Riskmanagement for projects

1. Riskmanagement for projects Wim De Bruyn Hogeschool Gent Leonardo partners

2. Projects and risks Scope Risks Costs Resources

3. A Project risk • The possible appearance of an unwanted and unplanned event in the future, that threatens (as a whole or partially)the project results or objectives

4. Projects and opportunities Scope opportunities Costs Resources

5. Opportunities • An opportunity is a positive risk. • An unplanned (but wanted) event that adds extra features or brings the project objectives easier or faster within reach.

6. Different perspectives for risk • Project • Business case • Customer • Project execution organization • Personal • Legal • GAMP

7. Risk management • The continuous systematic approach during projects to identify possible unexpected events and the organization of measures and actions to prevent or to minimize negative consequences and to make use of or to introduce positive consequences

8. Risk management: an integral part of project management • To get an overview of important risks and opportunities • To develop strategies to reduce or to avoid negative effects • To maximize possible interesting opportunities (f.e. low hanging fruits)

9. Project management includes risk management

10. Characteristics of project risks • The probability or likelihood that the risk(generator) appears in the project • The frequency of its appearance ( (f.e. weekly, daily, …) • The consequences of these facts

11. Riskmanagement 1. Development of a risk strategy 2. Risk analysis and risk management Identify Assess Measure Control 3. Evaluation

12. Risk management when ? • As early as possible • Avoidance of risk situations possible • Inclusion in the project contract (supplier and customer are responsible) • Measures can be stipulated • Late detection can be very costly, because most parts are already defined and started. • To take advantage of opportunities they need to be identified early.

13. 1. Definition of the strategy (a) • To what extension and how deep do we need (or want) to go ? • Size of project team • Experience of the project team • Technical complexity • Stability of management environment • Dynamic conditions • Confidence • External forces and influences • where, who (f.e. GAMP, Sarbanes Oxley)

14. 1. Definition of the strategy (b) • Sensitivity of the project • Is the project in a highly sensitive phase ? (f.e. in research reduces the project risk during the project, in space projects the risks and costs grow) • Possibility to execute control • Standard procedures available • Tolerance towards risks (how far can we go ?) • What is the risk to stop the project ?

15. Identifying project risks The biggest difficulties are there where we don’t look. (W. von Goethe) • List all possible project risks • Interviews • Brainstorming • Invite “experts” (or external persons) • Simulate

16. Identifying project risks • Organize and group the results • Origin • external not anticipated, external anticipated, internal non technical, technical, juridical, regulations • Risk Objects (projectengineer, supplier, …) • W’s • What, using what, who, when, where, how, why • Consequences • Business case (technical, operational, marketing) • Project risks (resources, planning, costs, scope creep) • Solution risks (reaching project objectives with the technology, …)

17. Position and compare • Existing project-evaluations of other projects • External experts • Literature • Questionnaires

18. Don’t forget … • Write down and document the risks formally

19. Define the risk profile Analyze the characteristics: • Probability of appearance • Past history (track record) • Experience • Conditions • Availability of measures • Frequency • Risk sensitivity in time (growth or reduction) Can be indicated as a percentage (chance that it appears) Analyze the possible relationship and interaction between risks

20. Define the risk profile • Consequences and effects on the project results and goals • Quality • Time • Money • Resources • Validation Look to the Criticality of the aspects Be objective • Public acceptation • Experience in prevention of that risk • Time before risk can appear Quantify the consequences (weighing and scores)

21. Probability High Medium Low Low medium High Consequence Gravity of the risk Severity of the Risk = Probability (of risk appearance) x (severity of) Consequence Higher gravity

22. Probability High Medium Low Low medium High Consequence Selection of risks Focus on the highest Severity (severity of) Consequence is somewhat more important 1 2 3

23. Selection of risks • Goal is to focus, so 10 is probably too much • Action plan will be coupled to serevity and priority, f.e. • Less then 25% manage the status • 40% : advise from other groups • 60% : direct and specific action • 90% and more: stop project • Document Risks in risk managent sheets (forms) formally

24. Measures and action plan • Management of risks COMPACT • Contingencies • (transfer of) Ownership • Monitoring • Prevention • Acceptance (severity low) • Correction (Plan B) • Transformation of risks towards an opportunity

25. Measures and action plan • Define the costs and earnings connected with the risk management • Connect this with decision matrix

26. Measures and actions for opportunities • MUST: for opportunities • Monitor • Use it (exploitation) • Stimulate • Trigger and activate opportunities

27. Measures and Action • Connect the action list (what, who, when) to the risks in the risk management sheets • Organise the function (part- or full time) of riskmanager (who, organisation, communication,)

28. Difference between a contract and a project plan ? • A projectplan is a management tool of the execution of a project • A contract is the formal arrangement of conditions in the relationship between the supplier (project group) and customer. Guarantees, delivery conditions, responsibility clauses are part of the contract.

29. Difference between a contract and a project plan ? Supplier Customer results R 1 results R 2 results R 3 results R 4 Where is the responsibility for project management ?

30. Difference between a contract and a project plan ? • In a contract people consider also commercial or strategic goals. • For a project manager the goal is to produce the described functionallity without taking into account previous (sometimes unknown) commercial or strategic conditions. • Include conditions in the contract.(look to COMPACT and MUST)

31. Customer Supplier contract Proj.mgr. Executionplan Projectplan Project Projectmanager as central point between customer, client, project

32. Point out risks in the project plan • Risks and the known measures should be defined in the project plan • Risks should be followed up and indicated as future, present or past • Look to the following tips for keeping risks under control :

33. Scope creep • Quantify and describe the scope clearly • Quantify risks and appoint the responsible party • Make clear arrangements about responsibilities of the project organisational unit. • Quantify crucial success factors • Assign the project a certain priority compared with other projects

34. Explore the project borders • The ultimate goal is customer acceptation and appreciation • Split risk full projects in smaller sequential projects with their own and independent projectvalue. • Manage the project expectations clearly and explicit what is possible and what is not. • Analyse the project environment and customer group. Try to get their confidence.

35. Project phases • Use pilots early in the projects to reduce risks. • Look to parallel development possibilities to reduce risks and time constraints • Try to trigger uncertainties early so that they can be repaired • Choose milestones at the moment that decisions need to be taken (f.e. go/no go early) or if the project needs to be reorganized or re-planned. • Indicate the point of no return • Check the project borders and define the preventive, curative and controlling measures

36. Risk and Project dimensions • We focus on the project risks that influence the dimension time, money, resources. • Define a clear project organization • Use a responsibility scheme (who is responsible for what) • Define a fast decision path for easy decisions • Connect with meeting participations also the participation in the project risks • Separate Business Oriented steering group decisions clearly from content and information providing groups • Separate the process activities from the project activities (separate project room, responsibilities, reporting, … )

37. Risk and project dimensions • Define conditions • For the customer organization • For the project organization/company • Don’t mix a fixed contract with the obligation of post calculation • Flow down fines and costs to the involved subcontractors

38. Risk and project dimensions • Communicate and stay communicating • Report about time, money, resources, % completed • Report about the effects of the risk management • Build your network • Subcontract if possible to make the organization more easy and to reduce risks • Create an efficient change management.

39. Risk and Projectplanning • Link margins and contingencies to specific risks • If not margins and contingencies create a false feeling of safety • Use network planning analysis tools (f.e. MS project) with critical path analysis • Fast tracking: execute activities in parallel that are logically sequentially (needs more management but can reduce time constraints • Parallel phasing: divide the project in subprojects • Calculate and evaluate alternative plans • Analyse the critical path and add extra management attention • Look critically to the resource organization : • Use only specialists inside their specific expertise domain • Add generalists for other or mixed tasks • Take care about the financial control : take care • Direct, indirect costs • Variable, fixed costs • Cost accounts • Early warning system

40. Monitoring the progress • A lot of project managers live from day to day, they are subject to a lot of events and taking control of project progress is difficult,therefore the following tasks are important: • Status of the risks • Looking forward • Report the progress • Stay cool

41. Know the status of the project • Measure • Analyze the information streams : • Projectplanning • Activity registration • Progress Report • Consultation • Managing by walking around • Preventive actions (risk management) • Curative actions and contingencies • Control the milestones • Reassess risks (Risk id., measure, owner, planned execution time, realisation time, status)

42. Look forward • What will happen in a short while • New chances, consequences • Risks that happened • Actions taken and their results • Change in priorities • Are some risks past • Are new risks coming up and what actions should be taken • Pareto rule : priorities • Risk management : who is responsible for which (sub) task

43. Identify Risk Alert project office Reception and validation of risk Add risk to list Evaluation of risk Inform all involved people Initiator Initiator Projectmanager Project manager Proj. mg., proj. office,initiator Project office Tasks and responsibilities

44. Priority and measures Communication of Risk (form) to all involved people Manage progress and reassessment Close risk item Proj. mgr., proj. office,initiator Project office Project manager Project office, proj. mgr. Tasks and responsibilities

45. Make risks and opportunities visible • Logbook(risk, indicator, probability, consequence, present situation, trend, measure, effect, moment, …) • Consultation of the project team, promote open, timely and honest information exchange • Bubble chart, evaluate the evolution of risks and opportunities with arrows

46. Report risks • Status of the projectrisks • Effectiviness of the undertaken actions (measures) • Actual costs of measures compared with the projected budget • Actual decisions

47. Stay cool !!! • Don’t become manipulated by team members or external people • Manage the project

48. Evaluation of the risk management • The latest phase is often forgotten or ignored: the evaluation of the project and the risk management. • Organisations and persons can learn from this evaluation, and avoid mistakes or failures in the future. • The evaluation forms the memory, the experience in project management

49. Make a risk management evaluation • Which risks were expected and did appear? • Which risks weren’t expected and did appear? • Which were expected and didn’t appear? • Which actions were effective and which weren’t? • Which contingencies were satisfactory and which weren’t? • Keep a risk logbook • Don’t use the risk management evaluation as a threat for the project team.

50. Transfer risk management experience • It will help to detect early possible future risks • It will enhance the control of future projects • Project and risk management become integrated • Make a business case out of the risk management experience • Make from a risk a controllable certainty. Risks and opportunities are dynamic.