Module 5

• Republic of the Philippines NUEVA VIZCAYA STATE UNIVERSITY Bayombong, Nueva Vizcaya
• This module will unfold further concepts and terms about risks and risk management. Also, this unit will allow the students to explore and be acquainted with the different risk management tools and techniques. Likewise, this will also educate students about the effectiveness of risk management structures and procedures.
• Desired Learning Outcomes


  • Develop understanding and awareness of the tools and techniques in risk management
  • Assess ways on how risk managers and project members can ensure that the risk management processes and structures are being followed and practiced correctly
• Risk Management Tools and Techniques

  1. Brainstorming

  2. Root Cause Analysis

  3. SWOT Analysis

  4. Risk Assessment Template for IT

  5. Probability and Impact Matrix

  6. Risk Data Quality Assessment

  7. Variance and Trend Analysis

  8. Reserve Analysis
• Only 27% of organizations can say that they 'always' use risk management practices in their project, while 35% use them only 'sometimes'.
• Brainstorming involves reviewing all project documentation, overseeing all historic data and information about risks from previous projects, reading over articles related to the risks involved, understanding all organizational process assets, and any information available that will give insight into the issues that might occur while the project is going on.
• Root Cause Analysis helps project members identify all the risks that are embedded in the project itself. It answers questions such as: What happened? Why did it happen? How?
• SWOT Analysis can be used to identify risks by looking at the strengths, weaknesses, opportunities, and threats to a project.
• A risk assessment template gives a list of risks in an orderly fashion, including the probability of occurrence and the impact it will have on the project.
• The probability and impact matrix helps in prioritizing risks based on the impact they will have and assists with resource allocation for risk management.
• Risk data quality assessment helps project managers and team members understand the accuracy and quality of the risk based on the data collected.
• Variance and trend analysis helps project managers look for variances between the schedule of the project and cost and compare them with the actual results to monitor risks while the project is underway.
• Reserve analysis involves keeping financial reserves as a backup that can be used to mitigate risks during the project.
• Risk Management Processes and Structures

  1. Risk Identification

  2. Risk Evaluation
• Risk identification includes both a creative process like brainstorming and a more disciplined process using checklists of potential risks.
• Risk evaluation involves developing an understanding of which potential risks have the greatest possibility of occurring and can have the greatest negative impact on the project.
• Having criteria to determine high impact risks can help narrow the focus on a few critical risks that require mitigation.
• Risk mitigation


  A plan to reduce the impact of an unexpected event
• Risk mitigation techniques


  • Risk avoidance
  • Risk sharing
  • Risk reduction
  • Risk transfer
• Risk avoidance


  • Developing an alternative strategy that has a higher probability of success but usually at a higher cost
  • Using proven and existing technologies rather than adopting new techniques
• Risk sharing


  • Partnering with others to share responsibility for the risk activities
  • Reducing political, legal, labour, and other risk types associated with international projects by developing a joint venture
• Risk reduction


  • Investing funds to reduce the risk on a project
  • Purchasing the guarantee of a currency rate to reduce the risk associated with fluctuations
  • Hiring an expert to review plans or estimates to increase confidence and reduce risk
  • Assigning highly skilled personnel to manage high-risk activities
• Risk transfer


  • Shifting the risk from the project to another party
  • Purchasing insurance to cover the cost of unexpected events outside the project team's control
• Contingency plan


  An alternative method for accomplishing a project goal when a risk event has been identified that may frustrate the accomplishment of that goal
• Contingency funds


  Funds set aside by the project team to address unforeseen events that cause the project costs to increase
• Projects with a high-risk profile will typically have a large contingency budget
• Some project managers allocate the contingency budget to the items in the budget that have high risk rather than developing one line item in the budget for contingencies
• Most project managers, especially on more complex projects, will manage contingency funds at the project level, with approval of the project manager required before contingency funds can be used
• Risk management


  • A creative process that involves identifying, evaluating, and mitigating the impact of the risk event
  • Can be very formal, with defined work processes, or informal, with no defined processes or methods
• Formal risk evaluation


  1. Use of checklists

  2. Brainstorming

  3. Expert input
• Risk breakdown structure (RBS)


  Can follow the work breakdown structure (WBS) to identify risk by activity
• Risk evaluation


  Prioritizes the identified risks by the likelihood and the potential impact if the event happens
• Risk management can be very formal, with defined work processes, or informal, with no defined processes or methods
• Formal risk evaluation includes the use of checklists, brainstorming, and expert input
• A risk breakdown structure (RBS) can follow the work breakdown structure (WBS) to identify risk by activity
• Risk evaluation prioritizes the identified risks by the likelihood and the potential impact if the event happens
• Risk mitigation is the development and deployment of a plan to avoid, transfer, share, and reduce project risk
• Contingency planning is the development of alternative plans to respond to the occurrence of a risk event