Assignment 4 Risk
Assignment 4 Risk
Assignment 4 Risk
(MANCOSA)
ASSIGNMENT COVER SHEET
SURMNAME MOHOLA
FIRST NAME/S TEBELLO GRIFFITH
STUDENT NUMBER 143511
MODULE NAME PROJECT COMMUNICATION & RISK
MANAGEMENT
ASSIGNMENT NUMBER 4
TUTOR’S NAME
EXAMINATION VANUE PRETORIA
DATE SUBMITTED 20 APRIL 2019
SUBMISSION 1ST SUBMISSION X RE-SUBMISSION
POSTAL ADDRESS 75 LA BOHEME COMPLEX
24 CHARLES DE GAULLE CRES
HIGHVELD, 0157
E-MAIL MoholaTG@gmail.com
CONTACT NUMBERS WORK: 012 311 5624
QUESTION 1……………………………………………………………………………1 - 10
1.1 As a competent project risk manager with “adequate planning data or effective
procedures”, provide clear and structured advice on how to “properly identify risks and
uncertainties, quantify and analyse them, communicate them to decision makers or take the
consequences into their project management”.
1.2 “Despite theory that holds risk and opportunities to be equally important, empirical
studies show a stronger focus on mitigating risks than exploiting opportunities”. Using
appropriate examples, clearly illustrate how a project manager and his/her team will ensure
that in their risk response planning, provision is made for both mitigating risks and exploiting
opportunities.
QUESTION 2……………………………………………………………………………11 - 12
2.1 From a project of your choice, formulate five (5) potential risks associated with the
project.
2.2 Develop a risk response matrix for the five (5) risks identified above and outline how you
would deal with each risk.
QUESTION 3……………………………………………………………………………13 - 16
As the appointed project manager, using a process flow diagram, illustrate and discuss how
you and your project team would develop an aggressive communication plan to manage
communication with the community of stakeholders impacting and influencing your project.
BIBLIOGRAPH…………………………………………………………………………17
1.1 A competent project risk manager can advise that there be an engagement in a risk
management process. A process is a means to implement a risk management plan. Project
management inherently involves high levels of risk, because projects by definition are
being done for the first time. All projects are risky ventures since they are unique and
temporary undertakings based on assumptions about the future, affected by risks and
subject to the influence of multiple stakeholders. The recent trend is toward an increase in
project risk due to:
• The extended project life cycle, including the initial proposal phase and the final
operation phase
• The interdependence with other projects in the portfolio
• The interaction with corporate strategy.
Risks must be understood in a way that clarifies all relevant and significant sources of
uncertainty. Failure to do this will impair the effectiveness of risk responses. Similarly, there
are key skills involved in making sure that risk register contains the right risks, (and that they
continue to be the right risks), that they are managed by the right risk owners, and that
appropriate and sound methods are used to select and prioritise risks for review. Project risk
may be defined as “uncertainty that matters”, since the dynamics of risk envisages a possible
event. It is important to point out that “uncertainty that matters” may be analysed, and
modelled, in at least two different ways:
1. Risk event oriented,
2. Parameter variability oriented.
In the first case, the focus is on the risk event that is analysed and managed individually, in
this case each risk may be described in terms of occurrence probability and impact severity.
In the second case the focus is on the variability of a project parameter, e.g. on the duration of
an activity or the cost of an item, variability deriving from the joint impact of a set of micro-
events influencing it. In this case, variability is normally described by means of a probability
distribution. The second case is the typical “variability oriented” approach developed for
instance by Program Evaluation Review Technique (PERT), assigning to each activity of the
project network a duration distribution. In summary, the risk event based approach focuses on
the single risk, whilst the parameter variability based approach may be applied to the
estimation of the overall project risk (Managing the Continuum, 2013).
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There should be a strong link between risk management and contracting strategy; some of the
most effective risk responses are contractual. Projects that have risk management weaknesses
from the stakeholders’ perspective often fail to manage this link effectively. The argument
that the risk management culture perspective is critical to overall project risk management
capability lies in the observation that it may be possible for a project to convey the
appearance of having an effective risk management process whilst ignoring the real
implications of risk. Sometimes this might be due to unconstructive behaviour or sometimes
it might be caused by a lack of understanding of what the risk management process should
involve (The Project Risk Maturity Model, 2011). The Project Management Institute views
risk as general to projects, and through the Project Management Body of Knowledge
(PMBOK), consists of a checklist of project management elements by topic. Risk
management is a major element of PMBOK, with major categories of:
• Planning,
• Risk identification,
• Quantitative risk analysis,
• Quantitative risk analysis,
• Risk response planning, and
• Risk monitoring and control.
While risk management practices vary across industries and firms, they typically constitute a
multi-stage process that includes governance, identification, quantification, management and
monitoring, as depicted in Figure 1.1. Once established, the risk process should ideally be
enduring and inculcated in a firm’s daily operations. Nevertheless, elements of the process
must be reviewed constantly, as a firm’s risk exposures may change over time.
Each of these categories applies to all projects to some degree, although the level of
uncertainty can make variants of tools applied appropriate.
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• Risk Management Planning
As with any process, inputs need to be gathered to organize development of a cohesive
plan. Things such as the project purpose and stakeholders need to be identified, followed
by identification of tasks to be accomplished. This applies to every kind of project. These
tasks are cohesive activities, usually accomplished by a specific individual or group, and
for each task estimation of duration and resources required, as well as immediate
predecessor activities are needed. This is the input needed for critical path analysis, to be
demonstrated in this chapter. That quantitative approach deals with risk in the form of
probability distributions for durations. But there are other risk aspects that need to be
considered. It is important to consider the organization’s attitude toward risk, and
qualitatively identify things that can go wrong.
Risk attitude depends upon stakeholders. Identification of what might go wrong and
stakeholder preference for dealing with them can affect project management team roles
and responsibilities. Risk management planning concludes with a risk management plan.
This plan should define methodologies for dealing with project risks. Such methodologies
can include training internal staff, outsourcing activities that other organizations are better
equipped to deal with, or insurance in various forms. Ultimately, every organization has
to decide which risks they are competent to manage internally (core competencies), and
which risks they should offload (at some expected cost).
• Risk Identification
Once the risk management plan is developed, it can naturally lead to the next step, risk
identification. The process of risk identification identifies major potential sources of risk for
the specific project. The risk management plan identifies tasks with their risks, as well as
project team roles and responsibilities. Historical experience should provide guides (usually
implemented in the form of checklists) to things that can go wrong, as well as the
organization’s ability to cope with them. There are a number of techniques that can be used to
identify risks. Some qualitative approaches include interviews of experts or stakeholders,
supplemented by techniques such as brainstorming, the nominal group technique, the Delphi
method, or SWOT analysis (strengths, weaknesses, opportunities, and threats). Each of these
methods is relatively easy to implement, and the quality of output depends on the
participation of a diverse group of stakeholders. The output from risk identification is a more
complete list of risks expected in the project, as well as possible responses along with their
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expected costs. This results in a set of responses that can be reviewed as events develop,
allowing project managers to more intelligently select appropriate responses. While success
can never be guaranteed, it is expected that organizational project performance will improve.
A qualitative risk analysis can be used to rank overall risks to the organization. A priority
system can be used to identify those risks that are most critical, and thus require the greatest
degree of managerial attention. In critical path analysis terms, critical path activities would
seem to call for the greatest managerial attention. Behaviourally, humans tend to work
hardest when the boss is watching. However, the fallacy of this approach is that other
activities that are not watched may become critical too if they delay too far beyond their
expected duration.
Qualitative risk analysis can provide a valuable screening to cancel projects that are just too
risky for an organization. It also can affect project organization, with more skilled personnel
assigned to tasks that call for more careful management. It also can be a guide to look for
means to offload risk, either through subcontracting, outsourcing, or insurance.
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• Risk Response Planning
Once risk analysis (qualitative, quantitative, or both) is conducted, project managers are
hopefully in a more educated position to make plans and decisions to respond to events. Risk
response planning is this process of developing options and reducing threats if possible. The
severity of risks as well as cost, time, and impact on project output (quality) should be
considered.
The process of project risk management is for project decision makers to trade-off the costs
of each risk avoidance strategy in light of organizational goals. The key to success is for
organizations to adopt those risks internally where they have competency in dealing with the
risk at issue, and to pay some price to offload those risks outside of their core competencies.
The output of risk response planning can be a prioritized list of risks with potential responses.
It also can include assignment of specific individual responsibilities for monitoring events
and triggering planned responses.
Risk management plays an important part within project management. Inadequate risk
management could have an impact whether the project will succeed or fail. To get an idea of
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what risk management is, what it means and how to use it as a tool for success, it’s easier to
understand risk. Risk can be rather difficult to define as expectations are focused on the
future and therefore a lot of uncertainties could come into play. Additionally, these
uncertainties could result in an outcome that is either more positive or more negative than
expected. Ensuring that adequate and timely risk identification is performed is the
responsibility of the owner, as the owner is the first participant in the project. The sooner
risks are identified, the sooner plans can be made to mitigate or manage them. Assigning the
risk identification process to a contractor or an individual member of the project staff is rarely
successful and may be considered a way to achieve the appearance of risk identification
without actually doing it.
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1.2 Implementing a risk response is the activity that actually adds value to a project. It helps
in preventing a threat occurring or does minimise negative effects. A consistent approach to
risk should be developed for each project, and communication about risk and its handling
should be open and honest. Risk responses reflect an organization’s perceived balance
between risk taking and risk avoidance. To be successful, an organization should be
committed to address risk management proactively and consistently throughout the project. A
conscious choice should be made at all levels of the organization to actively identify and
pursue effective risk management during the life of the project. Project risk could exist at the
moment a project is initiated. Moving forward on a project without a proactive focus on risk
management is likely to lead to more problems arising from unmanaged threats (PMBOK)
Generally, risk management is the process of identifying, measuring and assessing risks and
developing strategies to manage them. Strategies include: transferring the risk to another
party; avoiding the risk; reducing the negative effect of the risk; and accepting some or all of
the consequences of a particular risk. Over control of risk can be as damaging to business
interests as the lack of controls. The objective of risk management is not necessarily the
elimination or reduction of risks, but how they are actively managed in a business context.
This could mean that particular risks are being over controlled, and unnecessary costs
incurred. Robert Winter’s dictum that ‘undue aversion to risk can be the riskiest behaviour of
all’ can ring very true (Risk Management Reports, 1994). Once risks have been identified and
assessed, all techniques to manage the risk fall into one or more of four major categories.
Some ways of managing risk fall into multiple categories:
• Risk avoidance includes not performing an activity that could carry risk. An example
would be not buying a property or business in order not to take on the liability that
comes with it;
• Risk reduction (mitigation) involves methods that reduce the severity of the loss.
Examples include sprinklers designed to put out a fire to reduce the risk of loss by
fire, even though water damage can be severe; and
• Risk acceptance (retention) involves accepting the loss when it occurs. True self-
insurance falls in this category. Risk retention is a viable strategy for small risks
where the cost of insuring against the risk would be greater over time than the total
losses sustained.
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A project manager and the project team members should ensure they develop alternative
plans during the risk avoidance process that will establish high probability of a project
success and associates low costs required for project accomplishment. Definitely, one
significant way of mitigating risk is by engaging in risk avoidance. Risk avoidance is a risk
response strategy whereby the project team acts to eliminate the threat or protect the project
from its impact. It usually involves changing the project management plan to eliminate the
threat entirely. The project manager may also isolate the project objectives from the risk’s
impact or change the objective that is in jeopardy. Examples of this include extending the
schedule, changing the strategy, or reducing scope. The most radical avoidance strategy is to
shut down the project entirely.
Some risks that arise early in the project can be avoided by clarifying requirements, obtaining
information, improving communication, or acquiring expertise. Risk avoidance involves a
change in the concept, requirements, specifications, and practices that reduce risk to an
acceptable level. Simply stated, it eliminates the sources of high or possibly medium risk and
replaces them with a lower risk solution. This method may be done in parallel with the up-
front requirements analysis, supported by cost/requirement trade studies. It may also be used
later in the development phase when test results indicate that some requirements cannot be
met, and the potential cost and/or schedule impact would be severe. If the process associates
low costs for accomplishment of the project under consideration, then not only would the
process have mitigated the risks available but also would have exploited an opportunity for
the project. For instance, project manager and the project team members can creatively come
into a conclusion of selecting specific vendor with an immense proven record of establishing
the success of a project while also providing incentives that passably lower the project overall
cost budget.
Examples that will clearly illustrate how a project manager and his/her team will ensure that
in their risk response planning, provision is made for both mitigating risks and exploiting
opportunities is to identify risk response strategies are on the table below Risk response is the
process of developing strategic options, and determining actions, to enhance opportunities and
reduce threats to the project’s objectives. Risk response strategies are more explained as per
table below:
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For Threats For Opportunities
• Avoid • Exploit
Example: Risk can be avoided by removing Example: The aim is to ensure that the
the cause of the risk or executing the project opportunity is realized. This strategy seeks to
in a different way while still aiming to eliminate the uncertainty associated with a
achieve project objectives. Not all risks can particular upside risk by making the
be avoided or eliminated, and for others, this opportunity definitely happen. Exploit is an
approach may be too expensive or aggressive response strategy, best reserved
time‐consuming. However, this should be the for those “golden opportunities” having high
first strategy considered. probability and impacts.
Suitable for: Some political risks e.g. Suitable for: Economic/financial/market e.g.
adverse public opinion. Some new and emerging markets, positive changes
technical/operational/infrastructure risks e.g. in exchange rates or interest rates.
maintenance problems.
• Transfer • Share
Example: Transferring risk involves Example: Allocate risk ownership of an
finding another party who is willing to take opportunity to another party who is best able
responsibility for its management, and who to maximize its probability of occurrence and
will bear the liability of the risk should it increase the potential benefits if it does occur.
occur. The aim is to ensure that the risk is Transferring threats and sharing opportunities
owned and managed by the party best able are similar in that a third party is used. Those
to deal with it effectively. Risk transfer to whom threats are transferred take on the
usually involves payment of a premium, liability and those to whom opportunities are
and the allocated should be allowed to share in the
cost‐effectiveness of this must be considered potential benefits.
when deciding whether to adopt a transfer
strategy. Suitable for:
Technical/operational/infrastructure e.g. new
Suitable for: Environmental risks e.g. technology, improved designs.
natural disasters, storms, flooding may also
be insured against see risk insurance.
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Mitigate. • Enhance.
Example: Risk mitigation reduces the Example: This response aims to modify the
probability and/or impact of an adverse “size” of the positive risk. The opportunity is
risk event to an acceptable threshold. enhanced by increasing its probability and/or
Taking early action to reduce the impact, thereby maximizing benefits realized
probability and/or impact of a risk is often for the project. If the probability can be
more effective than trying to repair the increased to 100 percent, this is effectively an
damage after the risk has occurred. Risk exploit response.
mitigation may require resources or time
and thus presents a trade-off between Suitable for: Strategic/commercial
doing nothing versus the cost of mitigating opportunities such as new partnerships, new
the risk. capital investment, new promoters.
Suitable for:
Organisational/management/human
factors e.g. personality clashes, poor
leadership, and poor staff selection.
Acceptance.
E x a m p l e : This strategy is adopted when it is not possible or practical to respond to
the risk by the other strategies, or a response is not warranted by the importance of the
risk. When the project manager and the project team decide to accept a risk, they are
agreeing to address the risk if and when it occurs. A contingency plan, workaround plan
and/or contingency reserve may be developed for that eventuality.
Suitable for: Some political, legal and regulatory, and economic/financial risks may
need to be accepted with a contingency plan in place e.g. war and disorder, exchange
rate fluctuation.
Table 1.2 Risk Response Strategies
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2.1 Five (5) potential risks associated with the project can be:
• Artist Canceling
• Bomb Threat
• Low Ticket Sales
• Production Issues
• Funding Issues
2.2 Each manager should be responsible for ongoing risk identification and control within
their area of responsibility. Once risks are identified, a risk matrix can be developed. The risk
matrix is meant to be a tool revealing the distribution of risk across a firm’s portfolio of
products, projects, or activities, and assigning responsibilities or mitigation activities
(enterprise risk management models, 2010). The collection of some information about the
impact and probability of occurrence of risks could be undertaken using two simple matrices.
In one matrix the user is asked to say whether they feel there is a high, medium or low
probability of occurrence of each of the risks identified, and in the other to say whether they
feel that the risk would have a high, medium or low impact on the project if it occurred.
These matrices could be given to a number of people, particularly those involved in the
project and those with experience of working on similar projects. The information given
could then be distilled and plotted on a small grid, each risk being a point on the grid. This
grid gives an immediate picture of the risks in the project and a qualitative assessment of their
probability of occurrence and possible impact on the project. From this, it is possible to see
the risks that are likely to have the least bearing on the project and those that require further
investigation. Those in charge of the project have to decide which risks can be ignored and
which need further investigation. In most analyses, only a few key risks are investigated, and
by using this grid it should be easy to see which those risks are. The probability impact
analysis may be used for each option; however, it may also be used to identify those options
that warrant further detailed quantitative analysis, saving time and effort in the analysis
process. A risk matrix provides a two-dimensional (or higher) picture of risk, either for firm
departments, products, projects, or other items of interest. It is intended to provide a means to
better estimate the probability of success or failure, and identify those activities that would
call for greater control.
With all explained on the above, risk response matrix can be outlined as per table below:
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Risk Event Risk Response Contingency Risk Trigger Who is
Plan Responsible
Artist Canceling Mitigate Book When an Artist Booking Agent/
replacement cancels between Entertainment
artist depending when you book Attorney
on when they them and when
cancel the concert
actually takes
place
Bomb Threat Retain Wait until last A call if made to Entertainment
possible evacuate Director
moment to campus until
cancel or further notice
reschedule show due to bomb
threat
Low Ticket Mitigate Boost A preset number Promotional
Sales Promotions and of tickets is not Director
Advertisement reached in order
by adding Street to break even
Team Members
Production Mitigate Have backup A production Production
Issues production gear issue(s) cause Manager
in place to swap setup
out easily slowdowns or
mishaps
Funding Issues Mitigate Have alternate Funds from Entertainment
investors ready investor are Director/
to take place to inadvertently Entertainment
once that back stopped due to Attorney
out unforeseen
issues
Table 2.2 Risk Response Matrix
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3. The communication plan sets the standards for how and when communication takes
place for the project/program. Based upon understood stakeholder expectations
(interest and impact), the communications plan identifies communication objectives
for the project/program, key messages for important questions, how participants will
communicate, and the timing of communications.
How will project team members communicate with stakeholders? Some project
managers choose to answer this question with another “who," by focusing on the
team members tasked with keeping communication flowing. For instance, a
project communications coordinator may gain the responsibility of moving key
information across all channels. In other cases, the project manager may retain the
oversight of communication through multiple team members.
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Preparing the project communication plan assists the project team in identifying internal and
external stakeholders and enhances communication among all parties involved in the project.
The project manager leads the project development team to prepare a communication plan to
ensure that an effective communication strategy is built into the project delivery process. A
project communication plan that will guide the messages to a project’s affected
stakeholders is a critical part of any project. How well you communicate throughout
the life cycle of your project can make the difference between success and failure.
Below are steps in the development of the communication plan.
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In a project environment, communication means communicating with the project
stakeholders. Planning communication is the process of determining the information needs of
the project stakeholders and accordingly the communication approach. Communication
planning is the process of determining the following:
• The communication and information needs of the program stakeholders
• The four Ws: what information is needed, when it is needed, who needs it, and who will
deliver it
• How the information will be delivered—for example, by email, phone call, or presentation.
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negotiate a method to ensure that each stakeholder receives and understands the
project communication.
An example that can support the communication plan can be aligned with that of providing
telecommunications services to customer, who happens to be a stakeholder in this process.
Below is a communication plan flow that shows how services can be provided to the
stakeholder.
In this case, information has been gathered and stakeholder has been identified. Aligning that
potential project products, based on the work plan that includes all the elements of the WBS,
and the sub-products of the WBS is listed and Project stakeholders have information and
communication needs. Identified the information needs of the stakeholders and determined a
suitable means of meeting those needs are important factors for project success.
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BIBLIOGRAPHY
Project Communication Handbook, 2nd edition, 2007, Office of Project Management Process
Improvement
Managing Risk: In Construction Projects, 1999, Nigel J. Smith, Tony Merna, Paul Jobling