Risk Management Plan Sample

Use the following outline to prepare a comprehensive Risk Management Plan.

1.0    PROJECT SCOPE

         Insert the Scope Statement, or provide a brief summary of the project, including a description of the work to be accomplished, a description of the customer’s goals and objectives for the project, a general description of how the project will be accomplished, and other pertinent information that will provide a good overview of the project.

2.0    RISK EVENT DESCRIPTIONS AND EVENTS

         Determine the business and financial risks of the project, and, for each element of the WBS, identify any major risks involved in that element. Complete Risk Event Description and Risk Event Results. Reference or include a copy of the WBS in this section. The process is carried out as follows:

2.1    Identify Risks. Identify business and financial risks associated with the project. For each element of the WBS, identify any major risks associated with that element. For more information on risk identification, refer to the guide Risk Management. Complete a Risk Event Description form for each risk event identified, or use another method of documentation.

2.2    Analyze Risks and Calculate the Weighted Cost Impact. In analyzing the risks, make the assumption that the risk event identified will occur. Think in terms of the remedial activity that will need to take place to rectify the occurrence of the risk event. Using the same guidelines used in calculating the cost of the WBS elements, calculate the rectification cost (impact) without any form of “padding” or risk adjustment. Analyze the risk event and apply a weighting to the impact on a scale of 1 through 5 as follows:

·         Weight 1: Has little potential to cause disruption of schedule, costs, or performance (quality). Increase the impact by 5 percent.

·         Weight 2: May cause minor disruption of schedule, costs, or performance (quality). Increase the impact by 10 percent.

·         Weight 3: May cause some disruption of schedule, costs, or performance (quality). Increase the impact by 15 percent.

·         Weight 4: May cause major disruption of schedule, costs, or performance (quality). Increase the impact by 20 percent.

·         Weight 5: Could cause significant serious disruption of schedule, costs, or performance (quality). Increase impact by 25 percent.

Finally, estimate the probability of the event occurring as a percentage (between 0.01 and 0.99), and calculate the weighted cost impact as follows:

(Cost Impact + Cost Impact Increase) x Probability of Occurrence = Weighted Cost Impact

Example: For a risk event with an estimated cost impact of $2,750, a weight of 4, and probability of occurrence at 85 percent:

($2,750 + $550) x 0.85 = $2,805

2.3    Identify High-Risk Events. If a specific risk event has greater than 75 percent probability and/or the weighted cost impact is greater than 10 percent of the total project cost, the risk event is by definition a high-risk event. For each high-risk event, create a separate and unique WBS element that identifies the work required and the weighted cost impact required to rectify the occurrence of the high-risk event. This WBS element must be flagged as a high-risk event element as distinct from a normal WBS element.

2.4    Develop Mitigation Strategies. Determine potential strategies for mitigating the risk—either avoiding it, controlling it, or transferring it to another party. Assuming the risk consequences is also a potential mitigation strategy, but it is the least desirable. Evaluate the potential cost impact of the mitigation strategy and reflect that impact in the risk budget.

2.5    Establish the Risk Budget. Each high-risk event will become a line item in the risk budget. The other risk events should be accumulated and used to establish the managerial reserve. An amount for contingency, or those events and circumstances not anticipated in any way, should be calculated based on experience. These amounts together become the risk budget portion of the Project Budget. The risk budget should be margined at the same rate as the Project Budget to establish the budget at selling price. This then is presented to the customer in the proposal as the project price.

3.0    RISK REASSESSMENT PLAN

         Identify the major reassessment points for this project, and ensure that those reassessment points are identified in the Project Plan. At minimum, high-risk events should be reassessed at the following times:

·         Whenever major changes occur in the project or its environment

·         Before major decision milestones

·         Periodically, according to a predetermined schedule

4.0    RISK MANAGEMENT TIMETABLE

         Indicate the timetable for risk management activities. Ensure that the key events are also reflected on the Project Schedule. Major milestones include the following:

·         Completion of risk identification and analysis

·         Risk prioritization

·         Completion of mitigation strategy development

·         Incorporation into Project Plan and WBS

·         Key reassessment points

·         Documentation of risk results