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  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • First just consider a typical risk management process – all happy with this? CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • Then we’ll consider a typical project lifecycle Taken from a construction perspective, but is relevant for any type of project CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • Where would you consider risk management to fit in to this project lifecycle – short discussion Yes – from beginning to end. CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • If you are service or “product” provider, you may or may not be involved in this But a client should have gone through a risk management process to help them decide whether undertaking a project is the right thing to do to help them meet their strategic objectives, and of course, this might be a building, IT, marketing, recruitment – etc! CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • If you don’t engage stakeholders, they will turn off. People are the success factor for any process and if haven’t got them with you at the start, you won’t keep them with you throughout the project. CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited Can you clarify the situation Can you qualify out your threats Can you get the insurance
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • CORE RISK MANAGEMENT TRAINING © KB Risk Consulting Limited
  • Workshop Presentation Download

    1. 1. Implementing project risk management Kate Boothroyd FIRM Director, KB Risk Consulting Limited IRM North West England Regional Group Workshop D10
    2. 2. <ul><li>A typical risk process </li></ul><ul><li>A typical project lifecycle </li></ul><ul><li>How the two are linked </li></ul><ul><ul><li>Pre-project phase </li></ul></ul><ul><ul><li>Pre-implementation phase </li></ul></ul><ul><ul><li>Implementation phase </li></ul></ul><ul><ul><li>Business operation phase </li></ul></ul><ul><li>Summary </li></ul>Agenda IRM Forum 2008
    3. 3. 1. Typical risk management process IRM Forum 2008 Plan for Risk Management Define objectives Identify Assess Handle Manage / report / review
    4. 4. Risk and Risk Management <ul><li>Risk </li></ul><ul><ul><li>An uncertain event, which should it occur, may impact positively or negatively on the outcome of defined objectives </li></ul></ul><ul><ul><li>Considers both opportunities and threats </li></ul></ul><ul><li>Risk Management </li></ul><ul><ul><li>A formal process that enables identification, assessment, planning and management of risks </li></ul></ul>IRM Forum 2008
    5. 5. 2. Typical project lifecycle Business operation phase IRM Forum 2008 Implementation phase Pre-implementation phase Pre-project phase De-com- missioning Refurb Operation & Maintain Post Handover Implement Production Information Concept Design Scheme Design Detailed Design Business Consultancy Inception Feasibility
    6. 6. 3. How the two are linked IRM Forum 2008 Business operation phase Implementation phase Pre-implementation phase Pre-project phase De-com- missioning Refurb Operation & Maintain Post Handover Implement Production Information Concept Design Scheme Design Detailed Design Business Consultancy Inception Feasibility Risk Management
    7. 7. 3.1. Pre-project phase <ul><li>Part of a client’s strategic plan </li></ul><ul><ul><li>Strategy is about aiming in the right direction, and strategic risks look at whether a company is “doing the right things” </li></ul></ul><ul><li>Projects become a means of implementing your strategic plans </li></ul><ul><li>Risk management is used to help a client decide whether to proceed with a project – does it help them do the right things? </li></ul><ul><li>Perhaps you have been invited to help with this decision </li></ul>IRM Forum 2008 Business Consultancy Inception Feasibility
    8. 8. 3.2 Pre-implementation phase <ul><li>Probably when you first get to know about the project </li></ul><ul><li>Initial review to decide whether to submit a proposal </li></ul><ul><li>Kick off meeting held to decide how to undertake this phase and the project itself: </li></ul><ul><ul><li>Resources? </li></ul></ul><ul><ul><li>Time? </li></ul></ul><ul><ul><li>Capability? </li></ul></ul><ul><li>Frenzied activity: </li></ul><ul><ul><li>Discussions with client, client representatives, designers, staff, suppliers, sub-contractors, etc </li></ul></ul><ul><ul><li>Production of proposal information </li></ul></ul>IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    9. 9. Pre-implementation phase <ul><li>Where is your risk management in all of this? </li></ul><ul><li>Is there a request for a risk identification workshop two days before the proposal is due for review by senior management (if you’re lucky!)? </li></ul><ul><li>You have a kick off meeting. Use this to kick start your risk management process </li></ul><ul><li>Develop your risk management plan. </li></ul>IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    10. 10. Risk management plan <ul><li>Defines and plans risk process </li></ul><ul><li>Project Risk Management Plan </li></ul><ul><ul><li>Project specific document that holds the definition </li></ul></ul><ul><ul><li>of your chosen risk management process, </li></ul></ul><ul><ul><li>including: - </li></ul></ul><ul><ul><ul><li>Scope & objectives </li></ul></ul></ul><ul><ul><ul><li>Organisation, roles & responsibilities </li></ul></ul></ul><ul><ul><ul><li>Approach & process, tools & techniques </li></ul></ul></ul><ul><ul><ul><li>Deliverables </li></ul></ul></ul><ul><ul><ul><li>Reporting flows and structures </li></ul></ul></ul><ul><ul><ul><li>Process meeting life cycle </li></ul></ul></ul><ul><li>Record of ‘how, who, when and how often’! </li></ul><ul><li>Integral part of Project Execution Plan </li></ul>IRM Forum 2008 Plan for Risk Management Define objectives Identify Assess Handle Manage / review / report Production Information Concept Design Scheme Design Detailed Design
    11. 11. Risk management plan <ul><li>Plan how you will implement the risk management process for this phase, but also plan for the next phase too </li></ul><ul><ul><li>Resources </li></ul></ul><ul><ul><ul><li>On site </li></ul></ul></ul><ul><ul><ul><li>Advisory support </li></ul></ul></ul><ul><ul><li>Job descriptions </li></ul></ul><ul><ul><li>Time </li></ul></ul><ul><ul><ul><li>to effectively hand over the project at implementation </li></ul></ul></ul><ul><ul><ul><li>To carry out risk management at all stages </li></ul></ul></ul><ul><li>Does your process suit the needs of the project? </li></ul><ul><li>One size does NOT fit all, even if the colour and shape meets your corporate needs </li></ul><ul><li>Have you engaged your stakeholders? Do they understand why they need to use risk management and why they need to be involved? </li></ul>IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    12. 12. Pre-implementation phase <ul><li>You have decided how, what, why and when in relation to risk management </li></ul><ul><li>What have you based these decisions on? </li></ul><ul><li>Is this when you should do risk identification? </li></ul><ul><li>Does everyone fully understand the client’s requirements, and the company’s requirements? </li></ul><ul><li>Have you identified what it is you need to protect and enhance to ensure that the project is a success? </li></ul><ul><li>Consider defining the objectives </li></ul>IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    13. 13. Define objectives <ul><li>Sets the scene for risk identification </li></ul><ul><li>Understand why the project / activity is being </li></ul><ul><li>undertaken and what has to be achieved. </li></ul><ul><ul><li>Who are the stakeholders? </li></ul></ul><ul><ul><ul><li>Directly involved e.g. Client </li></ul></ul></ul><ul><ul><ul><li>Affected e.g. Neighbours </li></ul></ul></ul><ul><ul><ul><li>Interested e.g. Media </li></ul></ul></ul><ul><ul><li>Will the right people be involved </li></ul></ul><ul><ul><li>What has to be achieved? (Benefits) </li></ul></ul><ul><ul><li>Can the success criteria be defined - KPIs? </li></ul></ul><ul><ul><li>Use value management </li></ul></ul><ul><ul><li>What assumptions/exclusions have been made? </li></ul></ul><ul><li>Review and challenge requirements </li></ul>IRM Forum 2008 Plan for Risk Management Define objectives Identify Assess Handle Manage / review / report Production Information Concept Design Scheme Design Detailed Design
    14. 14. <ul><li>Task </li></ul><ul><ul><li>Leave this room and go to the car park </li></ul></ul><ul><ul><li>Identify the risks you may encounter on this journey </li></ul></ul>Exercise - Spot the risks <ul><li>Did you take account of different scenarios? </li></ul><ul><ul><li>E.g. </li></ul></ul><ul><ul><ul><li>Jane sets off the fire alarm </li></ul></ul></ul><ul><ul><ul><li>Peter starts a fire in the reception </li></ul></ul></ul><ul><ul><ul><li>Joe asks you to go for the hell of it </li></ul></ul></ul><ul><li>Moral </li></ul><ul><ul><li>ASK WHY YOU’RE DOING IT </li></ul></ul><ul><ul><li>If you don’t ascertain the objective of the exercise then you can’t accurately identify the risks and you will waste time, effort and resources </li></ul></ul>IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    15. 15. Pre-implementation phase <ul><li>You now have a plan to implement risk management </li></ul><ul><li>You know what the objectives are </li></ul><ul><li>Is this when you should identify you risks? </li></ul><ul><li>Yes!! </li></ul>IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    16. 16. Risk Identification <ul><li>Aims to be: - </li></ul><ul><ul><li>Comprehensive </li></ul></ul><ul><ul><li>Consistent </li></ul></ul><ul><ul><li>Complete </li></ul></ul><ul><ul><ul><li>“ All” risks ?? </li></ul></ul></ul><ul><li>If you don’t identify a risk, you can’t manage it </li></ul>IRM Forum 2008 Plan for Risk Management Define objectives Identify Assess Handle Manage / review / report Production Information Concept Design Scheme Design Detailed Design
    17. 17. <ul><li>Structured Brainstorming - Affinity Grouping (sticky notes) </li></ul><ul><li>SWOT Analysis </li></ul><ul><li>Assumptions analysis </li></ul><ul><li>Interviews </li></ul><ul><li>Generic Categories / Prompt lists / Check lists / </li></ul><ul><li>risk questionnaires </li></ul><ul><li>Strengths & weaknesses </li></ul>Identification Techniques Use a combination Which is the best technique? Horses for courses IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    18. 18. Assumptions <ul><li>Thoughts regarding assumptions: </li></ul><ul><ul><li>An assumption is a statement that is taken as being true for the purposes of planning a project in the earlier stages (but could change if new information becomes available) </li></ul></ul><ul><ul><li>If it does turn out not to be true then the project may need considerable re-planning </li></ul></ul><ul><ul><li>Assumptions are not priced – at least as part of a proposal. So if re-planning is required, who is going to pay for it? </li></ul></ul><ul><li>Assumptions analysis (testing if they are true) is a very good way of getting your first list of risks – but you can’t do this if you haven’t written them ALL down </li></ul><ul><li>Don’t abuse assumptions! </li></ul>IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    19. 19. <ul><li>Enables co-ordinated / combined management of risks across the sites / projects </li></ul><ul><li>Used in the identification of risks </li></ul><ul><li>Guides users towards more common descriptions </li></ul><ul><li>Used in the identification of feedback </li></ul><ul><li>Enables identification of trends - especially effective when one management action can cover more than one risk </li></ul><ul><li>Examples of risk categories or risk breakdown structure: - </li></ul>Generic Risk Categories IRM Forum 2008 <ul><ul><li>Access </li></ul></ul><ul><ul><li>Commercial </li></ul></ul><ul><ul><li>Communications </li></ul></ul><ul><ul><li>E conomic </li></ul></ul><ul><ul><li>Engineering / Technical </li></ul></ul><ul><ul><li>E nvironmental </li></ul></ul><ul><ul><li>Financial </li></ul></ul><ul><ul><li>Governance </li></ul></ul><ul><ul><li>Health & Safety </li></ul></ul><ul><ul><li>HR </li></ul></ul><ul><ul><li>Income / Revenue </li></ul></ul><ul><ul><li>L egal / Regulatory </li></ul></ul><ul><ul><li>P olitical </li></ul></ul><ul><ul><li>Programme / Schedule </li></ul></ul><ul><ul><li>Reputational </li></ul></ul><ul><ul><li>Resources </li></ul></ul><ul><ul><li>Safety </li></ul></ul><ul><ul><li>Security </li></ul></ul><ul><ul><li>Site parameters </li></ul></ul><ul><ul><li>S ocial </li></ul></ul><ul><ul><li>Stakeholder </li></ul></ul><ul><ul><li>Strategic </li></ul></ul><ul><ul><li>T echnology / Skills </li></ul></ul>Production Information Concept Design Scheme Design Detailed Design
    20. 20. Risk Naming - A Structured Language <ul><li>Risk Name </li></ul><ul><ul><li>A structured description </li></ul></ul><ul><ul><li>Understandable </li></ul></ul><ul><ul><li>Means something to those who read it </li></ul></ul><ul><ul><li>Bounds risk and subsequent analysis </li></ul></ul>IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    21. 21. Mouse on Mars IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    22. 22. Real Risks Vs Causes Vs Effects Background conditions CAUSE EFFECT Impact on Objectives IRM Forum 2008 Given Contingent Uncertain RISK Production Information Concept Design Scheme Design Detailed Design
    23. 23. <ul><li>Can you tell the difference between </li></ul><ul><li>causes , risks and effects ? </li></ul><ul><li>For the following planning issues </li></ul>Which is which? Project delays We’ll never be allowed to build it! Go over budget Poor quality plans drawn Neighbours object Ignorance of Planning regulations May not receive planning approval IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    24. 24. <ul><li>Due to ground surveys, geotechnical studies, trial pits, etc not having been carried out, unsuitable grounds conditions may be discovered, generating additional costs and potential project delays. </li></ul>Capture both sides of uncertainty <ul><li>Risk Title </li></ul><ul><ul><li>Unsuitable ground conditions </li></ul></ul><ul><ul><li>-ve statement giving consideration only to threat, therefore only taking account of half of the Real Risk / Uncertainty </li></ul></ul><ul><ul><li>Unknown ground conditions </li></ul></ul><ul><ul><li>Could result in a +ve or -ve effect, therefore considering both opportunity and threat </li></ul></ul><ul><li>Always take a balanced approach </li></ul><ul><li>Due to ground surveys, geotechnical studies, trial pits, etc not having been carried out, unsuitable grounds conditions may be discovered, generating additional costs and potential project delays. </li></ul>IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    25. 25. Risk Workshops <ul><li>Preparation </li></ul><ul><li>Issue clear agenda </li></ul><ul><li>Risk Workshops </li></ul><ul><ul><li>Ensure objectives have been or are defined </li></ul></ul><ul><ul><li>Record specific impact scale </li></ul></ul><ul><ul><li>Identify risks </li></ul></ul><ul><ul><li>Assess risks </li></ul></ul><ul><ul><li>Allocate owners </li></ul></ul><ul><ul><li>Develop action plans for significant risks </li></ul></ul><ul><li>Issue risk report </li></ul><ul><li>Make sure you have the right people involved, including representatives of the implementation phase </li></ul>IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    26. 26. Risk Owners <ul><li>Identification of the person to manage a risk </li></ul><ul><li>Note the distinction between a risk owner and a risk carrier </li></ul><ul><li>Risk Owner </li></ul><ul><ul><ul><li>Responsible for effective management and mitigation of risks allocated to them – best person to own and therefore influence the risk </li></ul></ul></ul><ul><ul><li>Risk Carrier </li></ul></ul><ul><ul><ul><li>The party that carries the cost, time, functionality penalty if a risk occurs </li></ul></ul></ul><ul><ul><li>You may own a risk on behalf of the client as you are the best person to manage it, but you might not be the risk carrier. </li></ul></ul><ul><ul><li>This may need to be made specific through the contract negotiations </li></ul></ul>IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    27. 27. Pre-implementation phase <ul><li>You have a list of risks, but you don’t know which risks are the biggest </li></ul><ul><li>Should monies be included for managing risks or do you need contingency sums </li></ul><ul><li>Now is the time to assess your risks </li></ul>IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    28. 28. <ul><li>Assess objectively </li></ul><ul><li>Prioritise key risks </li></ul><ul><li>Develop effective strategies </li></ul><ul><li>Focus management attention </li></ul><ul><li>Two methods </li></ul><ul><ul><li>Qualitative (descriptive) </li></ul></ul><ul><ul><li>Quantitative (mathematical) </li></ul></ul>Assessment IRM Forum 2008 Plan for Risk Management Define objectives Identify Assess Handle Manage / review / report Production Information Concept Design Scheme Design Detailed Design
    29. 29. Qualitative assessment - risk ratings <ul><li>Project Cost or Profit </li></ul><ul><li>Programme </li></ul><ul><li>Safety </li></ul><ul><li>Security </li></ul><ul><li>Legal </li></ul><ul><li>Reputation </li></ul><ul><li>Environmental </li></ul>IRM Forum 2008 Probability Threat -1 -2 -3 -4 -5 Very Unlikely Unlikely Possible Likely Very Likely Negligible Marginal Significant Critical Crisis 1 2 3 4 5 1 2 3 4 5 Minor Significant Substantial Very substantial Exceptional Opportunity Production Information Concept Design Scheme Design Detailed Design
    30. 30. Example Of Specific Scales Each risk has one probability of occurrence and at least one impact The impact with the highest impact type that is transferred to the Probability Impact Diagram (PID) Try and make it project specific IRM Forum 2008 Probability Impact (Negative values equal opportunities) 1 2 3 4 5 Very Unlikely Unlikely Possible Likely Very Likely Negligible Marginal Significant Critical Crisis % Project cost Reputation <5 5–20 20-50 50-80 >80 <3% or £5k >15% or £200k 3-5% or £5k-£20k 5-10% or £20km-£100m 10-15% or £100k-£200k Minor local reputational damage Major local reputational damage National adverse media coverage International adverse media coverage < 1 year International adverse media coverage > 1 year 1 2 3 4 5 Legal Clarifying statement Medium fine Large fine Criminal charges Small fine Production Information Concept Design Scheme Design Detailed Design
    31. 31. PID Diagram IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design Threats Very High High Medium Low Very Low Impact/Threats 1 2 3 4 5 Impact/Opportunities 5 4 3 2 1 -5 -4 -3 -2 -1 Probability Very High High Medium Low Very Low Opportunities
    32. 32. Current and post ratings <ul><li>(Pre) Current - indicates the current rating of the risk </li></ul><ul><li>- at the start of the activity indicates the position as undertaken within a competent site, with normal controls / procedures in place </li></ul><ul><li>- position prior to additional handling strategies (mitigation) undertaken </li></ul><ul><li>- once mitigation undertaken, indicates revised position of the rating </li></ul><ul><li>Post mitigation - indicates the suggested rating of the risk once any new actions have been successfully implemented </li></ul>IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    33. 33. <ul><li>Risk assessment produces lots of data : </li></ul><ul><ul><li>risk </li></ul></ul><ul><ul><li>root cause/effect </li></ul></ul><ul><ul><li>probability </li></ul></ul><ul><ul><li>impacts </li></ul></ul><ul><ul><li>timing (trigger dates / action dates) </li></ul></ul><ul><ul><li>proximity (immediate / near-term / long-term) </li></ul></ul><ul><ul><li>handling strategies (actions / contingency/fallback) </li></ul></ul><ul><ul><li>owner </li></ul></ul><ul><ul><li>etc </li></ul></ul><ul><li>Need structured method to record & report </li></ul><ul><li>This is the Risk Register </li></ul>Recording risk data IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    34. 34. Quantitative assessment <ul><li>Aims to: </li></ul><ul><li>Quantify the effect of risks </li></ul><ul><li>Predict likely project outcomes </li></ul><ul><li>Identify options </li></ul><ul><ul><li>how to respond </li></ul></ul><ul><li>Balance response against potential cost </li></ul><ul><li>Focus management attention </li></ul><ul><ul><li>priority areas </li></ul></ul>IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    35. 35. <ul><li>Contingency is usually arrived from the combination of the following two forms: - </li></ul><ul><ul><li>Estimating Uncertainty : uncertainty associated with possible performance for project or operational work scope in terms of cost and schedule duration. </li></ul></ul><ul><ul><li>Discrete risk : an event, circumstance or condition that may or may not occur, which could influence delivery of project or operational work scope </li></ul></ul>Contingency IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    36. 36. <ul><li>Establish the base programme and estimate before risk assessment </li></ul><ul><li>All impact assessments must reflect the current baseline </li></ul><ul><ul><ul><li>Assumptions, exclusions, allowances </li></ul></ul></ul><ul><ul><ul><li>Constraints </li></ul></ul></ul><ul><li>Note that part of a risk may already be covered within a base estimate or programme </li></ul><ul><li>Response strategies / mitigation actions must be reflected in the base plan – this provides funding for risks should they impact. </li></ul><ul><li>Must map discrete risks across correctly to the base plan – not all risks span all phases </li></ul><ul><li>If this is not done correctly in development of the proposal then funding for the Project will be incorrect </li></ul>Draw Up Base Programme and Estimate IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    37. 37. <ul><li>Price relevant risks only </li></ul><ul><ul><li>3 point estimate (3PtE) </li></ul></ul><ul><li>Assess </li></ul><ul><ul><li>Percentage likelihood of occurrence (not the risk rating) </li></ul></ul><ul><ul><li>Impacts (not the risk rating) </li></ul></ul><ul><ul><ul><li>Either financial (£s) or programme (working days) </li></ul></ul></ul><ul><li>Estimate </li></ul><ul><ul><li>the risk impact and likelihood of occurrence based upon residual risk assessment, assuming mitigation to have occurred , but only if mitigation activities and their associated cost have been included in the base estimate and there is a reasonable level of confidence about the future success of that mitigation ” </li></ul></ul><ul><li>Using the above details Monte Carlo simulation can be used to establish a realistic risk estimate </li></ul>Pricing risks IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    38. 38. <ul><li>Monte Carlo </li></ul><ul><li>Based on the Central limit theorem </li></ul><ul><ul><li>Mean of a set of n variables (where n is large), drawn independently from the same distribution  (x) will be Normally distributed as follows: </li></ul></ul><ul><li>x = Normal(  ,  /  n ) </li></ul><ul><li>Swings & roundabouts </li></ul><ul><ul><li>looks at a pot of risks </li></ul></ul><ul><ul><li>some things will go wrong, but some will go right </li></ul></ul><ul><ul><li>not everything will go wrong, but not everything will go right </li></ul></ul><ul><ul><li>if some things go right these this may compensate for those things that go wrong </li></ul></ul><ul><li>Wags and swags </li></ul>Monte Carlo Simulation - What Is It? IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    39. 39. <ul><li>May not be : </li></ul><ul><ul><li>required </li></ul></ul><ul><ul><li>appropriate </li></ul></ul><ul><ul><li>affordable </li></ul></ul><ul><ul><li>depends on project complexity (in line with ME/G/113 guidance) </li></ul></ul><ul><li>Most useful when most difficult </li></ul><ul><ul><li>early - lack details </li></ul></ul><ul><li>Difficulty in estimating uncertainty </li></ul><ul><li>GIGO </li></ul>Caveats IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    40. 40. <ul><li>How well do you understand your ability to estimate when uncertain? </li></ul><ul><li>For each question, estimate a credible min/max range for which you are 90% confident that the true value lies in your range, i.e. </li></ul><ul><ul><li>9:10 chance of being in range, 1:10 chance of being outside </li></ul></ul><ul><li>Need to judge extremes carefully </li></ul><ul><ul><li>avoid “zero to infinity” answers! </li></ul></ul><ul><ul><li>set as close together as possible within 90% confidence limit </li></ul></ul><ul><li>Clarifying questions are allowed </li></ul><ul><li>Use all available data </li></ul>Exercise : Estimating accuracy IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    41. 41. Pre-implementation phase <ul><li>Not all risks need to be priced in a contingency </li></ul><ul><li>Probably 80% can be managed, often by processes that are already in place </li></ul><ul><li>Risk management is NOT there to price you out of every project </li></ul><ul><li>It should give you the information to help you decide: </li></ul><ul><ul><li>How much to include to pay for the risks you are expected to take </li></ul></ul><ul><ul><li>How much to include in the base plan for management actions </li></ul></ul><ul><ul><li>Whether you want to submit a proposal for the job at all! </li></ul></ul><ul><li>How else can you manage your risks, both threats and opportunities? </li></ul>IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    42. 42. <ul><li>Determine responses </li></ul><ul><ul><li>appropriate, achievable & affordable </li></ul></ul><ul><li>Allocate Action Owners </li></ul><ul><ul><li>responsibility for taking action associated with risk responses under the control of the Risk Owner </li></ul></ul><ul><li>Allocate review dates </li></ul>Handling responses IRM Forum 2008 Plan for Risk Management Define objectives Identify Assess Handle Manage / review / report Production Information Concept Design Scheme Design Detailed Design
    43. 43. <ul><li>Terminate (Avoid) </li></ul><ul><li>Transfer </li></ul><ul><li>Treat (Mitigate) </li></ul><ul><li>Tolerate (Accept) </li></ul><ul><li>Take (Exploit Opportunity) </li></ul>Basic Response Strategies IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    44. 44. <ul><li>Do you think you are already managing risks? </li></ul><ul><ul><li>Consider controls already in place to manage the risks identified </li></ul></ul><ul><li>Can you improve on existing management </li></ul><ul><li>Is it cost effective? </li></ul><ul><li>When </li></ul><ul><ul><ul><li>Immediate response ? </li></ul></ul></ul><ul><ul><ul><li>Ongoing action ? </li></ul></ul></ul><ul><ul><ul><li>Contingency / fallback plans ? </li></ul></ul></ul><ul><li>How </li></ul><ul><ul><ul><li>SMART action plans </li></ul></ul></ul>Appropriate Response Checklist IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    45. 45. Pre-implementation phase <ul><li>When compiling the proposal are you happy that you have: </li></ul><ul><ul><li>got the right risk management approach </li></ul></ul><ul><ul><li>included the right resources to implement risk management effectively </li></ul></ul><ul><ul><li>the right risks against the right objectives </li></ul></ul><ul><ul><li>included the right people in identifying the risks </li></ul></ul><ul><ul><li>priced the right risks </li></ul></ul><ul><ul><li>mitigated the risks and included the associated costs appropriately in the proposal </li></ul></ul><ul><li>All the work put in at this stage will: </li></ul><ul><ul><li>Give you the information you need when questioned at review stage – any commercial decisions can be made on as many facts as possible rather than “just plucking a number from the air”! </li></ul></ul><ul><ul><li>Give you the confidence to defend figures or facts when questioned by the client </li></ul></ul><ul><ul><li>Give you the confidence to walk away if you need to – and sometimes you need to! </li></ul></ul><ul><li>You will now have increased confidence in your proposal </li></ul>IRM Forum 2008 Production Information Concept Design Scheme Design Detailed Design
    46. 46. 3.3 Implementation phase <ul><li>Okay, you have got the project! </li></ul><ul><li>Do you have to start again? </li></ul><ul><li>No? </li></ul><ul><li>So why do most people! </li></ul><ul><li>If you have taken the time to properly undertake risk management in the pre-construct phase, why should this not be taken through to the next stage </li></ul><ul><li>The risk management process must be included in the handover of the project to the implementation team </li></ul><ul><li>They must understand what their roles and responsibilities are, why the risks were raised, what plans were put in place to manage them and the money that they have for any priced residual risk </li></ul>IRM Forum 2008 Post Handover Construct
    47. 47. Setting yourself up successfully <ul><li>Do you have a risk drawdown policy – when monies can be drawn against discrete risks or estimating uncertainty pots </li></ul><ul><li>Recognise that as the project progresses and more information is known that monies may be released from general contingency to fund new risks </li></ul><ul><li>Think about training – how are you going to effect a change in culture if the team don’t understand the process </li></ul><ul><li>Include risk reviews at regular project meetings – otherwise you will waste time and effort and lose support for the process </li></ul><ul><li>Put risk management at the top of the agenda – straight after health and safety </li></ul><ul><li>Recognise that there may be three risk registers on a project – the project one, the client’s and yours. Sometimes that are risks owned by you or the client that are not for “public” discussion </li></ul>IRM Forum 2008 Post Handover Construct
    48. 48. Manage / review / report <ul><li>Why have we gone through the planning, defining objectives, identification, assessment and planning steps? </li></ul><ul><li>So we have got a clear focus on: </li></ul><ul><ul><li>What the risks are relevant to our objectives </li></ul></ul><ul><ul><li>Which risks require the most attention </li></ul></ul><ul><ul><li>What we are going to do about them </li></ul></ul><ul><li>We are now in a position to manage the risks in a professional and concise manner. </li></ul><ul><li>It’s called Risk MANAGEMENT for a reason!! </li></ul>IRM Forum 2008 Plan for Risk Management Define objectives Identify Assess Handle Manage / review / report Post Handover Construct
    49. 49. <ul><li>Risk Status – active, ongoing, closed </li></ul><ul><li>Risk Reviews – regular report </li></ul><ul><li>Risk Reports – what do management need to know? What should keep them awake at night? </li></ul><ul><li>Risk Management Audits – constructive reviews, internal and external audits </li></ul>Managing risk effectively IRM Forum 2008 Post Handover Construct
    50. 50. Sustaining the risk process <ul><li>Feedback to stakeholders (Project team) </li></ul><ul><li>Demonstrate benefits </li></ul><ul><li>Refresh the process </li></ul><ul><ul><li>Use different techniques </li></ul></ul><ul><ul><li>Re-launch </li></ul></ul><ul><li>Visible use of results </li></ul><ul><ul><li>Risk Register </li></ul></ul><ul><ul><li>P/I Grid </li></ul></ul><ul><ul><li>Risk Profiles </li></ul></ul><ul><ul><li>Risk Management Community </li></ul></ul>IRM Forum 2008 Post Handover Construct
    51. 51. 3.4 Business operation phase <ul><li>Once project has been handed over to the client to operate and maintain does the risk management process end? </li></ul><ul><li>No! </li></ul><ul><li>The process that has been developed should be handed over effectively to the client or operator </li></ul>IRM Forum 2008 De-com- missioning Refurb Operation & Maintain
    52. 52. Feedback <ul><li>Key vehicle for others to learn from successes and mistakes </li></ul><ul><li>Continuous improvement for the business and projects </li></ul><ul><li>Improved planning and estimating </li></ul><ul><li>Improved Risk Management process, maintaining its success </li></ul><ul><li>Gathered by: - </li></ul><ul><ul><li>Questionnaire </li></ul></ul><ul><ul><li>Interview </li></ul></ul><ul><ul><li>Workshop </li></ul></ul><ul><ul><li>External sources </li></ul></ul><ul><li>Can be gathered at any time throughout the whole project, but usually completed at the end </li></ul><ul><li>Make sure it is gathered before everyone leaves for the next project! </li></ul>IRM Forum 2008 De-com- missioning Refurb Operation & Maintain
    53. 53. 4. Summary <ul><li>Risk management is cradle to grave </li></ul><ul><li>It isn’t there to price you out of every project </li></ul><ul><li>Ensure you involve the right people </li></ul><ul><li>Ensure you hand the process over properly at each stage </li></ul><ul><li>Ensure you resource it properly </li></ul><ul><li>It is there to help you make better decisions, so ensure you use it in the decision making process </li></ul><ul><li>Don’t forget to MANAGE the risks! </li></ul>IRM Forum 2008

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