Risk Management
Vignesh Sivadass
Lecture2M22.pptxMANG 6143 Project Risk Management Mario Brito
Lecture outline
The other 3 frameworks
Minimum clarity approach
Tools
Recommended Reading
(Chapman and Ward, 2011), chapter 2
(Chapman, 2019), chapter 3
(Chapman, 2019), chapter 7
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In the previous lecture we have talked about the first important framework of the EP.
In this lecture we are going to cover the other 3 frameworks. And we are going to talk about tools.
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Key project definition questions – the seven Ws
| 1. who | who are the parties involved? | parties |
| 2. why | what do the parties want to achieve? | motives |
| 3. what | what is the deliverable product the parties are interested in? | design |
| 4. whichway | how will all relevant plans in each lifecycle stage deliver what is needed? | plans for: relationships and contracts, business case purposes, operations, activities |
| 5. wherewithal | what key resources are required to achieve execution of these plans? | resource plans for: operations, activities |
| 6. when | when do all relevant events have to take place? | integration of all plan-based timetables |
| 7. where | where will the project take place? (in location and all other context terms) | context |
For different lifecycle stages, planners will change the levels of management plans among corporate, operation and project. In the various stages in a different time, planners should focus on different factors. The EP approach uses the 7Ws framework to inject clarity in the each stage.
Go through the list.
In the E&D stage the emphasis should be on the who, why and what.
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Key project definition questions – the seven Ws
what
the design of
the product
of the project
who
all project parties
ultimately involved
plans for
relationships
and contracts
plans for
operations
why
project motives:
profit and
other motives
plans for
business case
purposes
wherewithal
resource
plans for
activities
when
integration of all
plan-based
timetables
whichway
plans for
activities
resource
plans for
operations
where - the location of the
project and all the relevant
wider context issues
The role of the goals-plan relationship framework
Plans for activities have obvious duration and cost implications.
Resource plans for activities also have cost and duration effects.
Plans for operations have further duration and cost effects.
Resource plans for operations are also relevant.
Plans for relationships and contracts are crucial.
Integration of all plan-based timetables clearly matters.
The design of the product of the process is fundamental.
All the motives for being involved in the project matter.
All the parties involved with relevant plans have relevant motives.
Plans for business case purposes should reflect all the above.
The third level of planning the framework of project risk management is using goals-plans relationship framework. In the E&D stage of the EP this framework links the overall goal of the corporate with the relevant plans in projects. This includes the plans and resources plans for activities and operations with visible durations and cost effects. The plans also involve maintaining relationships and contracts.
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Our estimation-efficiency spectrum exploration agenda
The minimum clarity to maximum clarity spectrum concept.
The clarity efficiency concept.
The risk efficiency concept.
The opportunity efficiency concept.
‘Best practice’ in these terms.
Clarifying degrees of ‘bad practice’ and ‘common practice’.
Using an initial focus on a ‘primary attribute’.
Multiple attribute trade-offs as integrated concerns.
The need for a process to achieve ‘best practice’.
Before I introduce the next framework lets explore the concepts of efficiency in more detail.
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Minimum clarity estimation: a simple MoD example
0
probability
(density)
0 2 10 18 20
outcome value in weeks
probability
density
format
0 2 10 18 20
outcome value in weeks
0
1.0
cumulative
probability
0.5
the median (P50)
is equal to the
expected value
and both are
10 weeks
cumulative
probability
format
0.05
0.9
0.1
The approximation involved: a density portrayal
Interval estimates and the ABCs of targets
Using a P10 estimate as a default aspirational target, and alternatives.
Using a P90 estimate as a default commitment target, and alternatives.
Expected values as balanced targets, and alternatives.
Provisions defined by balanced targets less aspirational targets.
Contingencies defined by commitment targets less balanced targets.
Range estimates as the default choice, and point estimate alternatives.
Expected values as an opportunity/risk datum, and alternatives.
Clarifying relationships between opportunity, risk and uncertainty.
Clarifying relationships between plans and outcomes.
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
Sensitivity diagrams: a high clarity BP example
Sensitivity diagrams: Highways Agency example
Clarity efficiency: ‘efficient frontier’ portrayal
Risk efficient options: ‘efficient frontier’ portrayal
Decision diagrams: one risk efficient choice example
Decision diagrams: two risk efficient choices example
An extract from Sally’s BCS cost estimate and contract
| 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 |
This is a Chapman and Ward (2011) example used to illustrate very simple modest clarity approaches.
Read the flooring example in Chapman and Ward (2011), chapter 2
Approximate ‘macro-phase’ alignments for three processes
| Association for Project Management (APM): Project Risk Analysis and Management (PRAM) Guide (APM, 2004) | Institution of Civil Engineers (ICE) and the Institute and Faculty of Actuaries (IFoA): Risk Analysis and Management for Projects (RAMP) (ICE and IFoA, 2005) | Project Management Institute (PMI): A Guide to the Project Management Body of Knowledge (PMI, 2009) |
| Initiate: define the project Initiate: focus the risk management process | Organise and define RAMP through the investment lifecycle Plan and initiate risk review | Plan risk management |
| Identify | Identify risks | Identify risks |
| Assess: structure ownership estimate evaluate | Evaluate risks | Perform qualitative risk analysis Perform quantitative risk analysis |
| Plan risk event responses Plan project risk responses | Respond to risks Assess residual risks Plan responses to residual risks | Plan risk responses |
| Implement responses | Communicate strategy and plans Implement strategy and plans Control risks | Monitor and control risks |
Flowchart for the basic SPP
identify all relevant sources,
responses & conditions
structure
all uncertainty
clarify
ownership
quantify
some uncertainty
evaluate
all the relevant implications
to the
appropriate
gateway
stage
capability-culture
assets
capability-culture
liabilities
create & enhance plans
for all relevant concerns
from
project
initiation or a
gateway
stage
select & focus the process
for appropriate clarity
capture the context
with appropriate clarity
shape base plans using
models of some key issues
A bar chart for the first pass of the SPP
ownership
quantify
evaluate
intense effort
on-going effort
no effort or intermittent effort
key:
structure
phase
create & enhance
select & focus
start of the
process
end of the first
complete cycle
capture
identify
shape base plans
Flowchart for the universal process (UP) which underlies the basic SPP
select & focus the process
for appropriate clarity
create & enhance the plans
for all relevant concerns
shape the plans
using models of key issues
test the plans
to ensure robustness
interpret the plans
to exploit creativity
implement the plans
as and when appropriate
a trigger
in some
other
process
return
to an
appropriate
process
capability-culture
assets
capability-culture
liabilities
capture the context
with appropriate clarity
A brief overview of the development of this process, elaborated in Enlightened Planning (Chapman, 2019) chapter 2.
Recommended reading
(Chapman and Ward, 2011), chapter 2
(Chapman, 2019), chapter 3
(Chapman, 2019), chapter 7
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