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PMI: Risk Management Professional (Part 1) Tutorials
Understanding Risk Management / Managing Uncertainty
Subtitles of the Movie (PMI: Risk Management Professional (Part 1) / Understanding Risk Management / Managing Uncertainty)
In this movie we'll address managing uncertainty. Managing risk is really about managing uncertainty. As I mentioned previously, every project contains some level of risk and some level of uncertainty to varying degrees, of course. During a previous movie we covered the different types of risk: Known Risk, Known-Unknown Risk, and Unknown-Unknown Risk. These all contain various levels of uncertainty and your job in managing risk is to decrease the level of uncertainty, be prepared to deal with uncertainty, and control the outcomes to the extent possible. To clarify and summarize: Uncertainty refers to the lack of knowledge of future events, whether these events are positive or negative to the project. This uncertainty can lead to risk, therefore the project team must plan for potential outcomes that may wind up impacting the project objectives, such as scope, cost, quality, schedule, and so on. Risk also stems from having to make decisions under uncertain circumstances, which result in potential risk. While the actual risk event itself may be uncontrollable, the idea is to control the events that lead up to the risk, and to control the outcome or impact of the risk. Let's look at an example. If driving your car down a road that contains sharp rocks creates the probability of getting a flat tire, you may decide to avoid the risk by taking another road that adds 15 minutes to your trip, but potentially saves up to two hours that would result out of having to get the flat tire changed. Another option would have been to make sure that your vehicle contains a spare tire and that you are knowledgeable in changing a tire, reducing the response time to fix the flat tire down to 30 minutes. When a risk is taken, it oftentimes is in pursuit of some kind of benefit to the project. Here are a few examples of this scenario, such as reducing costs, releasing cutting edge technology, achieving status for the company, meeting a schedule, and so on. These rewards play a role in determining how to manage uncertainty. With all that in mind, part of managing uncertainty is knowing when to accept risk. While the rules will vary according to the organization, the nature of the product, and other variables, here are some general rules for accepting risk, and functioning within uncertainty. Ask yourself the following questions to determine whether or not to accept risk. Can a potential outcome be determined? Are the chances of success greater than failure? Can the company afford the potential loss or impact? Is the information used to assess the risk reliable? Are the benefits of taking the risk clear? And, is this the only option available, meaning that there is no other alternative that exists which will yield the same results. Of course, there's a great deal of analysis, information gathering, and consideration that goes into Risk Assessment, but this is a great place to start. We'll talk more about decision making and risk acceptance later on in this course, but one of the key rules is that a risk should only be taken if the benefit exceeds the potential costs of an unsuccessful outcome. Another aspect of managing risk, and in asking yourself these initial questions, is knowing what project phase you are currently in within a project. The probability of risk occurring is highest at the beginning of a project and lowest at closing. The reason for this is that the beginning of a project has more uncertainty, therefore if a company cannot afford the cost or impact of an early risk materializing then it's a heavy gamble to take. In general, the impact of risk is actually the lowest at the beginning of a project and highest at closing. This is typically because there are not as many resources expended in the beginning as during the execution of the project, and particularly at the end. Because the probability and impact of risk always influences risk acceptance and risk response, this is key to know and to remember. With that now at the corner of your mind, we'll bring this movie to a close. Remember that risk and uncertainty go hand in hand and that uncertainty refers to the lack of knowledge of future events, which can lead to risk, whether it be a threat or an opportunity.
Tutorial Information
| Course: | PMI: Risk Management Professional (Part 1) |
| Author: | Vanina Mangano |
| SKU: | 33982 |
| ISBN: | 1-935320-38-6 |
| Release Date: | 2009-04-08 |
| Duration: | 7 hrs / 109 lessons |
| Work Files: |
Yes |
| Captions: | No |
| Compatibility: |
Vista/XP/2000, OS X, Linux QuickTime 7, Flash 8 |
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