Low Medium High cr Op

Reward

FIGURE 17-11. The risk-reward matrix.

Rigid ion

Policies/ Procedures

Rigid

Policies/ Procedures

Reduction

High

FIGURE 17-12. Which method to use?

Reduction ion

High

Tolerance for Risk

FIGURE 17-12. Which method to use?

very rigid. Most good methodologies today are based upon guidelines that provide the project manager with significantly more flexibility in decision-making.

This flexibility (i.e., use of guidelines) can affect the risk response method selected. While flexibility versus rigidity of policies and procedures may represent one component of selecting a risk handling option, one must recognize that it is not the only component, and it is often not the primary component. Although no empirical data exist as yet to support this, there appears a tendency for project managers to accept higher levels of risk if the project manager is given more freedom in decision-making. On the other hand, the rigidity of policies and procedures generally allows for lower levels of risk acceptance, and project managers seem to prefer avoidance. As risk management grows, more research will be done in this area.

The monitoring process systematically tracks and evaluates the effectiveness of risk handling actions against established metrics. Monitoring results may also provide a basis for developing additional risk handling strategies, or updating existing risk handling strategies, and reanalyzing known risks. In some cases monitoring results may also be used to identify new risks and revise some aspects of risk planning. The key to the risk monitoring process is to establish a cost, performance, and schedule management indicator system over the program that the program manager and other key personnel use to evaluate the status of the program. The indicator system should be designed to provide early warning of potential problems to allow management actions. Risk monitoring is not a problemsolving technique, but rather, a proactive technique to obtain objective information on the progress to date in reducing risks to acceptable levels. Some techniques suitable for risk monitoring that can be used in a program-wide indicator system include:

• Earned value (EV): This uses standard cost/schedule data to evaluate a program's cost performance (and provide an indicator of schedule performance) in an inte

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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