Risk Management
Vignesh Sivadass
2022MANG6143Lecture4slidesv31.pptMANG 6143
Project Risk Management
Mario Brito
Reading for this week
- Chapman(2019), Chapter 7, page 336-338
- Chapman and Ward (2011), page 153-154
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Your task this week is to:
- Read chapter 6 of Chapman and Ward (2011), page 153-154. In the class discuss how the Select and Focus phase of the SPP can be applied to a project in your subject area. Choose any project lifecycle stage.
- In the discussion board, write a comment that gives an example of the application of the Select and Focus phase in a project in your subject area. Assume that the project is in a given stage of the project lifecycle. Your comment should have at least 150 words.
- Review one comment from one colleague and write a comment. Write at least a 50 word review of their comment. What more can be said about the application of the Select and Focus phase to the selected problem? Give constructive feedback.
- Possible case study: Transcon. Chapman (2019), chapter 6, page 213-216.
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Four crucial common tasks for all phases
Document – record in text, tables and diagrams, with a view to ease of understanding for all parties involved.
Verify – ensure all providers of information agree as far as possible, and important differences of opinion are highlighted.
Assess – evaluate the analysis to date in context to ensure that it is ‘fit for purpose’.
Report – release verified documents and present findings as appropriate.
The value of knowledge which has been captured in a suitably structured accessible form can be enormous, during a project, and during subsequent related activities.
Capability-culture concerns for all phases
Assets – making the best use of all available skills and knowledge, for example.
Liabilities – resolving or accommodating all known missing skills and knowledge, for example.
Corporate clarity about any gaps between the assets available and the assets needed is crucial, as well as being able to cope with all of the current liabilities, to take advantage of available opportunities to reduce the set of liabilities and avoid any associated ‘risks’ becoming disasters.
Revisiting the simple BCS example to compare it with the offshore BP North Sea examples used to illustrate the key relative clarity concerns in the E&D strategy progress phase and earlier phases.
The Water and Sewage Limited (WSL) examples in the DOT and concept strategy stages as well as the E&D strategy stage.
The impact of the discount rate issue in the concept strategy phase – with important knock-on implications for all following phases – initial illustration using the WSL examples.
Short exercise
- Consider the BCS and the BP examples and answer the following questions
- Are there differences in terms of clarity with respect to the two projects?
- If so, why?
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An extract from Sally’s BCS cost estimate and contract
This is a Chapman and Ward (2011) example used to illustrate very simple modest clarity approaches.
| Item description | Target minimum | Target maximum | Target mid-point |
| Remove old floor covering and prepare the floor surface Lay new flooring Provision for clean-up and other time | 4 8 2 | 12 12 6 | 8 10 4 |
| Total hours Total cost | 14 £ 420 | 30 £ 900 | 22 £ 660 |
| Estimated value contract option basis is £ 660 + 10% = £ 726 |
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Sensitivity diagrams: a high clarity BP example
Clarity efficiency: ‘efficient frontier’ portrayal
Risk efficient options: ‘efficient frontier’ portrayal
The select and focus the process phase
- This phase involves ‘process design’ craft skills, a crucial aspect of the very general set of ‘modelling’ skills needed by the ‘process manager’.
- Understanding what these ‘process design’ craft skills involve at a ‘how to do it’ level is a core requirement for all those who aspire to managing this kind of process.
- At a ‘what needs to be done’ level this understanding is also crucial for all senior decision makers, because they have to be able to trust the judgement of their advisors, and know what to look for when selecting advisors.
- A useful place to start to understand what is involved is an overview of the task structure for this phase.
Select and focus phase specific tasks
start the
process
scope the process
clarify the process parties
clarify the process objectives
top-down uncertainty appreciation
consolidate the process strategy
needs
development
unacceptable
clarify the process lifecycle
clarify the process context
needs
development
select a process approach
determine resources required
determine timing
plan the process
unacceptable
assess
the process
scope
satisfactory
assess
the process
plan
satisfactory
stop the
project
to the
Identify
phase
What?
Where?
Why?
Who?
Whichway?
Wherewithal?
When?
Some of the process objectives which may be relevant
- Risk efficiency as a universal starting point.
- Clarity efficiency as another universal starting point.
- Opportunity efficiency (best practice as a clarified concept).
- The basic ABC of targets clarified as an essential capability.
- Balanced targets and expectations distinguished.
- Contingencies and provisions clarified and given clear owners.
- Opportunity management as the dominant goal.
- Culture change as an optional goal.
- Bottom up communication encouraged, with a shared ‘big picture’ perspective playing a central role in all communication, using a Gulf Canada example.
- Creativity and satisfaction (fun) used as effective objectives.
Key concerns which are often not addressed
- What subset of these objectives is appropriate for this particular application of the process in use? (usually a generic project or project risk management process for all projects being considered by an organisation)
- How should the process be shaped to this subset of appropriate objectives?
- What are the other important drivers, like capability-culture concerns, value at risk, project novelty, project complexity, time and resources available, learning curve position, lifecycle position, decisions of interest, and strategy/task level focus?
- Which of the seven Ws is the current focus, and how do the objectives of immediate interest relate to the plans which are most relevant?
- What are the most important questions which need addressing first?
Using decision diagrams to evaluate risk-reward tradeoffs:
the example involving two risk efficient choices used earlier
illustrates taking more risk may be worth while sometimes
Using simpler decision diagrams can be useful, especially if secondary criteria may need attention, as illustrated by the photocopier example
