PRINCE2 Foundation Certification Notes 8: Risk Theme

Important: The new PRINCE2® Foundation and Practitioner exams (PRINCE2® 2017) are available from 10 July 2017 (details of the changes here). Don’t worry, the changes are quite minor indeed as all the 7 principles, themes and processes remain the same. From now on until the end of 2017, candidates can take either the existing or updated English versions of the PRINCE2® exam. All PRINCE2® Foundation and Practitioner exams will be based on PRINCE2® 2017 from 1 January 2018. You can still seize the time to get certified based on the current version! Once you get PRINCE2® certified, your certification is still valid under PRINCE2® 2017 and onwards!

Introduction: In PRINCE2®, there are 7 Themes describing important aspects of project management that are vital to the success of the project. The Risk Theme is the fifth PRINCE2® Theme which provides an approach to identify, assess and control risks of the project to increase the likelihood of project success. The PRINCE2® Foundation Study Notes for the Risk Theme below details what are needed for the PRINCE2® Foundation Exam.

PRINCE2® Theme: Risk

• Risks are uncertainties introduced while carrying out the project (as projects are introducing something new and uncertain for the organization). According to PRINCE2®, “Risk is a set of events that, should they occur, will have an effect on achieving the project objectives” — i.e. risks may have positive (a.k.a. opportunities) or negative (a.k.a. threats) effects on the project.
• Risks affects the project objectives including six performance targets (i.e. time, cost, quality, scope, benefits and risk).
• Risk Management is the systematic approach to identifying, assessing and controlling risks.
• RRINCE2 Risk Management makes use of of the procedures and principles of Management of Risk (MoR) — owned also by AXELOS.
• PRINCE2® recommends the creation of Risk Management Strategy document which defines how risks are identified, assessed, controlled and communicated in the project — it also communicates the risk attitude of the Project Board. Risk Management Strategy includes the following:
  • Risk management procedure
  • Tools and Techniques
  • Recording and reporting
  • Timing
  • Scale
  • Proximity
  • Risk categories and Risk Response categories
  • Risk Tolerance
  • Roles and Responsibilities
  • Risk Budget — included in the project budget which is set aside for planned risk responses only and cannot be used for funding other change requests
• Risk Register — captures all the identified risks with the following details:
  • unique identifier, who raised the risk, when it was raised, category and description of risk.probability, impact, expected value, proximity, risk response category, risk response actions, risk status, risk owner and risk actionee

Management of Risk (MOR) Generic Approach

1. Understand the project context — the project environment.
2. Involve Stakeholders, Users, Suppliers and Teams to identify risks
3. Establish an approach for the Project and document this approach
4. Provide regular reports on Risk
5. Define risk Roles & Responsibilities

PRINCE2® Five Step Risk Management Procedures

1. Identify
   • understand the project context (e.g. high or low risk tolerance)
   • create the Risk Management Strategy for the project
   • all risks (including threats and opportunities) are to be identified
   • using techniques like: review lessons, risk checklists, risk prompt lists, brainstorming and risk breakdown structure
   • describes risks in terms of
     • Risk cause
     • Risk event
     • Risk effect
2. Assess
   • in terms of probability and impact on the project objectives through
     • Estimating — the probability, the impact, and the proximity for each threat or opportunity with the help of Summary Risk Profile Diagram (a diagram for plotting the probability and impact of individual risks to be evaluated against the Risk Tolerance)
     • Evaluating — the overall Risk Value for the project with e.g. Expected Monetary Value technique
3. Plan — Plan the Responses
   • plan the response for threats and opportunities:
     • Risk Responses for Threats:
       • Avoid
       • Share
       • Reduce
       • Accept
       • Fallback
       • Transfer
     • Risk Responses for Opportunities:
       • Share
       • Enhance
       • Exploit
       • Reject
4. Implement
   • implement the risk plans if the risk occurs
   • PRINCE2® Risk Roles
     • Risk Owner — responsible for managing and monitoring risks
     • Risk Actionee — (could be the same as Risk Owner) responsible for carrying out risk responses as requested by Risk Owner
5. Communicate
   • done throughout the whole Risk Management procedure
   • communicates to the stakeholders in meetings or using management reports:
     • Checkpoint Reports
     • Highlight Reports
     • End Stage Reports
     • End Project Report
     • Lessons reports

Risk Theme: Roles and Responsibilities

• Corporate or Programme Management: provide the Corporate Risk Management policy and direction
• Executive: be accountable for Risk Management, and, in particular, Business Case Risks
• Senior User(s): provide info of risks related users
• Senior Supplier(s): provide info of risks related supplier
• Project Manager: prepare the Risk Management Strategy document, the Risk Register and continually monitors risks
• Project Assurance: reviews Risk Management practices against the Risk Management Strategy
• Team Manager: helps with identifying, assessing and controlling of risk
• Project Support: updates the Risk Register according to descriptions in Risk Management Strategy document

(The PRINCE2® Risk Theme is similar to the Project Risk Management as described in the PMBOK® Guide for PMP Certification Exam dealing with identification, qualitative and quantitative analysis, planning, response and monitoring of risk in the project as in the PMP Exam.)

Wish you PRINCE2® Foundation Exam success!