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Topics: Risk Management
How does a RMP / SME identify the project(s) w/ highest risk ? most risky ? methadology to calculate overall Project Risk ($$ ?)
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Gents, we have a situation which truly requires expert judgement / SME advice :

Our PMO has 100+ engineering projects at different stages of project life cycle (initiation -- execution). Every project has a traditional Risk Register (RR) w/ approx. 20+ risks. Each inherent risk is assessed (w/ Impact:1-5, and P:1-5, where both P&I values are based on unified Risk Assessment Matrix) to obtain Risk Score=P*I (1-25). Data is tabulated and RR is updated during different stage gates, risk response/mitigation measures planned, and residual risk assessment is conducted, etc.

However, with all this info. for 123 engineering projects, we are still unable to identify projects with the highest overall risk, or even to prioritize/sort the most "risky" projects.
Despite the teams recommendation, I am sure that the # of identified risks is not a valid parameter eh !?

As such, your expertise is appreciated bigtime ! To ensure we are all on the same wavelength, pls. refer to specific questions below for your advice & recommendations.

Q1) How do we calculate the overall Project's risk using P&I (if values range from 1-5).
Q2) How do we assign a $ value to overall risk rating ?
Q3) Main objective is to identify projects with the highest risk ? With 123 projects, how do we technically identify these high risk projects using data from Risk Register ?
Q4) How can we compare/sort and claim this/these are the most "risky" project(s) ?
Q5) How does the Cost of the project affect the Risk rating ? $10M project vs. 0.5M

As an engineer, PMP, and RMP, I don't even know where or how to start...
Am sure y'all have done this before, and are experts in the field.
Appreciate your input, and instructions.
Cheers,

W.HANNA
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A risk register's content focuses on known unknowns but what about unknown unknowns which will be of greater importance the more complex and/or unique the project?

This is why many companies use a risk profiling questionnaire which will ask a set of questions and generate a risk score for the project as a whole. That can then provide a means of comparing different projects for portfolio management purposes.

Kiron
...
1 reply by W. HANNA, P.Eng., PMP, RMP
Mar 07, 2019 3:10 AM
W. HANNA, P.Eng., PMP, RMP
...
Thanks Kiron.
We do in fact use a risk profiling questionnaire/matrix to select then prioritize which projects will be granted approval to proceed based on generated risk score (using some fuzzy logic similar to what Keith mentioned).

However, now these projects are into planning, and some in execution, and we are monitoring actual open risks for specific project activities. We are using the risk score=P*I and this does not tell PMO the "level" of risk for each projects, or the relative "riskiness", or even total risk for org ! We therefore need a "calculation" (using existing parameters measured) to evaluate the magnitude of each project's overall risk (weekly), and specifically to be able to compare/sort/prioritize and justify quantitatively that this/these are the most "risky" project(s) at this time/stage.? Like top 10 projects in terms of risk.
We were also hoping to obtain a financial value linked to this overall risk score, and then evaluate total exposure ($) for further analysis.

PLEASE guide me to the proper methodology, or even a tool / formula, to utilize our P & I numbers and indicate overall project risk; such that we may sort these 120 projects in terms of their individual overall risk, relative risk, obtain total risk exposure for PMO, and get on with our life ;)
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it sounds to me like you are almost there...you have the data right?...you have the qualifications....I am sure u can get there!
...
1 reply by W. HANNA, P.Eng., PMP, RMP
Mar 07, 2019 3:19 AM
W. HANNA, P.Eng., PMP, RMP
...
LOL, thanks for your confidence Al.
Your words gave me a boost, but its interesting/sad to note that....the academic background, and PMP & RMP certifications have not prepared "me" for this practical basic exercise. Wasn't sure if I missed that section from the Standard...
Thanks again, your confidence make me determined to find a way to use the data...
Cheers,
Network:215



Coming up with a total risk score and cost is a similar problem to trade-off analysis when you are comparing very different things. Trying to combine a number of unlike variables to come up with single value can quickly become numerical soup.

Cost models try to do this by monetizing all the variables, and the output is largely dependent on the cost weighting of each variable which is often very subjective. Whichever variable has the highest weighting will also tend to dominate the equation.

Another approach is to identify a number of critical attributes, and develop a questionnaire rating them on a simple scale as Kiron mentioned. (A delay of 1-2 days is Fair. A cost overrun of $1M is unacceptable. etc.) Combining those can be as simple as expert judgment. When discussing the various risks among multiple experts for placement on a 5x5 risk matrix, most people will come up with relatively close assessments. The absolute value isn’t so important, but the discussion itself is invaluable to understanding the risk level. It does require ongoing participation to generate scores.

An objective score can be generated efficiently and repeatably using the questionnaire and fuzzy logic. That often seems to sound more difficult than it actually is. The ratings from the questionnaire become fuzzy sets scoring individual risk components, and combinations such as 2 or more very bad risks make a project risk very bad. Projects can be compared to each fuzzy set and the scores from all sets can then be combined to generate a single score. You see those sorts of things on Facebook aps all the time when a number of questions are asked, and they tell you which animal or superhero you are most like. It’s the same concept except compared to a risk rating, trade study score, etc. and also has applications in numerical optimization including unlike variables.
...
1 reply by W. HANNA, P.Eng., PMP, RMP
Mar 07, 2019 4:09 AM
W. HANNA, P.Eng., PMP, RMP
...
Thanks for your advice Keith.
We do in fact use a risk profiling questionnaire/matrix to select then prioritize which projects will be granted approval to proceed based on generated risk score (using some fuzzy logic similar to what you mentioned).

However, now these projects are into planning, and some in execution, and we are monitoring actual open risks for specific project activities. We are using the risk score=P*I and this does not tell PMO the "level" of risk for each projects, or the relative "riskiness", or even total risk for org !
We therefore need a "calculation" (using existing parameters measured) to evaluate the magnitude of each project's overall risk (weekly to get trend), and specifically to be able to compare/sort/prioritize and justify quantitatively that this/these are the most "risky" project(s) at this time/stage.? Like top 10 projects in terms of risk. Absolute value is not very important like you said, but we need to get any value rather than just looking at total number of risk events identified, and current practice of looking at % Open risk events.

We were also hoping to obtain a financial $ value linked to this overall risk score, and then evaluate total exposure ($M) for further analysis; project A represents ~ 30% of total exposure.

PLEASE guide me to the proper methodology, or even a tool / formula, to utilize our P & I numbers and indicate overall project risk; such that we may sort these 120 projects in terms of their individual overall risk, relative risk, obtain total risk exposure for PMO, and get on with our life ;)
Network:0



Mar 05, 2019 7:24 AM
Replying to Kiron Bondale
...
A risk register's content focuses on known unknowns but what about unknown unknowns which will be of greater importance the more complex and/or unique the project?

This is why many companies use a risk profiling questionnaire which will ask a set of questions and generate a risk score for the project as a whole. That can then provide a means of comparing different projects for portfolio management purposes.

Kiron
Thanks Kiron.
We do in fact use a risk profiling questionnaire/matrix to select then prioritize which projects will be granted approval to proceed based on generated risk score (using some fuzzy logic similar to what Keith mentioned).

However, now these projects are into planning, and some in execution, and we are monitoring actual open risks for specific project activities. We are using the risk score=P*I and this does not tell PMO the "level" of risk for each projects, or the relative "riskiness", or even total risk for org ! We therefore need a "calculation" (using existing parameters measured) to evaluate the magnitude of each project's overall risk (weekly), and specifically to be able to compare/sort/prioritize and justify quantitatively that this/these are the most "risky" project(s) at this time/stage.? Like top 10 projects in terms of risk.
We were also hoping to obtain a financial value linked to this overall risk score, and then evaluate total exposure ($) for further analysis.

PLEASE guide me to the proper methodology, or even a tool / formula, to utilize our P & I numbers and indicate overall project risk; such that we may sort these 120 projects in terms of their individual overall risk, relative risk, obtain total risk exposure for PMO, and get on with our life ;)
Network:0



Mar 05, 2019 8:33 AM
Replying to Al Taylor
...
it sounds to me like you are almost there...you have the data right?...you have the qualifications....I am sure u can get there!
LOL, thanks for your confidence Al.
Your words gave me a boost, but its interesting/sad to note that....the academic background, and PMP & RMP certifications have not prepared "me" for this practical basic exercise. Wasn't sure if I missed that section from the Standard...
Thanks again, your confidence make me determined to find a way to use the data...
Cheers,
Network:0



Mar 05, 2019 11:23 AM
Replying to Keith Novak
...
Coming up with a total risk score and cost is a similar problem to trade-off analysis when you are comparing very different things. Trying to combine a number of unlike variables to come up with single value can quickly become numerical soup.

Cost models try to do this by monetizing all the variables, and the output is largely dependent on the cost weighting of each variable which is often very subjective. Whichever variable has the highest weighting will also tend to dominate the equation.

Another approach is to identify a number of critical attributes, and develop a questionnaire rating them on a simple scale as Kiron mentioned. (A delay of 1-2 days is Fair. A cost overrun of $1M is unacceptable. etc.) Combining those can be as simple as expert judgment. When discussing the various risks among multiple experts for placement on a 5x5 risk matrix, most people will come up with relatively close assessments. The absolute value isn’t so important, but the discussion itself is invaluable to understanding the risk level. It does require ongoing participation to generate scores.

An objective score can be generated efficiently and repeatably using the questionnaire and fuzzy logic. That often seems to sound more difficult than it actually is. The ratings from the questionnaire become fuzzy sets scoring individual risk components, and combinations such as 2 or more very bad risks make a project risk very bad. Projects can be compared to each fuzzy set and the scores from all sets can then be combined to generate a single score. You see those sorts of things on Facebook aps all the time when a number of questions are asked, and they tell you which animal or superhero you are most like. It’s the same concept except compared to a risk rating, trade study score, etc. and also has applications in numerical optimization including unlike variables.
Thanks for your advice Keith.
We do in fact use a risk profiling questionnaire/matrix to select then prioritize which projects will be granted approval to proceed based on generated risk score (using some fuzzy logic similar to what you mentioned).

However, now these projects are into planning, and some in execution, and we are monitoring actual open risks for specific project activities. We are using the risk score=P*I and this does not tell PMO the "level" of risk for each projects, or the relative "riskiness", or even total risk for org !
We therefore need a "calculation" (using existing parameters measured) to evaluate the magnitude of each project's overall risk (weekly to get trend), and specifically to be able to compare/sort/prioritize and justify quantitatively that this/these are the most "risky" project(s) at this time/stage.? Like top 10 projects in terms of risk. Absolute value is not very important like you said, but we need to get any value rather than just looking at total number of risk events identified, and current practice of looking at % Open risk events.

We were also hoping to obtain a financial $ value linked to this overall risk score, and then evaluate total exposure ($M) for further analysis; project A represents ~ 30% of total exposure.

PLEASE guide me to the proper methodology, or even a tool / formula, to utilize our P & I numbers and indicate overall project risk; such that we may sort these 120 projects in terms of their individual overall risk, relative risk, obtain total risk exposure for PMO, and get on with our life ;)

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