Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects (2014) / Chapter Skim
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Project Risk Management: Overview P A R T 1 Part 1 Objectives The chapters in this part address the following questions: • What is project risk management? • When is project risk management performed?
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3 1.1 Background All projects involve risk. No matter how small, large, simple, or complex a project, some uncertainties will likely remain that, if realized, could affect the project budget, schedule, or scope.
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4 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects • Schedule opportunity: Can similar activities be combined in order to be completed in a more expedient way? • Scope or technical opportunity: Are there aspects of the scope that could lead to additional opportunities to complete enhancements for other projects?
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Introduction 5 The focus of project risk management is therefore not just on eliminating risk, but rather on managing it -- through the iterative steps of project risk management planning, identification, analysis, response planning, and monitoring and control -- to cost-effectively keep risk exposure at an acceptable level. Note that project risk can also relate to opportunities that may help the project team deliver the project with lower costs, shortened schedules, or enhanced scope or quality.
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6 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects life cycle, critical program risks are properly identified and suitable handling plans are developed and implemented. A well-executed life-cycle risk management process is essential for balancing cost, schedule, and performance goals, especially for programs with designs that approach or exceed the state-of-the-art.
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Introduction 7 • Capitalizing on opportunities. Reveal opportunities for improving projects early enough to realize them.
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8 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects • Establishing reserves or contingencies. Project risk analysis demonstrates the uncertainty of project outcomes and is useful for justifying contingencies for schedule and/or resources.
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Introduction 9 information based on their expertise if the amount of risk management was determined to be moderate or high rather than minimal. Likewise, the analysis of these risks and opportunities could range from a qualitative prioritization of risks based on the combined effect of their probabilities and impacts to more rigorous analytical methods involving uncertainty reduction through quantitative decision-tree analysis and probabilistic modeling.
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10 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects Part 4 -- Project Risk Management Implementation The final section of the guidebook includes suggestions for successful implementation of a project risk management process into existing practices and cultures. This section discusses characteristics of successful project risk management, barriers to implementation, and fostering a risk-based culture.
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11 C H A P T E R 2 2.1 What Is Project Risk Management? Risk management can occur at multiple levels in an organization, as summarized in Table 2.1.
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12 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects Figure 2.1 contains the complete flowchart of project risk management activities with decision points throughout the process. The flowchart depicts the flexibility of project risk management as well as the adaptability to add risk management activities along the course of a project as new information becomes available.
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The Risk Management Process 13 Step Key Activities Project Risk Management Planning Establish objectives for risk analysis aligned with project goals Identify resources desired versus resources available Scale effort according to expected benefit Perform comprehensive review of project scope, cost, and schedule to validate reasonableness Project Risk Identification Evaluate all project elements for risks and opportunities Establish a non-overlapping list of all possible risks and opportunities related to project success Project Risk Analysis Qualitative and quantitative analysis Evaluate risk and opportunity events in terms of the probability of their occurrence and their impacts Prioritize major risks for further analysis or risk planning Project Risk Response Planning Identify feasible mitigation strategies for highpriority risks Allocate risks to the parties best able to manage them Project Risk Monitoring and Monitor effectiveness of mitigation measures Reevaluate risk response strategies as appropriate Control to improve outcomes Document lessons learned for application on future projects Table 2.3. Project risk management process and key activities.
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14 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects Figure 2.1. Project risk management flowchart.
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The Risk Management Process 15 risk issues and objectives can apply. Table 2.4 outlines project risk management characteristics relative to project phases.
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16 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects the project risk management plan. If a more moderate approach is determined to be needed, the project manager can select a blend of the tools for low and high risk in order to create a mediumrisk approach.
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The Risk Management Process 17 Step Key Activities Tools (1) Project Risk Management Planning Establish objectives for riskanalysis aligned with project goals Identify resources desired versus resources available Scale effort according to expected benefit Perform comprehensive review of project scope, cost, and schedule to validate reasonableness Risk management plan Project Risk Identification Evaluate all project elements for risks and opportunities Establish a non-overlapping list of all possible risks to project success Risk checklist Risk register Project Risk Analysis Qualitative and quantitative analysis Evaluate risk events in terms of the probability of their occurrence and their impacts (consequences)
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18 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects Role Typical Responsibilities Senior Management Establishes the threshold for risk tolerance for the organization. Establishes the level of rigor and discipline at which project risk management will be performed through the organization.
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