Project Risk Management
Gordon Duncan & Steve Salvini
Heriot-Watt University
Basic Concepts
2
What is a project risk?
A project risk is
something that may affect
the achievement of the
objectives of the Project
What is a project issue?
A project issue is
something that is affecting
the achievement of the
objectives of the Project
Hands Up:
Risk or Issue?
“We might lose Janice –
the project would fail without her”
Hands Up:
Risk or Issue?
Exercise
Are any of these risks?
Objective – to travel by train from A to B for a meeting at a certain time
Failure to get from A to B on time for the meeting
Being late and missing the meeting
There is no buffet on the train so I get hungry
Missing the train causes me to be late and I miss the
meeting
Severe weather prevents the train from running and
me from getting to the meeting
Risk or No Risk?
Objective
– to
travel
by
train
from
A
to
B
for
a meeting
at
a certain
time
Objective
to
travel
by
train
from
A
to
B
for
meeting
at
certain
time
Objective
Objective–––to
totravel
travel by
bytrain
trainfrom
fromA
Ato
toB
B for
foraaameeting
meetingat
ataaa certain
certaintime
time
Failure
to
get
from
A
to
B
on
time
for
the
meeting
Failure
to
get
from
A
to
B
on
time
for
the
meeting
Failure
Failureto
toget
getfrom
fromA
Ato
toB
Bon
ontime
timefor
forthe
themeeting
meeting
This
is
simply
the
converse
of
the
objective
This
is
simply
the
converse
of
the
objective



Thisis
issimply
simplythe
theconverse
converseof
ofthe
theobjective
objective
 This
Being late
late and missing
missing the meeting
meeting
Being
Being lateand
and missingthe
the meeting
This is
is a statement of
of the impact
impact of the
the risk, not
not the
This
This isaastatement
statement ofthe
the impactof
of therisk,
risk, notthe
the



risk
itself
 risk
itself
risk itself
There
is
no
buffet
on
the
train
so
get
hungry
There
Thereis
isno
nobuffet
buffeton
onthe
thetrain
trainso
soIIIget
gethungry
hungry
This
does
not
impact
on
achievement
of
the
This
Thisdoes
doesnot
notimpact
impacton
onachievement
achievementof
ofthe
the


 objective
objective
objective
Missing
the
train
causes
me
to
be
late
and
miss
the
Missingthe
thetrain
traincauses
causesme
meto
tobe
belate
lateand
and IIIImiss
missthe
the
Missing
the
train
causes
me
to
be
late
and
miss
the
Missing
meeting
meeting
meeting
meeting
This
This is
is aa risk
risk which
which can
can be
be mitigated
mitigated by
bymaking
making
 sure

I
allow
plenty
of
time
to
get
to
the
station
sure I allow plenty of time to get to the station
Severe
weather
prevents
the
train
from
running
and
Severeweather
weatherprevents
preventsthe
thetrain
trainfrom
fromrunning
runningand
and
Severe
Severe
weather
prevents
the
train
from
running
and
me
from
getting
to
the
meeting
mefrom
fromgetting
gettingto
tothe
themeeting
meeting
me
me
from
getting
to
the
meeting

This is a risk which I cannot control but against
which I can make a contingency plan
Simple Example Risk
If
Then
We don’t want to
So let’s
… the weather
is severe
… it could
prevent the
train from
running and
me from
getting to the
meeting
… miss the
meeting…
… make sure that
we can have
access to video
conferencing
facilities at the
correct time
So what?
Mitigation
Contingency
Mitigation
Terminate
Prevent the risk– do things differently thus removing the risk
Treat
Reduce the risk – reduce likelihood of the risk or limit its impact
Transfer
Transfer the risk – pass management of the risk to a third party
Tolerate
Accept the risk – because nothing can be done to mitigate it or
the likelihood and impact are acceptable
11
Mitigation
Objective – to travel by train from A to B for a meeting at a certain time
Failure to get from A to B on time for the meeting

This is simply the converse of the objective
Being late and missing the meeting

This is a statement of the impact of the risk, not the
risk itself
There is no buffet on the train so I get hungry

This does not impact on achievement of the
objective
Missing the train causes me to be late and I miss the
meeting

This is a risk which can be mitigated by making
sure I allow plenty of time to get to the station
Severe weather prevents the train from running and
me from getting to the meeting

This is a risk which I cannot control but against
which I can make a contingency plan
Contingency
You can rarely eliminate a risk completely so…
Develop a contingency plan to be followed
should the risk crystallise into an issue
13
Contingency
Objective – to travel by train from A to B for a meeting at a certain time
Failure to get from A to B on time for the meeting

This is simply the converse of the objective
Being late and missing the meeting

This is a statement of the impact of the risk, not the
risk itself
There is no buffet on the train so I get hungry

This does not impact on achievement of the
objective
Missing the train causes me to be late and I miss the
meeting

This is a risk which can be mitigated by making
sure I allow plenty of time to get to the station
Severe weather prevents the train from running and
me from getting to the meeting

This is a risk which I cannot control but against
which I can make a contingency plan
Your SHED Mission…
Project
Shed
Project Manager
Ina Fix
Project Sponsor
Leenon Me
Risk Description
Risk Owner
Shed Risks
If it rains during drying of the concrete
foundation then it will lose its structural
integrity
Treat,
Transfer,
Tolerate or
Terminate?
Mitigation Actions
Contingency Actions
Bob the
Builder
Treat
Purchase Gazebo & check
If it rains, the erect the gazebo
weather forecast daily
If there are high winds they may blow down Basil the
a nearby tree damaging roof
Gardner
Treat
Prune tree
The Perseid meteor shower is due at the
time of the planned construction
Ina Fix, Project
Tolerate
Manager
If it blows down, buy more
materials and rebuild roof
Little or no action required as
there will be no impact on the n/a
project
The Perseid meteor shower may contain a Ina Fix, Project
Tolerate
giant meteor which will impact on Earth
Manager
Impact on the project
catastrophic but no other
realistic option
Weep / Hand over all project
responsibilities to the surviving
cockroaches
If there is a burglary from site there is a
risk that expensive materials will be lost
Ina Fix, Project
Transfer
Manager
Take out insurance against
loss of materials
Inform police and make claim on
insurance policy
If the weight of the mechanical digger is
too great then it may adversly affect lawn
over which access is made to site
Bob the Builder Terminate
Do NOT use a mechanical
digger
n/a
Project
Project Manager
Project Sponsor
Risk Description
Risk Owner
Shed Risks
Treat,
Transfer,
Tolerate or
Terminate?
Mitigation Actions
Contingency Actions
Sharing
Any questions!