Project risk management is a scalable activity and should be commensurate with of project risk management in the transportation industry. PDF | On Jan 1, , Karim Eldash and others published PROJECT RISK MANAGEMENT (COURSE NOTES). PROJECT RISK MANAGEMENT. Conference Paper (PDF Available) · November with 5, Reads. Conference: Atlantic international University, At U.S.A.
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Project Management and Leadership – D, PhD, PMP RISK MANAGEMENT IS BEING SMART ABOUT TAKING CHANCES. 4. RISK MANAGEMENT. “ the process involved with identifying, analyzing, and responding to risk. Risk is part of every project we undertake and the objective is . Introduction. This Guide provides an introduction to the processes involved in Project Risk Analysis and. Management, offering a simple but robust and practical.
All project team members should be encouraged to identify risks and this is an iterative process because new risks may become known as the project progresses. By ensuring the whole project team are involved in the identification of risks, they will have a sense of ownership and responsibility for both the risks and associated risk response actions.
Chapter 4 - Performing Risk Analysis Using the risk register each risk is now analyzed in terms of its probability and impact on the project if it were to occur. It should be performed as soon as possible after risks have been identified so that appropriate time and resources can be allocated to the more serious risks. It uses the probability and impact matrix PIM to rank and prioritize risks, and this information is placed back on the risk register.
Like all of the activities within risk management, this one should be performed regularly because new risks will be identified and the characteristics of existing risks may change as the project progresses. The availability of time and budget, and the need for qualitative or quantitative statements about risk and impacts, will determine which method s to use.
Chapter 5 - Planning and Controlling Risk Responses Having identified and assessed each risk you need to develop the options and actions to enhance opportunities and to reduce threats to the project. It is important that planned responses are appropriate to the significance of the risk, cost effective in meeting the challenge, realistic within the project context, agreed upon by all parties involved, and owned by a responsible person.
Planned risk responses that are included in the project management plan are executed during the life cycle of the project, but the project work should be continuously monitored for new, changing, and outdated risks. You will learn: Why a proactive approach to risk management is necessary. How to develop a risk management plan that will protect the project.
Managing Project Risk - Free eBook in PDF Format
How to identify and document risks. How to prioritize risks by assessing their probability and impact.
How to assess risks using both qualitative and quantitative approaches. No matter what the activity, there is an element of risk that must be analyzed and weighed against the potential rewards. The best organizations are those who can choose the right risks to take on, and the ones to avoid. Dealing with too little risk often means that the organization is being too conservative and is limiting their potential for growth - too much risk, however, and the company is likely to crash and burn at some point along the way.
As projects are a regular part of business, it only stands to reason that they incur a certain level of risk as well. Managing project risk deals with the activities involved in identifying potential risks , assessing and analyzing them, finally monitoring them throughout the life of a project.
Every project will have a unique set of risks based on the specific details of the work being done. It is often up to the project manager to outline these risks ahead of time and include them as part of the overall plan of the project.
Dealing with the risk inside of a project isn't much different from dealing with any other business risks that you encounter. While it probably isn't possible to foresee all potential risks that could come down the line, planning for as many of them as you can will give the project its greatest chance at success. Identifying the Risks Before a project even gets started, it is essential that any potential risks are identified and a strategy for managing such risks developed.
One of the best ways to do this is by learning from past experience - either your own experiences, or those of the organization as a whole. Even if the type of project you are working on presently is different than anything you have done before, it is likely the organization has already done something at least remotely similar.
Look back on those projects to see how they played out. Did anything pop up along the way that you could be ready for this time? It would be inappropriate to list them and their contributions, but we would like to express our gratitude. We apologize to them for failing to take any advice we should have.
Only the errors and omissions are entirely our own. Part I Setting the scene Part I Chapters 1—4 sets the scene, introducing concepts used throughout the rest of the book. Chapter 2 considers the implications of the project life cycle PLC , using an eight stage framework. Chapter 3 describes the key motives for formal risk management processes RMPs.
Chapter 4 outlines the nine phase generic process framework employed to discuss RMPs. It also suggests inherent uncertainty related to novel organization and a unique scope of work, which requires attention as a central part of effective project management.
Managing Project Risk - Free eBook in PDF Format
Much good project management practice can be thought of as effective uncertainty management. For example, good practice in planning, co-ordination, setting milestones, and change control procedures seeks to manage uncertainty directly. However, most texts on project management do not consider the way uncertainty management should be integrated with project management more generally, in terms of a wide view of what a co-ordinated approach to proactive and reactive uncertainty management can achieve.
For example, suppose success for a project is measured solely in terms of realized cost relative to some target or commitment. From this perspective it can be a natural step to regard risk management as essentially about removing or reducing the possibility of underperformance. Often it can be just as important to appreciate the positive side of uncertainty, which may present opportunities rather than threats. Two examples may help to illustrate this point. Example 1. It is also very important to recognize that the weather may be exceptionally kind, providing a counterbalancing opportunity.
Making sure supplies of pipe can cope with very rapid pipe laying is essential, for obvious reasons. Gas was to be provided on a take-or-pay contract in which gas supply would be guaranteed from an agreed date, but gas not required from that date would have to be paid for anyway.
This made any delay relative to the commitment operating date very expensive, the cost of such unused gas being in effect a project cost. Using British Gas supplies for testing was a nontrivial change, because its gas composition was different, requiring different testing procedures and gas turbine contract differences.
This aspect of problem solving is more subtle and is not widely understood, but it can be very important, in direct terms and from a morale point of view. High morale is as central to good risk management as it is to the management of teams in general.
If a project team becomes immersed in nothing but attempting to neutralize threats, the ensuing doom and gloom can destroy the project. In any given decision situation both threats and opportunities are usually involved, and both should be managed.
A focus on one should never be allowed to eliminate concern for the other. Moreover, opportunities and threats can sometimes be treated separately, but they are seldom independent, just as two sides of the same coin can only be examined one at a time, but they are not independent when it comes to tossing the coin. Courses of action are often available that reduce or neutralize potential threats and simultaneously offer opportunities for positive improvements in performance.
It is rarely advisable to concentrate on reducing threats without considering associated opportunities, just as it is inadvisable to pursue opportunities without regard for the associated threats. In spite of this, there is still a tendency for practitioners to think of risk management in largely downside, threat management terms a tendency that the authors are not always able to resist. Even in a safetycritical context, when the downside has clear priority, it is a serious mistake to forget about the upside.
Uncertainty management is not just about managing perceived threats, opportunities, and their implications; it is about identifying and managing all the many sources of uncertainty that give rise to and shape our perceptions of threats and opportunities.
It implies exploring and understanding the origins of project uncertainty before seeking to manage it, with no preconceptions about what is desirable or undesirable. Key concerns are understanding where and why uncertainty is important in a given project context, and where it is not. Uncertainty in projects The scope for uncertainty in any project is considerable, and most project management activities are concerned with managing uncertainty from the earliest stages of the Project Life Cycle PLC , clarifying what can be done, deciding what is to be done, and ensuring that it gets done.
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All these areas of uncertainty are important, but generally they become more fundamentally important to project performance as we go down the list. Potential for variability is the dominant issue at the top of the list, but ambiguity becomes the dominant underlying issue toward the bottom of the list. Uncertainty about variability associated with estimates involves the other four areas: each of them involving dependencies on later areas in this list.
For example, we may not know how much time and effort will be required to complete a particular activity. The causes of this uncertainty might include one or more of the following:. The other sources of uncertainty arise from a lack of understanding of what is involved.
Because they are less obviously described as threats or opportunities, they may be missed unless a broad view of uncertainty management is adopted. Uncertainty about the basis of estimates The quality of estimates depends on: who produced them, what form they are in; why, how, and when they were produced; from what resources and experience base; and what assumptions underpin them.
The need to note assumptions about resources, choices, and methods of working is well understood if not always fully operationalized. All three of these sources of uncertainty can have a very substantial impact on estimates, and this needs to be recognized and managed. Uncertainty about design and logistics In the conception stage of the PLC the nature of the project deliverable and the process for producing it are fundamental uncertainties. In principle, much of this uncertainty is removed in pre-execution stages of the PLC by attempting to specify what is to be done, how, when, and by whom, and at what cost.
The nature of design and logistics assumptions and associated uncertainty may drive some of the uncertainty about the basis of estimates.
The need to do so is perhaps indicative of a perceived failure of risk management practices. However approached, risk management and value management need joint integration into project management. Uncertainty about fundamental relationships between project parties The relationships between the various parties may be complex, even if they look quite simple.
The involvement of multiple parties in a project introduces uncertainty arising from ambiguity in respect of Ward, :. Ambiguity about roles and responsibilities for bearing and managing projectrelated uncertainty can be crucial. This ambiguity ought to be systematically addressed in any project, not just in those involving formal contracts between different organizations. Contractor organizations are often more aware of this source of ambiguity than their clients, although the full scope of the threats and opportunities that this ambiguity generates for each party in any contract e.
For example, interpretations of risk apportionment implied by standard contract clauses may differ between contracting parties Hartman and Snelgrove, ; Hartman et al.
The nature of assumptions about contractual relationships and associated uncertainty may drive uncertainty about objectives and priorities with further knock-on effects. However, the most important issues that risk management helps to resolve are usually related to objectives and relationships between project parties.
There are six basic questions that need to be addressed: 1. While somewhat contrived, this terminology helps to remind us of the need to consider all six aspects of a project, reinforced by the Rudyard Kipling quote used to open this chapter.
In the context of roots of uncertainty, these arrows can be interpreted as indicating the knock-on effects of uncertainty in each entity.
As Figure 1. Any uncertainty associated with entities earlier in the cycles portrayed by the diagram are of fundamental importance later. In the earliest stage of a project, during conception, uncertainty is at its greatest. The purpose for which the project is required and the parties who will be involved may not be clear. As indicated in Figure 1. Project initiators kick the whole process off. Why, in terms of the initial conception of purpose, drives the initial what, the design.
The design—be it a building, other physical product, service, or process—drives the initial activity-based plans, associated plan-based resource allocations, and plan-based timetable, the initial whichway, wherewithal, and when. These considerations may relate to capital cost only or more complex, through-life performance criteria.
As the project evolves it may be appropriate to bring in further later players, enlarging the who e. It may also become appropriate to consider other interested parties who are not direct players e.
In each case the feedback loops result in subsequent feedforward, which may result in fundamental changes to the what, whichway, wherewithal, or when.
In particular, if we recognize that the what, whichway, and wherewithal together describe the quality of a project and ignore revenue and other motives, then the lower part of Figure 1. The limited perspective inherent in the simple cost—time—quality triad is then apparent from the expansion of this triad by Figure 1.
Further, Figure 1. Risk Management Processes RMPs that adopt a simplistic focus on threats will not address many of these sources of uncertainty. This does not facilitate consideration of aspects of variability that are driven by underlying ambiguity.
To address uncertainty in both variability and ambiguity terms we need to adopt a more explicit focus on uncertainty management. Uncertainty about anything that matters has to be the starting point for holistic and integrated project risk management. Opportunities and threats are part of the sources of uncertainty that matter, but they are not risk per se in our terms.
Similarly, uncertain events, conditions, or circumstances that may have an effect positive or negative on project objectives are part of the sources of uncertainty that matter, but they are not risk per se in our terms.
Why uncertainty matters is not a simple issue, but Chapter 3 outlines key aspects of what is The scope of project risk management 13 involved; the rest of this book illustrates what is involved in more detail, and Chapman and Ward elaborate further.
Base plans provide a basis for project preparation, execution, and control. Base plans in activity terms imply base plans in resource allocation terms and associated base plan timetables. It may be useful to associate the who and why with base plans explicitly too, if changes are anticipated. Control involves responding to threats and opportunities, and revising performance targets where appropriate.
Where uncertainty presents potential future threats or opportunities, risk management seeks to modify the future incidence and quality of threats or opportunities and their possible impact on project performance via proactive planning in terms of base plans and contingency plans.
This does not mean that reactive planning will not be necessary or that all possible out-turns will have been predicted. It means that proactive planning will have been carried out to an extent that allows reactive planning to cope without nasty surprises most of the time. Reactive risk management, responding to the control function, sometimes without contingency plans in place, should be reasonably panic-free, without a need for crisis management most of the time.
To illustrate these points, consider another example, building on Example 1. If no proactive planning had 14 Uncertainty, risk, and their management been undertaken, the potential for overwhelming crisis management was obvious. As bow anchors approached the lay barge, they were picked up by tugs, carried ahead, and reset. Improperly controlled lowering of new pipeline sections could result in a pipe buckle—a key pipe-laying threat.A common risk avoidance technique is to use proven and existing technologies rather than adopt new techniques, even though the new techniques may show promise of better performance or lower costs.
Is the risk something that would do long-term damage to the organization if it came to pass? Although they might not have the same high-level view of the project that you do as manager, they likely have a great deal of knowledge within their specific field of expertise.
Further details on risk management can be found in our online risk management course , which includes a Risk Management Register in spreadsheet format. Why, in terms of the initial conception of purpose, drives the initial what, the design. The involvement of multiple parties in a project introduces uncertainty arising from ambiguity in respect of Ward, :.
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