Identifying and Managing Project Risk: Essential Tools for Failure-Proofing Your Project

by Tom Kendrick

Overview

It’s no wonder that project managers spend so much time focusing their attention on risk identification. Important projects tend to be time constrained, pose huge technical challenges, and suffer from a lack of adequate resources. Identifying and Managing Project Risk, now updated and consistent with the very latest Project Management Body of Knowledge (PMBOK)® Guide, takes readers through every phase of a project, showing them how to consider the possible risks involved at every point in the process. Drawing on real-world situations and hundreds of examples, the book outlines proven methods, demonstrating key ideas for project risk planning and showing how to use high-level risk assessment tools. Analyzing aspects such as available resources, project scope, and scheduling, this new edition also explores the growing area of Enterprise Risk Management. Comprehensive and completely up-to-date, this book helps readers determine risk factors thoroughly and decisively…before a project gets derailed.

Product Details

ISBN-13:	9780814413418
Publisher:	AMACOM
Publication date:	02/27/2009
Sold by:	HarperCollins Publishing
Format:	eBook
Pages:	400
File size:	4 MB

About the Author

Tom Kendrick is an internal project management consultant for Visa Inc., and the author of Results Without Authority (978-08144-7343-6). He has more than 30 years of project management experience, twelve of which were spent as a part of the Hewlett-Packard Project Management Initiative.

Read an Excerpt

Introduction

Your mission, Jim, should you decide to accept it ...

So began every episode of the classic TV series Mission:

Impossible, and what followed chronicled the execution of that week's

impossible mission. The missions were seldom literally impossible a though; careful planning, staffing, and use of the (seemingly unlimited)

budget resulted in a satisfactory conclusion just before the deadline—

the final commercial.

Today's projects should also probably arrive on a tape that "will self-destruct in five seconds." Compared with project work done in the past, current projects are more time constrained, pose greater technical challenges, and rarely seem to have enough resources. All of this leads to increased project risk—culminating too often in the "impossible project."

As a leader of complex projects, you need to know that techniques exist to better deal with risk in projects like yours. Used effectively a these processes will help you recognize and manage potential problems. Often, they can make the difference between a project that is possible and one that is impossible. This is what Identifying and

Managing Project Risk is about. Throughout this book, examples from modern projects show how to apply the ideas presented to meet the challenges you face. This is not a book of theories; it is based on data collected in the recent past from hundreds of complex projects worldwide.

A database filled with this information, the Project Experience

Risk Information Library (PERIL), forms much of the foundation for this book. These examples are used to identify sources of risk, and they demonstrate practical responses that do not always resort to brute force.

The structure of the book also reflects the changes adopted in the most recent edition of the Guide to the Project Management Body of Knowledge (PMBOK® Guide) from the Project Management Institute (PMI®, the professional society for project managers). The Risk section of the PMBOK® Guide is one of the key areas tested on the Project

Management Professional (PMP®) certification examination administered by PMI. This book is also consistent with the PMI® Practice

Standard for Project Risk Management and the topics relevant to the PMI

Risk Management Professional (PMI-RMP®) Certification.

The first half of the book addresses risk identification, which relies heavily on thorough project definition and planning. The initial six chapters show the value of these activities in uncovering sources of risk. The remainder of the book covers the assessment and management of risk, at the detail (activity) level as well as at the project level and above. These chapters cover methods for assessing identified risks, establishing an overall risk plan for the project, making project adjustments, ongoing risk tracking, project closure, and the relationship between project risk management and program, portfolio, and enterprise risk management.

It is especially easy on modern projects to convince yourself that there is little to be learned from the past and that established ideas and techniques "no longer apply to my project." Tempting though it is to wear these hindsight blinders, wise project managers realize that their chances of success are always improved when they take full advantage of what has gone before. Neither project management in general nor risk management in particular is all that new. Broad principles and techniques for both have been successfully used for more than a century. Even though many lessons can be learned from current projects (as the PERIL database illustrates), there is also much to be absorbed from earlier work.

As a graphic reminder of this connection, each chapter in this book concludes with a short description of how some of the principles discussed relate to a very large historical project: the construction of the Panama Canal. Taking a moment every so often to consider this remarkable feat of engineering reinforces the importance of good project management practices—and may provide some topical relief from what can be occasionally dry subject matter.

Risk in projects comes from many sources, including two that are generally left out of even the better books on the subject: (1) the inadequate application (or even discouragement) of project management practices and (2) the all too common situation of wildly aggressive project objectives that are established without the backing of any realistic plan. These risks are related because only through adequate understanding of the work can you detect whether objectives are impossible, and only by using the information you develop can you hope to do anything about it.

Identifying and Managing Project Risk is intended to help leaders of today's complex projects (and their managers) successfully deliver on their commitments. Whether you develop products, provide services a create information technology solutions, or deal with complexity in other types of projects, you will find easy-to-follow, practical guidance to improve your management of project risk, along with effective practices for aligning your projects with reality. You will learn how to succeed with seemingly impossible projects by reducing your risks with minimal incremental effort.

Table of Contents

Acknowledgments vii

Chapter 1 Why Project Risk Management?

The Doomed Project

Risk

Benefits and Uses of Risk Data

The Project Risk Management Process

Anatomy of a Failed Project: The First Panama Canal Project 1

Chapter 2 Planning for Risk Management

Project Selection

Overall Project Planning Processes

Defining Risk Management for the Project

The PERIL Database

A Second Panama Canal Project: Sponsorship and Initiation (1902-1904) 17

Chapter 3 Identifying Project Scope Risk

Sources of Scope Risk

Defining Deliverables

High-Level Risk Assessment Tools

Setting Limits

Work Breakdown Structure (WBS)

Other Scope-Related Risks

Documenting the Risks

Panama Canal: Setting the Objective (1905-1906) 40

Chapter 4 Identifying Project Schedule Risk

Sources of Schedule Risk

Activity Definition

Estimating Activity Duration

Activity Sequencing

Documenting the Risks

Panama Canal: Planning (1905-1907) 70

Chapter 5 Identifying Project Resource Risk

Sources of Resource Risk

Resource Planning

Staff Acquisition

Outsourcing

Project-Level Estimates

Cost Estimating and cost Budgeting

Documenting the Risks

Panama Canal: Resources (1905-1907) 100

Chapter 6 Managing Project Constraints and Documenting Risks

Analyzing Constraints

Managing Opportunities

Scope Modification

Resource Modification

Schedule Modification

Assessing Options and Updating Plans

Seeking Missing Risks

Documenting the Risks

Panama Canal: Improving the Plan (1906) 127

Chapter 7 Quantifying and Analyzing Activity Risks

Quantitative and Qualitative Risk Analysis

Risk Probability

Risk Impact

Qualitative RiskAssessment

Quantitative Risk Assessment

Panama Canal: Risks (1906-1914) 149

Chapter 8 Managing Activity Risks

Root-Cause Analysis

Categories of Risk

Risk Response Planning

Risk Avoidance

Risk Mitigation

Risk Transfer

Implementing Preventative Ideas

Contingency Planning

Risk Acceptance

Documenting Your Risk Plans

Managing A Specific Risk

Panama Canal: Risk Plans (1906-1914) 176

Chapter 9 Quantifying and Analyzing Project Risks

Project-Level Risk

Aggregating Risk Responses

Questionnaires and Surveys

Project Simulation and Modeling

Analysis of Scale

Project Appraisal

Project Metrics

Financial Metrics

Panama Canal: Overall Risks (1907) 212

Chapter 10 Managing Project Risk

Project Documentation Requirements

Project Start-Up

Selecting and Implementing Project Metrics

Management Reserve

Project Baseline Negotiation

Project Plan Validation

Specification Change Management

Panama Canal: Adjusting the Objective (1907) 251

Chapter 11 Monitoring and Controlling Risky Projects

Don't Panic

Applying the Plan

Project Monitoring

Collecting Project Status

Metrics and Trend Analysis

Responding to Issues

Communication

Project Archive

Project Reviews and Risk Reassessment

Taking Over a Troubled Project

Panama Canal: Risk-Based Replanning (1908) 272

Chapter 12 Closing Projects

Project Closure

Project Retrospective Analysis

Panama Canal: Completion (1914) 292

Chapter 13 Program, Portfolio, and Enterprise Risk Management

Project Risk Management in Context

Program Risk Management

portfolio Risk Management

Enterprise Risk Management

Panama Canal: Over the Years 301

Chapter 14 Conclusion

Choosing to Act

Panama Canal: The Next Project 332

Appendix: Selected Detail from the PERIL Database 339

Index 349

Editorial Reviews

Detailed, well-organized and comprehensive, Identifying and Managing Project Risk takes you through the planning, assessment and responses required for any kind of project of any size.” —Soundview

From the Publisher