Certification Summary

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PMP candidates will need a firm grasp on how to plan for, monitor, and control projects' risks. To effectively handle risks, the project manager will need to begin with risk management planning. A large, complex project will likely have more risks than a smaller project. In any situation, however, risks must be identified and planned for. The performing organization will often have risk management policies that dictate how the risk planning sessions are to be performed, and what level of risks call for additional planning.

Some stakeholders-and organizations-will be more tolerant to accept risks than others. A person's willingness to accept risk is called the utility function. A perfect example of the utility function is the stock market. Some people will only invest in solid, reliable stocks-but with little return on their investment. Other people will invest in startups, low-dollar stocks, and other high-risk companies-but will receive a higher yield if their investments pay off. The same is true with projects: some risks are worth taking while others are not. Risk planning and the utility function help the project manager determine which risks are acceptable.

As risks are identified the project manager can use the Delphi Technique to build consensus on which risks have the highest impact on the project. This anonymous approach allows participants to speak freely on the risks. Participants aren't hindered by the opinion of other stakeholders. The comments on the identified risks are distributed to all of the participants allowing participants to comment, concur, or dismiss opinions on the identified risks. Through rounds of discussion consensus on the risks are reached.

Qualitative risk analysis qualifies identified risks and creates a prioritization of the risks. Each risk is considered for its impact and likelihood of occurring. Once the risks have passed through qualitative risk analysis, quantitative risk analysis is needed. Quantitative risk analysis assesses the probability and impact of the risks and determines a risk score based on further analysis, discussion, expert judgment, simulations, and interviews with stakeholders.

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