Technical leaders on the project team also prepare essential support and input to the risk assessment. Risk mitigation strategies are most effective when they are developed by those responsible for their implementation. All project supervisory personnel should actively participate in developing mitigation plans.
RISK-BASED MANAGEMENT APPROACH
Most Parsons projects face a near constant barrage of risks, many of them could harmfully impact the outcome of a project. and it is hard to identify, prioritize, and manage these risks, the project manager performance can be compromised. Therefore, an awareness of, and ability to identify, project risks is a primary activity at all stages of a project.
Parsons project manager and project control manager should make sure that the project staff is directed at maximizing opportunities and minimize hazards throughout the project. The risk management approach is central to all project management activities, including the following:
• Planning the project.
• Organizing and structuring the work.
• Developing management systems.
• Creating project procedures.
• Allocating …show more content…
Each risk is assigned a single value associated with the potential impact if the risk event occurs. This value should represent a reasonably pessimistic scenario, but not necessarily the worst case scenario. Each risk is also assigned a single probability value. The product of the impact and the probability is the value assigned to the risk.
A project manager estimates that the cost of a critical piece of equipment may overrun budget by $1 million. The probability of the overrun is estimated to be 1 in 10, or 10%. The value assigned to the risk is $1,000,000 x 10% = $100,000.
Many project risks have many possible outcomes, each with a different consequence or probability. If the simplified single expected value approach is not enough, it can be expanded by dividing a risk into multiple gradations, as shown in the following example.
A project manager estimates a 10% probability that a piece of equipment will be $1 million over budget, but also a 30% probability that the equipment will have a smaller overrun of $500,000. (Total probability of an overrun is 40%.) The value assigned to the risk is ($1,000,000 x 10%) + ($500,000 x 30%) =