PMP Training: Resume Session 8

In Session 8 we went through 2 very important topics for every Project Manager: Risk Management and Performance Assessment.

Chapter 8. Risk Management

H3 Section 8.1: Risk Types

In this section, first we went through the Risk Management Process which has got the following steps:

Step 1: Plan Risk Management

Step 2: Identify Project Risks

Step 3: Qualitative Risk Analysis (probability & impact) and prioritizing risks

Step 4: Quantitative Risk Analysis (Expected Monetary Value) and defining contingency reserve

Step 5: Plan Risk Responses for opportunities/threats

Step 6: Implement Risk Responses

Step 7: Monitor Project Risks

And we also went different risk terms such as:

• Volatility vs Predictability
• Uncertainty vs Understanding
• Complexity vs Simplicity
• Ambiguity vs Clarity
• Urgency / Proximity / Connectivity / Dormancy
• Individual Risk vs Overall Risk
• Inherent Risk / Residual Risk / Secondary Risk / Insurable Risk
• Known Unknowns vs Unknown Unknowns

It is very important to distinguish between risk and issue.

Issue is an event that’s occurred and has got negative impact and requires corrective action / workaround, whereas risk is an event that’s not occurred yet and can have positive or negative impact if occurred. 

Contingency reserve is for identified risks (known unknowns) and management reserve is for unknown unknowns. 

Section 8.2: Risk Analysis

In this section we went through the qualitative analysis and how to assess/measure the probability and impact of a risk and prioritize them based on the score (threshold) or P/I Matrix, Risk Break-Down Structure and how to record risks in the risk register.

We also saw other techniques such as What-If scenario, Alternative Analysis, Decision-Tree Analysis, etc.

Then we went through the quantitative analysis technique which is also called Expected Monetary Value which helps to determine how much contingency reserve is needed for the identified risks. We also saw the Monte-Carlo Analysis.

Section 8.3: Responding to Risks

Responding to risks depends on the risk appetite in the project. Five key response techniques can be used for each type of risks.

For threat, the response plan for the prioritized risks could be:

• Accept: no active action
• Mitigate: reduce probability/impact
• Transfer: ex. through insurance
• Avoid: leave/quit
• Escalate: when risk is out of PM/team power/authority

For opportunitiy, the response plan for the prioritized risks could be:

• Accept: no active action
• Enhance: increase probability/impact
• Share: ex. with partner
• Exploit: take action
• Escalate: when risk is out of PM/team power/authority

We also saw the difference between risk audit and risk review, and had a quizz at the end of this chapter.

Chapter 9. Assessing Project Performance

Assessing Project Performance means knowing how does the project stand in comparison with the baselines and expectations. 

The Project Manager must be capable to collect the necessary information and deliver status reports to stakeholders to inform them of project status and if any actions are required. 

We went through types of KPI’s, SMART Goals, data representation tools such as Pareto Chart, Histograms, Run Chart, Control Chart, Scatter Diagram, etc.

Then we dove into the famous Earned Value Measurement techniques and learned the different formulas of Cost Variance (CV), Schedule Variance (SV), Cost Performance Index (CPI), Schedule Performance Index (SPI), Budget at Completion (BAC), Estimate at Completion (EAC), Estimate to Complete (ETC), To Complete Performance Index (TCPI), and of course the Earned Value (EV) and Planned Value (PV), and their different interpretations and scenarios that could be in the PMP exam. 

We had an exercise and several real exal questions.

In this chapter we also saw how to measure performance in Agile (such as burn charts and throughput chart) and also how to measure business performance through various techniques such as Cost/Benefit Ratio (CBR), Return on Investment (ROI), Net Present Value (NPV), Internal Rate of Return (IRR), PayBack Period, Time to Market (T2M), etc.

These two chapters were really important to learn not just because of the PMP exam but also because Project Managers go through them all the time during their projects.

Next week we will have the last session which will be the most important in the whole training.