5 Tactics for Risk Collaboration in Specialty Software Projects

Many organizations choose to implement specialty software products as a business solution. The benefits of doing so vary from filling critical gaps in a company's portfolio of solutions and services to enabling a quick response to new regulations, such as health and safety mandates.  

Never assume that because a solution is smaller in size, you can take a relaxed approach to risk management. With enterprise resource planning (ERP) solutions, success requires collaboration between the project manager and the software provider to manage risks. 

Here are some successful tactics for risk collaboration with specialty software providers:    

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...By 

Kevin Korterud

 on June 27, 2012 10:40 AM 

What is Project Risk Response Audit in PMP

A project risk response audit:

• is an examination of the effectiveness of risk response plans and of the performance of the risk owner.
• may be conducted by a third party, by the project's risk officer or by other qualified personnels.
  
  

The Auditor:

• reviews the risk response plan and data concerning project work results.
• evaluates the performance of the risk owner in implementing the response plan.
• documents the results of the audit and makes recommendations for improvement in the project's risk response efforts.

Introduction to Risk Monitoring and Control

Risk monitoring and control:

• is the process of responding to idenified and unforeseen risks.
• involves tracking identified risks, identifying new risks, implementing risk response plans and monitoring their effectiveness.

What is Contingency Reserve

Contingency Reserve is:

• established to deal with unknown risks and accepted known risks.
• may be in the form of additional time, money or resources.
• covers risk events that are not accounted for int he project baseline duration and cost estimations.
• determined by the potential impact of the risk but should include enough to implement any contingency plans as well as a buffer for dealing with unidentified risks.

What is a Contingency Plan?

In PMP, contingency plan is:

• a strategy developed in advance for dealing with the occurrence of identified risks.
  
  
• performed to construct a strategy before things go wrong.
  
  
• to include a fallback plan for risks with a high impact.  A fallback plan is to be implemented if the initial contingency plan is ineffective in responding to the risk event.

What is Risk Acceptance?

Risk Acceptance is:

• any decision not to change the project plan to deal with a risk.
  
  
• performed either passively by doing nothing or actively by creating a contingency plan to deal with the risk.
  
  
• to include contingency plan and contingency reserve.

Positive Risk Strategies

Corrective action in Positive Risk Strategy:

• Risk Exploitation
  - Used when a project team wants to make sure that a positive risk is fully realized
  - Done by hiring the best experts in a field or ensuring the most technologically advanced resources are available to the project team.
  
  
• Risk Sharing
  - Entails partnering up with another party in an effort to give your team the best chance of seizing the opportunity.
  - Joint ventures are a common example of risk sharing.
  
  
• Risk Enhancement
  - increase the probability that an opportunity will occur.
  - Done by focusing on the trigger conditions of the opportunity and trying to optimise their chances of occurrence.

Negative Risk Strategies

Preventive Action in Negative Risk Strategies include:

• Risk avoidance
  Attempts to eliminate the risk altogether.
  
  
• Risk Transference
  Passes the liability of a risk to another party.
  
  
• Risk Mitigation
  Reduces the probability and/or impact of the occurences of a risk event.

Introducing Risk Response Planning

Risk Response Planning is:

• the process of examing each risk and corresponding resonse alteratives
• determining which response will improve the likelihood of a positive outcome.

Perform Quantitative Risk Analysis: Output (in terms on PMP)

Risk Register Updates:

• Prioritized list of quantified risks
  What are the risks that most likely to cause trouble? That needs the most contingency?
  
  
• Amount of contingency and cost reserves needed.
  
  
• Possible realistic and achievable completion date and project costs with confidence level versus the cost oand time objective for the project.
  
  
• The quantified probability of meeting project objectives.
  
  
• Trends in quantified risk analysis.

Decision Tree Analysis

Decision Tree Analysis

• is an assessment of the data obtained using the decision tree method to evalute various possible outcomes.
  
• allows decision-makers to factor in both probability and impact for each branch of every decision under consideration.
  
• indicates the decision that will provide the greatest expected value when all the uncertain implications, costs, rewards and subsequent decisions are quantified.

Expected Monetary Value (EMV) Analysis

EMV is:

• a method of calculating the average outcome when the future is uncertain (i.e. Opportunities will have positive values and risks will have negative values).
  
  
• found by mulitplying the monetary value of a possible outcome by the probability it will occur.
  
  
• used in decision tree analysis.

Interviewing Methods

Interviewing methods provide a structure for gathering data needed to quantify the probability and consequences of risk on project objectives. This includes:

• Direct
  Asks an expert to assign subjective probabilities to a given range of values, providing a lowest possible value, most likely value and highest possible value.
  
  
• Diagrammatic
  Uses diagrams for an expert to assign subjective probabilities to a given range of values, providing a lowest possible value, most likely value and highest possible values.
  
  
• Delphi
  Group method allow experts to contribute their assessment anonymously.

Quantitative Risk Analysis - Introduction

Quantitative risk analysis is:

• the process of numerically assessing the probability and impact of each risk.
  
• determined the extent of the overall project risk.
  
• determined by the cost and schedule reserves.
  
• identified risks requiring the most attention.
  
• created by realistic and achievable cost, schedule or scope targets.

Methods to Perform Quantitative Risk Analysis

Methods to Perform Quantitative Risk Analysis:

• Quantitative Risk Analysis
  
  
• Subjective vs. Objective Probability
  
  
• Interviewing Method
  
  
• Quantitative Analysis Methods
  - Sensitivity Analysis
  - Expected Monetary Value (EMV) Analysis
  - Decision Tree Analysis

Output from Qualitative Risk Analysis

Risk Register (update)

• Risk Ranking for the project compared to other projects.
  
  
• List of prioritiesed risks and their probability and impact ratings.
  
  
• Risk grouped by categories.
  
  
• List of risk for additional analysis and response.
  - that wil move forward to quantitative risk analysis and/or response planning
  
  
• Watch-list
  - Documented for later revisit during risk monitoring and control.
  
  
• Trends
  - The PM should know if risk is increasing, decreasing or staying the same, so that trends can be analysed.

Introducing Qualitative Risk Analysis

Qualitative Risk Analyis is:

a subjective analysis of risks analysis of the risk identified in the risk identification. It includes:

• the probability of each risk occurring (eg, low, medium, high, etc)
• the impact (consequences, positive, negative) of each risk occuring.

Types of Risk Identifcation Output

Risk Identification Output:

Risk Register

• is the only output from the risk identification process.
• contains the results fo the qualitative risk analysis, quantitative risk analysis and risk response planning.
• identifies risks, potential risk responses and their triggers or waning signs.
• If risk categories are changed, they are updated in the risk register.
  

Any critial responses included inthe risk register are forwarded for use in the risk response planning process.

Common Information Gathering Techniques

The common types of Information Gathering Techniques include:

• Brainstorming
  Used to identify overall project risks or may focus in on the risks within a particular project segment or work package.
  
  
• Delphi technique
  Generate a consensus among project risk experts who anonymously submit their risk list to a facilitator.
  
  
• Interviewing
  Used to get information from people with a wide experience across many projects, such as stakeholders, team members, project manager, etc.
  
  
• Stregths, Weakness, Opportunities and Threats (SWOT) Analysis
  Examines the project from the perspective of strengths, weaknesses, opportunities and threats.

Risk Categories in Project Risk Management

Risk Categories can be classified as:

Technical, quality or performance risks

• Technical changes
• Changes to industry standards during the project
• Reliance on unproven or complex technology
• Unrealistic performance goals

Project Management Risk

• Inadequate time and resources allocation
• Ineffective project plan development
• Poor cost estimates

Organization Risk

• Resource conflicts with other projects
• Inadequate project funding
• Inconsistent management support

External risks

• Union Issues
• Changes of Management in customer's organization
• Country security issues