Project Risk Management. A Practical Implementation Approach. Michael M. Bissonette

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1 Project Risk Management A Practical Implementation Approach Michael M. Bissonette

2 Table of Contents Table of Figures Acknowledgments Preface xi xv xvii CHARTER 1: Practical Application of Project Risk Management 1 Overview 1 Content 3 Portfolio Project Risk Management A Holistic Perspective 3 Practical Project Risk Management Concerns 5 CHARTER 2: Risk Management Integral to Project Management 7 Project Risk Management Fundamentals 7 General Process Cyclesand Related Project Risks 9 Project Life Cycle Structure 9 Product Life Cycle 12 Product Development Cycle 13 Chapter 2 Summary 15 CHARTER 3: Risk Definitions and General Categories 17 Definition of Risk 17 Traditional Definition of Risk 17 PMBOK Guide Definition of Risk 18 Causes Versus Risks 18 Risk Metalanguage Statement: Example 1 19 Risk Metalanguage Statement: Example 2 19 Risk Description Metalanguage Statement: Example 1 19 Risk Description Metalanguage Statement: Example 2 19 The Potential Impact of Risks to Major Project Objectives 19 Risks to Major Project Objectives 20 Risk-Severity Definition 21 Risk Probability and Impact Scales 21

3 Project Risk Management Risk Categories and Groupings 22 The Risk Breakdown Structure (RBS) 23 The Work Breakdown Structure (WBS) 24 Chapter 3 Summary 2 CHARTER 4: Classical Project Risk Management Practices 27 Flanning Risk Management 28 The Risk Management Plan (RMP) I.0 General Information 2.0 RPM Methodology 3.0 Rolesand Responsibilities Risk Management Budgeting Risk Management Scheduling and Timing Project Risk Categories Individual (Qualitative) Risk Assessment Definitions Project Stakeholder Tolerances Risk Reporting Formats Initial Project Assessment Assumptions and Risks 35 II.0 Monitoring and Controlling Project Risks 3(> The Heart of the Risk Management Process 37 Chapter 4 Summary 39 CHAPTER 5: Determining Individual Project Risks 41 Assumptions Versus Risks Differentiating Between Assumptions and Risks 42 Project Assumption Register 4 3 Identifying Individual Project Risks 4 3 Practical Methods for Identifying Individual Project Risks 44 Types of Risks Project RBS Categories: Causes of Unsuccessful Project Execution 50 RBS Categories 5Q Practical and Relevant Questions to Ask for Identifying Risks 51 Chapter 5 Summary 9 M CHAPTER 6: Project Risks Influenced by the Project Managerand Project Team 53 Project Plans Poor Bases of Estimates Scope Omissions -- Invalid Assumptions --

4 Table of Contents Inadequate Contingencies 55 Identifying Project Flanning Risks 55 Project Management Controls 57 Poor Risk Management 57 Inadequate Cost and Schedule Controls 58 Poor Requirements Management 58 Compliance (i.e., Product Quality) Verification Caps 58 Poor Metrics 59 Poor Supplier Management 59 Poor Trade-Off Analyses 59 Identifying Project Management Controls Risks 59 Project Communications 61 Unclear Priorities 61 Poor Decisions 61 Poor Status Reporting 62 Poor Team Direction 62 Poor/Inadequate Escalation 62 Identifying Project Communications Risks 63 Project Leadership 63 Inadequate Training/Development 64 Dysfunction Within Team or Organization 64 Poor Project Manager Assignment Match 64 Identifying Project Leadership Risks 64 Chapter 6 Summary 65 CHARTER 7: Project Risks Influenced by Organizational and External Factors 67 Product Development Processes 67 Industry Mismatch 68 Market Mismatch 68 Development Process Gaps 69 Process Nonadherence 69 Identifying Product Development Process Risks 69 Productivity and Infrastructure Tools 70 Inadequate Productivity Tools 71 Inadequate Infrastructure Tools 71 Inadequate Training 72 Identifying Project Infrastructure Tools and Training Risks 72

5 Project Risk Management Project Resources Insufficient Funds Insufficient Time 7 Insufficient Furnished Equipment and/or Facilities 73 Personnel Resource Caps 74 Identifying Project Resource Risks 74 Business/External Factors 75 Competitive Threats 75 Company Health Team Physical Proximity Unrealistic Stakeholder Expectations 76 Project Cancellation 76 Identifying Risks Due to Project Business/External Factors 77 Chapter 7 Summary 77 CHAPTER 8: Individual Project Risk Analysis 79 The Difference Between Individual and Overall Risk Assessments 79 Performing Individual (Qualitative) Analysis of Project Risks 80 Risk Management Tools and Techniques for Qualitative Analysis 80 Informal (i.e., Reactive) Risk Management 81 Use of a Simple Risk Register 82 Formal Risk Flanning (Using a Risk Matrix) 82 Formal Risk Management (Using Risk Matrix and Tracking Risks) 85 Project Failure Modes and Effects Analysis (FMEA) 86 Mechanics of Individual Risk Analysis 87 Individual Risk Assessment Team 87 How Individual Project Risks Are Analyzed 88 Individual Project Risk Prioritization 89 Example: Application of Risk Management Tools and Techniques 90 Notional Project Description 90 Identifying, Assessing, and Flanning Responses for Notional Project Notional Project Risk Burn-Down Schedule 93 Chapter 8 Summary 94 CHAPTER 9: Overall Project Risk Analysis 95 Performing Overall (Quantitative) Project Risk Analysis " 95 Risk Management Tools and Techniques for Quantitative Analysis 96 Determining Overall Risk Via Interviewing and Expert Judgment

6 Table of ContentsM Determining Overall Risk Via Modeimg and Simulation 98 Description of Modeling and Simulation for Overall Project Risk Assessment 99 Mechanics of Modeling and Simulation for Analyzing Overall Project Risks 101 Organizational Assets That Benefit Overall Project Risk Analysis 108 Chapter 9 Summary 108 CHARTER 10: Determining and Flanning Project Risk Responses 111 Flanning Risk Responses 112 Balancing Risk Tolerance, Response Costs, and Project Objectives 112 Bottom-Up Project Risk Balancing 112 Holistic Project Risk Balancing 113 Combination of Bottom-Up and Holistic Project Risk Balancing 113 Risk (Threats) and Opportunity Response Options 113 Risk (Threat) Response Options 114 Opportunity Response Options 116 Concurrent Risk (Threat) and Opportunity Response Strategies 118 Practical Questions for Determining Risk Responses 119 Addressing Technical (or Quality) Risks (Threats) and Opportunities 120 Addressing Schedule Risks (Threats) and Opportunities 121 Addressing Project Cost Risks (Threats) and Opportunities 122 Chapter 10 Summary 124 CHAPTER 11: Monitoring and Controlling Project Risks 125 The Monitoring and Controlling Project Management Process Group 125 Accommodating Project Changes Over Time 127 Changes That AfFect Project Risk 127 Inherent Project Conflicts 129 Active Risk Management Throughout the Project Life Cycle 130 Risk Reassessment Process 130 Project Management Tools and Techniques to Monitor and Control Risks 131 Some Practical Project Risk Management Tips to Consider 135 Project Flanning Tips to Reduce Project Risk 136 Project Execution Tips to Reduce Project Risk 137 Chapter 11 Summary 138

7 Project Risk Management CHAPTER 12: Project Management Tools and Techniques Affecting Project Risk 139 Project Management Process Group and Knowledge Area Mapping 139 Project Management Knowledge Areas Versus Tools and Techniques Mapping Project Management Tools and Techniques for Risk Management 141 Project Management Estimating Tools and Techniques 142 Top-Down Estimating Bottom-Up Estimating 144 Analogous Estimating 144 Combination of Analogous and Bottom-Up Estimating 145 Modeling and Simulation 146 Project Management Scheduling Tools and Techniques 146 Informal Scheduling 146 Simple Gantt Chart Scheduling 148 Integrated Master Scheduling (IMS) 148 Modeling and Simulation Scheduling 149 Line of Balance Scheduling Project Management Cost and Schedule Management Tools and Techniques 151 Actual-Plus-Plan Versus Time 152 Earned Value Management (EVM) 153 Earned Value Management System (EVMS) 155 Project Management Quality Assurance Tools and Techniques 155 Informal/Reactive Quality Assurance 155 Six Sigma Lite Quality Assurance 156 Six Sigma Quality Assurance 158 Requirements Management Tools and Techniques 158 Project Requirements Document 159 Project Requirements Compliance Document and/or Checklist 160 Requirements Change Control 151 Requirements Reviews Project Management Communications Tools and Techniques...I" Project Management Plans 162 Project Statement of Work (SOW) Project Work Breakdown Structure (WBS) 163 Project Work Authorization Documents (WADs) 163 Project Customer and Management Meetings and Reviews 163 I61 2

8 Table of Contents 3 Project Management HR Tools and Techniques 164 Project Management Decision Making 165 Project Management Leadership 167 Supplier Management Tools and Techniques 167 Project Sourcing Strategy and Plans 168 Project Source Selection 169 Project Supplier Management and Control 170 Chapter 12 Summary 170 CHAPTER 13: Project Manager Competencies Versus Project Risk 171 Basic Project Manager Capabilities to Consider 172 Project Manager Abilities, Roles, and Responsibilities 172 Leadership Abilities and Skills for Effective Project Management 174 Project Manager Vision and Ability to Inspire 174 Project Manager Communication Skills 175 Project Manager Integrity 175 Project Manager Enthusiasm and "Can Do" Attitüde 176 Project Manager Empathy and Compassion 176 Project Manager Competence 177 Project Manager's Ability to Delegate 177 Project Manager's Composure 178 Project Manager Team-Building Skills 178 Project Manager Problem-Solving Skills 179 Chapter 13 Summary 179 CHAPTER 14: Various Project Risk Management Influencers 181 Organizational Influencers 181 Organizational Structure and Cultural Factors 181 Team Physical Proximity 182 Cultural Norms and Values 182 Compliance Requirements 183 Operating Environment 183 Management Expectations 183 Project and Functional Team Behaviors 184 Personnel Development and Training Philosophy 184 Functional Versus Matrix Versus Projectized Structures 184 Organizational Process Assets 186 Information Specific to the Performing Organization 186 Organizational Knowledge Bases 187

9 jproject Risk Management Project Stakeholders and Governance Project Stakeholders Project Governance Roles and Responsibilities Chapter 14 Summary 194 CHAPTER 15: Project "Best Practices" and Postmortems 197 Project "Best Practices" 198 "Better-Than-Best Practices" *99 Relatively Expensive Project Management "Better-Than-Best Practices" 199 Relatively Cost-Effective Organizational "Better-Than-Best Practices" 201 Interactions That Lead to the Establishment of "Best Practices" 202 Project Postmortems 206 Typical Postmortem Methodology 207 Postmortem Cautions 208 An Efficient and Effective Approach to Conducting Project Postmortems 209 Chapter 15 Summary 210 CHAPTER 16: Example Project Case Studies 213 Comparable Aerospace and Commercial Industry Projects 213 Comparable Commercial Industry Back-to-Back Projects 219 Comparison of Two Distinctly DifFerent Aerospace Projects 221 Chapter 16 Summary 226 Appendix A Sample Project Traffic-Light Ratings 229 Appendix B Data Supporting EVM Example 231 Appendix C Project Profile Data 233 Appendix D Multiproject Postmortem Example 235 log 3 References Glossary Index -Mi

Summary of 47 project management processes (PMBOK Guide, 5 th edition, 2013)

Summary of 47 project management processes (PMBOK Guide, 5 th edition, 2013) Integration Management: processes & activities needed to properly coordinate all aspects of the project to meet stakeholder