Sample Risk Management Plan: Part 2: Charter, Scope, and WBS
Published: November 15, 2011
Updated: November 16, 2011
Section 2 – Charter, Scope, and WBS
The charter for the A&D High Tech Internet Store Project has been completed and demonstrates the expectations and objectives of the stakeholders involved. Internal and external stakeholders, including representatives of Geneva, have signed off on the project charter and are willing to abide by the conditions set forth.
The scope of the project includes all the deliverables necessary to bring an Internet based storefront online. The project scope includes deliverables that are outside of the competencies of employees of A&D to develop, which necessitated the addition of Geneva for most of the application development.
The project plan is made up of the Work Breakdown Structure (WBS), task estimates, resource and cost estimates, resource assignments, and schedule. Each of these documents will be used to develop the project risk management plan.
2.1 Scope of the Risk Management Plan
Market conditions in the high-tech industry change frequently. The scope of risk management for this project does not include controlling market conditions or the demand for the products that A&D High Tech produces. The scope of the risk management plan for this project will focus on the risks associated with bringing the Internet store online by Christmas.
Application development has been outsourced to Geneva so direct control of the development portion of the project is outside the hands of A&D personnel. However, frequent communication between the Internet Store Project Manager and key personnel at Geneva will continue throughout the project to identify and address risk.
The risk management plan will focus on components identified through analysis of the Work Breakdown Structure (WBS), resource estimates, resource allocations, scheduling estimates, and cost estimates. Inspecting each line-item of these documents and applying the Delphi Technique will form the basis of risk identification.
2.2 Risk Management Plan Components
Documenting the risk management plan is an important process that will continue on throughout the life of the project. The following components will be developed as a result of the continuing process and be included in the risk management plan:
- A Gantt chart derived from the WBS and including resources and scheduling components. The Gantt chart would provide a visual representation of the project plan to align with risk management.
- The Risk Breakdown Structure (RBS) will detail the results of brainstorming sessions and include all identified risks.
- The results of Qualitative and Quantitative Analysis will detail the probability of individual risks occurring and what the magnitude would be if the risks manifest.
- The Risk Matrix will stand the controlling document for risk management and include each of the identified risks along with the probability of each risk occurring, the magnitude of each risk, and the mitigating actions for the risks.
- The results of plan reviews will demonstrate the iterative nature of risk management and ensure that the risk management plan remains in line with the project and organizational goals and objectives.
- The Corrective Action Plan will define the process used to correct the risk management plan when deficiencies are discovered.
- A Results Analysis of the risk management will add closure to the plan and stand as a reference for future risk management plans.
As stated by Jeffrey (2007), Eric Robertson was the initial project manager assigned to the development of the Internet store but will be taking a 30-day leave-of-absence due to a family emergency. Chris Johnson has been assigned to replace Eric and will acquire the responsibility to develop the risk management plan as part of his project management duties. Eric will assist Chris to any extent possible but Eric will be assigned other responsibilities upon his return.
The CIO of A&D High Tech, Matt Webb, carries final responsibility for all the initiatives of the IT department. Matt will monitor the progress of the overall project, including the risk management plan. Matt will also communicate the progress to both Jeff White, the VP of Sales and to Ted Walter, the CEO; each of whom has a vested interest in the final outcome of the project.
The relationships between development and monitoring are illustrated in Table 2: RACI Matrix for the Internet Store Risk Management Plan, included to the right:
2.4 Expected Monetary Value (EMV) Analysis
The Expected Monetary Value (EMV) of a decision is a comparison of the calculated value of the outcomes of the various paths for the decision. An analysis of expected monetary value aids in the decision making process by illustrating the possible financial outcomes of the decision’s possible options.
If you could somehow determine precisely what would happen as a result of choosing each option in a decision, making business decisions would be easy. You could simply calculate the value of each competing option and select the one with the highest value. In the real world, decisions are not quite this simple. However, the process of decision-making still requires choosing the most valuable option--most valuable being, in this case, the option that has the highest Expected Monetary Value (EMV), a measure of probabilistic value. (Vanguard Software Corporation, 2009).
This project could be used to demonstrate the expected monetary value of the decision whether or not to manage risk for an organization.
Using the Prototype from Exhibit 4 of the case study for this project as a guide, the assumption could be made that a typical order for A&D High Tech is $2,600 (Jeffrey, 2007). Making another assumption, that successfully completing the Internet store project by Christmas could generate 1000 orders for that period demonstrates that the project could generate an additional $2,600,000 by years end. An EMV of $1,950,000 for managing the risk in this project is derived by performing the math as illustrated in Figure 1: Decision Tree to Manage Risk, which immediately follows:
Stated in other terms, A&D has a 75% probability of successfully completing the project and gaining an additional $2, 600,000 in revenue if risk management techniques are applied to the project. Not applying risk management techniques to the project would translate to a 25% chance of successfully completing the project and an expected loss of $1,950,000 in additional revenue.
Dumbledore's Risk Management Series:
Jeffery, M. (2007). A & D high tech (A): Managing projects for success. Project Risk Assessment and Control (pp. 1–16). New York, NY: McGraw-Hill.
Vanguard Software Corporation (2009). Expected monetary value. Retrieved from http://www.vanguardsw.com/dphelp4/dph00076.htm