Masters Programme On RM


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  • The T5 Agreement At a cost of £4 billion, Terminal 5 represents a huge programme of construction works. BAA recognised at the outset that the risk associated with such a huge infrastructure project coupled with the sheer complexity and scale of work involved, required a fresh approach to the way this project was to be managed if it was to be built on time and within budget. Its solution is the T5 Agreement. The T5 Agreement is the legally binding contract between BAA and its key suppliers. Described as groundbreaking, it is unique in the construction industry. Through the agreement BAA accepts that it carries all of the risk for the construction project. With this burden removed from contractors and suppliers, it enables everyone working on T5 to: • Focus on managing out the cause of problems, not the effects if they happen • Work in truly integrated teams in a successful, if uncertain environment • Focus on proactively managing risk rather than avoiding litigation Research conducted by BAA into major construction projects highlighted two key areas that seemed to undermine progress: cultural confusion and the reluctance to acknowledge risk. The T5 Agreement tackles these areas by: defining an integrated approach to partnering and the management of risk; a succinct outline of the way in which teams work to develop Terminal 5 and method by which suppliers are managed. In order to ensure integration and homogenous culture on T5, all those working on the project are fully assimilated. While teams may be comprised of individuals from a variety of different companies, all are united under the single banner of Terminal 5 with a shared sense of values. BAA’s pioneering decision to accept all risk has been integral in the development of the unique T5 culture. With the burden of accountability lifted, those working on T5 can do so innovatively and positively. While traditional arrangements can result in a highly unproductive culture of blame and confrontation if something goes wrong, under the T5 Agreement a premium is placed on delivering solutions and results. Many of the suppliers involved in Terminal 5 were brought on-board at the earliest stages of the planning process. This enabled completely integrated expert teams to work together to identify potential problems and issues before designs were finalised and fabrication and construction began. As a result the teams of suppliers and consultants are in a position to add value whilst designing safe solutions within the time, quality, cost and safety targets. UK construction best practice performance on Terminal 5 is expected as a minimum standard. In light of this, the project has to ensure key milestones are met on time, on cost and to high quality and safety standards. An incentive scheme encourages teams to work together in order to find the most efficient way of achieving these milestones. With 16 projects and around 147 sub-projects efficient management of suppliers is vital. As ever the simple route has proven the most effective. BAA only has a direct contractual relationship with ‘First Tier’ suppliers, of which there are around 60. It is the First Tier suppliers who are responsible for the appointment and management of ‘Second Tier’ suppliers or subcontractors. In doing so they too are expected to operate within the spirit of the T5 Agreement. Although the results of this pioneering agreement won’t be fully recognised until construction is completed, examples of its success are already visible. As well as increased efficiency, productivity and transparency for all those involved, Terminal 5 is on time and on budget.
  • One of the Mayor’s functional bodies London Development Agency, Transport for London, Metropolitan Police Association, London Fire Emergency Planning Authority Governed by the RDA Act 1998 ‘as amended by the GLA Act 1999’ e.g. ‘The Mayor’ plays roles played by ‘The Secretary of State’ for the other RDAs Scrutinised by the Greater London Assembly (esp. Economic Development & Planning Committee) The GLA Group works closely together GLA Integration Unit (monthly meeting chaired by the Mayor) GLA Implementation Meeting (GLA+TfL+LDA re London Plan implementation) Project Steering Groups (e.g. Wembley Stadium & Infrastructure) Policy development (e.g. strategy, responses to national consultations)
  • Masters Programme On RM

    1. 1. A random walk through risk management Master’s programme on Risk Management IRM London 5 th February 2010 Dr David Hancock MBA Public Sector Risk Manager of the Year 2008/09
    2. 2. Agenda <ul><li>What are the challenges for project risk? </li></ul><ul><li>Terminal 5 Project </li></ul><ul><li>Problem areas for present risk management practices? </li></ul><ul><li>What are the challenges for the public sector? </li></ul><ul><li>London Development Agency </li></ul><ul><li>London Underground </li></ul>
    3. 3. <ul><li>Increased complexity of solutions </li></ul><ul><li>Projects solved and delivered through diverse teams </li></ul><ul><li>Increased relationships/partnerships </li></ul><ul><li>Increased societal interaction </li></ul><ul><li>Increased interaction with ‘non experts’ (General Public) </li></ul><ul><li>Increased political involvement </li></ul><ul><li>Higher customer expectation </li></ul><ul><li>Increased expectations of performance </li></ul><ul><li>Increased informed risk taking </li></ul><ul><li>Increased media attention </li></ul>What are the particular challenges for Projects?
    4. 4. Terminal 5 - Heathrow
    5. 5. Terminal 5 Project - Where?
    6. 6. Terminal 5 Project - Where?
    7. 7. Environment – October 1994 Canteen & Welfare Units Cambourne House
    8. 8. Risk and Opportunity <ul><li>pre-emptive pursuit of potential risks </li></ul><ul><li>top down identification and evaluation of risk </li></ul><ul><li>realistic responses preplanned </li></ul><ul><li>agreeing who actions on the basis of who is best able to influence </li></ul><ul><li>making sure actions are given the right resources & management </li></ul><ul><li>observing to regularly review & update potential risks & actions </li></ul><ul><li>with an emphasis on being practical </li></ul><ul><li>focusing on risks that are important </li></ul><ul><li>recognition & action is more important than exactness </li></ul><ul><li>biggest source of risk is usually lack of communication </li></ul><ul><li>the most unpredictable sources of risk are people </li></ul>
    9. 9. Risk and Opportunity
    11. 11. Problem Areas <ul><li>Tame Problems </li></ul><ul><li>Systems Complexity </li></ul><ul><ul><li>Messes (Ackoff 1970) </li></ul></ul><ul><li>Behavioural Complexity </li></ul><ul><ul><li>Wicked Problems (Rittel & Weber 1973) </li></ul></ul><ul><li>Wicked Messes (Roth & Senge 1996) </li></ul>
    12. 12. Problem Solving Problem Solution Gather Data Analyse Data Formulate Solution Implement Solution “ TAME” Problems can be solved by linear or “waterfall” process Time since beginning
    13. 13. Systems Complexity <ul><li>Clusters of interrelated or interdependent problems </li></ul><ul><li>Messes (Ackoff 1970) </li></ul>
    14. 14. “ MESSES” meet the following criteria: Organisational Complexity - clusters of interrelated or interdependent problems, or systems of problems. Messes are puzzles; rather than solving them we resolve their complexities. Cannot be solved in relative isolation from one another .
    15. 15. Behavioural Complexity <ul><li>Conflicting social ethics and beliefs </li></ul><ul><li>‘ Wickedness’ (Rittel & Webber 1973) </li></ul>
    16. 16. “ WICKED PROBLEMS ” are characterised by: An evolving set of interlocking issues and constraints - no definitive statement of the problem (no understanding of the problem until the solution has been developed). Many stakeholders - the problem solving process is fundamentally social (getting the right answer is not as important as having stakeholders accept the solution). The constraints (resources, politics) change with time - stakeholders come and go, change their minds or change the rules. Since there is no definitive Problem there is no definitive Solution .
    17. 17. Time since beginning “ WICKED” Problems cannot be solved by linear or “waterfall” process Problem Solution
    18. 18. Wicked Problem Solving Resolving “ WICKED MESSES ” is “ SATISFICING ” (H. Simon 1956) Because of the number of stakeholders, changing constraints and dynamics of the problem, there is no ideal solution-it is “as good as it gets” or “good enough” The Problem solving process ends when resource (time, money energy etc.) runs out! Therefore we need a different approach when handling risk with respect to problems which are not Tame
    19. 19. Boston Matrix Behavioural Complexity High Low Wicked Wicked Mess Tame Mess Resolution is social/ political/ ethical/ moral/ behavioural Solution is Scientific Dynamic Systems Complexity High Low
    20. 20. Risk Assessment <ul><li>Quantitative </li></ul><ul><li>An attempt to apply meaningful and objective probabilities and subsequently consider and then quantify the potential of such risks in terms of time, cost and quality (Laxtons guide to risk analysis and management) </li></ul><ul><li>Qualitative </li></ul><ul><li>Involves the registration of the identified risks, by ‘experts’ in a formal manner using subjective probabilities. </li></ul><ul><li>Selection of stakeholders is critical to its success. </li></ul><ul><li>Need to take into consideration Group Dynamics. </li></ul><ul><li>Also used to identify Opportunities </li></ul>
    21. 21. Risk Management
    22. 22. Risk and the Contract
    23. 23. T5 Agreement
    24. 24. Risk and Reward
    25. 25. Risk Management at the London Development Agency
    26. 26. The LDA is part of the GLA Group led by the Mayor of London
    27. 27. <ul><li>High levels of inequality </li></ul>There are significant challenges LONDON Costs are high Pressures on infrastructure and natural resources <ul><ul><li>Deprivation levels are very high </li></ul></ul>Global competition is increasing
    28. 28. Public Goods, Public Choice, Public Value
    29. 29. CAA <ul><li>The new joint assessment framework for local services from 2009, CAA, has a number of key differences to the current Comprehensive Performance Assessment: </li></ul><ul><li>Outcome focused </li></ul><ul><li>Area-focused, not just institutionally based </li></ul><ul><li>More forward-looking – based on assessing the risk of not delivering future outcomes, rather than assessing past performance </li></ul><ul><li>Greater attention to local priorities – in other words, not just looking at the agreed set of national indicators </li></ul><ul><li>Joint working by inspectorates – assessment should have meaningful impact on partners other than Local Authorities. </li></ul>
    30. 30. Area Assessment <ul><li>Forward looking, focused on outcomes in local priorities </li></ul><ul><li>Answers three questions: </li></ul><ul><ul><li>How well do local priorities express community needs and aspirations? </li></ul></ul><ul><ul><li>How well are the outcomes and improvements needed being delivered? </li></ul></ul><ul><ul><li>What are the prospects for improvement? </li></ul></ul><ul><li>These questions will be underpinned by four themes that run through the assessment: sustainability, inequality, vulnerable people and value for money </li></ul><ul><li>Green will signal exceptional improvement or innovation that others can learn from </li></ul><ul><li>A red flag indicates where there are worries about the ability to deliver and sustain priority improvements </li></ul><ul><li>Judgement agreed across inspectorates </li></ul>
    31. 31. The performance management framework has moved to a process of negotiation which is changing the relationship and the dynamic between central and local government. Central government has responded by attempting to adopt a more citizen-focussed and community-centred approach to public policy. What does this mean?
    32. 32. What are the particular challenges for Local Authorities? <ul><li>What does ‘acceptable’ mean and who chooses? </li></ul><ul><li>What about Local Strategic Partnerships, Local Area Agreements and Comprehensive Area Assessments for delivering local solutions? </li></ul><ul><li>How do we manage trade offs e.g. Education v Social Services v Housing etc? </li></ul><ul><li>What about reputational risk? </li></ul><ul><li>How do we manage increased public involvement in strategy and delivery? </li></ul>
    33. 33. <ul><li>What are the risks involved with delivery in partnership with the private and voluntary sectors? </li></ul><ul><li>The move towards unitary authorities and a desire to break down silo working by cross functional and organisational working should mean that the public sector approach to risk management needs also to be reviewed. </li></ul><ul><li>What is the role for our present risk and audit functions in this delivery? </li></ul>What are the particular challenges for Local Authorities?
    34. 34. What does a successful audit and risk management programme look like?
    35. 35. Risk Management & Governance Governance Accountability Openness & inclusivity Integrity Effectiveness Risk management Internal control systems Decision making
    36. 36. The need for holistic thinking I’m glad the hole isn’t in our end!
    37. 37. Corporate Risk register
    38. 38. CRR and Audit Plan
    39. 40. London Underground
    40. 41. Our Vision A World Class Tube for a World Class City Our Strategy To combine a reliable train service with the highest standards of customer care that we take from our heritage Our Challenge Keeping London Moving while Transforming the Tube
    41. 42. The shape of delivery in 2009/10 <ul><li>27 Programmes </li></ul><ul><li>120 Projects </li></ul><ul><li>430+ milestones </li></ul><ul><li>Enabled by: </li></ul><ul><li> £1.6bn of capital expenditure </li></ul>
    42. 43. The Shape of delivery - Programmes Core Asset Renewal and Upgrades Capability and Enablers Victoria Line Upgrade Jubilee & Northern Line Upgrade Piccadilly Line Upgrade Major Power Upgrades SSL Line Upgrade Cooling the Tube Accessibility Station Congestion Relief Operational Accommodation Station Modernisation & Refurbishment Crossrail / Thameslink Asset Renewal Information Management Company Management System OCR Periodic Review Customer Service Improvement Project Capability and Control People Strategy Health & Safety Operational Improvement Asset Management Capability Commercial Transformation Maintenance Capability Environment & Climate Change Industrial Relations Stakeholder Engagement
    43. 44. Stage Gate Reviews
    44. 45. Baseline
    45. 46. Risk and Contingency
    46. 47. Some thoughts on the Way Forward Training and development which produces: practitioners who can follow detailed procedures and techniques, prescribed by risk management methods and tools. From: Practitioners as Trained Technicians Learning and development which facilitates: development of reflective practitioners who operate and adapt effectively in complex environments, through experience, intuition pragmatic application of theory in practice. Towards: Practitioners as Reflective Practitioners From: Risk Management as Instrumental Processes The instrumental lifecycle image of risk management as a linear sequence of tasks to be performed on an objective entity ‘out there’, using codified knowledge, procedures and techniques, and based on an image of projects as temporary apolitical production processes. Concepts and images which focus interaction among people, illuminating: the flux and human action, and the framing of the risk profession) within an array of social agenda, stakeholder relations, politics and power. Towards: Risk Management as Social Processes
    47. 48. “ When all you have is a hammer, everything looks like a nail ” . Japanese Proverb “ Successful problem solving requires finding the right solution to the right problem. We fail more often because we solve the wrong problem than because we get the wrong solution to the right problem”. Russell Ackoff, 1974
    48. 49. “ We're better at predicting events at the edge of the galaxy or inside the nucleus of an atom than whether it'll rain on auntie's garden party three Sundays from now. Because the problem turns out to be different. We can't even predict the next drip from a dripping tap when it gets irregular. It's the best possible time to be alive, when almost everything you thought you knew is wrong”. Arcadia by Tom Stoppard