Risk Management
Vignesh Sivadass
2022MANG6143Week6slidesv3.pptMANG 6143
Project Risk Management
Mario Brito
Identify all relevant sources, responses & conditions
- This phase is relatively straightforward provided it is not confused with common practice event uncertainty identification processes which seem to have been inappropriately borrowed directly from very basic pre-1960s safety analysis.
- A basic understanding of all modelling issues from an enlightened planning perspective is needed – for example, the minimum-maximum clarity spectrum needs to be understood, as outlined in Enlightened Planning (Chapman, 2019) chapter 3 and then generalised.
- Clear understanding of clarity efficient uncertainty decomposition is crucial.
- A very basic concern is the level of detail required and the way the depth of decomposition required needs to be developed on successive passes.
- A useful place to start to understand what is involved is an overview of the task structure for this phase, after first outlining the background to the use of this task structure in a BP offshore project planning context, generalising earlier PERT, Generalised PERT and GERT via SCERT as discussed in Enlightened Planning (Chapman, 2019) chapter 3.
Identify phase specific tasks
clarify the immediate priorities
decompose the next priority
source if this is appropriate
clarify the relevant
primary responses
clarify the relevant secondary
sources and responses
deliverables
fit for purpose?
no
yes
to the
structure
phase
from
earlier
phases
search and classify
clarify the immediate need
for more breadth or depth
clarify the relevant
conditions
Some of the key general messages
Start with a focus on the key sources that matter the most, in the aspect of the seven Ws that matters the most at present.
Be clear about the composite nature of any relevant sources of uncertainty.
Use an explicit ‘closure with completeness’ source – other sources not worth decomposition.
Identify any key secondary sources of uncertainty and specific responses explicitly, but understand the need to avoid complex tertiary source and response chains most of the time.
Identify some important sources best treated as conditions now, but understand that the rest can be identified later, including a ‘closure with completeness’ condition with an owner if this condition does not hold.
A table of generic response types
| Type of response | Method of handling uncertainty |
| Modify objectives | Reduce or raise performance targets expressed as constraints, changing trade-offs between multiple objectives. |
| Avoid | Plan to avoid specified sources of uncertainty. |
| Influence probability | Change the probability of potential variations. |
| Modify consequences | Modify the possible consequences of variations. |
| Transfer consequences | Transfer consequences to another party via contract provisions or insurance. |
| Develop contingency plans | Set aside resources or make other plans to provide a reactive ability to cope. |
| Keep options open | Delay choices and commitments, choosing versatile options. |
| Monitor | Collect and update data about all sources of uncertainty. |
| Accept | Acknowledge and accept uncertainty, doing nothing about it. |
| Remain unaware | Ignore uncertainty, taking no action to identify or manage it. |
| Optimise all the above | Explicitly recognise the value of selecting an optimal combination. |
Some illustrations of process variants in the identify phase,
building on earlier BP North Sea offshore project examples,
with National Power and basic PERT models as linked simpler examples.
Common shortcomings and simple contexts when minimum decomposition of all relevant uncertainty is the key,
revisiting the Highways Agency example,
then revisiting the issue of eliminating the use of PIGs.
The goal of sensitivity diagram understanding
of all relevant sources of uncertainty with a focus on
what needs to be achieved in this phase and later.
Sensitivity diagrams: Highways Agency example
A basic probability-impact grid (PIG)
Probability
high
low
low medium high
medium
Impact
p1
p2
p0 = 0
p3 = 1
i0 = 0 i1 i2 i3
r2 r3 r4
r1 r2 r3
r3 r4 r5
More powerful portrayal of the information on a PIG
source number 3 – reliable probability
available, but very uncertain impact
impact
0 … complete scale for outcome values from zero to the feasible maximum
probability
1.0
0
source number 2 – very uncertain probability, but predictable impact
source number 1 – uncertain probability and impact
Health Warning
Any source which
has a probability of 1 does not lend itself to this portrayal, so
very important uncertainty is
omitted by any event based
risk management approach using
this framework
complete
scale from
0 to 1.0
Sensitivity diagrams: a high clarity BP example
Uncertainty-time profile graphs for cost using the
WSL example based on the Highways Agency report to illustrate key uncertainty and risk distinctions
cost
in £m
P90
time in years from now
1
2
3
0
100
200
fixed price
contract
agreed
expected value
P10
0
DOT
strategy
gateway
concept
strategy
gateway
E&D
strategy
gateway
D&A
strategy
gateway
The checklist approach – reinterpretation of one basic form as a useful generic prompt list
| Source of uncertainty | Impact | Likelihood | Exposure |
| Definition of project | |||
| Concept and design | |||
| Financing arrangements | |||
| Logistics | |||
| Local conditions | |||
| Resource estimates | |||
| Industrial relations | |||
| Communications | |||
| Project organization |
The relevance of prompt lists for sources of uncertainty which distinguish between project lifecycle stages
A basis for always looking ahead and sometimes looking back if necessary.
| Execution and delivery (E&D) strategy stage | Identifying and allowing for regulatory constraints. Considering concurrency of activities as required. Capturing dependency relationships. Avoiding or allowing for errors and omissions. |
| Tactics stage | Estimating all resource requirements. Ensuring adequate accuracy of resource estimates. Defining responsibilities (number and scope of contracts). Defining contractual terms and conditions. Selecting capable participants (tendering procedures and bid selection). |
| Execution stage | Exercising adequate coordination and control. Determining the level and scope of control systems. Ensuring effective communication between participants. Provision of appropriate organizational arrangements. Ensuring effective leadership. Ensuring continuity in personnel and responsibilities. Responding effectively to sources which are realized. |
| Delivery stage | Providing adequate testing. Providing adequate training. Managing stakeholder expectations. Obtaining licences to operate. |
