portfolio, programme and project risk (peter campbell)
DESCRIPTION
presentation at Communicating risk across the project portfolio, 4th July 2013TRANSCRIPT
Gain the Advantage
Measure the Risk
Peter Campbell FAPM MIRM MBCS MIET Society for Risk Analysis
Director: Risk Advantage LimitedChairman: Risk SIG
Portfolio, Programme and Project Risk Management
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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.
Gain the Advantage
Measure the RiskWhat is Risk ?
What are the problems ?
Success Criteria:• Risk Controlled.• Objectives Achieved.• Deliver the agreed
Scope.
Objectives:• To compete?• Complete the course?• Be the Best?
What are the advantages ?
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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?
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Concept
Implementation
Definition
Handover and Closeout
Operation
Termination
Project Life Cycle
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Product Life Cycle
Project Life Cycle
Whole Life Cycle
Replacement
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Measure the Risk
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Life Cycle (The front end)
Business/Sponsor Requirements
Programme/Project Team
Budget set.
Delivery time set.
Performance requirements defined.
Has risk been accounted for?
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Measure the Risk
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Risk Adjusted
UncertaintyUncertainty + Risk Risk +
Project
Project How do we
account for this ??
Set Targets
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Life Cycle (Tail end)
The Mersey Tunnel
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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
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Measure the Risk
Business Strategy and Objectives
Investigate situation
Analyseneeds
Definerequirements
Considerperspective
Evaluateoptions
Portfolio Risk Analysis
Supported by the Risk Management Process
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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
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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
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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
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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
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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”
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Gain the Advantage
Measure the RiskRisk Management
Process
Portfolio
Programme
Project
External Influence
Stakeholders Management
Board
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Gain the Advantage
Measure the RiskRisk Management
Process
Portfolio
Programme
Project
Escalation Process
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Gain the Advantage
Measure the RiskProject Risk
Management
Technical
Project
Stakeholders
Supply Chain
Project RiskLogistics
Delivery
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Requirements
Environmental
Gain the Advantage
Measure the RiskProgramme Risk
Management
Reputation
Technical
Supporting Projects
Stakeholders Supply Chain
Licensing
Operational
Regulation
Programme
Legislation
Risk
Business Socio-Economic
LegalLogistics
Delivery
FundingEnvironmental
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Gain the Advantage
Measure the RiskPortfolio Risk
Management Regulators
Owners
Government
Financial
Community
Political
Environment
PublicCustomers
International
Community
Pressure Groups
Competitors
Strategic
Commercial/Financial
Production/Operations
Tactical
Supply Chain
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Gain the Advantage
Measure the RiskProject and Programme Risk
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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.
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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.
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Gain the Advantage
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Management Reserve
Baseline Budget
Time
Cost
Budget Overspend!!
Specific Risk Reserve
Risk Control Cost
Unidentified/Uncontrolled Risk
Non-Specific Risk Reserve
Risk Exposure
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“Only those who will risk going too far can possibly find out how far one can go”
TS Elliot
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Measure the Risk
Peter Campbell
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Mobile: 07900 24 80 60
Questions
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