Conducting a Risk Analysis - UC San Diego Library

1 Conducting a Risk Analysis Why do a risk Analysis ? A proposal that includes risk Analysis can make a project seem feasible to project members and stakeholders. By thinking about risk factors that could impact your project at the beginning, you can manage the project more effectively by: reducing the potential for unexpected problems making informed decisions about which risks to mitigate from the outset developing a comprehensive risk management plan How do I do a risk Analysis ? 1. Determine factors that may impact your project If you have a solid project plan and completed your Analysis phase, then risk Analysis will be easier because you have already identified potential risks . To do risk Analysis , reflect on: your experience with the client what you know about the project background your experience with similar projects If you are not familiar with the client and/or project, you should: review records of similar projects done in the past, especially project evaluations talk to colleagues and experts familiar with similar projects talk to colleagues that have worked on projects with your client Doing this may help you identify risk factors specific to your project.

2 Next, you should create a list of risk factors. Consider internal and external risk factors (Table 1). Every project is different and therefore it is impossible to provide a compressive list of risk factors to is a risk Analysis ? The process of risk Analysis includes identifying and quantifying uncertainties .. [and] estimating their impact on outcomes .. ( ). There are two steps in Conducting a risk Analysis : 1. Determining factors that may impact your project 2. Assessing the likelihood that identified factors will occur Instructional designers familiar with the ADDIE model will recognize risk Analysis as part of the Analysis phase. Risk Analysis vs. Risk management Definitions of risk Analysis range from identifying and ranking risks to including a plan to mitigate them.

3 In a dictionary of project management terms, Cleland (1985) defines risk Analysis * as the process of subjectively determining the probability that a specific interplay of performance, schedule, and cost, as an objective, will or will not be attained along the planned course of action (p. 220). This is noticeably different from a definition of risk management , which includes a plan to minimize risks . In addition to identifying risks and assessing their impact on a project, Portny (2004), notes that risk management includes developing and implementing plans for minimizing their [ risks ] negative effects (p. 258). *Cleland uses risk assessment, which is used interchangeably with risk Analysis in PM literature. References Cleland, David I.

4 (1985). A project management dictionary of terms. New York: Van Nostrand Reinhold. Portny, Stanley E. (2004). Project management for dummies. New York: Wiley Publishing, Inc. Compiled by Dominique Turnbow, EDTEC 684, Summer 2010 Table 1: Sample Risk Factors for Instructional Design Projects Internal Risk Factors Factors within the project manager s or organization s control lack of time planning each of the ADDIE phases scope creep project manager does not directly supervise project personnel and therefore cannot control amount of time given to project insufficient support from drivers or suppoters of the project access to staff with appropriate skills/knowledge to become project members access to subject matter experts (SMEs)

5 Stakeholders request long review timelines insufficient budgets and timelines External Risk Factors Factors outside the project manager s or organization s control externally imposed timelines funding/budget negatively impacted at a level greater than the organization ( university budgets may be impacted by state budgets) accidents or illness that keep key project staff away for long periods of time unanticipated changes in the project or organizational environment 2. Assess the likelihood that identified factors will occur There are different ways to assess risk (see box to the right). The one you choose depends on your risks and client audience. Table 2 is an example of how you might assess risk using category ranking.

6 Table 2: Example of Category Ranking Risk probability of occurrence Risk SeverityRisk AnalysisDescribe risks How likely is it to occur (high, medium, low) How severe are the consequences? (high, medium, low)Final Analysis :( probability , severity) 1. Aggressive timeline high high(high, high)2. Access to SMEs low medium(low, medium)Adapted from: When determining risk severity, consider the impact of a risk on: the total project, rather than just a part of it ( look at the critical path) related risks (when assessing their impact on the overall project) project team morale, product quality, etc. In Table 2, the first example illustrates that if an aggressive timeline is very likely to happen, then other project resources will be impacted which means you may go over budget.

7 Example 2 illustrates that there is a low probability that you will not have access to SMEs, yet it would impact your project with some severity (medium) because your product relies on their input. When sharing risks with your client focus on ones that they can control and/or change, especially if they severely impact your project. What s Next? You are ready to create a risk management plan. Decide if you will avoid, mitigate or accept any of the identified risks . If you choose to avoid or mitigate the risk, your plan should include a description of how you will do so. Be sure to specifically describe risks and their associated consequences (Portny, 2004, ). For example, if x happens, then the timeline will be delayed by y weeks.

8 How to assess risk Assessing risk is when you estimate the probability of a risk occurring. Category ranking put risks into categories that represent the likelihood they will occur ( high, medium, low); some category rankings also color code the risk ( high risk = red, etc.) Ordinal ranking order the risks by so that the first one is the most likely to occur, the second next most likely to occur, etc. Relative likelihood of occurrence order your risks by how likely they are to occur, relative to one another ( x is eight times more likely to occur than is eight times more likely to occur than y) Revisit risks Analysis and modify it as necessary throughout the project. You should be open to identifying new risks and/or redetermine risk severity.

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