Congratulations! You've completed another fun-filled, action-packed chapter, and all of it on a single topic—risk. Risk is inherent in all projects, and risks pose both threats and opportunities to the project. Understanding the risks facing the project better equips you to determine the appropriate strategies to deal with those risks and helps you determine the response plans for the risks (and the level of effort you should put into preparing those plans).

The Plan Risk Management process determines how you will plan for risks on your project. Its only output is the risk management plan, which details how you'll define, monitor, and control risks throughout the project. The risk management plan is a subsidiary of the project management plan.

The Identify Risks process seeks to identify and document the project risks using information-gathering techniques like brainstorming, the Nominal Group technique the Delphi technique, interviewing, and root cause identification. This list of risks gets recorded in the risk register, the only output of this process.

Perform Qualitative Risk Analysis and Perform Quantitative Risk Analysis involve evaluating risks and assigning probability and impact values to the risks. Many tools and techniques are used during these processes, including risk probability and impact, probability and impact matrix, interviewing, probability distributions, expert judgment, sensitivity analysis, decision tree analysis, and simulation.

A probability and impact matrix uses the probability multiplied by the impact value to determine the risk score. The threshold of risk based on high, medium, and low tolerances is determined by comparing the risk score based on the probability level to the probability and impact matrix.

Monte Carlo simulation is a technique used to quantify schedule or cost risks. Decision trees graphically display decisions and their various choices and outcomes and is typically used in combination with earned monetary value.

The Plan Risk Responses process is the last Planning process and culminates with an update to the risk register documenting the risk response plans. The risk response plans detail the strategies you'll use to respond to risk and assign individuals to manage each risk response. Risk response strategies for negative risks include avoidance, mitigation, and transference. Risk strategies for positive risks include exploit, share, and enhance. Acceptance is a strategy for both negative and positive risks.

Contingency planning involves planning alternatives to deal with risk events should they occur. Contingency reserves are set aside to deal with risks associated with cost and time according to the stakeholder tolerance levels.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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