Imagine you are managing a large project, which is strategically important and complex. At the outset, you realize there will be a number of risks, which if not managed well, could paralyze the outcome and have negative impacts on the project objectives. You want to proactively identify, analyze, respond, track, and monitor your project’s risks. And, it would be great to have a dedicated risk management tool to use alongside your project management software.
What are your options? Will software tools like Excel help? Will a software tool for only project management meet your needs?
If you have ever managed risks, you know a spreadsheet is not the answer. A spreadsheet is not at all designed for project management–let alone risk management. It’s likely that a project management software tool only meets your need half-way.
Recently, the MPUG team conducted a survey on the most frustrating experiences faced by management practitioners with respect to software tools and one response was related to risk management and tracking, specifically in a scenario where spreadsheets were being used. Another aspect that came to light was the need for an integrated and risk-adjusted schedule-cost management system, which brings up questions like: what are the duration estimates and cost estimates associated with the risks? How can a PM manage risks in with a single, centralized tool?
In this piece, I’d like to present an integrated approach to project management with strong end-to-end risk management capabilities. For this purpose, I’ll be using two software tools:
- Microsoft Project (MSP) 2019 for project management, and
- Primavera Risk Analysis (PRA) 8.7.5 for risk management.
Let’s start with creating a project plan with MS Project.
Create the Project Plan
While you can directly use PRA to create your project plan, most project managers use MSP frequently for planning because of its simplicity, ease of use, and user friendliness. For this reason, we will create the plan first in MS Project. The plan depicted in the below figure.
The statistics of the project are these:
- Duration: 38 days
- Cost: $67,680 USD
- Finish Date: June 30, 2021 (06/30/21)
The project is the creation of a Smart Site and involves multiple resources.
Do note that if you have modified the calendars for the project and/or have added custom calendars, you’ll need to ensure you have the corresponding calendars in PRA.
Set-up PRA for Risk Management
Before importing the plan, ensure that the settings for MS Project in PRA are correct. This can be opened by going to PRA tool’s File à Microsoft Project à Edit Default Import Mapping… menu.
Keep the “Show this dialog…” checkbox enabled so that when you open the MSP Plan in PRA, you can have a quick look at the settings before actual import happens.
Import the MSP Plan into PRA
Now that we have set the MSP related settings in PRA, we will import the project plan created in MSP into PRA. It will happen in a few seconds. Post import, in PRA, the plan will be shown as below.
The imported project plan in PRA has the following statistics:
- Remaining Duration: 38 days
- Remaining Cost: $67,680 USD
- Finish Date: June 30, 2021 (06/30/21)
This is perfectly in sync with the statistics of our project plan created earlier in MSP. It’s also a good idea to check a few of the tasks in the project to see that the import has happened properly. In our case, the task/activity “PRD Preparation” has been considered. It matches perfectly with the MSP Plan considering Dates, Resources, and Cost, among other fields.
At this stage, I’ll recommend that you read this Risk Management Framework for Projects article to understand how risks are managed and monitored over various Risk Management processes. Here, I’ll be using only the Risk Register, not the Risk Report.
In addition, I’ll explain some key points with respect to risk management, which will help you to understand why I’ve taken the following steps and performed the associated activities. Take a look at the video [Duration: 4m:12s] below—it’s been taken from RMP Live Lessons. For a better experience, you may want to go full-screen with HD mode and plug-in your earphones.
Risk Identification and Risk Register
Now, we are going to prepare the Risk Register. Preparation of this key project artifact happens during the Risk Identification process.
To create the Risk Register with PRA software, go to Risk à Register… menu, or click on the Risk Register icon on the Risk Toolbar of PRA. The Risk Register creation dialog box will pop up, and we will use the standard risk register option.
When the standard Risk Register first opens, of course, it will be empty as shown below.
You can enter new risks easily by adding details for the identified individual project risks.
As you can enter the risks, provide all the needed information such as Risk ID, Threat or Opportunity, Risk Title, the Pre-mitigation information such as Probability scales, Impact Scales, etc. You can also add the Risk Details such as Cause, Effect, and Risk Category, among others.
As shown, we have four identified risks (threats) for this project with their respective details entered. The cause, effect, description, owner, RBS type, and status values have been entered for each of the risks.
Do not worry about the risk responses now. We will address them in the step for risk response planning as I explained in the earlier video. The risk score is calculated by taking the risk parameter values from the Risk Probability and Impact (PI) Matrix. For the sake of this example, I’ve used the following matrix.
The probability and impact scales notations in the Risk Register are these:
- Very Low (VL)
- Low (L)
- Medium (M)
- High (H)
- Very High (VH)
As you multiply the probability and impact values, you will get the Risk Score. For more depth, refer to this detailed article on Risk Matrix Reporting.
Our next step is to qualify these individual risks. We will determine the probability and impact values of these risks. You can have other risk assessment parameters, as well, such as Risk Manageability or Risk Proximity, among many others.
Considering the probability and impact values of these risks, as we qualify them, the Risk Register will be updated as shown below.
As you can see, the current Risk Register has seen a number of updates. Considering Risk ID – 001, some of the key updates are:
- Risk Score is now 21. (change from 72 to 21)
- Risk Owner is confirmed. (John R is the confirmed owner)
- Risk Status has been modified. (Status is “open” now; earlier “proposed”)
Similarly, we have also qualified other individual project risks: Risk 002, Risk 003, and Risk 004.
This step of risk quantification is optional, as we have seen in the RMP video. Though our project is a simple one, let’s do risk quantification for one individual risk (Risk 001: Poor understanding of design specification). After quantification of this risk, the pre-mitigated Quantified Risk Register will show as follows:
Note that Risk 001 has now been quantified from a schedule perspective by associating it with two tasks in the Project Plan, i.e. Task ID 000009 and Task ID 000010, from “Phase – 1” under the WBS element of “Design and Development Phase” at Level – 2 of the work breakdown structure (WBS).
I’ve used BetaPert probability distribution for the tasks mentioned and have entered the minimum, mostly likely, and maximum duration estimates. Similarly, you can also quantify with respect to cost estimates.
Post quantification, you can do a variety of analyzing such as:
- Monte Carlo Analysis,
- Criticality Analysis,
- Probabilistic Branching and Analysis, and
- Sensitivity Analysis, among many others.
Risk Response Planning and Response Integration
Next, we will do the risk response planning for the individual risks to bring down the probability and/or impact values of these risks. With this, we can keep the risk score within the risk threshold.
For this purpose, we again have to go to the Risk Register and modify the risk response strategies along with the associated risk response actions. The modified risk register is shown below.
Considering “Risk 004: Key resources unavailable,” the Risk Score has been reduced from 56 to 1, and similarly for certain other risks.
For Risk 004, the associated actions are noted under the highlighted “Mitigation” tab. There are two mitigation response actions:
- Risk Response Action – 1: Get the resources from other functional departments.
- Risk Response Action – 2: Prioritize project resources.
The assigned risk response owners and associated cost are noted. The associated cost also reflects on the top panel for Risk 004.
Risk Monitoring and Tracking
Our final step relates to risk monitoring and tracking. During risk monitoring, new risks may be identified, an existing risk status can change, an existing risk can become obsolete, or an existing risk may not occur.
Let’s say a new positive risk (opportunity) is identified, and we need to add this risk into the register. As we have seen earlier, risk management is both iterative and integrative in nature.
As shown, we now have a new risk—“Risk 008: Reuse of previous design module.” As this risk is freshly detected, default values have been populated. The blue letter “O” represents an opportunity.
Subsequently, we have to determine the initial characteristics of this risk, followed by qualification and quantification (optional), and have the needed risk response strategies with associated risk response actions. Finally, we have to monitor this new adjusted risk with response and associated actions.
As we reach the end of this article, some of you may be thinking can this risk register be exported to MS Excel? After all, not all stakeholders will have MS Project 2019 and Primavera Risk Analysis software installed.
The answer is yes! You can export the Risk Register to MS Excel by going to Risk Register’s File à Export Risk Register As… menu. From there, while saving, choose “Microsoft Office Excel (.xls)” option to save.
With this process in mind, I believe you will have a sound understanding of end-to-end risk identification, analysis, response planning, and implementation, followed with risk monitoring and tracking.
 Online Course: Practical RMP with Primavera Risk Analysis, by Satya Narayan Dash
 Online Course: RMP Live Lessons, Guaranteed Pass, by Satya Narayan Dash
 Online Course: MS Project Live Lessons, by Satya Narayan Dash