Today, we’ll discuss the Risk Management Basics and Learn them with an Excel template I made.
[Intro Video]
Hi, this is Mike Negami, Lean Sigma Black Belt.
Today’s topic is from one of my viewers: “Please share a heatmap for risk.
Thanks a lot, cheers from Perú.”
A heat map visualizes the numerical values by using colors on charts and tables.
This heat map is often used in the field of Risk Management in order to find any sign
of problems as soon as they appear.
Today I’ll introduce Risk Management in PMP.
I also made a template that allows you to immediately practice Risk Management by using
the heat map built in the template.
Here is that template.
Here are the instructions.
What is risk in the first place?
In PMP, they define "Risk is an uncertain event or condition that, if it occurs, has
a positive or negative effect on one or more project objectives such as scope, schedule,
cost and quality".
Interestingly, PMP targets not only threats as risk, but also opportunities as well, but
I won’t include that topic in this video.
The purpose of Risk Management is to prevent risk from occurring and if it occurs, minimize
the damage as much as possible.
How can we achieve that?
Let’s see each step of Risk Management.
The first step is Risk Registration.
Before starting this step, make sure to complete the Project Charter and Project Plan.
PMP divides a project into 10 Knowledge Areas.
Risk Management is one of them.
The other 9 areas are shown in the header of the table above.
Integration, Scope, Time, Cost, Quality, Human Resource, Communications, Procurement and
Stakeholder.
It’s a PMP priority to manage each area well.
Then, by referring to your project documents, consider all possible risks for each knowledge
area and each stage of your project, and write the risk names and descriptions in the first
two columns.
Then, select the Knowledge Areas in the next column that the risk relates to.
Up to this point is Risk Registration.
Next is Risk Analysis.
Compare and consider each risk item’s probability of occurrence, then put 1 to 5 in the next
column for the lowest to the highest.
Next, consider the degree of impact when each risk occurs.
PMP defines that the impacts will be on scope, schedule, cost or/and quality.
Therefore, in the next columns, evaluate how much each risk would impact on those four
Impacted Areas with a scale of 1 to 5.
Of course, leave it blank if it doesn’t impact at all.
After evaluating the impacts for all risk items, look at the Total Risk Index in Column
J. Total Risk Index is calculated to sum all
impact degrees, then multiply by the occurrence probability degree.
The higher the number, the higher the risk.
Sort that column in descending order and gather the higher risk items at the top.
Look at the above table.
Now the heat map is complete.
This table has the Knowledge Areas on the horizontal axis and the Impacted Areas on
the vertical axis.
The numbers on the table were calculated based on your data you input.
The more red each area has, the higher the number in the area and the riskier.
With this in mind, conduct the next step, Risk Response Planning.
Write your risk response plan for each item.
First, select a response strategy.
There are four strategies in PMP you can choose from.
I wrote them here.
Accept: Acknowledge the risk and don’t take any action unless the risk occurs.
Avoid: By changing project management plans, eliminate the threat entirely.
Mitigate: Reduce the probability and/or impact of an adverse risk to be within acceptable
threshold limits.
Transfer: Shift the impact of a threat to a third party, together with ownership of
the response.
Actually, there are three more, but they are for positive risks, which are opportunities.
Please read about them later.
In the next column, clarify the trigger point, which is the sign of each risk, name who will
monitor it and how, and how to respond if the sign appears and the actual risk occurs.
Because of this planning, you may have the ideas that you should do something now.
If so, do so.
Then, write the frequency of how often you should monitor the risk in the next column.
After writing this for all your risks, planning is complete.
The next columns are for Risk Control.
While conducting main project tasks, monitor each risk according to each one’s frequency.
When you’ve finished each monitoring, record the monitored date in the ‘Last Monitored
Date’ column.
With this date and the frequency, you can figure out when the next monitoring date should
be.
When you’ve caught a sign or an actual risk occurs and you’ve taken any action for that,
record what you did and that date.
With Risk Control, you rotate the PDCA cycle of Risk Management.
Today, we’ve learned Risk Management Basics in PMP along with the template I made.
Please practice this in your work.
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