Risk management is an integral part of effective project management. As future PMI Risk Management Professionals (PMI-RMP), one needs to have an understanding of certain risk attributes such as probability, impact, and urgency. Understanding these elements will help you develop an effective risk management plan, allowing you to predict potential issues in a project, devise strategies to mitigate them, and execute the project successfully.
I. Probability
Probability refers to the likelihood of a risk event occurring on your project. The probability attribute is typically assessed on a scale from 0 to 1, with 0 representing an impossibility for the risk to occur, and 1 indicating a certainty that the risk will occur.
For example, consider a software development project. The risk of an employee falling sick and being unable to work might have a moderate probability of 0.3. However, the risk of experiencing a severe software bug that halts production might have a higher probability of 0.8. Clearly understanding these probabilities is crucial in risk analysis and determining where to focus mitigation efforts.
II. Impact
Impact is the effect a risk event will have on the project if it occurs – typically in terms of cost, time, scope, or quality. Impacts, like probability, are usually rated on a scale. It could range from very low to very high, with numeric values assigned to denote the severity of each level.
For instance, in a construction project, the risk of a minor equipment failure may have a low impact, potentially causing a small cost overrun or minor schedule delay. However, the risk of serious construction accidents has a high impact, possibly causing a significant schedule delay and additional cost, not to mention the human loss.
III. Urgency
Urgency relates to the time available or required to respond to a risk event. Risks with high urgency require immediate attention, while low-urgency risks can wait. Urgency is often a function of both the risk’s proximity and its impact.
As an example, consider a retail business that is preparing for a significant sales event. The risk of running out of stock during the sales event has high urgency because the event is nearing and the impact of running out of stock is significant. On the other hand, the risk that a supplier might go out of business is a medium-urgency risk because, although the impact would be substantial, there are still several months to find a new supplier.
Table: Example of Risk Attributes
| Risk Event | Probability | Impact | Urgency |
|---|---|---|---|
| Employee sickness | 0.3 | Moderate | Low |
| Major Software bug | 0.8 | High | High |
| Running out of stock | 0.5 | High | High |
| Supplier going out of business | 0.2 | High | Medium |
In conclusion, understanding the risk attributes – probability, impact, and urgency are vital. PMI-RMP aspirants must be well-versed in identifying these attributes and assessing them accurately. This aids in prioritizing risks and effectively strategizing risk responses. Thus, a balanced consideration of these attributes leads to a well-managed project and a successful PMI-RMP.
Practice Test
Probability, impact, and urgency are the three primary risk attributes.
- True
- False
Answer: True
Explanation: These are the three main attributes used in risk management to define and assess the risk.
Probability in risk management refers to the likelihood that an event will occur.
- True
- False
Answer: True
Explanation: Probability is the chance or likelihood of a certain event occurring during the course of a project.
Impact in risk management refers to the magnitude of the risk’s potential to negatively affect a project’s objectives.
- True
- False
Answer: True
Explanation: The impact of a risk refers to the possible effect or consequence a risk can have on the project’s objectives in terms of cost, schedule, quality, performance etc.
The urgency in risk management is related to the timeline within which a risk is expected to occur.
- True
- False
Answer: True
Explanation: Urgency refers to the timeline within which the stakeholders will have to respond to a risk to avoid its negative impacts.
The higher the probability of a risk, the higher the impact.
- True
- False
Answer: False
Explanation: The impact of a risk is not necessarily related to its probability. A risk could have a low likelihood of happening but still pose a high impact.
A risk with high impact and high probability should be prioritized over a risk with high impact but low probability.
- True
- False
Answer: True
Explanation: Generally, risks with high impact and high probability should be prioritized over other risks due to the potential severity of consequences and likelihood of occurrence.
It is unnecessary to maintain an updated risk register which includes probabilities, impacts and urgencies of risks.
- True
- False
Answer: False
Explanation: Keeping an updated risk register is crucial in risk management. It helps to track and prioritize the risks, also to formulate proper responses.
The urgency of a risk does not play a role in prioritizing the risk response.
- True
- False
Answer: False
Explanation: The urgency of a risk plays a significant role in prioritizing risk responses because some risks may need to be addressed immediately while others can wait.
Risks with high urgency should be given priority over those with low urgency.
- True
- False
Answer: True
Explanation: Risks with high urgency need quick responses and thus should be prioritized.
Depending on the project, one of the three key risk attributes (probability, impact, and urgency) may be more relevant than the others.
- True
- False
Answer: True
Explanation: The relevance of the three risk attributes can vary across different projects. Certain projects may prioritize one attribute over the others based on their unique requirements and risk landscape.
Managing risks is not a continuous process, but a one-time activity at the start of the project.
- True
- False
Answer: False
Explanation: Managing risks is a continuous process throughout the life of the project. Risks may change or new risks may emerge as the project progresses.
It is more important to focus on the probability of a risk than its impact.
- True
- False
Answer: False
Explanation: Both risk probability and impact are equally important. High-probability risks with smaller impacts may still create significant cumulative effects.
Every identified risk should have an associated probability, impact, and urgency.
- True
- False
Answer: True
Explanation: For effective risk management, each identified risk should be evaluated for its probability, impact, and urgency.
The risk score is calculated by multiplying probability by urgency.
- True
- False
Answer: False
Explanation: The risk score is usually calculated by multiplying risk probability by impact, not urgency.
The risk matrix is a tool used to prioritize risks based on their probability, impact, and urgency.
- True
- False
Answer: True
Explanation: A risk matrix is indeed used to prioritize risks by visually representing the probability, impact, and urgency of each risk on a two or three-dimensional matrix.
Interview Questions
What are the three primary attributes used in risk identification processes according to the PMI-RMP framework?
The three principal attributes used in risk identification according to the PMI-RMP are probability, impact, and urgency.
Define the term ‘probability’ in the context of PMI-RMP.
In the context of PMI-RMP, probability refers to the likelihood of a specific risk occurring within the lifespan of a project.
What does ‘impact’ refer to in risk management?
Impact in risk management refers to the potential outcome, or the magnitude of the effect a risk could have on the project if it were to occur.
How does a risk with high urgency differ from one with low urgency in the PMI-RMP context?
A risk with high urgency would require immediate attention and action because it’s potential impact is imminent, while a risk with low urgency might not require immediate attention and can be planned for in the future.
How does probability assessment assist in risk management according to PMI-RMP?
Probability assessment assists in prioritizing risks. Risks with higher probabilities are generally kept on higher priority than those with low probabilities.
What are the techniques used to assess the probability and impact of a risk?
Techniques commonly used to assess probability and impact of a risk include risk probability and impact assessment, the Probability and Impact Matrix, and expert judgment.
In the context of PMI-RMP, how do you calculate the risk score?
The risk score is typically calculated by multiplying the assessed probability of a risk occurring by the assessed impact should the risk occur.
What role does urgency play in the risk response planning?
Urgency is key in dictating the speed at which the risk response needs to be implemented. More urgent risks often require expedited response plans to mitigate their impacts.
Is a risk with high impact always associated with high urgency?
No, a risk with a high impact may not always have high urgency. For instance, if a high-impact risk is also highly probable, but isn’t likely to occur until later stages of a project, it could have a lower urgency compared to an imminent but lower-impact risk.
How does understanding risk attributes help in developing risk response strategies?
Understanding risk attributes help in tailoring the response strategies to effectively address the risks. For instance, a risk with a high probability and low impact could be addressed differently than a risk with a low probability and high impact.
Can the risk attributes like probability, impact, and urgency change during the course of a project?
Yes, risk attributes can change during the course of a project as the project progresses or as circumstances change.
What is a risk register in the PMI-RMP context?
A risk register is a document where all information about identified risks is recorded, including their attributes of probability, impact, and urgency.
What is the role of a risk owner in PMI-RMP?
A risk owner has the responsibility for managing a particular risk which includes monitoring triggers, implementing response plans, and deriving mitigation strategies.
What is the difference between a risk and an issue in the context of PMI-RMP?
A risk is an uncertain event that may have a positive or negative impact on the project, while an issue is a known problem that is currently impacting the project.
Do we consider both probability and impact while ranking identified risks for prioritization?
Yes, both probability and impact are taken into account when ranking identified risks for prioritization to understand their overall risk score.
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