The Risk Management Plan is an evolving document that will change over the life of the project, with risks increasing and decreasing at different phases.
The Risk Management Plan is the document that specifies the approach, the management components and the resources to be applied to the management of a risk.
The Residual Risk Allowance associated with the planned contracts, which will be used by Acquisitions Branch to establish the Pre-Approved Amount for Anticipated Amendments (PAAA) to allow for efficiencies in processing amendments to the consultant contract. The Risk Management Plan should be developed in consultation with the Risk Taxonomy, available in tab 5. The residual risk amount will be used by the Real Property Contracting Directorate as a guideline in establishing the PAAA for construction and consultant contracts.
The Risk Response (Column J) is the selected strategy for minimizing risks before they materialize. The current literature offers rich insights into these challenges,[3] ,[4] ,[5] ,[6] but it offers no process for managing risks that apply to distributed team structures. We structured the risk management process into the three steps shown in Figure 1: identify and analyze risks, develop risk mitigation plans, and implement risk mitigation plans.
A risk mitigation plan should not only consist of business continuity plans and asset protection but also  a set of actions to maintain personal security and well-being . The Risk Taxonomy has been developed to aid in the preparation of the Risk Management Plan and provides a compilation of the most common risks related to project management. So, the eight areas of risks, the four types of resolution techniques, and the guidelines for combining them are syntheses of state-of-the-art research on distrib­uted teams and form the conceptual foundation for our risk management process.
We adopted a risk-action list approach in the risk management processes that offers directions for how to apply the four types of resolution techniques to the eight areas of distributed-team risks[30]. We have identified and categorized the risks (see Table 1), so risk management participants can focus on analyzing risk probabilities and impacts and prioritize how to address them. The former is the framework for the entire risk management aspect of the project while the latter pertains to the entire risks and response actions plan. Some of these might seem typical for any project, but the table focuses on risks related to distributed teams.
One of its processes focuses on risk management to help identify and analyze poten­tial problems before they occur so that managers can plan risk-handling activities and invoke them across the project life cycle.
Distributed environments can significantly intensify risks, to an extent that tradi­tional project management approaches might not apply. Thereafter, all such risks analyzed shall be documented according to their levels of priority in a form known as the risk mitigation plan. Manag­ers can distribute the resulting risk assessment data to the rest of the organization, allowing for risk management across subprojects and comparisons and learning among independent projects.
The projects that were most likely to have a risk management plan were those that were perceived to be high risk.
When risk management practices were applied to projects, they appeared to be positively related to the success of the project.
The risk management approach influenced the meeting of project schedules and cost goals but exerted less influence on project product quality. Projects that depend on good weather, such as road construction or coastal projects, face risk of delays due to exceptionally wet or windy weather. These are examples of known risksRisks that can be anticipated, such as exceptionally bad weather.. Project risks are separate from the organizational risksPossible loss that is associated with the business purpose of the project. Project risk is the possible outcome that planned events on the project will not occur as planned or that unplanned events will occur that will have a negative impact of the project. Organizational risks are associated with the business purpose of the project and assumed by the client when deciding to do the project.
According to PMI, project risk is a(n) ___________ event or condition that, if it occurs, has an effect on at least one project objective. A risk such as the future market price of a commodity is an example of a(n) _________ risk. Give an example of a known risk and an unknown risk that are different from those in the text. Describe the difference between organizational risk and project risk in your own words and give an example of each that is not used in the text.
Managing risks on projects is a process that includes risk assessment and a mitigation strategy for those risks. A more disciplined process involves using checklists of potential risks and evaluating the likelihood that those events might happen on the project. Identifying the sources of risk by category is another method for exploring potential risk on a project.
After the potential risks have been identified, the project team then evaluates the risk based on the probability that the risk event will occur and the potential loss associated with the event.
The Construction Industry Institute conducted a study of large construction project risk evaluation and categorized risk according to the potential impact of project costs. For example, a project team analyzed the risk of some important equipment not arriving to the project on time. On projects with a low complexity profile, the project manager may informally track items that may be considered risk items. On complex projects, statistical models are sometimes used to evaluate risk because there are too many different possible combinations of risks to calculate them one at a time. After the risk has been identified and evaluated, the project team develops a risk mitigation plan, which is a plan to reduce the impact of an unexpected event. Each of these mitigation techniques can be an effective tool in reducing individual risks and the risk profile of the project. One example of risk sharing is a large United States construction firm that won a contract to build a pipeline in Peru. Risk transferRisk transfer is the risk mitigation process of shifting the possible negative impact of an event to a party outside the project. The project risk plan balances the investment of the mitigation against the benefit for the project. In this example, the equipment arriving on time to meet the project schedule was considered a high risk. Some project managers allocate the contingency budget to the items in the budget that have high risk rather than developing one line item in the budget for contingencies. Risk management is a creative process that involves identifying, evaluating, and mitigating the impact of the risk event. Risk management can be very formal, with defined work processes, or informal, with no defined processes or methods.
Risk evaluation prioritizes the identified risks by the likelihood and the potential impact if the event happens. Risk mitigation is the development and deployment of a plan to avoid, transfer, share, and reduce project risk. A process for risk assessment that is parallel to the WBS is a _________ _______ _______ (three words). If you are planning a party at your residence, list three project risks and rate each of them for their potential impact and likelihood. John concludes that the high-impact risks can be mitigated and the costs from the mitigation would be acceptable in order to get a new job. Once the project is approved and it moves into the planning stage, risks are identified with each major group of activities. John decides to ask Dion and Carlita for their help during their first planning meeting to identify risks, rate their impact and likelihood, and suggest mitigation plans. As the project progresses and more information becomes available to the project team, the total risk on the project typically reduces, as activities are performed without loss.

Understanding where the risks occur on the project is important information for managing the contingency budget and managing cash reserves.
To determine the amount of contingency that can be released, the project team will conduct another risk evaluation and determine the amount of risk remaining on the project. During the closeout phase, agreements for risk sharing and risk transfer need to be concluded and the risk breakdown structure examined to be sure all the risk events have been avoided or mitigated. During the initiation phase, risks are identified that could threaten the viability of the project. During the execution phase, risks are checked off as activities are completed or mitigation is performed if loss does occur. High-risk events that require expensive mitigation options threaten the choice of the project during the _________ phase. Recall a project that you considered at one time but decided against during the initiation phase because the risks were too great or the mitigation plan was insufficient to proceed.
Identify the relationship between project risk and external, internal, technical, and environmental complexity.
Although increased complexity on a project increases the project risk profile, risk is only one component of the complexity profile, and the manageability of the risk is also reflected in the complexity level of the project.
Projects with high scores for internal complexity have risks to the budget, schedule, and quality due to organizational complexity and changes of scope due to lack of clarity in project and scope statements. High scores in technological complexity are associated with high levels of risk due to unknown flaws in the technology and lack of familiarity with it. High scores for external complexity imply high risks to the schedule, budget, and quality due to unknown factors and limited resources.
High scores for internal complexity imply high risks to the budget, schedule, and quality due to organizational complexity and changes of scope due to lack of clarity in project and scope statements.
High scores for technological complexity imply high risks to the budget, schedule, and quality due to unknown flaws in the technology and lack of familiarity with it. One complexity category that is likely to have high risks due to unknown causes is _______, due to lack of experience with the size of project.
Choose a simple project with which you are familiar and describe a risk that is typical of each phase of the project and a mitigation plan for those four risks. Choose a situation with which you are familiar where a risk event occurred that had a high impact on a project causing it to exceed the contingency allowances in the schedule or budget. The Risk Management Plan should be developed in consultation with the Risk Taxonomy which has been developed to aid in the preparation of the Risk Management Plan and provides a compilation of the most common risks related to project management.
The Risk Management Plan should be developed in conjunction with the Preliminary Project Plan, and updated with the Project Management Plan. Processes (including methods, templates, and guidelines) vary but are reasonably well aligned across sites. Analyzing 72 scientific articles, we identified inherent risks in distributed teams, tech­niques to solve them, and guidelines for applying the techniques. The purpose of such strategies is to lessen or reduce, if not totally eliminate the adverse impacts of the known or perceived risks inherent in a particular undertaking, even before any damage or disaster takes place. Developing a risk mitigation plan is supported by the list of resolution techniques and guidelines for how to ap­ply them to address specific risk areas (see Table 2).
For a given project, the first level of analysis therefore focuses on developing risk assessments at each site. Accepting risks should still signify that existing resources are used to the best of their capabilities to address the risks. Planning for events that that can delay a project, decrease its quality, or increase its budget is a necessary part of project planning.
Known risks are events that have been identified and analyzed for which advanced planning is possible. Risk assessmentIdentification of the possibility for loss due to an event and an estimate of its effect.
Some companies and industries developed risk checklists based on experience from past projects. Examples of people risks include the risk of not finding the skills needed to execute the project or the sudden unavailability of key people on the project.
High-impact risk consisted of risks that could increase the project costs by 5 percent of the conceptual budget or 2 percent of the detailed budget. A project with new and emerging technology will have a high-complexity rating and a correspondingly high risk.
Building on the identification of the risks, each risk event is analyzed to determine the likelihood of occurring and the potential cost if it did occur. On more complex projects, the project management team may develop a list of items perceived to be higher risk and track them during project reviews. One example of the statistical model used on projects is the Monte Carlo simulationA simulation that uses statistical processes to evaluate risk., which simulates a possible range of outcomes by trying many different combinations of risks based on their likelihood. The risk mitigation plan captures the risk mitigation approach for each identified risk event and the actions the project management team will take to reduce or eliminate the risk. The project team often develops an alternative method for accomplishing a project goal when a risk event has been identified that may frustrate the accomplishment of that goal.
This approach allows the project team to track the use of contingency against the risk plan. Contingency planning is the development of alternative plans to respond to the occurrence of a risk event.
He identifies the following risks during the initiation phase that might have a high impact and rates the likelihood of their happening from low to high.
A risk breakdown structure (RBS) can be used to identify increasing levels of detailed risk analysis. The risk plan needs to be updated with new information and risks checked off that are related to activities that have been performed.
Most organizations develop a plan for financing the project from existing organizational resources, including financing the project through a variety of financial instruments.
If the risk profile is lower, the project team may release contingency funds back to the parent organization.
The final estimate of loss due to risk can be made and recorded as part of the project documentation. He makes a checklist to be sure all the risk mitigation plans are completed, as shown below. On projects with a high degree of new technology, the majority of the risks may be in the early phases of the project. Mitigation options are considered to see if they would be sufficient to protect the project. A summary of actual costs associated with risks are compared with initial estimates to refine estimating capabilities. High scores for complexity in this category imply high risks for delay and expensive resolution to lawsuits, public opposition, changes for political considerations, and unforeseen ecological impacts. Using the four categories of the Darnall-Preston Complexity Index, identify a high-impact risk and explain your choice. For example, the collaboration structure risk area includes a risk factor for collaboration capabil­ity (see Table 1)[13],[14],[15].
When it comes to risk mitigation planning, many businesses go for the 'learn-as-you-go' approach and end up learning things the hard way.
During this step, participants can adopt resolution techniques from the list or develop novel resolu­tion techniques to address distributed-team risks in their project.
We adapt this approach to avoid redundancies and focus on managing risk in distributed teams.
The good news is that you and your team together can probably do an excellent job identifying those risk.

Some risk events are more likely to happen than others, and the cost of a risk event can vary greatly.
On projects with greater complexity, the process for evaluating risk is more formal with a risk assessment meeting or series of meetings during the life of the project to assess risks at different phases of the project. A common risk avoidance technique is to use proven and existing technologies rather than adopt new techniques, even though the new techniques may show promise of better performance or lower costs.
Many organizations that work on international projects will reduce political, legal, labor, and others risk types associated with international projects by developing a joint venture with a company located in that country. On international projects, companies will often purchase the guarantee of a currency rate to reduce the risk associated with fluctuations in the currency exchange rate. The team developed a contingency plan to install the roof in two phases to allow the installation of the equipment, if it was late.
Although the amount of contingency allocated in the project budget is a function of the risks identified in the risk analysis process, contingency is typically managed as one line item in the project budget. This approach also allocates the responsibility to manage the risk budget to the managers responsible for those line items. A risk breakdown structure (RBS) can follow the work breakdown structure (WBS) to identify risk by activity. For example, if you are planning an outdoor wedding, describe the backup plan in case of rain. To mitigate the risk of his new employer changing his mind, John makes sure that he keeps his relationships with his alternate employers cordial and writes to each of them thanking for their consideration in his recent interviews. John plans to spend one night on the road in a motel to reduce the risk of an accident caused by driving while too tired.
If additional risks are uncovered, a new mitigation plan is developed including the possible addition of contingency funds. On projects with a large equipment budget, the largest amount of risk may be during the procurement of the equipment. The process of conducting a risk analysis focuses on understanding what can go wrong and the likelihood that it will go wrong.
The project management team will develop an execution plan that includes developing and maintaining alignment among the various clients. If the mitigation was ineffective, describe how you might have prepared a different mitigation plan. Explain your choice of each example and relate it to the definition of each type of risk mitigation.
The sec­ond level focuses on developing risk assessments for the entire project based on the local estimates.
Project riskAn uncertain event or condition that, if it occurs, has an effect on at least one project objective. Evaluating the risk for probability of occurrence and the severity or the potential loss to the project is the next step in the risk management process. These were the critical few potential risk events that the project management team focused on when developing a project risk mitigation or management plan. On highly complex projects, an outside expert may be included in the risk assessment process, and the risk assessment plan may take a more prominent place in the project execution plan. A project team may choose a vendor with a proven track record over a new vendor that is providing significant price incentives to avoid the risk of working with a new vendor.
Partnering with another company to share the risk associated with a portion of the project is advantageous when the other company has expertise and experience the project team does not have.
A project manager may hire an expert to review the technical plans or the cost estimate on a project to increase the confidence in that plan and reduce the project risk. The risk of a truck drivers strike may be mitigated with a contingency plan that uses a train to transport the needed equipment for the project. The contingency plan was more expensive and contingency funds were placed in the budget to cover the possibility that the equipment would be late. As the risks decrease over the length of the project, if the contingency is not used, then the funds set aside by the organization can be used for other purposes. On global projects with a large amount of political risk, the highest portion of risk may be toward the end of the project. The project team then develops a project mitigation plan that addresses the items that were identified as high risk.
Although the organizational risk of the project decreases with the development of the execution plan, the organizational approach of the client did not change the complexity level of the project. Consider situations described by your classmates and contribute ideas for mitigation of events in their projects.
Consider the risks and plans described by your classmates and make suggestions for other mitigation options. Best practices require that the known and perceived risks be analyzed according to the degree and likelihood of the adverse results that are anticipated to take place. Your risk mitigation plan should detail the risks facing your business and the actions to manage the risk factors, if not eradicate them. These checklists can be helpful to the project manager and project team in identifying both specific risks on the checklist and expanding the thinking of the team.
Risk evaluation is about developing an understanding of which potential risks have the greatest possibility of occurring and can have the greatest negative impact on the project.
This risk event (the identified equipment arriving late) was rated as high likelihood with a high impact. The project team that requires drug testing for team members is practicing risk avoidance by avoiding damage done by someone under the influence of drugs. If the risk event does occur, then the partnering company absorbs some or all of the negative impact of the event. Assigning highly skilled project personnel to manage the high-risk activities is another risk reduction method.
If the Darnall-Preston Complexity Index (DPCI) is used to rate the project, high ratings in each category carry their own types of increased risks. After which, the development and integration of the corresponding risk mitigation strategies follows, and shall be referenced against the previously prepared risk management plan. The past experience of the project team, project experience within the company, and experts in the industry can be valuable sources for identifying potential risk on a project. A risk breakdown structure organizes the risks that have been identified into categories using a table with increasing levels of detail to the right.
The lack of formal risk management tools was seen as a barrier to implementing a risk management program. The result of this analysis is the information needed by the project leadership to develop an appropriate execution plan. This requires a collocated or mediated project meeting where participants uncover differences in perspec­tives and experiences across sites and negotiate how to prioritize overall distributed-team risks. The level of investment in formal risk management was also associated with managerial psychological dimensions. Some companies reduce risk by forbidding key executives or technology experts to ride on the same airplane. There are no risk-free projects because there is an infinite number of events that can have a negative effect on the project.
Risk management is not about eliminating risk but about identifying, assessing, and managing risk.

Example of a business impact analysis
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