Risk Assessments and Management for Effective Project Planning

1. Risk Assessments Judith Lane, PMP July 13, 2004

2. Setting the Stage

3. Vocabulary • Assumption • Issue • Problem • Risk

4. Definition - Assumption • An assumption is a single, simple, positive or negative statement that you must make at a critical time when an issue is still open. • Something you believe to be true. • Your best guess.

5. Definition - Issue • Any question that has been asked at the right time to which a high quality answer cannot be expected without special action being taken. • A missing piece of information required for effective project management.

6. Definition – Problem • A problem is a negative situation that is occurring now.

7. Work Plan Analysis Strategic Cost Analysis Brainstorming Checklists Definition - Risk • A risk is a possible future occurrence of an event or situation that will have a negative effect on the project should it occur. • A risk is a simple statement of the form:“IF” (Something Happens)“THEN” (Undesirable Consequences)

8. You Know What To Do Answer / Decision Assumption Document as an Issue “Problems” vs. “Issues” vs. “Assumptions” Action Item Log or Project Schedule Just Do It Problem You Don’t Know What To Do • A low quality assumption is a risk.

9. Assessments

10. Types of Assessments • Project Management Assessment • Fairly narrow but deep – looks at artifacts in depth, may do a schedule analysis • Tends to focus on problems • Technical Assessment • Deep and pointed, often at specific times in a lifecycle (e.g., design review, code review, etc.) • Tends to focus on problems • Risk Assessment • Broad, with enough depth to establish interdependencies and trends • Focuses on the program’s big picture

11. Why Risk Assessments? • When you manage risk, you manage the program.

12. The Assessment Model

13. The Assessment Team • Two to three people • Highly experienced • Multidisciplinary or broad background • Objective

14. The Focus of the Assessment Leadership and Management The Organization Structure Overall Solution Political Environment Visibility and Communication Infrastructure One Week

15. Assessment Flow Tailor Interview Questions Request Representative Sample of Team for Interviews Request Artifacts for Review Soft copy of Integrated Schedule Status Reports Cost Estimation Project Charter Org Chart Relationship Chart Account Plan Program Plan Stage of Lifecycle Management Workers Clients Other Partners Formulate Findings and Recommendations Analyze Results Conduct Interviews Artifact Review Interview Answers Apparent Trends Root Causes 45 minutes to 1.5 hours Short-term Long-term

16. Request Artifacts for Review • Soft copy of the integrated schedule • Is there a critical path? • Are there constraints and assumptions? • Are all stakeholders represented? • Status reports • If you can’t tell what’s going on, the intended audience can’t either. • Focus should be on decisions needed and prioritized risks. • Cost estimation • How do they account for risk in the estimate? • What is the estimating process?

17. Request Artifacts for Review (2) • Project Charter • If there is one, does it represent what the status reports and the integrated schedule are saying? • Organization Chart – project’s and client’s • Is the organization structured to succeed? • Is someone in charge of organizational change? • What is the decision-making process? • How effective is the communication flow? • Does someone represent the end-users?

18. Request Artifacts for Review (3) • Relationship Chart • Does everyone understand the political environment? • Does everyone understand the effect of the environment on the project? • Account Plan (only for commercial entities) • Is the account structured for success? • Is there a vision and a plan to achieve it? • Program Plan • Does the program plan make sense? • Is it achievable? • Is it manageable?

19. Request Representative Sample • Management • Senior managers as well as line managers • Workers • Business analysts, developers, experience modellers, etc. • They tend to know what is really going on. • Clients • Executive level as well as corresponding managers and workers • This will be the smallest number of interviews • Other Partners • Subcontractors, etc. Focus on the communication flow.

20. Tailor Interview Questions • Tailor the focus of the questions to the stage of the lifecycle. • For instance, it makes no sense to ask about number of defects during initiation. • Questions should be open-ended only. • Yes-no questions limit dialogue and, therefore, your ability to continue to dig deeper.

21. Conduct Interviews • Interviews should last 45 minutes to an hour-and-a-half (rare). • Expect some venting, but keep it controlled. • Practice active listening. • Continue asking why until the root answer is apparent. • Look for emerging trends and tailor questions to continue on those points. • Determine if discrepancies are indicators or one-offs.

22. Analyze Results • Review the artifacts • Don’t read in depth; look for key indicators. • Review the Interview Answers • The trends should be readily apparent by this time. • Discard discrepancies that have no basis in fact. • Apparent Trends • These will form the basis of your findings and your recommendations. • Root Causes • Perform root-cause analysis. 90% of the time, lack of solid processes or inadequate management will emerge as the root cause.

23. Formulate Findings and Recommendations • Limit findings to those that have the greatest potential impact. • Provide both short-term and long-term recommendations. • Use presentation format; follow with a paper, if necessary. • Understand legal ramifications. • Present both positive and negative findings. • Even the project with the greatest risk and problems has bright spots.

24. Presentation of Findings • Tailored to the audience • The team reviewed (This provides a feedback loop.) • The team leadership (Review with them first for accuracy of facts.) • Senior management • Executive management • Explanation of basis for observation - why • Observations and Recommendations • Snapshot in time • Short-term and long-term • What they all mean • Risk Rating

25. Format of Recommendation Slide • Observation (or Finding or Concern) • Impact • Probability • Short-term Mitigation • Long-term Changes Required You’ll report on both risks and problems and discuss any relationships between them.

26. Risk Rating Representations

27. Large Risk Impact Prioritizing Risks Probability “D” “C” D (Remote from Core) “B” C “A” A A Look Here First Proximity B C D A Small Risk Impact (Near to Core) B Time You are Here

28. Critical Success Factors • Assessment requested by senior management • Non-judgmental • Objective • Open-ended questions; don’t stop until you find the real answer. • Active listening • Putting the person at ease • Non-accusatory; “Here to help.” • Feedback loop

29. Some Ways to Present Specific Findings • Bubble Charts • Graphs

30. B B U U P 1 P S S 1 I I N N E E New S S Project S S C C O R M I New P T Project L I E C X A I L P 2 P T I 2 Y T Y Classifying the Project Positioning Activities and Projects Relative to Each Other Complexity Criticality and Size D D C C B B A A A B C A B C D D TECHNICAL COMPLEXITY PROJECT SIZE Great for portfolio analysis.

31. A B Assumption Stability C D Assumptions into Risks Assumptions Are OK Assumptions Sometimes Need Attention Assumptions are Unacceptable, Contain Risks, Require Action D C B A Our Sensitivity Low Quality Assumptions = RISKS

32. A B Assumption C D C B A D Attacking the Assumption Risk A s s u m p t i o n S t a b i l i t y The ACTIONS we need to carry out to STABILIZE the Assumption are often very different from those needed to DESENSITIZE us from the Assumption’s changing Action Required to Stabilize Action Required to Desensitize Project Sensitivity IDENTIFY AND ACT ON LOW QUALITY ASSUMPTIONS 32