Page 144 - Global Project Management Handbook

6-12 STATE OF THE ART OF GLOBAL PROJECT MANAGEMENT

● Understanding of the issues creating the risk
● Extent to which the risks are stable or subject to change
● Reliability of assumptions
The team evaluates each IPRA element based on the perception of the known or per-
ceived risk at the time of the assessment. Although these variables, likelihood of occurrence
and relative impact, may be challenging to judge, the project participants should reach con-
sensus for each element, given the knowledge available at the time of the assessment.
The assessment worksheet has fields for evaluation of likelihood of occurrence and
includes six preassigned values ranging from 1 (very low) to 5 (very high) and an NA
value corresponding to “not applicable” for the given element. All the elements should
be evaluated, except for items that are truly not applicable to the project. If the indi-
vidual element is not applicable, the corresponding (NA) box is checked.
Depending on the nature of the element and the specifics of a project, likelihood of
occurrence can be expressed as a probability that an event can happen or the chance
that an element’s existing status will change and require risk-mitigation steps. The like-
lihood is determined by identifying all the possible risks that may have a significant
impact on a project’s success. The project team should consider the description and
then ask the question, “Will this issue necessitate mitigation methods because (1)
events are likely to occur and/or (2) information is not known?” Elements that have a
very high, high, or medium level of probability of occurrence generally require the
project team’s attention.
Assessment participants should recognize that the likelihood of occurrence can be
anticipated for certain IPRA elements, whereas for others the likelihood is uncertain
and the probability of their occurrence is not well-defined or is even unknown. Often
not enough information exists to determine or assess the likelihood of occurrence. In
these cases, it is recommended that participants be conservative in their assessment
and rate the likelihood as having a higher chance. These elements obviously need to
be investigated further. Once the likelihood of occurrence for the element has been
determined, the corresponding box is checked.
For the relative impact section of the assessment worksheet, the project team has the
choice of using either the preassigned baseline relative impact or the project-specific
relative impact. These values are in response to the perceived or actual impact that may
occur if the given risk materializes. As with likelihood of occurrence, assessment ses-

sion participants should recognize that the relative impact may be known for certain
IPRA elements, but for others the consequences of the element occurring and how it
influences the project can be ill defined or even unknown. Situations will exist where
not enough information exists to determine or assess relative impact. In these cases, it
is recommended that participants use the baseline relative impact rating. When the
baseline rating is not used, the project team chooses a project-specific relative impact
level. For this decision, the project team should consider the IPRA description and then
ask the question, “If the issue occurs, how will it affect cost, schedule, and the relative
success of the project?”
As discussed earlier, these steps are repeated for each of the 82 IPRA elements.
The combination of these two values (likelihood of occurrence and relative impact)
will help to determine the relative importance of risk for a given element on a project.
This combination is shown in Fig. 6.2. The appropriate relative importance risk level
can be found by locating the coordinates of the likelihood of occurrence (L) and rela-
tive impact (I). Once the relative importance for the element has been determined, it is
plotted at its specific location on the risk matrix. Risk items that plot in the upper
right-hand corner of the risk matrix represent the greatest risk to the project, whereas
those in the lower left are of lesser concern. Obviously, elements with higher relative