Project Risk Management_intro

Project Risk Management

Basic Introduction

DefinitionsProject

Temporary endeavor with a defined beginning and end Risk

A possible future event which if it occurs will lead to an undesirable outcome.

ManagementArt and science of planning, organizing, securing and managing resources

Project RiskThe cumulative effect of the chances of an uncertain occurrence that will adversely affect project objectives.

Risk ManagementA systematic and explicit approach for identifying, quantifying, and controlling project risk.

Project Risk Management The art and science of –identifying, assessing, and responding to project–risk throughout the life of a project and in the –best interests of its objectives

The processes concerned with conducting:

PROJECT RISK MANAGEMENT

The objectives is:• To decrease the

probability and impact of events adverse to the project, and

• To increase the probability and impact of positive events

PMBOK : • Risk management

planning• Risk identification• Risk analysis• Responses to risks • Risk monitoring and

controlISO 3100:• Establishing the

Context• Identify risks• Analyze & Evaluate

risks• Treat risks

• Monitor and Review• Communication and

Consult

SCOPE TIME COST QUALITY

DeliverablesREPUTATION

PenaltyREPUTATION

Additional Cost LOWER PROFIT

RejectREPUTATION

PROJECT RISK• Effect or uncertainty on objectives (ISO), • Uncertain event or condition that, if it occurs, has

a positive or negative effect on a project’s objectives (PMBOK)

Establishing the contextExternal • To ensures that the relevant externally generated threats, and

opportunities are properly taken into account and the risk management framework is appropriate to the requirements of the Project

• To ensures that all Stakeholders and their objectives are considered when developing risk management criteria, – this helps to establish policies for communication with these parties.

Internal Requires the Project Team to consider, and align the risk management process with the: • Corporate risk management policy • Corporate and team culture• Internal stakeholder structure and capabilities (resource and

skill availability, etc.)• Project systems and processes (either available or planned)05/02/2023

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• Establishing the Context

• Identify risks• Analyze & Evaluate

risks• Treat risks


Consult

Establishing the contextIn short - Establishing the Context includes of the activity of Risk Management Planning, Alignment of Project Objectives & Decision, Frameworks, Fact & Constraint and Communication to related stakeholders External and Internally

Policy Decisions

Strategic Decisions

Tactical Decisions

Decisions that have made

Decisions that need to be included the analysis

Decisions that can be made later


• Identify risks• Analyze & Evaluate risks• Treat risks


Consult

TECOP FRAMEWOR

KS

Risk Identification

Risk Register issuesgenerated by

multi-disciple team

Project Allowances

(Contingency)

Technical

Commercial

Economical

PoliticalGovernment

Community

Agreements

Drilling

Subsurface

Insurance

Valuation

Financing

Infrastr.

Brainstorming

OrganizationalSystems

Partners




Consult

RISK IDENTIFICATIONRisk Statement: Cause – Risk / Event – ConsequenceWhat is Cause?• Reason for ; result in ; the reason why something happenedWhat is Risk?• Effect or uncertainty on objectives (ISO), • Uncertain event or condition that, if it occurs, has a positive

or negative effect on a project’s objectives (PMBOK) What is Event?• Occurrence or change of a particular set of circumstancesWhat is Consequence?• Outcome of an event

As a result of a <definite cause>, an <uncertain Event / Risk > may occur, which would lead to < consequences for the project objective(s)>




Consult

The Uncertainty Spectrum

TOTALCERTAINTY

TOTALUNCERTAINTY

GENERALUNCERTAINTY

SPECIFICUNCERTAINTY

(Unknown - unknowns) (Knowns)

NOInformation

CompleteInformation

PartialInformation

(Known - unknowns)

SCOPE OF PROJECT RISK MANAGEMENT*

*Note: in this range the information to be known




Consult

ISSUEBLACK SWAN

RISK AND ISSUE

What is the different ?• Risk is an event that may occur on a project that will have a negative impact.

Risk is not a certainty. It may occur and have less than 100% probability of occurring.

• An issue is an event that the project will or currently faces that will/does have a negative impact. An issue has a 100% probability of occurring.

What is the similarity?•Both risk and issue management require planning. •A risk generally has a mitigation strategy and contingency plan.

Risk and uncertainty are equivalent

A project risk that has occurred can also be considered an issue (PMBOK)

Common of Risk Management Process

Brainstorm Risk IdentificationRisk

Register

Risk Analysis

Risk Evaluation & Treatment

• Eliminate• Mitigate• Transfer• Accept

RISK EVALUATIONPoints of scales Consequences• Consequences are rated in term of potential impact to

on objective (Cost , Schedule, Health, Enviro, External / Company Image)

• Consequences are rated from slighted to massive.• Where risk has several consequences, the highest

consequence is used to generate the rating.

Likelihoods• Likelihoods are rated in terms of percentage / likely of

occurrence.• Likelihoods are rated from Improbable/Rare to

Frequent/Very Likely (to be happened).




Consult

Sample Risk Matrix

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SETTING THE PRIORITIES

Rationale Agreed priorities are used to determine where the greatest attention, planning and detail risk assessment should be focus.

• Using the control effectiveness• (High Risk without control, High risk with control that are

not fully effective, etc.)• Using the potential exposure• Using Milestones

Using the level of risk




Consult

Risk TreatmentRisk Treatment / Response defines steps for : Enhancing opportunities Responding to threats

Risk Response Type: Avoidance - eliminate Mitigation

Reduce EMV by reducing probability Reduce Impact

Transfer buy insurance

Acceptance Active: develop plan to deal with risk if it occurs Passive: Accept risk (e.g., lower profit




Consult

Where is the Contingency Plan allocated in the Risk Management Process ?

CONTINGENCY PLAN




Consult

CONTINGENT PLANNINGContingent planning:

a means to address risks to the project through a formal process and provide resources to meet the risk events.

It is the establishment of management plans to be invoked in the event of specified risk events

Examples:The provision and prudent management of a

contingency allowance in the budgetThe preparation of alternatives work areas and work-

arounds.




Consult

What is Contingency Plan• A Contingency plan is a plan devised for a specific situation when

things could go wrong. Contingency plans are often devised by governments or businesses who want to be prepared for anything that could happen. They are sometimes known as "Back-up plans", "Worst-case scenario plans", "Scrap Situation" or "Plan B" .

• Contingency plans include specific strategies and actions to deal with specific variances to assumptions resulting in a particular problem, emergency or state of affairs. They also include a monitoring process and “triggers” for initiating planned actions. They are required to help governments, businesses or individuals to recover from serious incidents in the minimum time with minimum cost and disruption.

http://en.wikipedia.org/wiki/Contingency_plan

• A Contingency Plan is fallback position, or workaround in the event of an adverse occurrence, or risk event, on the project.

• A plan that identifies key assumptions beyond the project manager's control, and their probability of occurrence. The plan identifies alternative strategies for achieving project success.

http://www.maxwideman.com/pmglossary/PMG_C07.htm

http://en.wikipedia.org/wiki/Governments

http://en.wikipedia.org/wiki/Businesses

http://en.wikipedia.org/wiki/Contingency_plan



Probabilistic Planning • P10 Estimate – a 10% chance that the project

cost/schedule will be less than or equal to the estimate total and a 90% chance that the project cost/schedule will be greater than the cost estimate total.

• P50 Estimate – a 50% chance that the project cost/schedule will be less than or equal to the estimate total and a 50% chance that the project cost/schedule will be greater than the cost estimate total.

• P90 Estimate – a 90% chance that the project cost will be less than or equal to the estimate total and a 10% chance that the project cost/schedule will be greater than the cost/schedule estimate total.

Typical Life Cycle Profiles

Total project life cycleINCREASING

RISK

$

VALUE

TIME

Plan AccomplishPhase 1

ConceivePhase 2Develop

Phase 3Execute

Phase 4Finish

Opportunity & Risk

Amount at Stake

(period when highestrisks are incurred)

(period of highestrisk impact)

Risk versus Amount at Stake

COST ESTIMATE & CONTIGENCY• LEVEL PROBABILITY VS COST

ESTIMATE

A D B CE

P90

P70

P50

P35

P10

A : Value P10B : Value P50C : Value P90D : Deterministic EstimateE : Deterministic By PM

DeterministicEstimate

(IncludingAllowance)

ContingencyP50 –

Deterministic Estimate

COST

PSample

AACE COST ESTIMATE CLASSIFICATION

http://www.aacei.org/technical/rps/17r-97.pdf

Sample of Schedule Risk Assessment Result

Sample of Schedule Risk Assessment Result

Documents

Project Risk Management_intro