PMI-RMP Introduction to Project Risk Management Processes Tutorial

4.1 Introduction to Project Risk Management Processes

Hello and welcome to the Project Management Institute’s Risk Management Professional Certification Preparatory Course offered by Simplilearn! In this lesson, we will understand the processes carried out during the Project Risk Management. Let us look into the objectives of this lesson in the next screen.

4.2 Objectives

After completing this lesson, you will be able to: ? Define Project Risk Management ? Explain Project Management ? Identify Project Risk Management Processes In the next screen, let us begin with Project Risk Management.

4.3 Project Risk Management

Project Risk Management includes the processes of conducting risk management planning, identification, analysis, response planning, and controlling risk on a project. It has been mentioned in Practice Standard for Project Risk Management that Project Risk Management aims to identify and prioritize risks in advance of their occurrence, and provide action-oriented information to project managers. Project risk management is an integral part of the project management. It provides an approach through which uncertainty can be understood, assessed, and managed within the projects. Effective project risk management is essential for the success of a project. Let us discuss the interdependencies between Project Risk Management and Project Management in the following screen.

4.4 Project Risk Management and Project Management

When you say risk management is an integral part of project management, it means that they are dependent on each other. The output of many project management processes can be considered as an input for risk management and vice versa. For example, by getting the information about the project progress in terms of schedule, you realize that it is not in line with the expected progress, which can become a risk for the project. So, risk management plays an important role to decide what response must be given or what actions are to be taken. Similarly, based on the response of risk management, the project management plan with respect to the deliverable will change. As you already know, all the projects have uncertainty. Project management can be seen as an attempt to control this uncertain environment through the use of structured techniques like estimating, planning, cost control, activity allocation, earned value analysis, monitoring, and review meetings. Project risk management provides an approach by which uncertainty can be understood, assessed, and managed within projects. So, effective project risk management is a critical success factor for project success. Let us continue this discussion on Project Risk Management and Project Management in the next slide.

4.5 Project Risk Management and Project Management (contd.)

The management or the project manager should not look at project risk management as an optional activity or overhead. The interface between project risk management and other processes of project management must be clear to address the uncertainty. The outputs of project risk management should be considered within the project management processes. They can impact various aspects like: estimating resources, cost, or duration; assessing the impact of scope changes; resource allocation and project progress reports to the stakeholders. The effectiveness of project management process is increased by using the information and results from project risk management. On the other hand, some of the outputs of other project management processes such as work breakdown structure (WBS), estimation of schedule and cost, and assumptions are important prerequisites for project risk management. Let us first discuss how we can make risk management process effective, in the next screen.

4.6 Project Risk Management Processes

You make risk management more successful, effective, or consistent by using processes, methodologies, or a set of activities. However, before using these processes you should keep some points in our mind. Risk management process should be scalable to meet different elements like available resources, methodology and processes used, tools and techniques used, supporting infrastructure, review and update frequency, and reporting requirements. It is important to have a clear understanding of the risk threshold that defines the views of key stakeholders on acceptable levels of risk. It is equally important to identify the framework to manage the risk, starting from the initiation stage to its successful implementation. Project risk management activities, resources, and attention should be appropriated to the project; since different projects warrant different levels of risk management application. Some of the actions required for tailoring are: defining objectives against which risks will be identified; defining how the elements like resources, methodologies, tools, infrastructure, and communication are scalable for the project; and defining risk thresholds, tolerances, and the assessment of framework. The outputs should be documented, communicated, and reviewed to ensure common understanding of the scope and objectives for the project risk management processes.

4.7 Project Risk Management Processes (contd.)

In this screen, we will look into the high level activities carried out in the six project risk management processes. The first process is Plan Risk Management. In this process, you define the scope and objectives of the project risk management processes. The key output of this process is the project risk management plan. The second process is Identify Risks. In this process, you identify maximum possible known risks. You will be focusing on the tools and techniques used in the process of identifying risks. The key output is the Risk Register. The third process is Perform Qualitative Risk Analysis. This process is about prioritizing risks and ranking them as high, medium, and low for further action. The focus will be on tools used to prioritize risks.. The fourth process is Perform Quantitative Risk Analysis. In this process, you evaluate the combined effect of risks on the overall project outcome. The risks are quantified numerically. The fifth process is Plan Risk Responses. This process helps us determine appropriate response strategies and actions for each individual risk and for overall project risk; and integrates them into overall project management plan. The sixth and the last process is Control Risks. This process focuses on implementing risk response plans, tracking identified risks, monitoring residual risks, identifying new risks, and evaluating risk process effectiveness throughout the project. In the next screen, we will look into the flow of all these six processes and how it works logically.

4.8 Project Risk Management Processes (contd.)

The working and typical flow of the six project risk management processes is shown on this screen. Click each step to learn more. Plan Risk Management: In the first step, you have to carry out the risk management planning by identifying the tailored mechanism for each process; identifying the risk thresholds; and process rules. After documenting all these points, you get the risk management plan. Identify Risk: The second step is to identify the risks. This can be done by listing down the risks and the risk owners against each risk. Risk management plan acts as an input for the process of identifying the risks. The output of identify risks process is the risk register. Perform Qualitative Risk Analysis: The third step is related to performing qualitative risk analysis. Here, the identified risks will be analyzed with respect to the probability, impact, and root causes. By using different tools, you can arrive at importance and the prioritized lists. The output of this process calls for risk register updates. Perform Quantitative Risk Analysis: The fourth step is performing the quantitative risk analysis, considering the overall impact on the objectives. To make this process effective you can use numerical models. Quantitative techniques provide insights into the combined effect of identified risks on project outcome. You can also use agreed confidence limits or levels and sensitivity analysis techniques to increase the effectiveness of this process. This step provides a chance to reprioritize the list of risks. Plan Risk Responses: The fifth step is to plan risk responses. In other words, this step helps us to find the response for each risk, based on the opportunity and threat. Identification of contingency plans, strategies, actions, action owners, timing, analysis, project plan updates, and communication are also involved in this step. The chances are that while carrying out this step, one may identify new risks. In that case, all the steps starting from step two must be repeated. Or, one may have to refine the analysis in terms of either qualitative or quantitative or both. Control Risks: The last step is called control risks. This step is about tracking of the risks in terms of its status and trends, and taking actions as appropriate. This step is also about reporting and trends in risk exposures. The outcome of this step is reporting about the individual risk, the overall project risks status, and forecasts to the stakeholders. While performing this process, you may identify new risks. In such cases, you have to restart the analysis stage for new risks and carry out rest of the steps, as depicted in the diagram. Also, if any action taken with risk response is not appropriate, then you must consider revisiting the plan risk response process. We will discuss in detail about these processes in further lessons of this course. Let us move on to the quiz questions to check your understanding of the concepts covered in this lesson.

4.10 Summary

Here is a quick recap of what was covered in this lesson: ? Project risk management and project management provides an approach through which uncertainty can be understood, assessed, and managed within the projects. ? Risk management can be effective by using processes or methodologies or a set of activities. ? Project risk management has six processes: Plan Risk Management, Identify Risks, Perform Qualitative Risk Analysis, Perform Quantitative Risk Analysis, Plan Risk Responses, and Control Risks.

4.11 Conclusion

This concludes an Introduction to Project Risk Management Processes. The next lesson covers Plan Risk Management.

4.1 Introduction to Project Risk Management Processes

Hello and welcome to the Project Management Institute’s Risk Management Professional Certification Preparatory Course offered by Simplilearn! In this lesson, we will understand the processes carried out during the Project Risk Management. Let us look into the objectives of this lesson in the next screen.

4.2 Objectives

After completing this lesson, you will be able to: ? Define Project Risk Management ? Explain Project Management ? Identify Project Risk Management Processes In the next screen, let us begin with Project Risk Management.

4.3 Project Risk Management

Project Risk Management includes the processes of conducting risk management planning, identification, analysis, response planning, and controlling risk on a project. It has been mentioned in Practice Standard for Project Risk Management that Project Risk Management aims to identify and prioritize risks in advance of their occurrence, and provide action-oriented information to project managers. Project risk management is an integral part of the project management. It provides an approach through which uncertainty can be understood, assessed, and managed within the projects. Effective project risk management is essential for the success of a project. Let us discuss the interdependencies between Project Risk Management and Project Management in the following screen.

4.4 Project Risk Management and Project Management

When you say risk management is an integral part of project management, it means that they are dependent on each other. The output of many project management processes can be considered as an input for risk management and vice versa. For example, by getting the information about the project progress in terms of schedule, you realize that it is not in line with the expected progress, which can become a risk for the project. So, risk management plays an important role to decide what response must be given or what actions are to be taken. Similarly, based on the response of risk management, the project management plan with respect to the deliverable will change. As you already know, all the projects have uncertainty. Project management can be seen as an attempt to control this uncertain environment through the use of structured techniques like estimating, planning, cost control, activity allocation, earned value analysis, monitoring, and review meetings. Project risk management provides an approach by which uncertainty can be understood, assessed, and managed within projects. So, effective project risk management is a critical success factor for project success. Let us continue this discussion on Project Risk Management and Project Management in the next slide.

4.5 Project Risk Management and Project Management (contd.)

The management or the project manager should not look at project risk management as an optional activity or overhead. The interface between project risk management and other processes of project management must be clear to address the uncertainty. The outputs of project risk management should be considered within the project management processes. They can impact various aspects like: estimating resources, cost, or duration; assessing the impact of scope changes; resource allocation and project progress reports to the stakeholders. The effectiveness of project management process is increased by using the information and results from project risk management. On the other hand, some of the outputs of other project management processes such as work breakdown structure (WBS), estimation of schedule and cost, and assumptions are important prerequisites for project risk management. Let us first discuss how we can make risk management process effective, in the next screen.

4.6 Project Risk Management Processes

You make risk management more successful, effective, or consistent by using processes, methodologies, or a set of activities. However, before using these processes you should keep some points in our mind. Risk management process should be scalable to meet different elements like available resources, methodology and processes used, tools and techniques used, supporting infrastructure, review and update frequency, and reporting requirements. It is important to have a clear understanding of the risk threshold that defines the views of key stakeholders on acceptable levels of risk. It is equally important to identify the framework to manage the risk, starting from the initiation stage to its successful implementation. Project risk management activities, resources, and attention should be appropriated to the project; since different projects warrant different levels of risk management application. Some of the actions required for tailoring are: defining objectives against which risks will be identified; defining how the elements like resources, methodologies, tools, infrastructure, and communication are scalable for the project; and defining risk thresholds, tolerances, and the assessment of framework. The outputs should be documented, communicated, and reviewed to ensure common understanding of the scope and objectives for the project risk management processes.

4.7 Project Risk Management Processes (contd.)

In this screen, we will look into the high level activities carried out in the six project risk management processes. The first process is Plan Risk Management. In this process, you define the scope and objectives of the project risk management processes. The key output of this process is the project risk management plan. The second process is Identify Risks. In this process, you identify maximum possible known risks. You will be focusing on the tools and techniques used in the process of identifying risks. The key output is the Risk Register. The third process is Perform Qualitative Risk Analysis. This process is about prioritizing risks and ranking them as high, medium, and low for further action. The focus will be on tools used to prioritize risks.. The fourth process is Perform Quantitative Risk Analysis. In this process, you evaluate the combined effect of risks on the overall project outcome. The risks are quantified numerically. The fifth process is Plan Risk Responses. This process helps us determine appropriate response strategies and actions for each individual risk and for overall project risk; and integrates them into overall project management plan. The sixth and the last process is Control Risks. This process focuses on implementing risk response plans, tracking identified risks, monitoring residual risks, identifying new risks, and evaluating risk process effectiveness throughout the project. In the next screen, we will look into the flow of all these six processes and how it works logically.

4.8 Project Risk Management Processes (contd.)

The working and typical flow of the six project risk management processes is shown on this screen. Click each step to learn more. Plan Risk Management: In the first step, you have to carry out the risk management planning by identifying the tailored mechanism for each process; identifying the risk thresholds; and process rules. After documenting all these points, you get the risk management plan. Identify Risk: The second step is to identify the risks. This can be done by listing down the risks and the risk owners against each risk. Risk management plan acts as an input for the process of identifying the risks. The output of identify risks process is the risk register. Perform Qualitative Risk Analysis: The third step is related to performing qualitative risk analysis. Here, the identified risks will be analyzed with respect to the probability, impact, and root causes. By using different tools, you can arrive at importance and the prioritized lists. The output of this process calls for risk register updates. Perform Quantitative Risk Analysis: The fourth step is performing the quantitative risk analysis, considering the overall impact on the objectives. To make this process effective you can use numerical models. Quantitative techniques provide insights into the combined effect of identified risks on project outcome. You can also use agreed confidence limits or levels and sensitivity analysis techniques to increase the effectiveness of this process. This step provides a chance to reprioritize the list of risks. Plan Risk Responses: The fifth step is to plan risk responses. In other words, this step helps us to find the response for each risk, based on the opportunity and threat. Identification of contingency plans, strategies, actions, action owners, timing, analysis, project plan updates, and communication are also involved in this step. The chances are that while carrying out this step, one may identify new risks. In that case, all the steps starting from step two must be repeated. Or, one may have to refine the analysis in terms of either qualitative or quantitative or both. Control Risks: The last step is called control risks. This step is about tracking of the risks in terms of its status and trends, and taking actions as appropriate. This step is also about reporting and trends in risk exposures. The outcome of this step is reporting about the individual risk, the overall project risks status, and forecasts to the stakeholders. While performing this process, you may identify new risks. In such cases, you have to restart the analysis stage for new risks and carry out rest of the steps, as depicted in the diagram. Also, if any action taken with risk response is not appropriate, then you must consider revisiting the plan risk response process. We will discuss in detail about these processes in further lessons of this course. Let us move on to the quiz questions to check your understanding of the concepts covered in this lesson.

4.10 Summary

Here is a quick recap of what was covered in this lesson: ? Project risk management and project management provides an approach through which uncertainty can be understood, assessed, and managed within the projects. ? Risk management can be effective by using processes or methodologies or a set of activities. ? Project risk management has six processes: Plan Risk Management, Identify Risks, Perform Qualitative Risk Analysis, Perform Quantitative Risk Analysis, Plan Risk Responses, and Control Risks.

4.11 Conclusion

This concludes an Introduction to Project Risk Management Processes. The next lesson covers Plan Risk Management.

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