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Practical project risk assessment

Practical project risk assessment . Simon White – Client Services Manager, Pertmaster Ltd. Why do projects fail * ?. Plan too optimistic Shoehorning, cramming, scale-to-fit Under-bid Spin … Things go wrong Scope creep Lack of resources Unanticipated work / events …

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Practical project risk assessment

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  1. Practical project risk assessment Simon White – Client Services Manager, Pertmaster Ltd

  2. Why do projects fail* ? • Plan too optimistic • Shoehorning, cramming, scale-to-fit • Under-bid • Spin • … • Things go wrong • Scope creep • Lack of resources • Unanticipated work / events • … * Fail = over-run, over-spend or under-perform

  3. Plan too optimistic • Optimistic estimates • Natural “optimism bias” • Lack of scope / understanding • by the project team • by the project planners • by the contract negotiator • Other reasons? • fear of failure • reverse engineering • “most likely case” planning

  4. 4:30pm 6:30pm 4:30pm 5:00pm 6:30pm “I’ll be home by …” • Experience • range: • range and shape:

  5. A simple example • Deterministic schedule finishes on December 10 • relies on combinations of durations that equal 70 days • Likelihood of the 10th December?

  6. A simple example

  7. More realistic schedules

  8. More realistic schedules No longer a single date

  9. Plan too optimistic • Optimistic estimates • Natural “optimism bias” • Lack of scope / understanding • Most likely case • Best / likely / worst case analysis • Likely case is not the most likely! • Parallelism • Risk is compounded • “Merge bias”, “Nodal bias” • Needs to be taken into account

  10. Parallelism • This project also completes on 10 December • Each single path has 18% chance • Is it more or less risky than single path? • Likelihood of 10 December finish?

  11. More risky…

  12. More realistic schedules

  13. More realistic schedules

  14. Why? • At project level

  15. Set contingency • Efficient contingency • Confidence levels, achievable targets • Management reserve • Contingency at project level, not task level

  16. Optimise mitigation • Transfer, Eliminate, Reduce, Accept, … • Reduce probability • Reduce impact • Understand benefit • Is it worth mitigating?

  17. Post-mitigation assessments Where we are now Where we can be Cost of getting there

  18. Understand response benefit

  19. Understand response benefit

  20. Team • Forum for expressing opinions / concerns • Opportunity to agree / challenge assumptions • Awareness - overall view of project • Understanding - project team can discuss and collaborate on where project is • Openness / honesty • Schedule review, task definition clarifications • Cost and schedule together

  21. Compelling reasons • Understand risk • Understand bid viability • Plan according to reality • Bid at right price • Negotiate • Understand sensitivity • Plan risk response – cost/benefit analysis • Risk management – ownership, planning

  22. Why? • At project level • At portfolio level

  23. At portfolio level • Multiple projects • Project interdependency • Shared resources • Shared goals • Can share risk across projects

  24. Portfolio view of risk

  25. At portfolio level • Portfolio view of risk - balance • Compare risk across projects • Project selection / focus

  26. Set contingency • Portfolio contingency • Confidence levels, achievable targets • Management reserve • Contingency at portfolio level, not project level • Draw-down for specific risks • Balance across portfolio

  27. Why? • At project level • At portfolio level • At business level

  28. At business level • Increase profitability • Bid / no bid • Understand cost commitments

  29. At business level • Bid / no bid • Increase profitability • Understand cost commitments

  30. At business level • Risk to revenue • Understand revenue pipeline • Investment decisions

  31. At business level • Risk to revenue • Understand revenue pipeline • Investment decisions

  32. At business level • Understand sensitivity

  33. At business level • Understand sensitivity • Better business decisions • Bid, negotiate and win at the right price

  34. Why not? • “What do you want the estimate to be?” • “Are you saying my plan is wrong?” • “You want 3 estimates?” • “Just get out there and do it” • “Analysis paralysis” • “GIGO” • “Unknown unknowns”

  35. Summary • Plan with uncertainty • … to plan with certainty! • Plan better • Make the best of the project team • Business benefits: • Project and portfolio bid viability • Realistic assignment and forecasting of project funds • Modelling & reporting “real-world” events • Intelligent risk mitigation scenarios • Portfolio analysis & intelligence

  36. Thank you • Questions? • White papers and more information at: www.pertmaster.com

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