Integrating Risk and Benefits Management

1. Integrating Risk and Benefits Management Bruce Phillips and William Foulds

2. content Life Cycle Engineering Life Cycle Engineering Who are we? …and what do we do? Why ‘risk and benefits’? Context, integration and themes Understanding the risk/benefit relationship Case Studies The important enablers Success Factors

3. our business Solutions Consultancy Services • Collaborative Solutions – ensuring the information and processes our customers need are securely shared, better organised and available at the point of need Management Services – supporting and delivering critical projects and programmes, managing risk and providing assurance and governance Visualisation Solutions – advanced solutions that work with the growing big data challenge, and more information systems to support more informed decision making Lifecycle Engineering – managing and supporting assets, ensuring they are available and affordable through life Information & Knowledge Management – delivering confidence in the quality and assurance of our customers’ information Data Analytic Solutions - helping our customers to work smarter and make better decisions

4. our people Bruce Phillips Will Foulds The business – Management Services, Project Management Group Leader The business – Management Services, Risk Management Group Leader • The profession - Institute of Risk Management (IRM) Member and • MSc Risk Management, PRINCE2 and APMP • The profession – APMP, MSP, APM Benefits SIG and APM SWWE Committee The ‘sharp-end’ - Delivering enterprise, portfolio, programme and project risk management architectures and solutions worldwide The ‘sharp-end’ - Delivery and leadership of many projects, programmes and transformation changes in Defence, Security and ICT

5. making it up as you go along…

6. It’s all about Risk…isn’t it? why ‘risk’? • “Effect of uncertainty on objectives” (ISO 31000). • Golden Rule: “Risk is in the eye of the beholder”. • Determined by: • Perception: What is the risk, and how big is it? • Appetite: What risk am I willing to accept? • Value: What’s it worth to me? • Coin-toss game • Flying in an aeroplane • We use risk management as a mechanistic process to achieve objectives. • But, our actions are a balance of Risk and Benefit • Individuals, project teams, stakeholders • The intended project benefits

7. why risk management? • Identify elements of uncertainty • Balance appetite, perception and value • Focus management attention • Communicate - Monitor, report and update • Fundamentally linked to Strategic Objectives • Recent Trends: Objectives biased, not benefits • Compliance: Birth of the ‘compliance’ approach restricts benefits identification • Integration: Little alignment of Benefits and Risk Management functions

8. It’s all about Benefits…isn’t it? why ‘benefits’? • Outcome considered to be an advantage by one or more stakeholders. • Delivery of benefits is the rationale behind the investment in business change. • In project management, success can only be achieved through delivery of benefits. • Like risk management, it contributes towards the achievement of strategic objectives. • Therefore, integrated risk and benefits management enables success. • Experience tells us that there is a poor record of transformational change initiatives realising the benefits they were intended to deliver. • Lack of benefits identification or management? • Not managing the uncertainty?

9. why benefits management? • Supports: • The decision to invest • Delivering the vision • Defining project outputs • Ownership and contribution • Helps harness (the inevitable) changes and opportunities as they come along. • It’s also about non-benefits i.e. risk! • Fundamentally linked to Strategic Objectives • Business Case: Investment decisions not based upon the balance of risk v benefits! • Understanding: Benefits and risk management seen as a ‘black arts’. • Measuring Success: We don’t - we just move on to the next project.

10. key risk/benefits themes • Plan: Simple strategies to integrate… integrated risk and benefits management strategy • Execute: Bring risk and benefits into alignment through monitor and control… benefits/non-benefits focused risk register • Harvest: Review of what benefits were delivered and when… updated risk/benefits realisation plan • Learn: Understanding the risk/benefit relationship and what we learnt (good and bad)… continuous improvement plan • Integration: Positive cumulative effect through managing risk and benefits together • Engagement: Improved collaboration, communication, ownership and visibility • Learning: Helps to ensure experiential learning is encouraged and exploited

11. typical lifecycle Pre-Project Project Transition Early Operations Sustained Operations Monitoring Risk with No Direct Consideration of Impact on Benefits Risk Management Strategy Potential Risk Impacts not Integrated in to Benefits Realisation Plan Little or No Risk v Benefits Performance Review Benefits Management Strategy Focus on Benefits. Insufficient Focus on Non-Benefits No Appetite for Opportunity Benefits or Trade-offs No Benefits Realisation Measurement or ROI Assessment No Real Validation of Risks Against Benefits and their Profiles Risk Register Risk Impact Curve Outputs Transitioned to Users Embedding the New Capability Delivery Understand the context New Capability Seen as BAU and Used Effectively Benefits Realisation Value Curve

12. target lifecycle Pre-Project Project Transition Early Operations Sustained Operations Integrated Risk and Benefits Management Strategy Monitoring Risk and Controlling Benefits Review of Risk v Benefits Performance against Baseline Integrated Risk and Benefits Realisation Planning ‘after’ Risk Impact of Non-Benefits Benefits Focused Risk Register ‘before’ ROI and Assess Contribution towards Strategic Objectives Opportunity and Trade-off Decisions Validating Candidate Risks Against Agreed Benefits and their Profiles Schedule and Cost Risk/Benefit Analysis Risk Impact Curves Maximise Outputs Transitioned to Users Minimise Embedding the New Capability Delivery Understand the context New Capability Seen as BAU and Used Effectively ‘before’ Benefits Realisation Value Curves ‘after’

13. arms factory build • Scenario • Design/build; Risk Management to ensure programme planning and decision support. • Objectives: a) factory build, b) markets and exports serviced and c) deliver long-term economic return. • Traditional methods of risk management to be deployed under contract: T, C and P. • Solution • Working with local stakeholders and project team to identify benefits: a) local recruitment, b) sustainability for dual-purposes and c) 25% increase in production ahead of rivals • Benefits-based risk register. • Graphic of risk ‘burn-down’ and realisation of benefits to the local people and economy. • Benefits • Novel risks/opportunities that traditional methods would have missed. • Increased support from local stakeholders (linked to motivation). • Benefits approach enhanced risk register. • Delivering value, not just a product.

14. security services • Scenario • Significantly under-performing service provision • Original objectives around demand/capacity management, product quality, value • Concept of risk and benefits completely alien • Threat of losing the contract • Solution • Understand risk impact on current baseline • Define new service levels based on delivery of achievable benefits • Risk aligned benefits realisation planning • Joint team continuously reviewing risk and affects on benefits, via skilled PMO • Benefits measured using same baseline approach and metrics • Benefits • Culture shift in attitude to risk and benefits • Increased project and programme success • Customer satisfaction • Value driven by increased productivity x6

15. army communications programme • Scenario • Objectives around managing equipment obsolescence and reducing training burden • No defined benefits • Benefits not really understood - at all levels • Decisions being taken without understanding risk and impact on benefits • Solution • Benefits workshops, seniors/decision-makers • Identify, prioritise benefits and understand risk • Goal based benefits realisation plan focused on the management of risk • Integrated risk mitigation of non-benefits and end benefits • Decision-making based on impact on benefits • Benefits • Realisation that ‘it’s all about delivering benefits’ • Risk to benefit relationship understood • Benefits selected on value, prioritisation and risk • Benefit options, based on risk impact

16. defence systems engineering • Scenario • Environmental protection system for armoured vehicle procurement programme • Two options: ‘active’ (self-regenerating filters) and ‘passive’ (disposable filters) • Risks and benefits of each option not considered or understood • Decision required for business case • Solution • Through-life assessment of both options based on risk and benefits relationship • Considering risk/benefit curves for both options determined ‘passive’ as optimum • Recommendation based on balance of risk and delivery of benefits, approved by ChEng • Benefits • Clear risk/benefit assessment based on capability, financial, organisational and regulation categories • Decision-makers know the impact of their decision • Approach adopted for other areas of the vehicle enabling fleet based benefits/risk trade-offs

17. navy communications programme • Scenario • Complex ICT transformation programme • Process, organisation, technology and information but no coherence • Poor governance - and new SRO! • Integrated risk and benefits management immature • Solution • Creation of a blueprint with under-pinning benefits and risks • Creation of a programme plan that defines how outputs and outcomes will be delivered • Creation of a scheduling approach that integrates risk and benefits • Exploring the relative schedule and cost risk/benefits of different delivery options • Benefits • Risks and benefits traceable from vision to implementation • Coherence in future state of the programme • Accountability: known cost of risk and cost of benefits • Culture change

18. critical success factors Culture: Leadership, Attitude, Collaboration Simplicity: Empowerment, Process, Transparency Habit: Methodology, Motivation, Sustainability

19. Any Questions?