Portfolio, programme and project risk (Peter Campbell)

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presentation at Communicating risk across the project portfolio, 4th July 2013

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Portfolio, programme and project risk (Peter Campbell)

  1. 1. Gain the Advantage Measure the Risk Peter Campbell FAPM MIRM MBCS MIET Society for Risk Analysis Director: Risk Advantage Limited Chairman: Risk SIG Portfolio, Programme and Project Risk Management Risk Advantage Limited 1
  2. 2. Gain the Advantage Measure the Risk Risk Advantage Limited Biography Risk Management consultant in the Defence, Communication, Aviation, Transportation, Construction, Local and Central Government and Nuclear sectors. Implementation of quantitative and qualitative risk management processes and delivery of Risk Management training. Working with NEC Engineering and Construction Contract (Thomas Telford) to provide guidance on implementing Risk Management in an NEC environment. Chairman of the APM Risk Management SIG and a British Standards Institution Risk Management committee member. Author for guides and books such as „Integrating Risk and Earned Value Management‟, the „Project Risk Analysis and Management Guide‟, the APM „Body of Knowledge‟, the Cabinet Office Management of Risk Guide and the BS31100 Code of Practice. Additionally; author of papers on the application and benefits of quantitative Risk Management. Provide risk and estimating training, workshops and presentations for academic, professional bodies and commercial clients.
  3. 3. Gain the Advantage Measure the RiskWhat is Risk ? Success Criteria: • Risk Controlled. • Objectives Achieved. • Deliver the agreed Scope. Objectives: • To compete? • Complete the course? • Be the Best? Risk Advantage Limited 3
  4. 4. Gain the Advantage Measure the Risk  BoK (V6) now includes Portfolio. Programme and Project (P3) Risk Management.  PRAM (Edition 3) will include P3 Risk Management. I‟ve been on my „soap box‟ pushing the application of Risk Management from concept to termination/replacement (Whole Life Management) for years. Why Portfolio, Programme Project Risk? Risk Advantage Limited 4
  5. 5. Gain the Advantage Measure the Risk Concept Implementation Definition Handover and Closeout Operation Termination Project Life Cycle Risk Advantage Limited 5 Product Life Cycle Project Life Cycle Whole Life Cycle Replacement
  6. 6. Gain the Advantage Measure the Risk Risk Advantage Limited Life Cycle (The front end) Business/Sponsor Requirements Programme/Project Team  Budget set.  Delivery time set.  Performance requirements defined. Has risk been accounted for?
  7. 7. Gain the Advantage Measure the Risk 7 Risk Adjusted Uncertainty + Risk+ Project How do we account for this ?? Set Targets Risk Advantage Limited
  8. 8. Gain the Advantage Measure the Risk Risk Advantage Limited Life Cycle (Tail end) The Mersey Tunnel
  9. 9. Gain the Advantage Measure the Risk Risk Advantage Limited The government wanted the original Mersey Tunnel to be Toll free but it agreed to pay half of the original estimated cost of £5 million providing that any tolls would only be for a limited period (initially set as for a maximum of 20 years). A large part of the building cost and the running costs were supposed to come from rates in Liverpool and Birkenhead. The two councils managed to claw most of this back and after 1947 were getting all their contributions refunded. When a second crossing was needed, the consultants initially recommended a 6 lane bridge. The authorities instead decided to build a 2 lane tunnel, and then 3 years later decided to add another 2 lane tunnel. The actual construction costs turned out 50% higher than estimated. Due to the construction overspending, high interest rates and lower than expected traffic, the Tunnels were now losing money at a staggering rate. Tolls were increased 500% in stages, but the losses continued. The losses were just added to debt and had to be borrowed for creating bigger losses. The Mersey Tunnel
  10. 10. Gain the Advantage Measure the Risk Business Strategy and Objectives Investigate situation Analyse needs Define requirements Consider perspective Evaluate options Portfolio Risk Analysis Supported by the Risk Management Process Risk Advantage Limited 10
  11. 11. Gain the Advantage Measure the Risk Project objectives focus on deliverables and outputs. Programme objectives focus on benefits and outcomes. For example: Project: Construction of a new building is an example of a Project and provides an output, a facility to: • Sell goods. • Store items. • Provide business accommodation. Programme: Once in use the building can deliver benefit through revenue stream. Project and Programme Risk Advantage Limited 11
  12. 12. Gain the Advantage Measure the RiskProject Risk Management Process Initiate Risk Management Plan. What is required from the Risk Management Process. Risk to Objectives. (Threat and Opportunity). Structure. Ownership. Estimate. Evaluate. Response. Action dates. Owners. Effect the Plan. Monitor result. Identify Assess Plan Implement Manage the Process Risk Advantage Limited 12
  13. 13. Gain the Advantage Measure the RiskProgramme Risk Management Process Initiate Risk Management Plan. What is required from the Risk Management Process. Risk to Objectives. (Threat and Opportunity). Structure. Ownership. Estimate. Evaluate. Response. Action dates. Owners. Effect the Plan. Monitor result. Identify Assess Plan Implement Manage the Process Risk Advantage Limited 13
  14. 14. Gain the Advantage Measure the RiskPortfolio Risk Management Process Initiate Risk Management Plan. What is required from the Risk Management Process. Risk to Objectives. (Threat and Opportunity). Structure. Ownership. Estimate. Evaluate. Response. Action dates. Owners. Effect the Plan. Monitor result. Identify Assess Plan Implement Manage the Process Risk Advantage Limited 14
  15. 15. Gain the Advantage Measure the RiskThe „Real‟ Risk Risk Taxonomy Because of <cause> a <risk> may occur, which would lead to <effect>. Example: Cause: Loss of specialist staff through Company budget constraints……… Risk: May lead to greatly reduced product output……… Effect: Many clients may not receive deliveries which could lead to loss of contracts with significant financial and reputational damage to the Company. Using “There is a risk…” could easily, and typically, turn this into: “There is a risk that clients may not receive deliveries” Risk Advantage Limited 15
  16. 16. Gain the Advantage Measure the RiskRisk Management Process Portfolio Programme Project External Influence Stakeholders Management Board Risk Advantage Limited 16
  17. 17. Gain the Advantage Measure the RiskRisk Management Process Portfolio Programme Project Escalation Process Risk Advantage Limited 17
  18. 18. Gain the Advantage Measure the RiskProject Risk Management Technical Project Stakeholders Supply Chain Logistics Delivery Risk Advantage Limited 18 Requirements Environmental
  19. 19. Gain the Advantage Measure the RiskProgramme Risk Management Reputation Technical Supporting Projects Stakeholders Supply Chain Licensing Operational Regulation Programme Legislation Business Socio-Economic Legal Logistics Delivery Funding Environmental Risk Advantage Limited 19
  20. 20. Gain the Advantage Measure the RiskPortfolio Risk Management Regulators Owners Government Financial Community Political Environment Public Customers International Community Pressure Groups Competitors Strategic Commercial/ Financial Production/ Operations Tactical Supply Chain Risk Advantage Limited 20
  21. 21. Gain the Advantage Measure the RiskProject and Programme Risk 21 Portfolio Programme Project Portfolio Risk: New Markets, Economic Conditions, Legal Requirements, Number of Programmes to Deliver, Central and Local Government requirements, Employment Regulations. Programme Risk: Interdependencies of Projects, Public Inquiry, Supplier Relationships, Resource Allocation, Infrastructure requirements. Project Risk: Meeting User Requirements, Design, Environmental conditions. Risk Advantage Limited
  22. 22. Gain the Advantage Measure the RiskWhat can go Wrong? • Same Risk addressed by many: • Environmental conditions appearing in 5 Project Risk Registers all with control action funding. This was on same site. • Project trying to control a Risk not within their authority. • Risk of Regulation change funded in Project. • Insufficient Management Reserve as full risk exposure not known. • Projects/Programmes sanctioned when Portfolio Risk not considered. • Risk identification limited to Project Risk. Risk Advantage Limited 22
  23. 23. Gain the Advantage Measure the Risk } Management Reserve Baseline Budget Time Cost Budget Overspend!! Specific Risk Reserve Risk Control Cost Unidentified/Uncontrolled Risk Non-Specific Risk Reserve Risk Exposure Risk Advantage Limited 23
  24. 24. Gain the Advantage Measure the Risk “Only those who will risk going too far can possibly find out how far one can go” TS Elliot Risk Advantage Limited 24
  25. 25. Gain the Advantage Measure the Risk Peter Campbell ?? ? ?? ? ?? ? ?? ? ?? ? peter.campbell@riskadvantage.co.uk Mobile: 07900 24 80 60 Questions Risk Advantage Limited 25

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