Colorado Technical University MPM344-1702B-02 Project Risk Management Project Risk Management Student: Seth Holley 07 Jun 2017 Contents Project Outline .............................................................................................................................................. 3 Risk Management Justification ..................................................................................................................... 4 Project Risk Assessment................................................................................................................................ 7 Designing A Beach House ....................................................................................................................... 7 Project risks identification ..................................................................................................................... 7 Project risk assessment ........................................................................................................................... 9 Project Risk Responses Strategy ................................................................................................................. 11 Project Risk Responsibility Plan .................................................................................................................. 15 Project Risk Monitoring & Control Plan ...................................................................................................... 16 Project Risk WBS & Budget Updates ........................................................................................................... 17 Project Risk Communications Plan.............................................................................................................. 18 References .................................................................................................................................................. 19 Project Outline The project involves designing a beach house in the Atlantic City. The plan is to make a 3bedroomed house with two baths with a perfect view of the ocean. Within six to sixteen weeks, a custom design will be carried out at the beach house. The beach house will be considered as a 3-bedroomed house, 1000 square feet with one bathroom. The stock plan without modifications will take one week since there are no changes. The stock plan with modifications will take a maximum of four weeks. Risk Management Justification Risk management is critical to help in the success of a project as there are many possible risks which could lead to failure of this project. A project manager will have to identify and recognize the causes of risks and trace them through the entire project and their consequences. This is the only way to help achieve the project’s objectives. Managing the risks in this project is a critical and necessary process to achieve goals of the project regarding safety, cost, time, quality and environmental suitability. The effectiveness of the risk management process allows one to identify the projects weaknesses and strengths. This helps to plan for any unexpected events and be ready. Risk management strategies contribute to establishing internal and external risks. It includes any identifiable hazards, occurrence probability, potential impact, and actions. This provides for minimizing and eliminating adverse risks that will lead to in time project completion. This leads to decreased expenses on any activities that do not return investments. Hence, the success of the project is almost inevitable without a risk management plan. ii) Steps to develop a risk management plan 1. Identify the risk- It involves identifying risks that may affect the project or the outcome of the project. 2. Analyzing the risk- It consists of determining the likelihood and possible consequence of each risk. The nature of the risk is understood and its possible potential to affect the goals and objectives of the project. 3. Evaluating the risk- The risk is ranked regarding risk magnitude. Whether the menace is acceptable or needs to be taken care of. 4. Treating the risk-The highest ranked risk are set aside, and a plan is developed to modify the risks to achieve the least possible risk levels. Here, risk mitigation strategies are finalized, contingency and preventive plans and measures of risk treatment. 5. Monitor and review the risk- The risks are monitored, tracked and evaluated. iii) Represent this process in a flow diagram Identify the risks Analyzing the risk Evaluating the risk Treating the risk eff New risk Monitoring and reviewing the risk Project Risks Identification Risk can happen at any time during the project from the early stages where decisions such as selection of methods of construction and other choices can be subjective. Hence, risk management use is necessary from the beginning. Several risks could lead to failure of the project. The categories where risk could occur in this project include technical, environmental or external. A technical risk is the effect changes could have on the project when an implementation does not work as anticipated. Failing to identify the threat could lead to increased maintenance time, technical debt and degraded performance. In environmental risks, the home-owners in beach areas are prone to storm seasons, rising sea levels and other effects of climate change. The real estate industry is aware of the need to consider the risks of climate change that may lead to catastrophic damage due to storms and rising seas. With a higher risk of climate change comes in the high insurance premiums. External risks are risks that cannot be measured by the project team. They are tough to predict and control. They include catastrophic hazards and economic changes in the country. Project Risk Assessment Designing A Beach House The construction and designing of a beach house in Atlantic City is carried out in various phases, all characterized by hazards, uncertainties, and risk. It’s the goal of every typical project to be completed within the stipulated cost, time and scope. However, rarely are the times that these goals are achieved due to the immense risks that affect projects from the word go to its termination. Designing a beach house is a project that is even more vulnerable to risks compared to typical house construction projects. In order to possibly mitigate these risks before they take into disasters, project risk identification and assessment will come in hand. Project risks identification This is one of the most significant processes in project planning and management. Risk identification involves determining which risk might affect the project and documenting their characteristics. Environmental, performance, scope, political concerns, technological issues, and schedule uncertainty are the categories of risks that will affect the project at various phases. It’s through a detailed shareholder analysis that the risks have been identified and categorized, some of the most influential external and internal stakeholders consulted in the project risk identification process include the project sponsors -the owner of the house, products suppliers, the local authority, the project team members and the surrounding community. Not only does the stakeholder analysis help in overcoming the various outlined risks, but it also helps in mitigating risk of conflict of interest among the various groups (Taylan, 2014). To be more specific, scheduling risk will be the main risk that will affect the project in the planning phase. For example, the schedule may not be realistic, critical tasks may be missing from it, and unfamiliar house designs and other services may take longer than expected. The project requirement risk that the project will include, the lack of certainty on the project requirements at the start phase of the project, they may also have been based lined but consistently continue to change. Additionally, the total designing features requested may be beyond the capability of the development team or cannot be delivered in time. Apart from the schedule and requirement risks, the rest of the risk can be categorized as secondary risks. Permits and licenses, economic instability, political factors, local community objection, and stakeholders changes are some of the common secondary risks that are likely to affect the project implementation. The main problem with these types of risks is that they are always overlooked and end up turning into disasters. The technological risk is also one of the most likely factors that will affect the project. From a project manager view, the new technology is poorly understanding by various project teams who will try to embrace it just to introduce delays. Construction risks can be further be categorized into resource and delivery risks (Aminbakhsh, 2013). Key skills and staffs may not be available when needed. Subcontractors and various designing engineers may also fail to meet the milestones or under-perform. The cause and effect diagrams (Ishikawa tools), also known as fishbone tools were used in identifying these risk factors that are likely to impede the project. This technique is effective in categorizing the various generic concerns- for example, the materials, resources, people(manpower), environment and methods of designing the house. The categories of these concerns are drawn as branches from the main arrow which represents each major generic heading from which now discussion begins. The tool proved to be effective especially after a lengthy brainstorming and when team’s thinking seems to fall into ruts. Project risk assessment The various risks involved in designing the beach house can be further be prioritized based on risk rating. The probability has been typically conducted using a risk assessment matrix. The matrix specifies both the probability and impact of the risks, where the likely hood of risk has been rated as low, moderate or high. The risk impact of the risks is rated in an impact score of 1 to 5. Risk Performance Legal and contractual Environment Risk description Underperformance and defective work Risk like hood ranking High Risk impact ranking 4 Delayed dispute resolution and subcontracting procedures. Environmental pressures and concerns Moderate 3 Low 3 Low 4 Moderate 2 Technical Lack of specialized staffs. Political Regulations (safety or labor laws in Atlanta) Risk impact description The project quality and scope objective will not be attained. Delayed project implementation and termination. Termination of the project before the deliverables are obtained. The project quality objectives will be compromised. Delayed and increased project costs. security Negligence, vandalism and corruption Technology Defective designs financial Inflation and lack of enough funds High 5 Moderate 1 High 4 Summary: The beach house is a medium risk project. Project suspension or termination in case of intense security risks. Poor integration of new technology will delay the project implementation. The project will not be executed in time and with the stipulated resources. Project Risk Responses Strategy There are quite a number of uncertainties in the projects that are carried out in different areas. These uncertainties are majorly referred to as risks that may be incurred in the process of conducting a given project. It is, therefore, vital for these different types of risks to be identified earlier before they actually take place and be able to interpret what might go wrong. This added with analysis on how they can be well controlled is known as risk management (Barkley, 2004). Risk management is very important in assisting projects to be successful after a long run. Risk management is necessary for many projects to achieve their goals and this paper mainly discusses on how some already identified risks can be well managed for the success of a project. To start with, failure of a vendor to comply with the agreed terms and plans with the project management may be one of the serious secondary risks that a project may face. Human beings are prone to errors and this is a risk that comes from a person selling some vital products to be used in the project development (Portny, 2015). It may also be from a given company that offers something for sale. The risk response that is appropriate for this is transfer. If the vendor hired is not performing then it means the projects will take much time than planned and the quality may also not be as expected. What will help after identifying this risk is avoiding this vendor and replacing with one who is serious and able to deliver as required. The contingency plan for this problem is getting to know more vendors who can supply what is needed for the project. Being close to them in a manner that if the selected vendor fails then they can be easily used as an alternative to freely supply what is needed. Moreover, time is a vital factor in any project that is undertaken. The delay of equipment ordered for the project offers a great risk. This means that all which were planned to take place at that phase will delay or not done at all. Mitigation plans can be the best response for this kind of risk. The mitigation appropriate in this case is known as risk buffering. It will involve the establishment of some reserve by adding the cost of the project and buying the equipment planned to be hired if it is affordable (Barkley, 2004). In case the equipment is too expensive then, other plans to hire another one and secure it within quickest time possible will help in combating the risks entailed. All these plans are believed to be kind of buffers that can assist in absorbing the effects of risks from a delay of equipment. Environment risks are other sources that may bring catastrophic damages or losses to a project. In the case where the location of the project experiences seasonal hurricanes then this may pose a great risk to the project. The best response for this risk is mitigation (Portny, 2015). However, hurricanes are naturally occurring and there is very minimal that we can do control them. The action that can be done to make this risk less of a problem is by taking insurance. Even if it means paying high premiums due to high chances but it will be the best way to control losses in the case of occurrence of the risk. This is where the insurance company will help to pay for the damages and losses incurred when the risk insured against occurs. More so, the time expected for the project to be cleared may take longer due to certain factors. An example of the factors may be, involvement learning curve making the task effort to take longer than planned. The risk response appropriate the case is mitigation (Portny, 2015). The contingency plan that will be employed to mitigate this risk is an overestimation of the manhours used by the project participants. This will help to respond effectively to significant future time lapse as it will cater for the time that may be added to a number of unavoidable factors. Furthermore, all the type of risk responses mentioned in this project can be applied in any type of a project. They are different processes that are put in place by the project managers so as to develop strategic options and determine a number of actions that when put in action will reduce the threat to the objectives of the project. They can also be used to enhance safe opportunities that work towards minimizing risks. All these have to be done within a wellorganized strategy where the project team members are assigned different activities for every risks response identified as appropriate for a given risk. The example of risks that were identified within the project case in this discussion was touching four different areas. This is the nature of risks as they can occur at any stage within the project just from the design to the closure stages. The major specific areas where risks may occur within the project are, design stage, within the environment and the real construction. The areas are not fixed and may vary from one project to another. The table below further illustrates the situation risks and the best type responses that could be taken. Performance Risk statement Risk response The vendor that was hired is Transfer; it is the most not performing appropriate as the project should not stop for long due to this failure. The responsibility will be simply transferred to another identified vendor of who can do the same work on time as needed. Environment The area of location of a Mitigation; this is the best as project is prone to hurricanes it majorly entails coming up that do happen in some with actions that make the risk seasons of the year. This may less of a problem to a person cause damage to properties or organization and this helps and or even loss of life. to reduce sufferings extreme losses that may occur. An insurance policy will be taken against the possible risks. Contractual The equipment that was hired Mitigation; this is where the for the project is a month late. project managers make an extensive budget to cater for any emergency that may occur. The contingency plan will be over budgeting so that if the equipment planned to be used delays or is not there then another one may be bought and the project proceeds. That is if the equipment is affordable. Technical The task planned taking longer Mitigation; employing people than expected due to because who are well qualified for the of involvement of a learning project so that more time is curve. not wasted on training again To summarize, there are many risks involved in the process of carrying out any project. Many risk response exists that may be used under different circumstances by the risk management team to tackle and handle different risks (Schwindt, 2015). Examples of these responses are; avoid, transfer, mitigate, and accept. These risks pose a threat to the project and success will only be achieved depending on how they are identified and well managed. Project Risk Responsibility Plan Project Risk Monitoring & Control Plan Project Risk WBS & Budget Updates Project Risk Communications Plan References 1. Tara.D, smallbusiness.chron.com/risk-management-important-project-success56920.html .2015 2. Enamul, H. www.daily-sun.com/printversion/details/225156/Marine-driveway---Amilestone-project- 2017 3. Aminbakhsh, S. G. (2013). Safety risk assessment using analytic hierarchy process (AHP) during planning and budgeting of construction projects. Journal of safety research, 46, 99-105. 4. Taylan, O. B. (2014). Construction projects selection and risk assessment by fuzzy AHP and fuzzy TOPSIS methodologies. Applied Soft Computing, 17, 105-116. 5. Barkley, B. T. (2004). Project risk management. New York [u.a.: McGraw-Hill Professional. 6. In Schwindt, C., & In Zimmermann, J. (2015). Handbook on project management and scheduling: Vol. 2. 7. Portny, S. E. (2010). Project management for dummies. Hoboken, NJ: Wiley Pub.
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