Excellence Understood Using Predictive Project Analytics to assist

Enabling risk analytics for project success Jack Su IIA Luncheon – March 27th 2013

© Deloitte & Touche LLP and affiliated entities.

Discussion items

• Why do projects fail? • What drives project performance? • Improving project performance through risk analytics • Question & close

Enabling risk analytics for project success 2


To set the context…

3 Enabling risk analytics for project success

Suncor Energy Inc. $4.195 Billion

Canadian Natural Resources Ltd. $3.845 Billion

Cenovus Energy Inc. $1.96 Billion

In 2013, there will be

up to $23 billion in new

project capital across

Alberta oilsands

organizations

Top spenders include:

Meg Energy Corp. $1.94 Billion

Conocophillips Canada Ltd. $1.66 Billion

Canadian Oil Sands Ltd. $1.326 Billion

Source: oilsandsreview.com, March 2013

Why do projects fail?


Poll question #1

What percentage of projects fail to meet expectations at your company?

< 25% 25% - 50% 50% - 75% More than 75% All of them Don’t know / N/A



The challenge with projects

63% of IT projects have either failed (21%) or have been challenged (42%) Chaos Report, Standish Group International, 2010

Projects between $1M and $3M have a chance of success estimated at 34%, and projects over $10M only a 7% chance of success. Chaos Report, Standish Group International, 2010

37% of business process changes fall short of expected benefits “Securing the value of business process change”, Economist Intelligence Unit (EIU), October 2008

44% of all projects failed to meet either time, budget or quality goals, while 15% were either stopped or failed to meet all objectives “Making Change Work”, Survey of 1,500 change management executives, IBM, October 2008

49% of federally funded IT projects are poorly planned, poorly performing or both Review of federally funded technology projects, US Government Accountability Office, July 2008

57% of public sector contracts experienced cost overruns “Cost overruns, delays and terminations: 105 outsourced public sector information, communication and technology projects”, European Services Strategy Unit, Research Report, December 2007



Why do projects fail?

62% of companies experienced a project

failure last year

71% of projects were delivered late and

over budget

Projects are complex and difficult

Involve fundamental changes to business processes

Involve implementing new and unproven technologies

Requirement for urgent short-term specialist resources

Constant pressure to deliver more quickly and cheaply

Conflicting objectives and competing priorities

Project risks are difficult to control

Capital efficiency is a must

Non-routine projects are becoming more prevalent

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2

3

4

5

6

7

8

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Significant cost overruns, operational failures, regulatory noncompliance, customer dissatisfaction, or loss of competitive advantage.

What are the likely impacts of failed projects?



However, management is responding…

Organizations are requiring more visibility and control over high-risk

projects

• Project failure is not an option • Project management is a core

competency • Need to improve program

governance management • Want and need independent risk

reviews as boards are asking more questions

Risk management is now becoming part of the governance cost

In our experience typical spend for risk management varies by project depending on risk and complexity: • Low complexity/risk 1%-1.5% • Medium complexity/risk projects

1.5%-2% • High risk/complex projects 3%-5%

In some cases, we have seen spend on risk to go up to 10% for mission-critical programs



…and key governance groups are starting to offer additional support

1 External Audit Risk

Program Governance

PMO

4 Internal Audit

2

5

3

Senior Management 6

Board of Directors 8 Audit Committee 7


Government & Regulators 9

What drives project performance?


Poll question #2

What is the primary reasons for project failure at your company?

Lack of agreed-upon objectives and scope Lack of clearly defined requirements and

assumptions Failure to properly resource the project Lack of executive alignment Don’t know / N/A



Research shows that seven areas have significant impact on project success

Business Unit • Requirements and expectations of business unit end users

Delivery Management • Project delivery

Governance • Direction and oversight for projects

Ownership • Accountability of stakeholders for project outcomes

Resource Management • Allocate and manage project resources

Risk Management • Project risk management

Contract Management • Vendor and contract management



Research shows that project performance is directly related to the number of effective controls in place…

*Source: Helmsman Institute/University of Technology Sydney



…and that the nature of controls is driven by project complexity

WHAT IS COMPLEXITY?


© Deloitte & Touche LLP and affiliated entities. 15

Context

• Number of stakeholder groups

• Power of stakeholder

• Stakeholder Alignment

Social Factors

• Breadth of Change across the organization

• Cross Discipline Familiarity

• Multi-Disciplinary

• Paradigm Shift

Ambiguity

• Approach Uncertainty

• Assumption/Decision Uncertainty

• Breadth of Assumptions

• Cost Estimation

• Level of conceptual complexity and abstraction

• Risk

Technical

• Impact on Infrastructure

• Integration Complexity

• System Development Complexity

Project Management

• Contracting Mechanism

• Financial Cost

• Flexibility

• Level of Accountability

• Project Journey

• Project Structure

• Project Team Experience

• Project Team Size

• Resources

• Rollout

• Schedule Complexity

• Timeframes

• Variation

Enabling risk analytics for project success

All projects can be measured against standard complexity characteristics

Improving project performance


What if there was a way to predict whether projects were going to fail to deliver their objectives – and what you would need to change to make them successful?


So what if you could predict project outcomes?


Introducing Predictive Project Analytics (PPA)

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Predictive project analytics • Database containing information on

2,000+ completed projects ranging from $50K to $5B

• Projects from various industries/regions and captures how they were managed to a successful completion

• By entering complexity details, it can be analyzed against other completed projects

• The output defines the level of expected controls (up to 172) across:

.

PPA-Project Predictive Analytics

• Governance • Ownership • Delivery Management • Business Unit

• Resource Management • Risk Management • Contract Management

40%

30%

20%

10% Financial services

Energy anddefense

Overview of projects in the database

60% 30%

10% Information technology& business process

Public sectorinfrastructure &Engineering

35%

30%

30%

5% AmericasEuropeEMEAOther


Periodic monitoring provides course correction over life of the project

Of concern Under performing

As expected acceptable range for success

Over performing potential over investment

There is a major role for Internal Audit going forward to protect the investments made by the company

Actual performance averaged across all factors

Actual vs. Expected performance for each factor


Internal Audit


When to use Predictive Project Analytics?

Feasibility Design / Sanction

Constru-ction

Trans-sition Operations

Complexity Assessment

Baseline Expected Project Practices

Health Check Set up for success

Health Check Implementation readiness

Health Check • Post-implementation

review • Forensic Project Audit

Initiate Analyze/Design Develop Test Migrate

Data Go-Live Maintain/Support

Capital Project Lifecycle

Systems Development

Lifecycle

Complexity Assessment

Gate Zero Review



Other ways of using Predictive Project Analytics?


Enhanced M&A planning & execution

Knowledge management

analytics

PMO methodology

Resource management

analytics

Internal project review process

& targeted turnarounds

Project portfolio

management


At the aggregate-level, project performance data can improve organization-wide project performance

Comparing project performance across

business units and projects can yield powerful

insights about your organization and

capabilities

Understanding your organization’s overall project execution capability can enhance your ability to plan investments and consistently achieve success


Q&A


For more information

If you would like more information on using risk analytics to improve projects or Predictive Project Analytics, please contact us:

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Alberta Contact: Jack Su Senior Manager 403-702-2191 [email protected]

Enabling risk analytics for project success

National/Global Contacts: Gabriel Rodriguez Partner 416-601-6301 [email protected]

Angela Moch Senior Manager 416-601-5687 [email protected]


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Excellence Understood Using Predictive Project Analytics to assist