MIS 448 CH11 - Risk Flashcards

Terms Definitions
Project risk management is the art and science of
identifying, analyzing, and responding to risk throughout the life of a project and in the best interests of meeting project objectives
Project risk management is the art and science of
select good projects, determining project scope, and developing realistic estimates
Project risk management is the art and science of
A dictionary definition of risk is “the possibility of loss or injury”
Project risk management is the art and science of
potential problems that might occur in the project and how they might impede project success
Project risk management is the art and science of
a form of insurance; it is an investment
Project risk management is the art and science of
Positive risks are risks that result in good things happening; sometimes called opportunities
A general definition of project risk is
an uncertainty that can have a negative or positive effect on meeting project objectives
The goal of project risk management is to
minimize potential negative risks while maximizing potential positive risks
Risk utility or risk tolerance is
the amount of satisfaction or pleasure received from a potential payoff
Those who are risk-seeking have
a higher tolerance for risk, and their satisfaction increases when more payoff is at stake
Risk Utility rises at a decreasing rate
for people who are risk-averse
The risk-neutral approach achieves
a balance between risk and payoff
Project Risk Management Processes: Planning Risk Management
deciding how to approach and plan the risk management activities for the project
Project Risk Management Processes: Identifying Risks
determining which risks are likely to affect a project and documenting the characteristics of each
Project Risk Management Processes: Performing qualitative risk analysis
prioritizing risks based on their probability and impact of occurrence
Project Risk Management Processes: Performing quantitative risk analysis:
numerically estimating the effects of risks on project objectives
Project Risk Management Processes: Planning Risk Responses
taking steps to enhance opportunities and reduce threats to meeting project objectives
Project Risk Management Processes: Monitoring and Controlling Risks
monitoring identified and residual risks, identifying new risks, carrying out risk response plans, and evaluating the effectiveness of risk strategies throughout the life of the project
Contingency plans are
predefined actions that the project team will take if an identified risk event occurs
Fallback plans are
developed for risks that have a high impact on meeting project objectives and are put into effect if attempts to reduce the risk are not effective
Contingency reserves or allowances are
provisions held by the project sponsor or organization to reduce the risk of cost or schedule overruns to an acceptable level
Broad Categories of Risk
Market risk
A risk breakdown structure is
a hierarchy of potential risk categories for a project
Identifying risks is the process of
understanding what potential events might hurt or enhance a particular project
Risk identification tools and techniques include:
Brainstorming
A risk register is:
A document that contains the results of various risk management processes and that is often displayed in a table or spreadsheet format
Risk events refer to
specific, uncertain events that may occur to the detriment or enhancement of the project
Risk Register Contents
An identification number for each risk event
Risk Register Contents (continued)
Triggers for each risk; triggers are indicators or symptoms of actual risk events
Performing Qualitative Risk Analysis
Assess the likelihood and impact of identified risks to determine their magnitude and priority
Risk quantification tools and techniques include:
Probability/impact matrixes
A probability/impact matrix or chart lists
lists the relative probability of a risk occurring on one side of a matrix or axis on a chart and the relative impact of the risk occurring on the other
A probability/impact matrix or chart lists
List the risks and then label each one as high, medium, or low in terms of its probability of occurrence and its impact if it did occur
Can also calculate risk factors
Numbers that represent the overall risk of specific events based on their probability of occurring and the consequences to the project if they do occur
Top Ten Risk Item Tracking is
a qualitative risk analysis tool that helps to identify risks and maintain an awareness of risks throughout the life of a project
A watch list is
a list of risks that are low priority but are still identified as potential risks
Performing Quantitative Risk Analysis
Often follows qualitative risk analysis, but both can be done together
Decision tree analysis
A decision tree is
a diagramming analysis technique used to help select the best course of action in situations in which future outcomes are uncertain
Estimated monetary value (EMV) is
the product of a risk event probability and the risk event’s monetary value
Simulation uses
a representation or model of a system to analyze the expected behavior or performance of the system
Monte Carlo analysis simulates
a model’s outcome many times to provide a statistical distribution of the calculated results
To use a Monte Carlo simulation, you must have
(most likely, pessimistic, and optimistic) plus an estimate of the likelihood of the estimate being between the most likely and optimistic values
Sensitivity analysis is a
technique used to show the effects of changing one or more variables on an outcome
After identifying and quantifying risks, you must
decide how to respond to them
Four main response strategies for negative risks
Risk avoidance
Residual risks are
risks that remain after all of the response strategies have been implemented
Secondary risks are
a direct result of implementing a risk response
Monitoring and Controlling Risks involves
executing the risk management process to respond to risk events
Workarounds are
unplanned responses to risk events that must be done when there are no contingency plans
Main outputs of risk monitoring and control are:
Risk register updates
Results of Good Project Risk Management
Unlike crisis management, good project risk management often goes unnoticed
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