Project Risk Management for Senior Responsible Officers, Project Directors, and Project Managers

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Project Risk Management forSenior
Responsible Officers, Project Directors, and
Project Managers

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Project Risk Management

• Experience has shown that risk management must
  be of critical concern to project managers, as
  unmanaged or unmitigated risks are one of the
  primary cause of project failure
• P.S. Royer (Proactive Risk Management, USA)
• Risk is the chance of something happening that
  will have an impact on objectives
• Australian Standard AS/NZ 4360

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Gateway Findings
Project Risk Management features as one of the
highest areas of concern in gateway reviews
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Gateway Findings

• Gateway Review teams consistently identify
  project risk management as an issue. Specifically
  in the following areas
• Comprehensive identification of project/ program
  risks
• Thorough analysis and assessment of identified
  project/ program risks by key stakeholders
• Identification and development of risk treatment
  strategies
• Effective allocation of risk roles and
  responsibilities

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Gateway Findings

• Continued
• Regular monitoring, evaluate and update risk
  management plans and risk registers, and maintain
  risk management processes for the duration of the
  project/ program
• Understanding the risk management processes
  (AS/NZS4360) and application in a project
  management context
• Awareness that risk management is an iterative
  process throughout the lifecycle of a project,
  where some risks will disappear and new ones will
  emerge

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Project Risk Management

• Essentially, projects are like organisations.
  They have project governance, internal management
  systems, a number of staff, external
  stakeholders, an external environment and goals,
  objectives and deliverables. However, project
  delivery in the construction industry comes with
  a higher degree of uncertainty due to
• Industrial factors
• complexity changing technologies
• uniqueness of projects
• OHS and industrial relations
• dynamic nature
• skill shortage
• different team compositions for each project
• Multiple organisational interests/goals/objective
  s

Quality
Scope
Time
Cost
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Project Risk Management

• Absence of sound Project Risk Management is
  likely to result in
• Failure to keep within the cost estimate
• Failure to achieve the required completion date
• Failure to achieve the specified quality standard
• Failure to meet purpose or stakeholder
  expectations    
• With the potential for the following
  consequences
• Damage to Government image and prestige
• Loss of ministerial support
• Reduced funding for future projects
• Failure to achieve value for money
• Pressure for further investment

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Project Risk Management

• Famous examples
• Sydney Opera House took more than 16 years to
  construct, original cost estimate 50 million,
  final cost 102 million, due to the roof design
  changing a number of times, adverse
  relationships, with the final product not meeting
  the quality standard as specified.
• Federal Parliament Building
• Auditor Generals report noted that the project
  was not managed properly by the Parliament House
  Authority, the architect or the construction
  manager, partly due to un-clear responsibilities
  and lack of knowledge regarding the fast-track
  method.

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Project Risk Management (PRM)

• Possible reasons for lack of project risk
  management
• Informal risk management considered by SRO as
  sufficient
• Incomplete application of project management
  methodologies
• Lack of risk management skills
• Lack of risk management resources
• General lack of resources
• Lack of managerial support
• Lack of effective risk management tools
• No risk culture

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Project Risk Management (PRM)

• "We all consider risk implicitly in our decision
  making and thinking. However, by discussing each
  step with other interested parties it becomes a
  conscious and formal discipline. It provides a
  mechanism to help ensure that the lessons of the
  past are taken into account."
• Australian Standard Guidance Manual
• HB4362004 (page 22, para 3.3.2)

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Project Risk Management

• Benefits of Project Risk Management
• Increases likelihood of success, fewer surprises!
• SRO obtains greater knowledge of the inherent
  nature of the project
• Optimises project performance
• Provides SRO with confidence that all strategic
  risks to the projects objectives have been
  identified, and are monitored
• Protects reputation of project and department
• Makes life more comfortable !

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Project Risk Management

• Benefits of Project Risk Management (continued)
• Provides a defensible position
• Promotes mutual understanding of the projects
  objective by all stakeholders
• Risks are allocated to the party which is best
  suited to carry/manage the risk
• Increases likelihood of funding approval
• Growing of historical data supports lessons
  learnt
• Prioritisation of risks enables effective
  resource allocation

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Project Risk Management

• Key Messages
• Australian Standard AS/ NZ4360 2004
• PMBoK and Prince2 (include project risk
  management process)
• Project risk management needs to be fully
  integrated into the project management
  methodology.
• Project Management methodologies have made
  provisions to deal with known and unknown
  risks.

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Project Risk Management

• Key messages continued
• Project Management methodologies absolutely
  require sound project risk management.
• Need for consistent Project Risk management
  across all stages of the projects lifecycle.
• Capture lessons learnt !

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Project Risk Management

• Further reading
• Gateway Website www.gatewayreview.dtf.vic.gov.au
  
• DHS Documents and CMB Capital Project development
  guidelines link and processes
• www.capital.dhs.vic.gov.au/CapitalProjectLifec
  ycle/
• OGC - Office of Govt Commerce in the UK
• www.ogc.gov.uk/guidance_managment_of_risk_4441.as
  p
• 4. Performance Audit of Government funded Capital
  projects
• www.audit.vic.gov.au/speeches/agspeech_26.html
  TopOfPage

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Developed for the Gateway Supervisory Committee

• For further information, please contact
• VMIA
• The Victorian Managed Insurance Authority (VMIA)
  is the statutory authority, reporting through the
  Department of Treasury and Finance, established
  to provide insurance for state assets and risks,
  to deliver risk management services to State
  departments and agencies and to monitor the
  effectiveness of risk management across
  government.
• www.vmia.vic.gov.au