Execution Risk Analysis: Definition & Example

Instructor: Martin Gibbs

Martin has 16 years experience in Human Resources Information Systems and has a PhD in Information Technology Management. He is an adjunct professor of computer science and computer programming.

At all stages of the project portfolio, there are risks as well as the need to analyze those risks. In this lesson, you will learn about execution risk analysis and why it is useful in project and portfolio management.

Understanding Execution Risk Analysis

Imagine that you are constructing a new deck. You've gone through the planning and design, and are now in the building (execution) phase. What risks do you face? In this phase of the project, it is important to analyze the risks so that you can have a successful implementation.

This type of analysis is execution risk analysis. This analysis requires a review of the risks that your project or portfolio will face during go-live, or execution of the project. These issues may be financial, regulatory, or involve any number of risks (e.g., deck boards that are too short). In other words, you analyze possible pitfalls, or banana peels, that may occur during the execution phase of the project. Execution risk analysis varies from other forms of risk analysis, but it's an important analysis to conduct during any phase of the project.

Execution Risk Analysis

How It Compares to Other Forms of Risk Analysis

When you read about risk analysis, the focus is often on picking a project that will result in the best return on investment (ROI) versus the risk to the organization. Risk analysis is also done during the project to check for the same pulse. Are the risks you are accepting worth the ROI for this project?

Execution risk analysis still keeps an eye on the ROI, but the focus is narrowed on the actual success of the project itself. In other words, what risks do you face that could doom the final project? Will a deluge of rain compromise the foundations? Will the back brace on the house fail? What happens if the support posts fail during or shortly after construction?

Performing Execution Risk Analysis

It is important to have a holistic view of the project or portfolio. While it is important to understand project-level risks and address them, we cannot forget that the implementation/execution is a major phase as well.

Execution risk analysis can use the same tools as other risk analyses. For example, a decision tree analysis lists out each potential project risk and the value it has on success and failure. Failure is a negative value in the decision tree. You create probabilities for each item, or risk. You can apply this to execution risk by considering the probability of specific failures (For example, delivered deck boards are too short, frost damages foundation, nails are too long, etc.).

The graphic is an option for risk analysis at any phase but has been tailored to look at the execution phase.


Risk Analysis Cycle
Risk Analysis Cycle

Timing

Just because execution risk analysis addresses the execution phase of the project does not mean that you only perform the analysis at this phase of the project! This analysis should be part of an overall risk assessment or risk analysis review.

Even as you are planning for the deck project, you need to be thinking of execution risks. Just as with standard risk analysis, you can use decision trees to map out what you imagine going wrong during the execution phase of the project.


Risk Analysis at All Phases
Risk Analysis - All Phases

To unlock this lesson you must be a Study.com Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use Study.com

Become a Study.com member and start learning now.
Become a Member  Back
What teachers are saying about Study.com
Try it risk-free for 30 days

Earning College Credit

Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Create an account to start this course today
Try it risk-free for 30 days!
Create an account
Support