence. Record the consequence of these risks in terms of cost, schedule and possible damage to the project; (b) using probability theory in risk management with help on analyzing the expected value and risk matrix; and (c) ranking the risk according to probability and impact.

5.       To face the challenge of the upcoming risks, one should develop a response plan for the risks. The best way to reduce the risk is to reduce both the impact and the probability of risks. There are five categories of classic risk response strategies: (a) accept the risk with understanding it; (b) avoid the risk by pick lower risk approach; (c) making contingency plans for risk treatment; (d) transfer the risk to third party like insurance or subcontract part of the project; and (e) mitigate the risk by minimizing the impact and overcome the difficulties. In general, one should identify what risk is controllable and make document for what you learn the inside during risk planning, identify someone to be responsible for every risk and rank the risk by severity and probability.

6.       Establish contingency and reserve preparing for unknown risks through the  following four steps: (a) identify all the risks in the risk log; (b)establish the additional cost of executingthe contingency plan; (c) sum the expected value of contingency for each of these risks; and (d) try your best for prepare for the known risks.  We should make contingency reserve for identified risks, the known unknowns, and make management reserve for the unknown unknowns.

7.  Finally the risk management effort is a continuous effort. One should monitor known risks with a risk log, check for new risk at regular status meetings, repeating the major risk identification activities at preplanned milestones within the project, prepare response plans and check whether sufficient contingency or management reserve exists, and finally remove negligible risks.