There are some tools and techniques defined by the PMI that can help you manage risks more effectively. In this article, we'll explore what’s new in PMBOK Project Risk Management as per the 4th PMBOK. Project Risk Management is one of the PMBOK project management knowledge areas.
Comparison of Versions 3, 4 and 5
The diagram shows a comparison of versions 3 and 4 of the PMBOK. (Click the image for a larger view.) As you can see, not a lot has changed in terms of processes. The processes have simply been renamed to start with a verb. For the CAPM and PMP exams, it is important for you to recall the names of the processes as specified in the PMBOK. In other words, Risk Management Planning is not the same as Plan Risk Management.
As version 5 has identified a tenth knowledge area--Stakeholder--you must look to include stakeholder risk in your project plan. The new standards require the project manager not only to ensure that each of the processes below is undertaken, but also that the risks are communicated to adn understood by stakeholders.
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One of the PMBOK project management knowledge areas is the Project Risk Management knowledge area, which consists of the following processes:
- Plan Risk Management
- Identify Risks
- Perform Qualitative Risk Analysis
- Perform Quantitative Risk Analysis
- Plan Risk Responses
- Monitor and Control Risks
Plan Risk Management
This process entails how you intend to manage risks. Key inputs to this process are: Project Scope Statement, Cost Management Plan, Schedule Management Plan, and Communications Management Plan. Your organization may also have a certain attitude towards risk and risk tolerance. Therefore, Enterprise Environment Factors is also a key input. The output of this process is the Risk Management Plan, which can include:
- Roles and Responsibilities, which is also used in many PMBOK project management knowledge areas
Risk categories, which is more easily done by using a Risk Breakdown Structure
Definitions of risk probability and impact, which is useful in computing the Expected Monetary Value (EMV)
- Reporting formats
The output of the PMBOK Project Risk Management process is the Risk Management Plan.
The Identify Risks process of PMBOK Project Risk Management entails identifying risks and documenting their characteristics. Identify Risks is a process that you’ll revisit several times during the project. For example, you may identify risks during the daily team meeting. Key inputs to this process are: Risk Management Plan, Activity Cost and Duration Estimates, Scope Baseline, and Stakeholder Register. There may be other project documents, such as Assumptions Log and Work Performance Reports, which can help in this process.
Some Tools and Techniques used in this process are: Brainstorming, SWOT Analysis, and Expert Judgment.
The output of this process is the Risk Register, which contains the list of potential risks and the potential responses. Project Risk Management is one of the critical PMBOK Project Management knowledge areas.
Perform Qualitative Risk Analysis
This process entails assessing the impact and likelihood of identified risks. The purpose (output) of this process is to prioritize risks and update the Risk Register, which was created in the Identify Risk process. Therefore, the Risk Register is a key input to this process. Other inputs are the Risk Management Plan and the Scope Statement.
Some Tools and Techniques used in this process are: Risk Categorization, Probability/Impact Rating Matrix, and Expert Judgment.
The output of this process is an updated Risk Register, which will contain relative ranking of risks and watch-lists of low priority risks. In PMBOK Project Risk Management quantifying risks is the next step.
Perform Quantitative Risk Analysis
This process involves the quantification of each risk with numerical values. Key inputs include: Risk Register, Risk Management Plan, Cost Management Plan, and Schedule Management Plan.
Some Tools and Techniques used in this process are: Expected Monetary Value Analysis Using Decision Trees and Expert Judgment.
The output of this process is an updated Risk Register, which will contain a prioritized list of quantified risks and probabilistic analysis of the project. In PMBOK Project Risk Management quanitying risks is the process we'll see. Th
Plan Risk Responses
In this PMBOK project management knowledge areas, Risk Response planning involves the process of reducing negative risks (threats) and enhancing positive risks (opportunities). Key inputs of PMBOK project risk management include: Risk Register and Risk Management Plan.
Some Tools and Techniques used in this process are: Strategies for Negative Risks, Strategies for Positive Risks, and Expert Judgment.
Some outputs of this process of PMBOK project risk management are:
- An updated Risk Register, which will contain residual risks, secondary risks, and contingency amount.
- Project Management Plan Updates and Risk-Related Contractual Agreements
Monitor and Control Risks
In this PMBOK project management knowledge areas, the process of keeping track of risks during the project is involved. It requires the Risks Register and Risk Management Plan as the key inputs. Some tools and techniques include Risk Audits and Status Meetings. Key outputs are: Risk Register Updates and Requested Changes.
For a complete list of the Inputs, Tools and Techniques, and Outputs (ITTO) of PMBOK project risk management, refer to the PMBOK. This is the last process of the PMBOK project risk managment knowledge area. The PMBOK project management knowledge areas consist of many others. A common problem area is project cost management. Refer to the Project Cost Management article for more information.
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