PRINCE2 Risk management EXAM CRAM
The PRINCE2 7 Risk Management Practice describes in detail how to deal with potential threats and opportunities to the project. Remember that in PRINCE2, the definition of a risk can either mean a negative impact threat to the project objectives, or a positive impact opportunity to the project objectives.
Since projects are a mechanism to introduce change of some kind, then project situations are riskier than simply managing ‘business as usual’.
The reason for this is the projects are unique and therefore many types of unforeseen threats and opportunities might arise.
Be aware that there is a strong relationship between risk management and delivery of the Business Case because effective risk management is a prerequisite for continued business justification.
The Risk Management Exam Cram Steps
For the above reasons, PRINCE2 lays down a clear procedure in order to deal with risk, and it does so in five steps;
- identify
- assess
- plan
- implement
- communicate.
Make sure you are familiar with each of these steps.
Risk Management Exam Cram Threats and Opportunity Actions
PRINCE2 has defined a number of standard countermeasures or actions if you will, to a threat:
- Avoid the threat so it will not occur
- Reduce the threat so that it is less likely to occur or its impact will be diminished
- Plan a fallback action to reduce the impact should the risk occur
- Transfer the financial effect of the risk to a third party
- Make a conscious decision to accept the risk and therefore take no action at the present time
Where a risk has been identified as an opportunity than a different set of actions may be taken:
- Exploit the opportunity so that the risk definitely occurs
- Enhance the opportunity so that it is more likely to happen or that its positive impacts are increased
- Reject the opportunity
- Make a conscious decision not to take any action to pursue it
There is one action which may be applied either to a threat or an opportunity and in this case, PRINCE2 recommends the Share response as this allows the two parties (typically customer and supplier) to share the costs if the situation turns into a threat, or to share the positive benefits if the risk turns into an opportunity.
Every risk should be assigned a Risk Owner whose responsibilities are to monitor, manage, and control that particular risk. The risk owner may also delegate various risk countermeasures tasks to a role known as the Risk Actionee.
In the PRINCE2 Practitioner exam you may be asked which of the Reports have a section for risk reporting. You can determine the answer for this by checking out the management product descriptions in Appendix A of the PRINCE2 Manual. There you will find, highlight report, checkpoint report, end stage report, lessons report, and end project report.
Risk Management Exam Cram Responsibilities
In a similar way, the exam question may ask about risk responsibilities, and again there is a useful table on the last page of the risk theme within the PRINCE2 Manual.
While on the subject of roles, make sure that you understand the difference between who is responsible, verses who actually carries the activities out!
An example here would be that the Project Board Executive is responsible for the Risk Management Strategy in that they ensure that the document exists and that it is being followed, whereas it is the Project Manager’s role to create the Risk Management Approach and to perform the management tasks laid out within it.
The project manager is responsible for ensuring that effective risk management is carried out, but it is also important that you understand the responsibilities for the rest of the project management team.
Risk Cause, Event, and Effect
Every risk should be described in a clear and unambiguous way.
You must be able to identify and define a risk based on its cause, event, and effect. The cause names the situation that is the root cause of the risk, the event is the situation that actually gives rise to the risk, and the effect is the impact to the project.
Put another way, for each risk, you should consider three things; what would cause it, the uncertain event that might follow the cause, and the effect on the project objectives in the event that the risk does occur.
The Risk Management Approach
You must understand how the define the project approach to risk management using the Risk Management Approach. Remember that this important document describes how risk will be managed.
The Risk Management Approach document will also describe whether a Risk Budget will need to be created and the calculations that led to the Risk Budget amount. Also be familiar with sections such as procedure, timings, responsibilities, records, reporting, and tools. A PRINCE2 Practitioner exam question may check your understanding of typical information contained in such sections.
The same is true of the Risk Register and how it is used to record typical information on each individual risk. It is important to understand the types of information that are held here.
The Risk Budget Exam Cram
Remember also how a Risk Budget might be determined, and that this Risk Budget should include management costs as well as those directly associated with each individual risk.
Never be tempted to spend the risk budget on non-risk project situations such as to fund a change request.
The normal method for calculating the risk budget is to create a list of each individual risk along with its impact, response, and weighted costs as well as the risk likelihood or probability. The sum total of the factored weighted costs will give the risk budget.
Residual and secondary risks
Remember that although each given risk has an identified response should that risk occur (this is called the inherent risk), and that response does not remove all of the potential problem, then a residual amount of risk may still exist. In some cases, the risk response may introduce a new secondary risk.
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