Risk, opportunity and issues

0:00Sara: Welcome to Project Management Exam Prep.

0:03This episode is about risk, opportunity and issues.

0:07Every project management exam tests it.

0:10Leo: You will learn how the three bodies frame it, which responses you can choose,

0:14how to put a number on a risk, and what to do when a risk has already happened.

0:19We finish with a drill, so keep a pen ready.

0:22Sara: Let us start with the three lenses. What does IPMA® say?

0:26Leo: IPMA®, the International Project Management Association, sets out its standard in

0:31the Individual Competence Baseline, the ICB4.

0:35Its element on risk and opportunity asks you to identify, assess,

0:39respond to and control both sides of uncertainty.

0:43Issues sit in its element on plan and control.

0:46Sara: And PMI®?

0:47Leo: PMI®, the Project Management Institute, publishes the PMBOK® Guide,

0:52its guide to the project management body of knowledge.

0:54The eighth edition has a risk performance domain.

0:58The outline of PMI®'s Project Management Professional exam, the PMP®,

1:03tests how you plan and manage risk and how you manage issues.

1:08It asks you to recognize when a risk becomes an issue.

1:12Sara: And APM?

1:13Leo: APM, the Association for Project Management, publishes the APM Body of Knowledge.

1:19It has a section called risk and issue management.

1:21The syllabus of APM's Project Management Qualification, the PMQ,

1:27has an objective with the same name, and asks you to know proactive and reactive

1:31responses.

1:33Sara: Where do the words differ?

1:35Leo: In four places. First, the word risk. PMI® and APM use it for both directions.

1:42The ICB4 says risk and opportunity, and uses risk for the downside.

1:47In this series, threat means the downside, and risk means both.

1:52Sara: Second?

1:53Leo: Lowering a threat. APM and the ICB4 say reduce.

1:59PMI® says mitigate.

2:01Sara: Third?

2:02Leo: Passing part of a threat to someone else.

2:05PMI® and APM say transfer. The ICB4, whose list matches the international risk standard

2:11ISO 31000, says sharing.

2:16Sara: And fourth?

2:17Leo: The word issue. For APM, an issue is a problem that breaks, or will break,

2:22the limits delegated to the project, so the sponsor must decide.

2:26The project manager solves smaller problems.

2:30Others use issue for any risk that has happened.

2:33Sara: What is the core, whichever exam you take?

2:36Leo: Three ideas. One: a risk is an uncertain event that would change your objectives

2:41if it happened. It can hurt, or it can help.

2:44So you look for threats and opportunities at the same time.

2:47Sara: Two?

2:48Leo: Risk work is a cycle, not a one-time list.

2:51You agree how you will manage risk. You identify risks with the team and the stakeholders,

2:56and write them in the risk register, the list of risks with their owners.

3:00You analyse them, first on simple scales, and the big ones with numbers.

3:05You choose responses and carry them out.

3:07You monitor them, escalate what is beyond your authority, and close risks that can

3:12no longer happen.

3:14Sara: Does that change in agile work?

3:16Leo: The steps stay, but the rhythm changes.

3:19In a linear project, you identify risks at the start and at each gate.

3:23In iterative work, you revisit them every iteration.

3:27Risky items move up the backlog, and the team raises new risks in its reviews.

3:32Sara: And three?

3:33Leo: An issue is not uncertain any more. It has happened, or it is happening now.

3:37So you log it, judge its impact, decide who acts, and escalate it if it breaks your

3:42limits. Then you look for the root cause, so that it does not come back.

3:47Sara: Now the responses. The one-page model sheet, free in the description,

3:51has the full table.

3:53Leo: For a threat, you can avoid it, which removes the cause.

3:58You can reduce it, which lowers the chance or the damage.

4:01You can transfer it, for example by contract or insurance.

4:06Or you can accept it and watch it.

4:09Sara: And for an opportunity?

4:11Leo: The mirror images. Exploit it, to make it certain.

4:14Enhance it, to make it more likely or larger.

4:18Share it with a partner who can capture it.

4:20Or take no action. PMI® calls that accept, APM reject, and the ICB4 ignore.

4:26They are close cousins: PMI®'s accept still takes the gain if it comes.

4:32Sara: Is there one more option?

4:34Leo: Escalate. You escalate when the risk is outside the project's scope,

4:38or when the response is beyond your authority.

4:41The new owner must accept it.

4:43Sara: And if a risk happens anyway?

4:46Leo: Then you use a contingency plan, prepared now and started by a trigger.

4:51APM calls it a reactive response. The responses you take now are proactive.

4:57Sara: And the money?

4:58Leo: Expected monetary value. Multiply the probability by the impact.

5:03A fifty percent chance of fifteen thousand euros of overtime has an expected value

5:08of seven thousand five hundred. Add up the expected values of your threats,

5:13and you have a first estimate of the contingency reserve for known risks.

5:17Sara: And for the risks nobody has found?

5:19Leo: A management reserve, held above the project manager.

5:24Some teams subtract expected opportunities from the reserve.

5:27APM advises keeping opportunities you have not captured out of the budget.

5:32Whichever rule you use, say which one, and why.

5:35Sara: How does this change between Mid-level and Senior?

5:39Leo: First, the two levels. They are this series' own labels.

5:42Mid-level means leading moderately complex projects, the level of IPMA® Level C and

5:48PMI®'s PMP® exam. Senior means leading complex projects and people,

5:55the level of IPMA® Level B and of APM's chartered status, Chartered Project Professional.

6:01At Mid-level, you run the process well.

6:04Take Parking Permits Online, a city project that moves resident parking permits

6:09online in eight months. The project manager, Anna, keeps the register with the team,

6:14picks responses, and holds a small reserve under a rule agreed with the steering

6:18group.

6:19Sara: And at Senior level?

6:21Leo: You design the process for others. Take One City Account, a thirty-month city project

6:27that brings fourteen online services under one login, led by Anna some years later.

6:33There, Anna agrees with the board how much risk the city will accept,

6:38and who decides at which amount. She holds a contingency of one point two million

6:42euros. The city manager holds a management reserve of eight hundred thousand.

6:48Sara: So the Senior answer is about the system, not only the list.

6:52Sara: Now the drill. A city is moving resident parking permits online,

6:57and most residents renew in January. There is a twenty-five percent chance that

7:02the payment gateway certification slips.

7:04If it does, staff must take payments by hand in January, which costs forty thousand

7:10euros. An early certification slot costs five thousand euros and cuts the chance

7:15to ten percent. Should the project manager book it, and what else?

7:20Leo: Pause and write your answer. You have forty-five seconds.

8:08Sara: First, the numbers.

8:10Leo: Before the response, the expected loss is ten thousand euros:

8:15twenty-five percent of forty thousand. After it, the loss is four thousand,

8:20plus the slot's five thousand, which makes nine thousand.

8:24So the slot saves one thousand.

8:27Sara: Only just.

8:28Leo: Yes. A shortcut helps. The slot costs five thousand, which is twelve and a half

8:34percent of the forty thousand at stake.

8:36So it pays off only if it cuts the chance by more than twelve and a half points.

8:42It cuts the chance from twenty-five to ten, which is fifteen points,

8:46so it passes. Then prepare a contingency plan: staff trained to take payments by

8:52hand, so renewals never stop. Name an owner and a trigger date,

8:57and cover the residual risk, what is left, in the reserve.

9:01Sara: What lifts that to Senior?

9:02Leo: The numbers are close, so a Senior answer asks what the city can tolerate.

9:08A failure in January means queues and bad press, so you would book the slot even

9:14at equal numbers, and say why. You also check for new risks, and feed the lesson

9:19into the city's risk rules.

9:22Sara: How do the exams ask this?

9:25Leo: IPMA®'s written exam asks for open answers; at Level B it may be oral.

9:29IPMA®'s certification also includes an interview, where assessors ask about your

9:35own projects, so note one threat from your work.

9:39The PMP® exam uses scenarios. PMI®'s outline adds questions built on a case study

9:45or a chart: practise the calculation. APM's PMQ asks for short written answers,

9:53for example: proactive responses act now; reactive ones are prepared now and used

9:58only if the risk occurs.

10:00Sara: Let us recap.

10:02Leo: One. Risk covers threats and opportunities.

10:05An issue has already happened, or breaks your limits.

10:08Sara: Two. Risk work is a cycle: plan, identify, analyse, respond, monitor,

10:16escalate and close. In iterative work, it runs every iteration.

10:22Leo: Three. For a threat, avoid, reduce, transfer or accept.

10:28For an opportunity, exploit, enhance, share or take no action.

10:34Escalate what is outside your scope or authority.

10:37Sara: Four. Expected value is probability times impact.

10:42It sizes the contingency reserve. The management reserve covers what nobody has

10:46found.

10:47Leo: And five. The names differ between IPMA®, PMI® and APM, but the moves are the same.

10:55Learn the moves, then the words your exam uses.

10:58Sara: The model sheet and the study handout are linked in the description.

11:01See you in the next episode.