The Owner's Role in Project Risk Management (2005) / Chapter Skim
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7 Active Risk Management
7 Active Risk Management
Pages 61-69
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From page 61... ...
This approach often includes an assumption that additional resources will be made available to solve the problems that arise, precludes the prevention of some undesirable events, and increases the costs of addressing others. An inexperienced project team, inadequate front-end risk management planning, and a tradition of budget increases may be the primary motivation for passive risk management and deterrents to implementing proactive risk management.
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From page 62... ...
It should be part of the initial project approval package, and an updated plan should be part of all subsequent project planning and performance reviews. Risk management plans are dynamic documents that are used to guide day-to-day decisions by the project team.
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From page 63... ...
ACTIVE RISK MANAGEMENT 63 BOX 7-1 Typical Table of Contents for a Risk Management Plan 1.0 Introduction and background 1.1 Statement of project philosophy, goals, and objectives relative to risk management 1.2 Risk management process and procedures 2.0 Risk management team 2.1 Team functions and responsibilities 2.2 Team members 3.0 Risk management process 3.1 Identification of risks 3.2 Assessment of risks 3.3 Analysis of risks 3.3.1 Qualitative 3.3.2 Quantitative 3.3.3 Methodology 3.4 Setting priorities on risks to be managed 3.4.1 Critical risks 3.4.2 Significant risks 3.4.3 Other (nonsignificant or de minimis) risks 3.5 Risk management 3.5.1 Risk avoidance 3.5.2 Risk transfer 3.5.3 Insurance 3.5.4 Risk control 3.5.5 Options 3.5.6 Organizational structures 3.5.7 Risk assumption 4.0 Risk management action plan 4.1 Risk register 4.2 Actions 4.3 Responsibilities 4.4 Commitments 4.5 Deadlines 5.0 Risk monitoring and updating 5.1 Waterfall diagrams 5.2 Leading indicators and other warnings 5.3 Decision points 6.0 Conclusion
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From page 64... ...
Figure 7-1 shows the progression of a risk as mitigation actions are applied over time. A risk mitigation activity is initiated and tracked because a risk assessment has shown that there is a high risk.
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From page 65... ...
The risk register emphasizes that risk assessment should not be a static, one-time operation, as it unfortunately sometimes is, but a continuous operation throughout the life of the project, starting with initial preproject planning. Risk management requires the development of risk mitigation and reduction plans and management of the project in accor
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From page 66... ...
· Rank or priority of the risk compared to others · Severity of the impact if the risk materializes · Impact on project quality, scope, performance, or ultimate success · Impact on project cost · Impact on project duration · Likelihood that the risk will materialize, given current management controls · Leading indicators for the risk and when they must be evaluated · Risk reduction and mitigation plans now in effect · Risk reduction and mitigation plans contingent on leading indicators · Tracks of the leading indicators or priority of the risk over past time · Forecasts of the leading indicators over future time · Tickler file on actions to be taken in the future Of course, any information that a manager wishes to track can be included in the risk register. The most important reason for having a computerized system is to maintain a tickler file that reminds managers of what they are supposed to do and when it must be done.
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From page 67... ...
The effective use of this tool includes regular and frequent progress reporting on each risk until the risk or the project passes the point where the risk is no longer an issue and is closed out. Project risk registers have been used successfully on many projects, including DOE projects, but they can easily become a merely bureaucratic paper exercise.
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From page 68... ...
The risk event description in Column 2 should include specific risk event details. Columns 3 and 4 are the results from the IPRA evaluation.
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From page 69... ...
embassy representative TRANSFER -- M H Paul Smith 12/5/XX OPIC political risk insurance ACCEPT -- L M Rick Reyes 11/1/XX Assess tax implications and potential increase CONTROL -- M M John Jones 10/18/XX Assess local capabilities and requirements in detail Column 7 refers to the cost of the action relative to the total installed cost of the project (high (H) /medium (M)
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