MONDAY 8 OCTOBER, 2007 Project Management - Setting the Standard

1. CS1.2.2 Project Management &Corporate Governance Yvonne Butler MONDAY 8 OCTOBER, 2007 Project Management - Setting the Standard Australian Institute of Project Management National Conference 2007 Hobart Tasmania October 7 – 10, 2007

2. Corporate Governance and Project Management Governance Yvonne Butler General Manager Strategy & Development APP Corporation

3. Corporate Strategy Corporate Governance Governance of Project Management Overview

4. Corporate Strategy

5. Some statistics… • Fortune Magazine -less than 10% of business strategies are effectively delivered • AICD - 7/10 CEO’s who fail do so not because of wrong strategy but because of poor execution • 70% of capital expenditure spent on initiatives not aligned with organisational strategy • Caritas – 79% of Execs state that they have at least 10% redundant projects • PwC – 2.5% of companies had 100% of projects on time, within budget, to scope and delivering the right benefits So why do strategies fail?

6. Wrong strategy….

7. Implemented the wrong initiatives (or in wrong order) Didn’t know about similar initiatives already underway Unrealistic time commitments Idealistic cost expectations No prioritisation No or ineffective portfolio/program/project management Poor governance Right Strategy, Poor Execution

8. Corporate Governance

9. Definitions ‘Corporate governance involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined.’ OECD Principles of Corporate Governance 2004

10. Definitions (cont’d) ‘Corporate governance is concerned with structures and processes for decision-making, accountability, control and behaviour at the top of organisations’. Standards Australia Applications of Corporate Governance HB 401-2004

11. Definitions (cont’d) ‘Corporate governance is the framework of rules, relationships, systems and processes within and which authority is exercised and controlled in corporations… It influences how the objectives of the company are set and achieved, how risk is monitored and assessed, and how performance is optimised.’ Australian Stock Exchange Corporate Governance Principles 2007

12. ASX 8 Principles: • Lay solid foundations for management and oversight • Structure the Board to add value • Promote ethical and responsible decision making • 4. Safeguard integrity in financial reporting

13. ASX 8 Principles (cont’d): • 5. Make timely and balanced disclosure • Respect the rights of shareholders • Recognise and manage risk • Remunerate fairly and responsibly

14. Principle 7: Recognise and Manage Risk • Risk management is the culture, processes and structures of an organisation • Companies should have policies for oversight and management of business risks (not only financial) • Requires management to implement risk management and internal control systems • CEO required to disclose material risks and provide improvement assurance

15. The context of Risk How Governance and Adding Value come together Audit & Review C’tees

16. Corporate Approach to Risk Management Context Identify Analyse Evaluate Treat Communicate

17. Why is Corporate Governance Important? • Key to determining the cost of capital in a global capital market • Investors are willing to pay more for the shares of a well-governed organisation • “Organisations that have good governance are able to realise a premium of more than 20% from their investors” McKinsey’s Investor Opinion Survey, 2005

18. SO WHAT?? So where is this going? Strategy Governance Risk Project Management Bar

19. Corporate Governance Strategic Planning Management of Operations Governance of Project Management Portfolio Program Project

20. Governance of Project Management

21. What is it • Is the link between corporate governance and project governance • Concerns those areas of corporate governance specifically related to portfolio, program and project management activities in organisation • Explicit alignment of the organisation’s project portfolio with the organisation’s objectives • Often risk based • Influences directors and executives to adopt excellent practices regarding the governance of 3Ps

22. Achieving your vision Business Transformation Portfolio Management Program Management Project Management Office Office Office Program and Project Management Strategic Portfolio Definition Organisational Define Plan Program Deliver Program Realise Business Direction Portfolio of Work of Work Benefits Deliver Projects Information and Knowledge

23. Benefits • Assures directors that robust governance is consistently applied across projects managed throughout the organisation • Optimises the portfolio of projects • Assesses 3P progress, identifies problems • Focuses support, flexes resources, better communication • Minimises risk • Maximises benefits to be realised from projects • Ensures the continued performance of the organisation

24. Key Principles • Board has overall responsibility for the governance of project management • Organisation fosters a project management culture of improvement and trust • Roles, responsibilities and performance management criteria for governance of project is clearly defined Directing Change: A Guide to Governance of Project Management Association for Project Management (UK)

25. Principles (cont’d) • Disciplined governance arrangement, supported by appropriate methods and controls, are applied • Coherent relationship is demonstrated between business strategy and project portfolio • All projects have approved plans with authorisation points at which business case is reviewed • Board decides when independent scrutiny of projects and project management systems is required • Clearly defined criteria for reporting project status and escalation of risks

26. Good start, but… No reference to: • prioritisation • benefits realisation • portfolio or programs - jumps down to project level • no explicit linkage with portfolio management and the critical role it plays in delivering organisation strategy

27. The Real Issues? • Governance of Project Management, Portfolio Management hasn’t become real yet. • Surprising given more companies are using project management disciplines to implement corporate strategy and manage multiple projects. • Project governance, should be aligned to governance of project management, which should be aligned to corporate governance

28. The Real Issues? • Need to see explicit connection between portfolio management and delivery of organisational strategy • Most Board’s see project management as tactical. We need to fill that gap to ensure corporate sustainability. • Portfolio, program and project management should be common terms in the Boardroom and at executive management

29. ASX Corporate Governance Governance of Project Management AICD/ AIM Project Governance AIPM Call to Action… We need to be more proactive and work more closely with our CEOs and Boards to demonstrate the absolute alignment and benefits of project management Peak bodies need to start talking and elevate PM from tactical to strategic Governance Task Force

30. The road becomes clear for business success…yvonne.butler@app.com.au