Project risk and uncertainty in pmbok 7th edition

Summary

This video explores the concept of uncertainty and its relationship to risk, focusing on key types of uncertainty: ambiguity, complexity, and volatility. It explains how these shades of uncertainty can impact projects and distinguish between uncertainties that pose risks and those that do not. Uncertainty becomes a risk when it affects project objectives and can be measured in terms of probability and impact. The video also highlights the importance of understanding these distinctions in project management, especially for the PMP exam, and promises further guidance on managing these uncertainties in future videos.

Takeaways

• 😀 Uncertainty refers to the state of not knowing or understanding, often leading to an inability to predict or solve problems effectively.
• 😀 Ambiguity is a type of uncertainty characterized by unclear or multiple possible outcomes. It can occur in conceptual terms or in situations with unpredictable results.
• 😀 Situational ambiguity arises when the outcome of a process is uncertain, such as when a new process is introduced and its impact is unclear.
• 😀 Misunderstanding ambiguity in project requirements can lead to unnecessary changes during the execution phase, creating major issues in project management.
• 😀 Complexity involves a high number of interconnected factors that make predicting outcomes difficult, especially when roles and responsibilities are unclear.
• 😀 There is an overlap between complexity and ambiguity, as complexity often leads to ambiguity, but ambiguity does not always lead to complexity.
• 😀 Volatility refers to fluctuations in resources or skills, making it hard to predict project changes, like in companies with high employee turnover rates.
• 😀 Not all uncertainties are risks. For uncertainty to be classified as a risk, it must impact project objectives and be measurable in terms of probability and impact.
• 😀 A risk is an uncertain event or condition that, if it occurs, can have a positive or negative effect on project objectives, and its probability and impact can be measured.
• 😀 Understanding the difference between risk and uncertainty is crucial in project management for effective planning and mitigation strategies.
• 😀 In future videos, the focus will shift towards strategies for managing uncertainties, with particular emphasis on risk management techniques.

Q & A

What is uncertainty, and how is it defined in the script?

Uncertainty is the state of not knowing, characterized by a lack of understanding or awareness about issues, events, possible paths to follow, or solutions to pursue. It arises when there is no clear information or clue about a situation, such as when you don’t know what is inside a box before opening it.

How are uncertainty and risks related, and what is the key difference between them?

Uncertainty and risks are often used interchangeably but they have a significant difference. Uncertainty refers to situations where there is a lack of knowledge, while risks are uncertainties that have an impact on the project objectives or constraints and can be predicted and measured.

What is ambiguity, and how does it affect project management?

Ambiguity is the state of being unclear, where multiple outcomes or interpretations are possible. In project management, ambiguity can arise during the collection of requirements or contract drafting, leading to misunderstandings, changes during execution, or disputes in contracts.

What are the two types of ambiguity discussed in the video?

The two types of ambiguity are conceptual ambiguity, which relates to unclear terms or concepts, and situational ambiguity, which occurs when more than one outcome is possible in a situation, such as the introduction of a new process in a project.

How does complexity differ from ambiguity in the context of project management?

Complexity refers to a project or program’s environment being characterized by many interconnected influences that interact in diverse ways. It often causes ambiguity because unclear roles, responsibilities, or overlapping power and interests make it difficult to predict outcomes. However, ambiguity does not always cause complexity.

What is volatility, and how does it relate to project management uncertainty?

Volatility refers to ongoing fluctuations in resources, skills, or circumstances, such as high employee turnover in a company. This makes it difficult to predict how changes might impact the project, increasing the uncertainty around the project’s execution.

What conditions must be met for uncertainty to be classified as a risk?

For uncertainty to be classified as a risk, two conditions must be met: 1) The uncertainty must have an impact on the project objectives or constraints; and 2) It must be measurable and predictable, meaning its probability and impact can be calculated.

Can you give an example to illustrate the difference between uncertainty and risk?

An example is a soccer game. If you know the teams and their past performances, you can predict the likelihood of winning and place a bet, which involves risk. However, if the teams are unknown and have never played before, it would be an uncertainty, as you cannot make an informed prediction or calculate the probability of an outcome.

What is the definition of risk according to the PMBOK Seventh Edition?

Risk is defined as an uncertain event or condition that, if it occurs, has a positive or negative effect on one or more project objectives. This definition encompasses uncertainty, probability, and measurable impact on the project.

How are risks related to ambiguity, complexity, and volatility in projects?

Risks can arise from the shades of uncertainty such as ambiguity, complexity, and volatility. If these uncertainties have an impact on the project objectives and can be predicted and measured, they can be classified as risks that need to be managed in project execution.