Project Risk Management Terms

by Project Management Process Group

1. Plan Risk Management

2. Identify Risks

• Assumptions Analysis. An analysis of the assumptions made when calculating estimates.
• Assumptions Log. A document where project manager and project team capture, document, and track assumptions throughout the project’s lifecycle.
• Brainstorming. A technique for gathering information that brings subject matter experts, team members, risk management team members, and anyone else who might benefit from the process together in a room and asks them to start identifying possible risk events.
• Delphi Technique. An estimating technique that entails soliciting information from experts anonymously to avoid peer pressure.
• Nominal Group Technique. A method that uses group members to vote on which ideas generated from a brainstorming session are worthy of further investigation. Not mentioned in the in the PMBOK Guide, it is possible a question about it on the PMP exam anyway.
• Risk Register. The documented list of all identified risks of the project and their characteristics.
• SWOT Analysis. A technique for analyzing strengths, weaknesses, opportunities, and threats of the internal organization and the external environment.

3. Perform Qualitative Risk Analysis

• Probability and Impact Matrix. A graphical means of displaying the overall risk rating for every risk in a standardized manner.
• Risk Categorization. A technique for grouping risks by identified categories, for easy monitoring and reporting.
• Risk Data Quality Assessment. A technique for PMP examining the quality and certainty of data being used in risk analysis. Poor quality of information leads to poor quality of assessment.
• Risk Probability and Impact Assessment. A tool for assessing the likelihood that the identified risks will occur and the amount of pain – or gain – they pose to the project objectives.
• Risk Urgency Assessment. A technique for determining how soon the potential risk events might occur, to focus on those risks that are likely to occur in the short term over those that will occur at a further point in time.
• Watch List of Low Priority Risks. A list of risks with low probability and impact that a project manager wants to monitor as the project goes on.

4. Perform Quantitative Risk Analysis

• Decision Tree Analysis. A tool for making decisions that diagrams out all of the option forecasted to address the identified risks based on known probabilities and outcomes, to calculate the expected monetary value of each of them.
• Expected Monetary Value (EMV) Analysis. A statistical technique that calculates the probability and impact of all the paths one can take through the project and assign a monetary value to each decision. It is often used in conjunction with the decision tree analysis technique. The formula of EMV is probability (P) times impact (I). Expressed as EMV = P x I.
• Monte Carlo Analysis. A statistical and mathematical method for extrapolating from observed data what a likely future scenario or scenarios will be in terms of possible total project cost or completion dates.
• Sensitivity Analysis. A mathematical technique used to determine which parts of the project are most sensitive to risk.
• Tornado Diagram. A special type of bar chart used in sensitivity analysis for comparing the relative importance of those parts of the project that can be affected by risk, from most likely down to least likely.

5. Plan Risk Responses

• Accept. A risk response strategy for either positive or negative risks that does nothing and accepts the consequences of a risk occurring.
• Avoid. A risk response strategy that eradicates a particular negative risk by eliminating its cause.
• Contingency Plans. Plans that describe the specific alternatives to deal with certain opportunity or threat, should they occur.
• Contingency. The reserve for time and cost developed for “known unknowns”.
• Enhance. A risk response strategy that increases the probability or impact of a particular positive risk.
• Exploit. A risk response strategy that adds work or change to project to ensure that a particular positive risk occurs.
• Fallback Plans. Back-up plans for identified risks accepted actively which include an alternative set of actions and tasks, available in the event the primary contingency plan does not work.
• Mitigate. A risk response strategy that minimizes the probability and impact of a particular negative risk.
• Residual Risk. A risk that remains after risk response planning.
• Secondary Risk. A risk that results from implementing a response to another threat or opportunity.
• Share. A risk response strategy that assigns ownership or partial ownership of a particular positive risk to a third party.
• Transfer. A risk response strategy that makes a third-party responsible for a particular negative risk.
• Workaround. Unplanned solutions to unidentified risks accepted passively that occur during project execution.

6. Implement Risk Responses

7. Monitor Risks

• Reserve Analysis. An analytical technique that takes care of uncertainty by adding extra time – also called buffers or time reserves – to the schedule or extra cost, as either contingency or management reserves.
• Risk Audits. An analysis of the effectiveness of risk response strategies conducted by a third party.
• Risk Reassessment. An ongoing process, led by the project manager and involving the project team, which reviews the information recorded in the risk register to make sure that identified individual risks, their probability and impact, and the prepared risk responses are still current and appropriate. Likewise, risk assessment uncovers any new risk that may have arisen.
• Status Meetings. Meetings scheduled regularly throughout the entire project that focus upon a particular project status metric, such as risk management activities.
• Technical Performance Measurement. A tool that compares the actual performance of the project with the predetermined parameters, to initiate particular risk strategies in case of deviance.
• Trend Analysis. A statistical forecasting technique for identifying any trends and observed data and predicting from this a likely future outcome.
• Variance Analysis. A tool to spot and analyze the differences between what somebody planned to do against what somebody is actually doing.

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