Planning Risk Management

Lecture 2
Project Selection
Project risk is a significant factor before there is a project
The process of project selection creates both project risk and relies on
project risk analysis.
The processes for project selection and project risk management are
linked
Project selection affects the project risks.
Strategic Planning process
Strategic Analysis
Guiding Principles
Mission
Vision
Strategic Objectives
Project Selection
Appropriate project selections techniques can minimize several problems
like
Choosing too many projects
Project priorities misaligned with business and technical strategies
Overestimated resources and resource capabilities
Inadequate analysis during project selection creates these risks
The project risk management data is critical for project selection process
Companies just starting up have a high-tolerance for risk projects and the project mix
contains high amount of uncertainty.
Eg: organizations delivering custom solutions with fixed fees avoid risky projects to
protect the reputation and financial penalties.
Project Selection
An effective project selection process have only three outcomes
Firstly, the project might be authorized and active
Secondly, the project may require changes (to scope, schedule, or resource)
before its an active project on portfolio
Thirdly, rejection, turned down by the management or postponed for later
consideration
Based on relative costs and benefits, the decision on selecting,
changing and rejecting a project take place.
The expected project benefits can be estimated through predictions of
financial metrics for return of investment (ROI).
Project Selection
Risk Management information is critical, as it assess the credibility of
the estimates for the overall return and its the trigger for change in
project objectives.
The best project selection processes include frequent reviews, at least
once per quarter
To update project information
Revisit the assumptions and rebalance the project load
Project Selection
The most effective project selection processes include frequent
reviews, at least once per quarter, to update project information,
revisit the assumptions, and rebalance the project load.
This ensures that inappropriate projects are weeded out early and the
mix of ongoing projects contains the best available opportunities.
Project Selection
Project risk also arises from the type of projects selected.
The mix of projects by typesuch as
new research and development,
next generation,
evolutionary,
partner or joint venture,
maintenance,
support,
Infrastructurealso needs to be kept in balance.
Project Selection

The proportions will vary over time and from organization to

organization, but the target mix should consistently reflect strategic
planning decisions and staffing constraints.

It requires ongoing discipline to ensure that the project load does not
become overloaded with too many projects of a given type
for example, too many maintenance projects or too many projects that
depend
Project Selection

When the project load deviates from the overall business objectives,
it increases business risk for the organization as a whole. Project
selection should result in an appropriate mix of projects with risk and
benefit profiles consistent with business objectives and adequate
staffing for a focused portfolio of good projects.
Key Ideas of Project Risk Planning

Project selection affects risk management and depends upon it.

Project risk management builds on the foundation provided by your

project definition and planning.

project risk plan summarizes your risk management approach.

Overall Project Planning Processes

The project selection process is one source of project risk for all
projects, but another factor, the overall approach used for project
management, is even more influential.

When projects are undertaken in organizations that lack adequate

project management processes, risks will be unknown, and probably
unacceptably high.
Overall Project Planning Processes

Without adequate analysis of projects, no one has much idea of what

going right looks like, so it is not possible to identify and manage
the risksthe things that may go wrong.

The project management processes provide the magnifying glass you

need to inspect your project to discover its possible failure modes.
Overall Project Planning Processes
Regular review of the overall methods and processes used to manage
projects is an essential foundation for good risk management.

If project information and control is sufficient across the organization and

most of the projects undertaken are successful, then your processes are
working well.

For many high-tech projects, though, this is not the case. The methods
used for managing project work are too informal, and they lack adequate
structure.
Overall Project Planning Processes
Too many technical projects are undertaken with indifference or even
hostility to planning. This occurs for a number of reasons, and it originates
in organizations at several levels.

At the project level, other work may carry higher priority, or planning may
be viewed as a waste of time.

Above the project level, project management processes may appear to be

unnecessary overhead, or they may be discouraged to deprive project
teams of data that could be used to win arguments with their managers.
Sub-category risks in PERIL Database
Group Work

Select a company of your own and Build a situation

analysis for selecting a project, to eliminate an
existing problem.