Risk Management Professional - PMI-RMP Practice Exam: Process# 1- Plan Risk Management

 Risk Management Professional - PMI-RMP Practice Exam

1-     Plan Risk Management

 

Risk Management Plan. The risk management plan is a component of the project management plan that describes how risk management activities will be structured and performed. The risk management plan may include some or all of the following elements:

i.                 Risk strategy. Describes the general approach to managing risk on this project.

ii.                Methodology. Defines the specific approaches, tools, and data sources that will be used to perform risk management on the project.

iii.              Roles and responsibilities. Defines the lead, support, and risk management team members for each type of activity described in the risk management plan, and clarifies their responsibilities.

iv.              Funding. Identifies the funds needed to perform activities related to Project Risk Management. Establishes protocols for the application of contingency and management reserves.

v.                Timing. Defines when and how often the Project Risk Management processes will be performed throughout the project life cycle, and establishes risk management activities for inclusion into the project schedule.

vi.              Risk categories. Provide a means for grouping individual project risks. A common way to structure risk categories is with a risk breakdown structure (RBS), which is a hierarchical representation of potential sources of risk. An RBS helps the project team consider the full range of sources from which individual project risks may arise. This can be useful when identifying risks or when categorizing identified risks.

vii.             Stakeholder risk appetite. The risk appetites of key stakeholders on the project are recorded in the risk management plan, as they inform the details of the Plan Risk Management process. In particular, stakeholder risk appetite should be expressed as measurable risk thresholds around each project objective. These thresholds will determine the acceptable level of overall project risk exposure, and they are also used to inform the definitions of probability and impacts to be used when assessing and prioritizing individual project risks.

viii.           Definitions of risk probability and impacts. Definitions of risk probability and impact levels are specific to the project context and reflect the risk appetite and thresholds of the organization and key stakeholders. The project may generate specific definitions of probability and impact levels or it may start with general definitions provided by the organization.

ix.              Probability and impact matrix. Prioritization rules may be specified by the organization in advance of the project and be included in organizational process assets, or they may be tailored to the specific project. Opportunities and threats are represented in a common probability and impact matrix using positive definitions of impact for opportunities and negative impact definitions for threats. Descriptive terms (such as very high, high, medium, low, and very low) or numeric values can be used for probability and impact. Where numeric values are used, these can be multiplied to give a probability-impact score for each risk, which allows the relative priority of individual risks to be evaluated within each priority level. An example probability and impact matrix is presented in figure below, which also shows a possible numeric risk scoring scheme.

x.                Reporting formats. Reporting formats define how the outcomes of the Project Risk Management process will be documented, analyzed, and communicated. This section of the risk management plan describes the content and format of the risk register and the risk report, as well as any other required outputs from the Project Risk Management processes.

xi.              Tracking. Tracking documents how risk activities will be recorded and how risk management processes will be audited.

 

Risk Breakdown structure: [Tool] A hierarchically organized depiction of the identified project risks arranged by risk category and subcategory that identifies the various areas and causes of potential risks. It is often tailored to specific project types.

Criteria for valid risk management plan includes: Acceptance by stakeholders; Alignment with internal and external constraints on project; Balance between cost/effort and benefit; and Fulfil requirements of Project Risk Management process.

3 critical success factors for the Plan Risk Management process are: 

• Identify and address barriers to successful Project Risk Management 

• Involve project stakeholders in Project Risk Management 

• Comply with the organization’s objectives, policies, and practices.

The risk management plan should indicate the intensity of effort and the frequency with which the various Project Risk Management processes should be applied.