Risk management in projects

What is Risk ?

—  The probability that a program or project will experience an undesired event

—  and the consequences, impact, or severity of the undesired event, were it to occur

Risk = Probability x Impact

Risk in Projects: International Business

—  Project & Implementation Manager, Percepta

—   Setting up customer service centres in India, China, Thailand, etc

—  Project stages:

¡  Initiation

¡  Planning

¡  Execution

¡  Evaluation

—  What were the project objectives?

—  What were the risks?

Queensferry Crossing Project
(Gerry Henderson, Jacobs, Feb 2014)

—  Project phases:

¡  Design

¡  Procurement

¡  Preliminaries

¡  Temporary works

¡  Manufacturing

¡  Construction

¡  Commissioning

 —  What are the Risks?

—  Not meeting deadlines

—  Over costs

—  Quality not met

—  Unforeseen risk eg 2 seals on island, which was due to be blown-up

—  Other difficulties-  contractor disputes, clash of personalities,  org cultures, unforeseen risks eg weather..

Risk in Projects: International Business (Percepta)

—  Project Objectives:

¡  Meeting clients requirements:

¡  Meeting Percepta’s objectives:

¡  Project Risks:

¡  What are the risks in this type of project?

¡  Compare and contrast the risks in this project to the Queensferry Crossing?

¡  - same risks as well as language, culture, etc

Why do we Manage Risk?

—  Project problems can be reduced as much as 90% by using risk analysis

—  Positives:

¡  More info available during planning

¡  Improved probability of success/optimum project

—  Negatives:

¡  Belief that all risks are accounted for

¡  Project cut due to risk level

Risks and Risk Management

—  A risk is a problem that has yet to occur; a problem is a risk that has already materialised

—  Risk management is a process of anticipating problems and minimising their impact

—  But . . . If your corporate culture won’t allow people to admit uncertainty, you can’t do risk management

Risk Management

An organised, systematic decision making process that efficiently identifies, analyses, plans, tracks, controls, communicates and  documents risk to increase the likelihood of achieving program/project goals.

(Larson & Gray, 2011)

Risk Management Approaches

Proactive Risk Management:

the process of assessing continuously what

can go wrong, determining what risks are

important, their impact, and implementing

a strategy to deal with those risks

Reactive risk management:

This risk management approach is better known

as crisis management or putting out fires. This

type of risk management almost always

negatively affects the project’s schedule, cost

and quality. In addition, process improvement

opportunities are ignored – fire fighting

has priority

Risk Management Benefits

—  A proactive rather than reactive approach.

—  Reduces surprises and negative consequences.

—  Prepares the project manager to take advantage
of appropriate risks.

—  Provides better control over the future.

—  Improves chances of reaching project performance objectives within budget and on time.

Risk Management Process

—  Step 1: Risk Identification

—  Step 2: Risk Assessment

—  Step 3: Risk Response Development

¡  Contingency Planning

¡  Contingency Funding

—  Step 4: Risk Response Control

¡  Change Control Management

Summary

The chances of a risk event occurring

e.g.

—  Time estimate

—  Cost estimate

—  Design error

are greater in the concept, planning & start-up phases of the project

—  How to Manage the Risks?

—  Firstly, put onto all organisations to manage own risk

—  Profile risk over time

—  NCR –non-conformance reports

—  Finance risk – put sum aside (6%)

—  Bonds- to insure finance/contracts