Risk Identification, Estimating and Evaluation Techniques in a PRINCE2 Project
Master PRINCE2 Risk Identification, Estimating and Evaluation Techniques!
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MASTER RISK MANAGEMENT
In this article you will learn the key techniques used in PRINCE2 Risk Management with examples of their application. Learn how to:
Examples of risk identification techniques
Review lessons
Risks are driven by a certainty, so one of the most effective ways to reduce uncertainty is to review similar previous projects to see what threats and opportunities affect them
Risk checklists
These are in the house lists of risks that have either been identified all have occurred on previous similar projects. Risk checklists are useful aids to ensure that risks identified on previous projects are not overlooked
Risk prompt lists
These are publicly available lists that categorize risks into types for areas and are normally relevant to a wide range of projects. Risk prompt lists are useful aids to help stimulate thinking about sources of risk in the widest context
Brainstorming
This enables group of thinking, which can be more productive than individual thinking periods however, it is important to avoid criticism during the brainstorm as this can stop people contributing.
In addition to identifying risks, brainstorming can also be used to understand the stakeholders use of the risks identified
Risk breakdown structure
This is a hierarchical decomposition of the potential sources of risk. Each descending level represents an increasingly detailed definition of sources of risk to the project.
The structure acts as a prompt and an aide to support the project management team in thinking through the potential sources of risk to the objectives.
There are numerous ways to break down risk and it may be useful to do more than one list
For example, a risk breakdown structure could be broken down by PESTLE (political, economic, social, technological, legal/legislative, environmental). Product breakdown structure, management stage, delivery step, benefits/objectives, and so on
Examples of risk estimation techniques
Probability impact grid
This great contains ranking values that may be used to rent threats and opportunities qualitatively. The probability scales are measures of probability derived from percentages, and the impact scales are selected to reflect the level of impact on project objectives.
The values within the agreed to sales are the combination of a particular probability and impact, and are determined by multiplying the probability by the impact
A probability impact grid can be used to provide an assessment of the severity of a risk and the label risks to be ranked so that management time and effort can be prioritized.
For example, the project board may set its risk tolerance at any risk with a value greater than 0.18, and it may require a proactive response for any risk with a value greater than 0.045
Expected Value
This technique quantifies as risk by combining the cost of the risk impact with the probability of the risk occurring. Expected value is useful when a tangible measure of risk is required to label risks to be prioritized.
For example, if the cost of a risk was £160,000 and it’s likelihood of currents was estimated at 25%, then the expected value would be £40,000
Probability trees
These are graphical representations of possible events resulting from given circumstances. A probability tree can be used to predict an outcome in a quality of way when historical data is used to populate the likelihood of each circumstance happening.
Probability trees assist in communicating to project participants or decision makers, the likelihood of the different possible outcomes to a set of circumstances
Pareto analysis
This technique rents for orders risks often they have been assessed to determine the order in which they should be addressed.
Pareto analysis can be used to focus management efforts on those risks that have the potential to have the greatest impact on the project objectives
Example of risk tolerance
A large electrical resale a would not tolerate any disruption to its core retail all warehouse systems during the peak trading. Extending from November through to January.
During this period, it does not allow changes to the systems unless they are needed to keep the company running. A project would need to escalate to the project board any risk that might impact the systems during this period
Examples of risk evaluation techniques
Risk models
Risk models, such as Monte Carlo simulation, enable to “what if” scenarios to be run using random numbers to determine whether each risk within a given range occurs.
The simulations are repeatedly one to predict the “average” level of risk to the project timescale or cost. The scenarios can also be used to model extreme cases, that is is nearly all the risks occur
Expected monetary value
This technique takes the expected values of a number of risks and sums them to arrive at an overall value. It provides a quick and easy assessment of a group of risks to understand their combined effect. Threats are represented as a negative impact and opportunities as a positive impact
Examples of a risk owner and risk actionee
Risk owner
There is a threat that a key supplier may file, which might impact the projects ability to deliver on time to a customer. The commercial director has been appointed as the risk owner
Risk actionee
A number of risk responses have been identified and selected.
One of the risk responses (prepare contingent plans), is to identify and possible alternative suppliers who have the capacity to understand the affected work packages at short notice, and to obtain some quotes from them.
The procurement manager is the risk actionee for this particular risk response
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