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

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. 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. 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. 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. 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. 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. Gain the
Advantage
Measure
the Risk
7
Risk Adjusted
Uncertainty
+ Risk+
Project
How do we
account for
this ??
Set Targets
Risk Advantage Limited

8. Gain the
Advantage
Measure
the Risk
Risk Advantage Limited
Life Cycle (Tail end)
The Mersey Tunnel

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. 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
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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. 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. 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. 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. 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. Gain the
Advantage
Measure
the RiskRisk Management Process
Portfolio
Programme
Project
External
Influence
Stakeholders Management
Board
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17. Gain the
Advantage
Measure
the RiskRisk Management Process
Portfolio
Programme
Project
Escalation Process
Risk Advantage Limited 17

18. Gain the
Advantage
Measure
the RiskProject Risk Management
Technical
Project
Stakeholders
Supply Chain
Logistics
Delivery
Risk Advantage Limited 18
Requirements
Environmental

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. 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. 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. 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. 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. 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. Gain the
Advantage
Measure
the Risk
Peter Campbell
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peter.campbell@riskadvantage.co.uk
Mobile: 07900 24 80 60
Questions
Risk Advantage Limited 25