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Prabodhan Shikshan Prasarak Sanstha’s

Rajendra Mane College of Engineering and Technology

Ambav (Devrukh)

(NAAC B+ Accredited Institute, Affiliated to University of Mumbai)

Institute Level Elective Subject: Project Management (BE SEM VIII)

Subject Code: ILO 8021

Module 4

Planning Projects

Subject Incharge: Dr. Rahul V. Dandage

Asso. Prof. and Head, Automobile Engineering

Department, RMCET, Ambav

Contents

• Crashing project time, Resource loading and

levelling, Goldratt's critical chain,

• Project Stakeholders and Communication plan

• Risk Management in projects: Risk management

planning, Risk identification and risk register,

Qualitative and quantitative risk assessment,

Probability and impact matrix.

• Risk response strategies for positive and negative

risks

28/03/2020 Dr. Rahul V. Dandage, RMCET, Ratnagiri 2

Crashing project timeIn CPM, two activity times and two costs are often specified for each activity.

The first time/cost combination is called normal, and the second set is referred to

as crash. Normal times are “normal” in the same sense as the m time estimate of

the three times used in PERT. Crash times result from an attempt to expedite the

activity by the application of additional resources—for example, overtime, special

equipment, and additional staff or material.

While standard practice and rules of thumb are sufficient for estimating the

resource needs for normal progress, careful planning is critical when attempting

to expedite (crash) a project. Crash plans that appear feasible when considered

activity by activity may incorporate impossible assumptions about resource

availability.

When we expedite a project, we tend to create problems; and the solution to

one problem often creates several more problems that require solutions. The use

of three probabilistic activity time estimates may reduce the chance that crashing

will be needed because they include identification and estimation of risks and

uncertainties that are sometimes forgotten or ignored when making deterministic

time estimates.


Resource LoadingResource loading describes the amounts of individual resources an existing

schedule requires during specific time periods. Therefore, it is irrelevant whether

we are considering a single work unit or several projects; the loads (requirements)

of each resource type are simply listed as a function of time period.

Resource loading gives a general understanding of the demands a project or

set of projects will make on a firm’s resources. It is an excellent guide for early,

rough project planning. Obviously, it is also a first step in attempting to reduce

excessive demands on certain resources, regardless of the specific technique used

to reduce the demands.

If resources of a project are increased by X percent, the output of the project

usually does not increase by X percent, and the time required for the project does

not decrease by X percent.


Resource LevellingResource leveling aims to minimize the period-by-period variations in

resource loading by shifting tasks within their slack allowances. The purpose is to

create a smoother distribution of resource usage.

There are several advantages to smoother resource usage. First, much less

hands-on management is required if the use of a given resource is nearly constant

over its period of use. The PM can arrange to have the resource available when

needed, can have the supplier furnish constant amounts, and can arrange for a

backup supplier if advisable. Moreover, the PM can do this with little error.

Second, if resource usage is level, the PM may be able to use a “just-in-time”

inventory policy without much worry that the quantity delivered will be wrong. If

the resource being leveled is people, leveling improves morale and results in

fewer problems in the personnel and payroll offices because of increasing and

decreasing labor levels.

Not only are there managerial implications to resource leveling, there are also

important cost implications. When resources are leveled, the associated costs also

tend to be leveled.


Goldratt’s Critical Chain RuleThe problem of constrained resource scheduling of multiple projects could be

reduced to the problem of scheduling activities using scarce resources in the case of a

single project. However, the best-known attack on the resource constrained scheduling

problem is Goldratt’s Critical Chain (1997).

Goldratt applies his Theory of Constraints to the constrained resource scheduling

problem. The original focus of the Theory of Constraints to project management was

the single project case, but it, too, is just as applicable to multiple projects.

In addition to the problems of multitasking, thoughtless optimism, the student

syndrome, and few other things; Goldratt adds several more common practices (e.g.,

“safety time”) and argues that all of these lead to a vicious cycle that makes projects

substantially late. Using the logic of his Theory of Constraints, Goldratt recommends

that new projects should be scheduled based on the availability of scarce resources

(Walts). He then suggests that “time buffers” be added in the schedules of resources

that feed bottleneck (scarce) resources, and the bottleneck resources themselves.

Goldratt argues that two activities scheduled to be carried out in parallel and

using the same scarce resource are not independent as the traditional theory would

assume.


Goldratt’s Critical Chain Rule (contd.)Using Goldratt’s meaning of the word “dependent,” the activities of a project can

be ordered into paths based on their resource dependencies as well as on their

technological precedence requirements. The longest of these paths of sequentially

time-dependent activities is known as the “critical chain.” A project, therefore, is

composed of its critical chain and of noncritical chains that feed into.

There are two sources of delay for the project. One comes from a delay of one or

more activities in the critical chain. The second results from a delay in one or more of

the activities on a noncritical or “feeder” chain because such delays could delay

activities on the critical chain. A project buffer protects the critical chain, and feeding

buffers protect the feeder paths.

Resources used by activities on the critical chain are given priority so that they

are available when required. If there are one or more truly scarce resources or Walts

involved, the status of demands for any Walt must be kept up to date, and the Walts

must receive immediate communication when any change in the critical chain is

contemplated. Indeed, Goldratt urges that such resources be reminded of their

scheduled workloads. Because any delay on the critical chain will delay the project,

Walts must be available to work on critical activities when needed.


Project StakeholdersProject stakeholders are individuals, groups, or organizations who may affect, be

affected by, or perceive themselves to be affected by a decision, activity, or outcome

of a project. They are comprised of persons and organizations such as customers,

sponsors, the performing organization, and the public who are actively involved in the

project, or whose interests may be positively or negatively affected by the execution

or completion of the project. They may also exert influence over the project and its

deliverables. Stakeholders may be at different levels within the organization and may

possess different authority levels, or may be external to the performing organization

for the project.

It is critical for project success to identify the stakeholders early in the project or

phase and to analyze their levels of interest, their individual expectations, as well as

their importance and influence. This initial assessment should be reviewed and

updated regularly. Most projects will have a diverse number of stakeholders

depending on their size, type, and complexity. While the project manager’s time is

limited and should be used as efficiently as possible, these stakeholders should be

classified according to their interest, influence, and involvement in the project, taking

into consideration the fact that the affect or influence of a stakeholder may not occur

or become evident until later stages in the project or phase. This enables the project

manager to focus on the relationships necessary to ensure the success of the project.


Project

Stakeholders

Management


Power/Interest Grid with Stakeholders


Project Communication ManagementProject Communications Management includes the processes that are required to

ensure timely and appropriate planning, collection, creation, distribution, storage,

retrieval, management, control, monitoring, and the ultimate disposition of project

information.

Project managers spend most of their time communicating with team members

and other project stakeholders, whether they are internal (at all organizational levels)

or external to the organization. Effective communication creates a bridge between

diverse stakeholders who may have different cultural and organizational backgrounds,

different levels of expertise, and different perspectives and interests, which impact or

have an influence upon the project execution or outcome.

On most projects, communication planning is performed very early, such as

during project management plan development. This allows appropriate resources, such

as time and budget, to be allocated to communication activities. Effective

communication means that the information is provided in the right format, at the right

time, to the right audience, and with the right impact. Efficient communication means

providing only the information that is needed.


Project Communication ManagementWhile all projects share the need to communicate project information, the

information needs and methods of distribution may vary widely. In addition, the

methods of storage, retrieval, and ultimate disposition of the project information need

to be considered and appropriately documented during this process.

The communication activities involved in these processes may often have many

potential dimensions that need to be considered, including, but not limited to:

• Internal (within the project) and external (customer, vendors, other projects,

organizations, the public);

• Formal (reports, minutes, briefings) and informal (emails, memos, ad-hoc

discussions);

• Vertical (up and down the organization) and horizontal (with peers);

• Official (newsletters, annual report) and unofficial (off the record

communications); and

• Written and oral, and verbal (voice inflections) and nonverbal (body language).


Basic Communication ModelThe components of the basic communication model need to be considered when

project communications are discussed. As part of the communications process, the

sender is responsible for the transmission of the message, ensuring the information

being communicated is clear and complete, and confirming the communication is

correctly understood. The receiver is responsible for ensuring that the information is

received in its entirety, understood correctly, and acknowledged or responded to

appropriately.


Communication planThe communications management plan provides guidance and information on

managing stakeholder expectations. The information used includes, but is not limited

to:

• Stakeholder communications requirements;

• Information to be communicated, including language, format, content, and level

of detail;

• Reason for distribution of information;

• Person or groups who will receive information; and

• Escalation process.

The methods of communication identified for each stakeholder in the

communications management plan are utilized during stakeholder engagement

management. Based on the stakeholders’ communication requirements, the project

manager decides how, when, and which of these communication methods are to be

used in the project.


Project Risk ManagementProject Risk Management includes the processes of conducting risk management

planning, identification, analysis, response planning, and controlling risk on a project.

The objectives of project risk management are to increase the likelihood and impact of

positive events, and decrease the likelihood and impact of negative events in the

project.

Project risk is an uncertain event or condition that, if it occurs, has a positive or

negative effect on one or more project objectives such as scope, schedule, cost, and

quality. A risk may have one or more causes and, if it occurs, it may have one or more

impacts. A cause may be a given or potential requirement, assumption, constraint, or

condition that creates the possibility of negative or positive outcomes. The risk is that

the permitting agency may take longer than planned to issue a permit; or, in the case of

an opportunity, additional development personnel may become available who can

participate in design, and they can be assigned to the project. If either of these

uncertain events occurs, there may be an impact on the project, scope, cost, schedule,

quality, or performance. Risk conditions may include aspects of the project’s or

organization’s environment that contribute to project risk, such as immature project

management practices, lack of integrated management systems, concurrent multiple

projects, or dependency on external participants who are outside the project’s direct

control.28/03/2020 Dr. Rahul V. Dandage, RMCET, Ratnagiri 15

Project Risk ManagementProject Risk Management processes are as follows:

1 Plan Risk Management-The process of defining how to conduct risk

management activities for a project.

2 Identify Risks-The process of determining which risks may affect the project

and documenting their characteristics.

3 Perform Qualitative Risk Analysis-The process of prioritizing risks for further

analysis or action by assessing and combining their probability of occurrence and

impact.

4 Perform Quantitative Risk Analysis-The process of numerically analyzing the

effect of identified risks on overall project objectives.

5 Plan Risk Responses-The process of developing options and actions to enhance

opportunities and to reduce threats to project objectives.

6 Control Risks-The process of implementing risk response plans, tracking

identified risks, monitoring residual risks, identifying new risks, and evaluating risk

process effectiveness throughout the project.


Risk AttitudesOrganizations perceive risk as the effect of uncertainty on projects and

organizational objectives. Organizations and stakeholders are willing to accept varying

degrees of risk depending on their risk attitude. The risk attitudes of both the

organization and the stakeholders may be influenced by a number of factors, which are

broadly classified into three themes:

• Risk appetite, which is the degree of uncertainty an entity is willing to take on

in anticipation of a reward.

• Risk tolerance, which is the degree, amount, or volume of risk that an

organization or individual will withstand.

• Risk threshold, which refers to measures along the level of uncertainty or the

level of impact at which a stakeholder may have a specific interest. Below that risk

threshold, the organization will accept the risk. Above that risk threshold, the

organization will not tolerate the risk.


Plan Risk ManagementPlan Risk Management is the process of defining how to conduct risk management

activities for a project. The key benefit of this process is it ensures that the degree,

type, and visibility of risk management are commensurate with both the risks and the

importance of the project to the organization. The risk management plan is vital to

communicate with and obtain agreement and support from all stakeholders to ensure

the risk management process is supported and performed effectively over the project

life cycle. The inputs, tools and techniques, and outputs of this process are depicted in

Figure.


Risk IdentificationIdentify Risks is the process of determining which risks may affect the project and

documenting their characteristics. The key benefit of this process is the documentation

of existing risks and the knowledge and ability it provides to the project team to

anticipate events.

Participants in risk identification activities may include the following: project

manager, project team members, risk management team (if assigned), customers,

subject matter experts from outside the project team, end users, other project managers,

stakeholders, and risk management experts.

Identify risks is an iterative process, because new risks may evolve or become

known as the project progresses through its life cycle. The frequency of iteration and

participation in each cycle will vary by situation. The format of the risk statements

should be consistent to ensure that each risk is understood clearly and unambiguously

in order to support effective analysis and response development. The risk statement

should support the ability to compare the relative effect of one risk against others on

the project. The process should involve the project team so they can develop and

maintain a sense of ownership and responsibility for the risks and associated risk

response actions. Stakeholders outside the project team may provide additional

objective information.


Risk RegisterThe primary output from Identify Risks is the initial entry into the risk register.

The risk register is a document in which the results of risk analysis and risk response

planning are recorded. It contains the outcomes of the other risk management

processes as they are conducted, resulting in an increase in the level and type of

information contained in the risk register over time. The preparation of the risk

register begins in the Identify Risks process with the following information, and then

becomes available to other project management and risk management processes:

• List of identified risks-The identified risks are described in as much detail as

is reasonable. In addition to the list of identified risks, the root causes of those risks

may become more evident. These are the fundamental conditions or events that may

give rise to one or more identified risks. They should be recorded and used to support

future risk identification for this and other projects.

• List of potential responses-Potential responses to a risk may sometimes be

identified during the Identify Risks process. These responses, if identified in this

process, should be used as inputs to the Plan Risk Responses process.


Qualitative Risk AssessmentPerform Qualitative Risk Analysis is the process of prioritizing risks for further

analysis or action by assessing and combining their probability of occurrence and

impact. The key benefit of this process is that it enables project managers to reduce

the level of uncertainty and to focus on high-priority risks. The inputs, tools and

techniques, and outputs of this process are depicted in Figure.


Qualitative Risk AssessmentPerform Qualitative Risk Analysis assesses the priority of identified risks using

their relative probability or likelihood of occurrence, the corresponding impact on

project objectives if the risks occur, as well as other factors such as the time frame for

response and the organization’s risk tolerance associated with the project constraints of

cost, schedule, scope, and quality. Such assessments reflect the risk attitude of the

project team and other stakeholders. Effective assessment therefore requires explicit

identification and management of the risk approaches of key participants in the

Perform Qualitative Risk Analysis process. Where these risk approaches introduce bias

into the assessment of identified risks, attention should be paid to identifying bias and

correcting for it.

Establishing definitions of the levels of probability and impact can reduce the

influence of bias. The time criticality of risk-related actions may magnify the

importance of a risk. An evaluation of the quality of the available information on

project risks also helps to clarify the assessment of the risk’s importance to the project.

Perform Qualitative Risk Analysis is usually a rapid and cost-effective means of

establishing priorities for Plan Risk Responses and lays the foundation for Perform

Quantitative Risk Analysis, if required. The Perform Qualitative Risk Analysis process

is performed regularly throughout the project life cycle, as defined in the project’s risk

management plan.28/03/2020 Dr. Rahul V. Dandage, RMCET, Ratnagiri 22

Probability and Impact MatrixRisks can be prioritized for further quantitative analysis and planning risk

responses based on their risk rating. Ratings are assigned to risks based on

their assessed probability and impact. Evaluation of each risk’s importance and

priority for attention is typically conducted using a look-up table or a

probability and impact matrix.

Such a matrix specifies combinations of probability and impact that lead to

rating the risks as low, moderate, or high priority. Descriptive terms or

numeric values can be used depending on organizational preference. Each risk

is rated on its probability of occurrence and impact on an objective if it does

occur. The organization should determine which combinations of probability

and impact result in a classification of high risk, moderate risk, and low risk.

Usually, these risk-rating rules are specified by the organization in

advance of the project and included in organizational process assets. Risk

rating rules can be tailored in the Plan Risk Management process to the

specific project.


Probability and Impact Matrix


Quantitative Risk AssessmentPerform Quantitative Risk Analysis is the process of numerically analyzing the

effect of identified risks on overall project objectives. The key benefit of this process

is that it produces quantitative risk information to support decision making in order to

reduce project uncertainty. The inputs, tools and techniques, and outputs of this

process are depicted in Figure.


Quantitative Risk AssessmentPerform Quantitative Risk Analysis is performed on risks that have been

prioritized by the Perform Qualitative Risk Analysis process as potentially and

substantially impacting the project’s competing demands. The Perform Quantitative

Risk Analysis process analyzes the effect of those risks on project objectives. It is used

mostly to evaluate the aggregate effect of all risks affecting the project. When the risks

drive the quantitative analysis, the process may be used to assign a numerical priority

rating to those risks individually.

Perform Quantitative Risk Analysis generally follows the Perform Qualitative

Risk Analysis process. In some cases, it may not be possible to execute the Perform

Quantitative Risk Analysis process due to lack of sufficient data to develop appropriate

models. The project manager should exercise expert judgment to determine the need

for and the viability of quantitative risk analysis. The availability of time and budget,

and the need for qualitative or quantitative statements about risk and impacts, will

determine which method(s) to use on any particular project.

Perform Quantitative Risk Analysis should be repeated, as needed, as part of the

Control Risks process to determine if the overall project risk has been satisfactorily

decreased. Trends may indicate the need for more or less focus on appropriate risk

management activities.


Plan Risk ResponsesPlan Risk Responses is the process of developing options and actions to enhance

opportunities and to reduce threats to project objectives. The key benefit of this

process is that it addresses the risks by their priority, inserting resources and activities

into the budget, schedule and project management plan as needed. The inputs, tools

and techniques, and outputs of this process are depicted in Figure.


Plan Risk ResponsesThe Plan Risk Responses process follows the Perform Quantitative Risk

Analysis process (if used). Each risk response requires an understanding of the

mechanism by which it will address the risk. This is the mechanism used to

analyze if the risk response plan is having the desired effect. It includes the

identification and assignment of one person (an owner for risk response) to

take responsibility for each agreed-to and funded risk response. Risk responses

should be appropriate for the significance of the risk, cost-effective in meeting

the challenge, realistic within the project context, agreed upon by all parties

involved, and owned by a responsible person. Selecting the optimum risk

response from several options is often required.

Several risk response strategies are available. The strategy or mix of

strategies most likely to be effective should be selected for each risk. Risk

analysis tools, such as decision tree analysis, can be used to choose the most

appropriate responses. Specific actions are developed to implement that

strategy, including primary and backup strategies, as necessary.


Risk Response Strategies for Negative

Risks or ThreatsThree strategies, which typically deal with threats or risks that may have

negative impacts on project objectives if they occur, are: avoid, transfer, and

mitigate. The fourth strategy, accept, can be used for negative risks or

threats as well as positive risks or opportunities.

Each of these risk response strategies have varied and unique influence

on the risk condition. These strategies should be chosen to match the risk’s

probability and impact on the project’s overall objectives.

Avoidance and mitigation strategies are usually good strategies for

critical risks with high impact, while transference and acceptance are

usually good strategies for threats that are less critical and with low overall

impact.


Risk Response Strategies for Negative

Risks or Threats• Avoid-Risk avoidance is a risk response strategy whereby the project team acts

to eliminate the threat or protect the project from its impact. It usually involves

changing the project management plan to eliminate the threat entirely.

• Transfer- Risk transference is a risk response strategy whereby the project

team shifts the impact of a threat to a third party, together with ownership of the

response. Transferring the risk simply gives another party responsibility for its

management—it does not eliminate it.

• Mitigate-Risk mitigation is a risk response strategy whereby the project team

acts to reduce the probability of occurrence or impact of a risk. It implies a reduction

in the probability and/or impact of an adverse risk to be within acceptable threshold

limits.

• Accept-Risk acceptance is a risk response strategy whereby the project team

decides to acknowledge the risk and not take any action unless the risk occurs. This

strategy is adopted where it is not possible or cost-effective to address a specific risk

in any other way.


Risk Response Strategies for Positive

Risks or OpportunitiesThree of the four responses are suggested to deal with risks with

potentially positive impacts on project objectives.

The fourth strategy, accept, can be used for negative risks or threats as

well as positive risks or opportunities.

These strategies are to exploit, share, enhance, and accept.


Risk Response Strategies for Positive

Risks or Opportunities• Exploit- The exploit strategy may be selected for risks with positive impacts

where the organization wishes to ensure that the opportunity is realized. This strategy

seeks to eliminate the uncertainty associated with a particular upside risk by ensuring

the opportunity definitely happens.

• Enhance-The enhance strategy is used to increase the probability and/or the

positive impacts of an opportunity. Identifying and maximizing key drivers of these

positive-impact risks may increase the probability of their occurrence.

• Share-Sharing a positive risk involves allocating some or all of the ownership

of the opportunity to a third party who is best able to capture the opportunity for the

benefit of the project. Examples of sharing actions include forming risk-sharing

partnerships, teams, special-purpose companies, or joint ventures, which can be

established with the express purpose of taking advantage of the opportunity so that

all parties gain from their actions.

• Accept-Accepting an opportunity is being willing to take advantage of the

opportunity if it arises, but not actively pursuing it.


References

• Guide to Project management Body of

Knowledge (PMBOK Guide), fifth edition,

Project Management Institute, 2013

• Jack Meredith, Samual Mantel (2009) Project

Management: A managerial approach, 7th

Edition.



Dr. Rahul V. Dandage

Asso. Prof. and Head, Automobile Engineering

Department, RMCET, Ambav

Whatsapp-9975171527

Email: [email protected]/

[email protected]

mailto:[email protected]/

mailto:[email protected]

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