A project is almost always executed in an uncertain environment and hence will entail risks. Project management, on the other hand, tries to bring certainty into this uncertain work and therefore invariably involves risk management.
Risk management on its own can be – and indeed is – many times a dedicated function of its own for highly risky projects, but that doesn’t remove the role of a project manager. You as a project manager must know risk management irrespective of riskiness – high or low – of the project. However, the reverse, i.e., a risk manager playing the role of a project manager, may not always be true.
Hence, if a project management software tool provides capabilities to manage risks, it’ll stand out among its peers. Primavera P6 Professional is one such software tool and comes with certain integrated risk management capabilities to help PMs.
In this article, we learn more about Primavera P6. This article is about project managers steering their projects with risk management, but is equally applicable to other team members, including the risk manager.
So, let’s start with our project plan first. But before that let’s discuss briefly how Primavera P6 considers project risks.
Project Risks and Risk Types in Primavera P6
Primavera P6 provides the following definition of risk:
Risks are any uncertain events or conditions that, if they occur, have a positive or negative effect on project objectives.
As you can see, a risk can be an event or condition. It can lead to positive or negative effect, impact or consequence. The impact is always on the project objectives.
This leads to another understanding, which is called Risk Types. There are two types of risks considered in Primavera P6:
- Positive risks, which will have a positive effect on the project objectives. These are also called Opportunities.
- Negative risks, which will have a negative effect on the project objectives. These are also called Threats.
Now, risk management in P6 considers both, i.e., management of both threats and opportunities. While managing risks with P6, we try to reduce the probability and/or impact of the threats and enhance the probability and/or impact of opportunities.
Our Project Plan in Primavera P6
We have the following project plan, WebMS (Risk Management), created with the help of Primavera P6.
As shown above, for our project, we have a number activities associated with various work breakdown structure (WBS) elements. For example, under the WBS element of the Design and Development phase, we have four activities, and under Milestones we have two milestones. In P6, milestones are also one of the activity types.
We are going to identify the risks for this project using the capability provided in the software tool.
Opening Risks Window in Primavera P6
After the risks are identified, to add them into the plan, go to Project menu > Risks to open the Risks window. You can also visualize the Risks window by clicking on the Risks icon on the Project toolbar, shown in the left side of the toolbars.
As you click on the Risks icon on the Project toolbar or go to the Risks command under the Project menu, it will open-up the Risks window as shown below.
As shown above, in this window we have the following parameters shown:
- Risk ID: The risk identifier, which uniquely identifies the risk,
- Risk Name: The name of the risk.
- Risk Category: The category to which the risk belongs to. The category can be People, Cost, Contract, Time, Project Management or others.
- Risk Type: The type of the risk, which can be only two as we learned before.
- Risk Status: There can be varieties of statues such as Proposed, Active, Closed.
- Risk Owner: The owner of the risk for end-to-end risk management.
- Identified By: The person who has identified the risk.
- Identified On: The date on which the risk is identified.
In addition, there are a number of other parameters, which can be seen in various tabs of the bottom-pane of the Risks window.
Adding Risks in Primavera P6
Next, to add the risks, go to Edit menu > Add command, while you’re in the Risks window. Otherwise, you can choose to click on “+” icon on the Edit toolbar, which is usually to the extreme right.
This will add or create a New Risk – displayed as (New Risk) above. This newly created risk will have certain default risk parameters associated. For example, by default:
- Risk ID will be 1. If you add another, Risk ID will be 2 and so on.
- Risk Type will be Threat.
- Risk Status will be Proposed
After you add a number of risks, we have the following view.
As shown, we have three risks, each with a unique Risk ID.
- RISK1 – Poor design specification.
- RISK2 – Key resources unavailable.
- RISK3 – Reuse of previous design module.
While the former two are threats, the latter is an opportunity. Do notice changes in color coding based on risk types.
Modifying Risk Parameters in Primavera P6
As you add the risks, you can see there are a number of default risk parameters. Some of them are:
- Risk ID: Uniquely assigned, though it can be edited.
- Risk Name: Takes user provided name.
- Risk Type: Default one is Threat, but can be changed.
- Risk Status: Default one is Proposed, but can be changed.
- Risk Exposure Start: Default one is the project’s start date.
- Risk Exposure Finish: Default one is the project’s finish date.
- Project Name: The currently opened project.
You can definitely add the other parameters such as Risk Owner, Risk Identifier, Risk Identification date, among others.
For example, to have the Risk Owner, select the particular field and click on the “…” icon. It’ll open the Select Risk Owner dialog box. From these, select the resource and assign the owner by clicking on the “+” symbol as shown below.
Go on adding the risks, which you and your team have identified. Risk identification is an iterative process and can happen any time during the project life cycle. In our case, after we added the risks, the view comes as shown below.
A few things can be noted by looking at the above figure:
- A negative risk or threat is shown with a red colored dice.
- A positive risk or opportunity is shown with a white colored dice.
- Additional risk parameters are shown in the bottom-half of the Risks window. There are various tabs under it such as General, Impact, Activities, among others.
Determining the Risk Score in Primavera 6
This is one of the critical areas in risk management, which confuses many. It’s actually not that complicated once you understand the fundamentals. To have a strong foundational grasp, I’d strongly recommend that you read this article: Risk Matrix reporting.
The Risk Score in Primavera P6 is determined by a its own Probability*Impact (PI) matrix. In P6, there are actually two overall risk score fields seen the Impact tab of the bottom pane:
- Pre-response Risk Score: It’s the risk score before a risk response strategy has been applied.
- Post-response Risk Score: It’s the risk score after a risk response strategy is taken.
As shown above, for both Pre- and Post-response, we have three fields to consider.
- Probability: It’s the chance of risk occurrence
- Schedule: The impact of the risk on schedule should the concerned risk occur.
- Cost: The cost impact of the risk should the concerned risk occur.
In other words, you can say that the Risk Score is calculated based on the values you select for the above three fields under the Impact tab. All these three fields have scales associated.
For the Probability field, the scales are noted in the tables below.
For the two impact fields of schedule and cost, the scales are noted in the tables below. To reiterate, all these fields will be used to determine the risk score.
Risk Response Strategies in Primavera P6
Now that we have understood the scales based on which risk score will be determined, let’s see it in action. This goes hand-in-hand with risk response types or strategies. There are many ways you can plan for the risk response types in Primavera P6.
Taking an example, let’s take RISK 1 – Poor design specification. For this risk, the pre-response fields are taken as shown below.
As shown above, for RISK1:
- Probability = 1 – Very High (70% or higher),
- Schedule (Impact) = 2 – Very High (10% to 20%), and
- Cost (Impact) =3 – Medium (10% to 20%).
Based on the above value under the probability and impact fields, the Risk Score has been auto-calculated as 36.
Next, we’ve to reduce the score of this risk as it’s a threat. To understand more on risk response strategies (or types), I’d strongly encourage you to read this article. Primavera P6 approach to risk management is somewhat similar, though it provides its own risk response types.
For our case in Primavera P6, we will have the Reduce response type and populate the corresponding field. One can also have a detailed risk response description. As you complete doing that, we will have the following view.
Again, for RISK1, after we took the risk response:
- Probability = 4 – Low (10% to 30%),
- Schedule (Impact) = 4 – Low (1% to 5%), and
- Cost (Impact) = 5 – Very Low (Up to 1%).
After the risk response, the risk score has been reduced to 3, which was 36 earlier!
You continue doing that for all the risks identified for the project and do it iteratively.
Conclusion
Risk management is essential in any project as outlined in the beginning of this article. It not only protects your project(s) against uncertainty, volatility, and ambiguity, but also results in improved decision-making, ensures regulatory compliance wherever needed and prohibits your project(s) from getting completely derailed.
Usually, the risk is highest during the initial stages of the project and usage of software tools such as Primavera P6 Professional can help mitigate a number of risks. In addition, the Primavera P6 software tool also provides issue management and threshold management capabilities.
Finally, as we close this article, I’d say the following. In the realm of projects, certainty is a rare guest. A project, which is a temporary endeavor, unfolds in this landscape of uncertainties. Project management rises in this landscape, and hence, to manage a project is to manage its risks. As we just learned, Primavera P6 is not just about project management but also a partner for you in managing project risks.
Learn More + Earn 1 PDU
Join us for an upcoming webinar on this topic, where you will have following benefits:
- Live demonstration of a project with risks.
- Working with both threats and opportunities.
- Determining the risk score.
- Applying risk responses (strategies).
- Face-to-face questions and answers (Q&As)
Learn more and register HERE: Managing Risks with Primavera P6
References
[1] New Course: Primavera P6 Pro Live Lessons, by ManagementYogi.com
[2] RMP Live Lessons – Guaranteed Pass, by ManagementYogi.com
[3] RMP 30/40 Contact Hours, by ManagementYogi.com
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