PMP® EXAM PREP

BOOTCAMP
(2021 UPDATE)
Session 3
Instructor: Barb Waters, MBA, PMP

PMP® Exam Prep

If you are watching on replay, this slide deck
This course will assist learners in preparing
may have been modified to correct typos or
for PMI’s PMP Exam (2021 Update)
to make minor adjustments. If you notice a
difference it is intentional and not an
indication of exam changes.
Audit
• Structured, independent review
• Determine if activities comply
with policies, processes and
procedures
• Identify inefficiencies
• Can be scheduled or random
• Internal or external
 Identifying and following the correct processes in QA leads to acceptable deliverables in QC.

Quality Assurance: Procedures Quality Control: Deliverables

• Store food properly Food Quality

• Wash hands Health Standards

• Follow food preparation processes Consistency of menu items

• Assemble plates efficiently Speed of service

• Wash and sanitize dishes Clean plates and tableware

 Problems can be found through Prevention (conformance) activities such as inspections,
or through Failure (non-conformance) when the customer is dissatisfied.

Quality Assurance: Procedures Quality Control: Deliverables

• Store food properly Food Quality

• Wash hands Health Standards

• Follow food preparation processes Consistency of menu items

• Assemble plates efficiently Speed of service

• Wash and sanitize dishes Clean plates and tableware

Why are there spots on the dishes?
• Is it an equipment issue?
• Is it a training issue?
• Is it something else?

Ishikawa
Diagram Spots on dishes

Fishbone
Diagram

Cause and Effect

Diagram
Identify the Issue correct it or Submit Change Request Validate Change
 Problems can be found through Prevention (conformance) activities such as inspections,
or through Failure (non-conformance) when the customer is dissatisfied.

Quality Assurance: Procedures Quality Control: Deliverables

• Store food properly Food Quality

• Wash hands Health Standards

• Follow food preparation processes Consistency of menu items

• Assemble plates efficiently Speed of service

• Wash and sanitize dishes Clean plates and tableware

 Cumulative percentages

100
200
175 80
150
Frequency

125 60
100
75 40
50
25 20
0
Personnel Materials Equipment Design
 Prevention Appraisal Internal Failure External Failure
Training Testing Scrap Warranty

Documenting processes Destructive testing Rework Liability

Maintaining equipment Inspecting Lost business

Don't skip steps Loss of reputation

Use continuous improvement to increase efficiency, eliminate or reduce waste, and make incremental improvements.

Low Cost and Customer Exposure High

QUALITY AND PROCESS
IMPROVEMENT

Total Quality Management

• Continuous incremental improvements
• All team members participate
• Increase efficiency
• Eliminate or reduce waste
• Process improvement is iterative

Quality: “The degree to which a set of inherent

characteristics fulfill requirements”
• Normal distribution
• “Bell curve”
• Special cause
• Common cause

Empirical Rule
• 68.2% of the samples will be within 1 standard
deviation of the mean
• 95.4% of the samples will be within 2 standard
deviations of the mean Six Sigma = 6σ
• 99.7% of the samples will be within 3 standard 99.9997% of samples within 6 standard deviations of the mean
3.4 defects per million
deviations of the mean
This is a “left-skewed” distribution
 X Bar chart

Upper Control Limit UCL

3s
Center Line Mean
0s

3s
Lower Control Limit LCL

Time
• A process is out of control when 1 data point exceeds a control limit
• A process is out of control when 7 consecutive (Rule of 7) plot points are above or below the mean within the control limits
• A process is out of control when 7 consecutive (Rule of 7) plot points trend up or trend down within the control limits.

Assignable Cause
UCL
+3sd
Assignable Cause Mean
0
Assignable Cause

-3sd
LCL
Assignable Cause

Research an assignable cause for out of control processes

Your Upper Control Limit (UCL) is 11, and the Lower Control Limit (LCL) is 3.
Which of these is out of control?

A) 3 4 6 7 4 10 11 5 7 11 11

A 7 B 7
B) 4 4 6 6 3 5 4 5 11
3 3

C) 5 8 9 3 3 3 3 3 8
11 11
D) 8 8 9 7 4 11 11 7 9
C 7 D 7

3 3
Your Upper Control Limit (UCL) is 50, and the Lower Control Limit (LCL) is 12.
In which circumstance do you look for an assignable cause?

A) 20 29 28 12 15 40 30 45

B) 50 32 38 28 48 47 48 40

C) 30 40 25 11 30 48 16 30

D) 30 33 32 18 28 45 30 20
Y Y Y

X X X

Positive correlation Negative correlation No correlation

Note that correlation does not necessarily mean causation
Types of change requests:
Preventive Action Corrective Action
• Aligning the project work to the project plan • Realigning the project work to the project plan
• Improving and documenting processes • Reaffirming processes
• Preventing defects • Adhering to processes
• This is conformance • This is conformance
• It is relatively inexpensive • It is relatively inexpensive
• It includes little to no customer exposure • It includes little to no customer exposure

Defect Repair
• Modifying a nonconforming product or component
• This is nonconformance
• It is expensive
• It includes high customer exposure
 Dedicated resources Shared resources
PM can hire staff PM must negotiate for staff

Projectized organization Functional organization

Executive Executive

Project Project Functional Functional

manager manager manager manager

Project Project
Staff Staff Staff Staff
team member team member
RESOURCES TERMINOLOGY
Overallocated resources Benched resources

The project manager is responsible for coordinating the right resources at the right time.
RESOURCES
MANAGEMENT PLAN

How should the resources be staffed, managed and

released?
Resource Planning Documents
• Resource breakdown structure
• Resource calendars
• Project staff assignments
• Team performance assessments
 (OBS)
• Shows departments and teams within the organization
• Does not specify job assignments or individual names

Finance manager

Operations
manager
CEO
Human resources
manager

Project
manager
RESOURCE
BREAKDOWN
STRUCTURE
(RBS)

• Breaks project work into

resource categories
• Shows individuals and
assignments
 • Visually simple
• Breaks resources into categories
• Organizes data
• Reports on utilization

Software Project

(RBS)
Software Developers Testers

Andy Tim Kim

Cost: $45/hr Cost: $35/hr Cost: $25/hr
Availability: 20 Availability: 40 Availability: 40
hrs/wk hrs/wk hrs/wk

Copyright ® Skillsoft 2020

 AND

RAM (Responsibility Assignment Matrix)

Activity Activity Activity Activity
Name X
Name X
Name X
Name X
Name X

Role:
Responsibilities:

Hierarchical type chart Authority:

Text-oriented format

Copyright ® Skillsoft 2020

 ANALYSIS

Candidates Availability Cost Experience Ability Knowledge Skills Total score

D. Alford 3 2 3 3 3 2 16

C. Dillon 3 1 3 3 3 3 16

L. Ricci 1 3 2 2 2 2 12

J. Edwards 3 2 2 1 1 1 10

F. Philips 1 2 1 3 2 2 11

L. Tan 2 1 3 2 3 3 14

J. Fernandez 2 3 1 1 1 1 9

S. Branson 1 2 1 2 1 2 9
 TEAMS

Benefits and Challenges

• Language/jargon
• Cultural differences
• Time zones
• Assumptions
• Technology
• Misunderstanding
VIRTUAL TEAMS

Advantages
• Talent is not limited to one geographic
region
• Around the clock coverage
• Little or no travel or relocation expenses
• Ability to work from home

Copyright ® Skillsoft 2020

VIRTUAL TEAMS

Disadvantages
• Miscommunications
• Time zone barriers
• Difficult to share experiences and
knowledge
• Feelings of isolation
• More difficult to monitor performance
• Hard to develop bonds between team
members
VIRTUAL TEAMS
Team Member Needs
• Shared goals
• Frequent check-ins
• Clear roles and expectations

Areas of Focus
• PM facilitation
• Team dynamics
• Shared vision
• Purposeful communication
VIRTUAL TEAM
TOOLS

• Videoconferencing tools
• Collaboration tools
• Task boards
In-house Third Party
• Pre-assignment • Acquisition
• Negotiation with functional manager • Procure from a vendor
Staffing Plan:
• Resource skills
• Resource availability
• Outsourcing needs
• Union contracts
• Costs associated with skill levels
• Release criteria
• Training needs
• Rewards
• Safety policies

Enterprise Environmental Factors (EEFs)

• How do they influence staffing decisions?
 PROJECT STAFF ASSIGNMENTS

Project name: Customer Support Contact Center

Prepared by: Jack Ellison

Function Area/
Name Project role E-mail Phone
Vendor

Julio Fernandez HR Department Recruiter [email protected] (202) 555-1111 x 2

(202) 555-1111 x 3
Fiona Philips Testing Unit Software testing [email protected]

Install and
[email protected] (202) 555-1111 x 7
Julia Edwards IT Department implement
software
 RESPONSIBILITY ASSIGNMENT MATRIX (RAM)

Team members Advertise Interviews Onboarding Orientation Equipment Training

D. Alford X

C. Dillon X X

L. Ricci X X

J. Edwards X

F. Philips X

L. Tan X

J. Fernandez X

S. Branson X
 RACI CHART
A RACI Chart is a type of Responsibility Assignment Matrix, or RAM.
Team members Test Software
D. Alford R, C
C. Dillon R R = Responsible (does the work)
L. Ricci A A = Accountable (must answer for the work)
C = Consult (subject matter expert)
J. Edwards R I = Inform (should be notified about status)
F. Philips C
• Team members can have > 1 role
L. Tan I • Only one person can be accountable
J. Fernandez C
S. Branson I

A RASI Chart is another type of Responsibility Assignment Matrix, or RAM. RASI

is an acronym that stands for Responsible, Accountable, Support, and Informed.
INVESTING IN TEAM MEMBERS

I have a team member who doesn’t

have the skills we expected. What
should I do? ?

Project Employee
Manager
TEAM DEVELOPMENT
Strategies to improve team performance:
• Set high performance and technical expectation benchmarks
• Recognize individual efforts and contributions
• Quickly identify problems

Coach
• Develops and maximizes both team and individual performance
• Help team apply Agile practices in daily work
• Facilitate relationships between development team and
customer
• Keep focus on goals of the project

Ensure team members are energized

Focus on one task at a time
SKILLS
• Leadership
• Team building
• Motivation
• Communication
• Influencing
• Decision making
• Political and cultural awareness
• Negotiation
• Trust building
• Conflict management
• Coaching
ACTIVITIES

• Help individual team members work together

effectively
• Particularly valuable when team members
operate from remote locations without the
benefit of face-to-face contact
• Informal communication and activities can
help in building trust and establishing good
working relationships
SMART GOALS

Specific
Measurable Earn the PMP® certification within
2 months. Study 100 hours, take all
Attainable 5 class sessions and pass the
practice exams with a score of at
Results oriented least 80%.
Timely
 RECOGNITION AND REWARDS

• Award based on attaining specific goals

• Follow Resource Management Plan
• Money or intangibles are acceptable
• Reward must be valued by the individual
• Cultural differences should be
considered
• People are motivated by growth and
challenge
• Give recognition throughout the life
cycle
 STAGES OF TEAM DEVELOPMENT:
TUCKMAN LADDER

1 Forming

2 Storming

3 Norming

4 Performing

Productivity – none to low

5 Adjourning Management style - directive

The management style should be situational, depending on the team’s stage of development
 STAGES OF TEAM DEVELOPMENT:
TUCKMAN LADDER
On my last
I disagree.
project, we did
I think we should

1 Forming
it this way…
do it this way.
???

2 Storming

3 Norming

4 Performing

Productivity – low
5 Adjourning Management style - coaching
 STAGES OF TEAM DEVELOPMENT:
TUCKMAN LADDER

1 Forming ?

2 Storming

3 Norming

4 Performing

Productivity – medium
5 Adjourning Management style – supporting

The management style should be situational, depending on the team’s stage of development
 STAGES OF TEAM DEVELOPMENT:
TUCKMAN LADDER

1 Forming

2 Storming

3 Norming

4 Performing

Productivity – high
5 Adjourning Management style - facilitating
 STAGES OF TEAM DEVELOPMENT:
TUCKMAN LADDER
Goodbye,
it was great
working

1 Forming with you!

You too!

2 Storming

3 Norming

4 Performing

5 Adjourning
• Give praise immediately
• Make positive feedback public
• Be specific
• Consider the receiver
• Do it often
• Don’t wait for the big successes
• Be sincere

Copyright ® Skillsoft 2020

 TOOLS
Gives insight into strengths and weaknesses
Manage team preferences, aspirations, and how they process
and organize information
Facilitates productive teams
Tools include
• Attitudinal surveys
• Specific assessments
• Structured interviews
• Ability tests
• Focus groups
PERSONALITY PROFILE ASSESSMENTS

Whole Brain Thinking Social Style Model

Ned Herrmann TRACOM

Theory of Psychological Types DiSC Assessment Model

Carl Jung William Moulton Marston

Myers-Briggs Type Indicator (MBTI) True Colors Methodology

Katherine Cook Briggs and Isabel Briggs Myers Don Lowry
 INVESTING IN TEAM MEMBERS

I have tried to coach a team member but

nothing I do helps. He is so disruptive,
and it is hurting the team’s performance.
What should I do?
%*#&!

Project Employee
Manager
 TEAM MOTIVATION
Line of Sight

• Goals help the staff to channel their energy • how the organization works

productivity • the strategic goals, and

• Feedback helps the staff to adjust their direction to • how my work contributes to success.
attain the goals
• Action plans outline the tasks that are necessary to
obtain the goals
• Individuals that are committed to the goals will have
higher productivity
Self
• Employee satisfaction is related to participating in the
Team
goal setting especially when top management is also
Value stream
committed to the goals.
Company
 MCGREGOR'S X AND Y THEORIES

Theory X Theory Y
(authoritarian management style): (participative management style):
• The average person dislikes work • Effort in work is as natural as work and play

• People must be forced to work towards • People apply self-control and self-direction, without
organizational objectives external control

• The average person prefers direction, avoids • Commitment to objectives is a function of rewards
responsibility, relatively unambitious, and want associated with their achievement
security
• People accept and seek responsibility

• Using imagination, ingenuity, and creativity in solving

organizational problems is widely distributed in the
population
MASLOW’S HIERARCHY OF NEEDS

Self
Self-fulfilment, growth, learning
Actualization

Esteem
Accomplishment, respect, appreciation

Social
Love, affection, friends, approval

Safety
Financial and physical safety, shelter

Physiological
Air, water, food, clothing
 MCCLELLAND’S NEEDS THEORY
Need for Achievement: Need for Affiliation: Need for Power:
• Prefer tasks of moderate difficulty • Prefer to spend time maintaining • Desire to influence, coach and
where performance is due to efforts social relationships encourage others to achieve
not luck • Not the most effective managers • Concerned with discipline and self
• Desire more feedback on successes because they worry about being respect
and failures disliked • Top managers have a high need for
power and a low need for affiliation

1. Provide achievement training for 1. Affiliators are not as motivated 1. Be aware of the positive and
employees in pay-for-performance negative side to power
2. Achievers prefer to work in pay- environments 2. Facilitate the positive influence by
for-performance environment 2. Give them the opportunity to allowing these individuals to
work in groups accomplish group goals and
coaching others
3. Keep alert for an “If I win, you lose”
mentality
 HERZBERG'S THEORY OF HYGIENE
Hygiene/Dissatisfier Motivators/Satisfiers
• Working conditions • Recognition
• Policies • Achievement
• Administrative practices • Advancement
• Salary and Benefits • Growth
• Supervision • Status
• Status • Responsibility
• Job security • Job challenge
• Fellow workers
• Personal life
CONFLICT MANAGEMENT
Sources of conflict
• Scarce Resources
• Scheduling Priorities
• Personal Style

Types of conflict
• Dysfunctional vs. Functional

Desired outcomes of conflict

• Agreement
• Stronger Relationships
• Greater Productivity

Strategies to reduce conflict

• Address conflict early and in private using a direct, collaborative approach
• Support team ground rules and group norms
• Clearly define roles and responsibilities
• Plan for communications

Roles in conflict resolution

• Team members are initially responsible for resolving conflict
• PMs can help facilitate resolutions for escalated conflict
• Formal disciplinary procedures may be needed in extreme circumstances
 THOMAS KILMANN MODEL
FOR HANDLING CONFLICT
The Thomas Kilmann Conflict Mode Instrument is a model for handing conflict:

ASSERTIVE
Force/Direct/Compete Collaborate ✓

Compromise

Withdraw/Avoid Smooth/Accommodate
PASSIVE

UNCOOPERATIVE COOPERATIVE
 COMMUNICATION METHODS
Interactive

Sharing platforms
• Information portal
• Communities of interest
• Answering specific requests
• Training
Push Pull
• Newsletters
• Publications
• Team meetings
• One-on-one meetings
Too much information can lead to
• Confusion
• Unproductive actions
• Wasted time
• Frustration and doubt
• Misunderstanding

Stakeholders’ information needs differ

Targeted properly
• Right format
• Right time
• Right audience
STAKEHOLDER COMMUNICATION
REQUIREMENTS

Communication Preferences
Name Contact Role

Frequency Method

213-555-3400 Environmental lawyer and

David Ross Weekly E-mail
[email protected] watchdog

555-555-1234
Rashid Sufi Subject Matter Expert As needed Email or phone
[email protected]
 WITH WHOM TO SHARE

Choosing target audience

• Who will benefit?
• Who will find it relevant?
Different stakeholders require different
information
• Upper management
• Project managers
Target Audience
When to Share
• Report frequently
• Start as early as possible
• Only after proper analysis
COMMUNICATION MODEL
Basic communication model

2. Transmit message
1. Encode 4. Acknowledge 3. Decode

Sender Receiver

Decode Encode
5. Feedback message
 COMMUNICATION MODEL

Noise
2. Transmit message
1. Encode 4. Acknowledge 3. Decode
Misunderstandings
Language differences Noise

Technology problems Sender Receiver

Noise

Decode Encode
5. Feedback message
TECHNOLOGY CONSIDERATIONS

Urgency
Availability
Ease of use
Project environment
Sensitivity of the information
COMMUNICATION DIMENSIONS

Formal / Informal Official / Unofficial

Internal / External Written / Oral

Vertical / Horizontal Verbal / Non-Verbal

 COMMUNICATION CHANNELS

Communication Channels Formula n (n-1)

EXAMPLE:
You have 5 people on your team. How many communication
2
channels are there?

5(4) 20
= = 10
2 2
 CHANNELS

“Other”
There are 6 people on the team.
N=6

There are 6 “other” people on the team. N = 6 + 1 (remember to count yourself)

N=7
 CHANNELS

“More” There are 6 people on the team. Three “more” people are added.
N=6 Now N = 9

6(5) 30 9(8) 72 = 36
= = 15 =
2 2 2 2
How many “more” communication channels are there?
This requires two calculations!

Step 1 – Calculate for N = 9 (How many channels there are now)

Step 2 – Calculate for N = 6 (How many channels there were before)
Step 3 – The difference is how many “more”
POLITICAL
AWARENESS
Understanding the power and influence of stakeholders
and their relationships with the project. Being willing and
able to recognize these relationships, structure
communications and manage stakeholder engagement
within this political environment.
Project risks:
• Events that might happen
• Would have an impact on objectives

Negative risk = threat

Positive risk = opportunity
Opportunity Threat
Be able to spot risks
Determine if they are threats or opportunities
Add identified risks to a risk register
Seek input from subject matter experts
 RISK TERMS TO KNOW FOR THE EXAM
Risk Appetite
The degree of uncertainty an entity is willing to take on in anticipation of a reward
Risk tolerance is a “range”.

RISK TERMS TO KNOW

FOR THE EXAM
Risk Tolerance
The degree, amount, or volume of risk that an
organization or individual can withstand.
 Risk threshold is a “tipping point”.

Risk Threshold
Refers to measures along the level of uncertainty or
the level of impact at which a stakeholder may have
a specific interest. Below that risk threshold, the
organization will accept the risk. Above the
threshold, the organization will not tolerate the
risk.
 Project Very Low Low Moderate High Very High
Objectives
Cost Insignificant <5% 5-15% 10-20% >30%
Cost increase Cost increase Cost increase Cost increase Cost increase

Schedule Insignificant Schedule slips Overall schedule Overall schedule Overall schedule
schedule <5% slips slips slips
slippage 5-15% 10-20% >30%
Scope Scope decrease Minor areas of Minor areas of Scope reduction Project end item is
slightly noticeable scope affected scope affected Unacceptable useless
to client
Quality Quality Only very demanding Quality reduced, Quality reduced, Project end item is
degradation applications Requires client Unacceptable unusable
slightly affected approval to the client
noticeable
 PLAN RISK MANAGEMENT

RISK MANAGEMENT PLAN

• Approach to managing risk

• Tools and methodology
• Team responsibilities
• Risk categories

Governance
• Procedures for spending and approvals
• Meetings, documentation, and reporting
 ASSUMPTIONS ANALYSIS

?
Assumption. A factor in the planning process that is considered to be true, real, or
certain without proof or demonstration

Assumptions Analysis. A technique that explores the accuracy of assumptions and

identifies risks to the project from inaccuracy, inconsistency, or incompleteness of
assumptions

?
We have to make certain assumptions during planning
Ex. Prices of raw materials will remain steady
Ex. Vendors will follow through on commitments
FUTURE Ex. Resources will remain available
Inaccurate assumptions contribute to risk
Root Cause Analysis SYMPTOMS

• What happens “if”…?

• The Five Whys
• Cause and Effect diagrams
• Checklists
• Pre-mortem

Analysis Pitfall
• Addressing proximate causes may not solve the problem
• Systemic problems will cause more failures if not
addressed

CAUSES
 Identified through internal analysis

Strengths Weaknesses

SWOT

Opportunities Threats

Identified through external analysis

 Weaknesses Cell Action
Strengths
• Location • Poor cash flow at
• Specialist knowledge the moment Exploit the opportunities using the
S-O
in web site design • Small company – strengths
lack of resources

SWOT S-T Avoid threats using the strengths

Opportunities Threats Turn weakness into strength using

W-O
• Can expand into online • Could be poached opportunities
shopping and web site or taken over by
design bigger
• Exposure might attract organizations W-T Fix weakness
new customers
A list of general risk categories that can be used to help generate ideas about individual
risks that could affect the project.

Examples:
VUCA (volatility, uncertainty, complexity, ambiguity)
PESTLE (political, economic, social, technical, legal, environmental)
TECOP (technical, environmental, commercial, operational, political)
 Risk Register for Project XYZ
Identify Root Probability Ranking Categories Priorities Time and Potential Risk Assumptions
Risks Causes and Impact Cost Responses Owners
Objectives
 KNOWNS AND UNKNOWNS
Known-Unknown Risks Unknown-Unknown Risks
• Have been identified and analyzed (risk register) • Have not been identified (not in risk register)
• Ability to plan risk responses • Cannot be managed proactively
• You know the risk, but not when or if it will happen • You don’t know about the risk or its cost to the project
• Manage the risk or use contingency reserve • Use management reserve

Risk Register for Project XYZ

Identify Root Probability Ranking Categories Priorities Time and Potential Risk Assumptions
Risks Causes and Impact Cost Responses Owners
Objectives
The risk report is a project document which summarizes overall
project risk. It lists the sources, categories and counts of risks. It
is also used to provide risk metrics and trends.

Risk Report Risk Register

• Summary of all risks • Individual risks

• High level strategic view of all risks • Focused view of each individual
risk and its related details
• Rank and prioritize risks

• Categorize risks

Technical
Reliance on new or unproven technology
Changing industry or tech standards
Organizational
Poor project prioritization
Inadequate or inconsistent funding
Conflict with other projects for resources
External
Legal or regulatory changes
Weather/natural disasters
 Very Low Low Moderate High Very High

Cost Insignificant <5% 5-15% 10-20% >30%

Cost increase Cost increase Cost increase Cost increase Cost increase
Schedule Insignificant Schedule slips Overall schedule Overall schedule Overall schedule
schedule <5% slips slips slips
slippage 5-15% 10-20% >30%
Scope Scope decrease Minor areas of Minor areas of Scope reduction Project end item
slightly noticeable scope affected scope affected Unacceptable is useless
to client
Quality Quality Only very demanding Quality reduced, Quality reduced, Project end item
degradation Applications Requires client Unacceptable is unusable
slightly affected approval to the client
noticeable
Probability-impact Priority rating Threats
combination
.90 .09 .23 .45 .68 .81

Low --------------------High
Low/Low Low

Low/Medium Low .75 .08 .19 .38 .56 .68

Probability
Low/High Low-Medium .50 .05 .13 .25 .38 .45
Medium/Low Low
.25 .03 .06 .13 .19 .23
Medium/Medium Medium

Medium/High High .10 .01 .03 .05 .08 .09

High/Low Low
.10 .25 .50 .75 .90
High/Medium High

High/High Very High Impact

Low -------------------------------------High
 COST OF RISK

INTERVIEWS AND DATA GATHERING

Interviewing techniques draw on experience and historical data to quantify the
probability and impact of risks on project objectives.

Range of Cost Estimates

Risk Low Most Likely High
Risk 1 $4M $6M $10M

Risk 2 $16M $20M $35M

Risk 3 $11M $15M $23M

Total Risk $31M $41M $68M

 Range of total project costs

1.0
Probability Distributions
Interviewing relevant stakeholders helps determine the 0.75

three-point estimates for each WBS element. In this

0.50
example, the likelihood of completing the project at or
below the most likely estimate of $41 million is 0.25
relatively small.
0.00
31m 41m 68m
Graphical aids used to assist decision making under Project
Deliverables
uncertainty Activity
Uncertainty can be shown as a range of possibilities
(probability distribution) and simulations (e.g. Monte
Carlo) can be used to indicate which elements have the
greatest influence on key outcomes
Risk Project
Condition Estimates
SENSITIVITY ANALYSIS

Sensitivity analysis helps to determine

which risks have the most potential
impact on the project.
 TECHNIQUE

Probability analysis
• Run variables through a model to determine different outcomes
• Determine a range of possibilities and their probabilities
• The simulation is run several thousand times until a range of
probabilities becomes clear
EXPECTED MONETARY VALUE

Wager = $1 on black
Probability of landing on black = 18/38
Probability of not landing on black = 20/38
 (EMV)

Expected Monetary Value (EMV) analysis is a statistical concept that calculates the average outcome when
the future includes scenarios that may or may not happen.
Risk analysis of two choices:

Option A: We can try to be first to market with our software product.

There is an 80% chance of incurring a cost of $400,000 for rework effort and additional technical support.
There is a 30% chance of recognizing $2,000,000 in extra revenue by being first to market.
Threats = - $400,000 * .8 = - $320,000
Opportunities = $2,000,000 * .3 = $600,000
EMV = $280,000
 (EMV)
Expected Monetary Value (EMV) analysis is a statistical concept that calculates the average outcome when the future
includes scenarios that may or may not happen.
Risk analysis of two choices:

Option B: Instead of being first to market, we can focus on the inclusion of an extra feature.
There will be a $70,000 investment. There is a 50% chance of added rework of $160,000. There is a 60% chance that
inclusion of this feature will return $500,000 if we are the only vendor with this feature.
Threats = -$160,000 * .5 = - $80,000
Opportunities = $500,000 * .6 = $300,000
EMV = $150,000 (Don’t forget to subtract the $70,000 investment!)
Which choice is best for us?
 DECISION TREE

Risk of rework and

Extra support
Try to be first 80% * - $400,000
-$320,000+$600,000
to market EMV= $280,000
Recognize extra
Revenue
Which 30% * $2,000,000
Option?
Risk
of rework
Include an extra 50%* - $160,000 -$80,000 + $300,000
feature (-$70,000 investment)
Recognize extra revenue EMV= $150,000
60% * $500,000
Discrete Distribution
The data can only contain specific values Continuous Distribution
Ex: Decision Trees The data can fall within a range of values
Ex. Three-point estimating, PERT

1.0
Mutual Exclusivity 0.75
The outcome of one event prevents the possibility of another.
0.50
Ex. Painting a house blue prevents the possibility of any other color.
Ex. Heads on a coin toss prevents the possibility of tails on that 0.25
same toss.
0.00
31m 41m 68m
 THREATS

Possible Risk Responses – Threats

Responses Description
Escalate Determining that the threat is outside the scope of the project and exceeds the authority of the project manager.
Example: The project manager notifies the PMO that a cease and desist order has been received to stop project work.

Avoid Changing the project management plan through integrated change control to totally eliminate the threat.
Example: Removing a feature from the scope. Extending the schedule baseline to meet the due date.
Transfer Shifting the impact to a third party who is responsible for the response. Usually involving cost risk and contracts.
Example: Purchasing insurance or a warranty.
Mitigate Reducing probability and impact so it falls within an acceptable threshold.
Example: Negotiating with a backup supplier for more materials. Interviewing candidates for potential job openings before
you need them. Following the weather report.
Accept Determining not to change the course of the risk. Could be Passive where no action is taken or Active which is using pre-
determined contingency reserves to “accept” the risk.
Example: Putting funds into a contingency reserve to pay for the impact of the risk event.
 OPPORTUNITIES

Possible Risk Responses - Opportunities

Responses Description
Escalate Determining that the opportunity is outside the scope of the project and exceeds the authority of the project manager.
Example: The project manager notifies the PMO that a vendor has offered a volume discount to the organization.

Exploit Changing the project management plan through integrated change control to eliminate the uncertainty and make it
happen.
Example: Adding a feature to the scope baseline to potentially guarantee best product on the market.
Share Allocating some or all of the impact to a third party who is best able to capture the opportunity for the benefit of the
product. Usually involving joint ventures and contracts.
Example: Creating a joint venture firm to share the opportunity.
Enhance Maximizing the probability and impact.
Example: Adding more resources to an activity so that it finishes early.
Accept Being willing to take advantage of an opportunity but not actively pursuing it.
Example: Expert and experienced staff will quickly create a high-quality deliverable.
TERMS

Risk Trigger: Risk Owner:

An event that lets you know a risk is about to The person or party responsible for the risk
occur. response.
Triggers can be identified before or after the risk
event.
• Monitor and manage risks

Trigger
Risk Event !
Event
Secondary Risk: creating a new risk because of response implementation
Example: Fast tracking schedule creates a new risk to the quality of the deliverable.

Residual Risk: Left over risk after a response has been implemented
Example: Providing safety training can’t guarantee zero incidents

Fallback Plans: A reaction to a risk that has occurred, and the primary response was inadequate
Example: Avoided the risk by extending the schedule baseline due date but we are still behind schedule.
Now we must crash activities.
 Well, it looks like we are getting
some negative media attention.
We knew this was a possibility
and I’d like to handle it as quickly
as possible. What should we do
first?

IMPLEMENT
RISK
RESPONSES

Project Manager
 What terrible luck. We never see
this type of damaging weather. This
is unheard of, so of course we
didn’t plan for it. What do we do
first?

IMPLEMENT
RISK
RESPONSES

Project Manager
 FLOW CHART
A Risk Event has Occurred
Was the risk identified during risk No (Unknown-Unknown) Consult Risk Management Plan and
planning? Project Management Plan
Use Management Reserves
Yes (Known-Unknown)
Consult risk register Yes Update OPAs
Implement risk response
Project Document Updates
Is the risk response 100% successful?
No Update OPAs
Implement contingent response Yes Project Document Updates
Is the response 100% successful? Use contingency reserves if needed
Perform Risk Reassessment
No Submit Change Requests
Consult Risk Management Plan and
Project Management Plan
Use Management Reserves
 Do the contingency
reserves need to be modified? Did the response work?

Are the risk management Are there any new risks?

policies being followed?

Has an assessed risk changed? Are our assumptions still valid?

MONITORING RISKS
Risk Reassessment Risk Audits

1. Identifying new risks 1. Documenting the effectiveness of risk

2. Reassessing current risks responses
3. Closing outdated risks 2. Making sure root causes have been
addressed
Iterative Process 3. PM is accountable for auditing at an
appropriate frequency
What risks have changed?
How well are we handling risks?
MONITORING RISKS

Reserve analysis
How much time and money is left compared to the amount of risk?
 DAILY BOOTCAMP SURVEY

Please share your thoughts.

At the end of each Bootcamp session please let us know how we are doing. Your feedback helps us to offer the best possible
Bootcamp experience.

Thank you for attending Session 3!