Project Management - Risk Management

Course Information

• Course Title: PROJECT MANAGEMENT
• Course Code: 0404438
• Course Leader: Prof. Alex Opoku (PhD, MSc, BSc (Hons), PGCHE, FHEA, MCIOB, FRICS)
• Professor of Sustainable Built Environment

Lecture Overview

• Topic: Project Risk Management

Course Learning Outcomes

• Understand what a project is, what project management is, and the role and responsibilities of the project manager within the construction team
• Understand how project managers manage projects by integrating scope, time, cost, quality, human resources, communications, risk, and procurement of a project
• Apply methods for estimating time and cost and managing quality in a construction context
• Understand theories of leadership, communication, motivation, and conflict management within teams
• Understand procurement and risk management and how they are related

Project Management Knowledge Areas

• Project Initiation
• Project Planning
• Project Execution
• Monitoring & Controlling
• Project Closing
• Project Integration Management
• Project Scope Management
• Project Time Management
• Project Cost Management
• Project Quality Management
• Project Human Resources Management
• Project Communications Management
• Project Risk Management
• Project Procurement Management
• Project Stakeholder Management

What is Risk?

• Risk is concerned with unpredictable events that may occur in the future
• The exact likelihood and outcome of these events is uncertain
• These events could potentially affect stakeholder objectives/interests

Categories of Project Risk

• Foreseen Risks: Identified but have uncertain influences on the project
• Unforeseen Risks: Not formally identified in the planning stage, are not anticipated, and have no mitigation plan

Project Management Process Groups

• Initiating
• Planning
• Executing
• Monitoring & Controlling
• Closing

Risks across the PM Knowledge Areas

• Risks related to scope, time, cost, quality, integration, human resources, communications, and procurement influence project risk

Examples of Project Risk

• Technical Risk: Scope definition, requirements definition, technical processes, technology, technology scaling, performance, reliability, safety, security, test, and acceptance
• Management Risk: Project management, organization, project resources, communication, information sharing, corporate policy, reputation
• Commercial Risk: Contractual terms/conditions, financing, liabilities/warranties, payment terms, suspension/termination, internal procurement, subcontracts, client stability, applicable law, partner financial stability, partner experience
• External Risk: Legislation/regulatory, exchange rates, site/facilities, competition, weather, political, special interest groups

Risk Management System

• The process of identifying, analyzing, and responding to risk
• Includes maximizing positive risks and minimizing the consequences of negative risks
• A system that identifies and quantifies risks to which a project is exposed so that conscious decisions on how to manage the risks can be made

Project Risk Management Process

• Plan Risk Management
• Identify Risks
• Perform Qualitative Risk Analysis
• Perform Quantitative Risk Analysis
• Plan Risk Responses
• Implement Risk Responses
• Monitor Risks

How Do We Manage Risk?

• Risk Planning: Define scope, team, strategy
• Risk Identification: Identify risk event, impact, and probability
• Risk Analysis: Analyze quantitatively, qualitatively, and as a combination
• Risk Response Planning: Define action plan, assign action officer, and specify resolution date
• Risk Monitoring & Control: Regularly assess and re-evaluate the risk

Project Risk Response Strategy

• Avoid
• Reduce
• Contingency Plan
• Accept
• Transfer
• Share
• Escalate
• Terminate
• Treat
• Tolerate
• Mitigate

Risk Response: Meaning of Terms

• Avoid: Change the plan to bypass the issue, remove the cause of the threat
• Transfer: Outsource the risk to a different team or agency
• Mitigate: Reduce the impact of the risk
• Accept: Assume the negative impact and budget for dealing with it

Risk Register

• The document used to record identified potential risks that could affect the execution of a project
• Maintained by the integrated project team, and regularly updated
• Risk management plans may be recorded in or linked to the risk register

Risk Assessments

• Techniques include determining severity x frequency x number of people affected
• R = S x (F x N)

Risk Management & Stakeholders

• Project Risk Roles: Project Sponsor, ERM, Risk Owners, Project Manager, Project Management Team, Risk Manager, PMO

Rules of Risk Taking

• Never risk a lot for a little
• Don't risk more than you can afford to lose
• Don't take risks based on principle
• Don't take risks to save face
• Always analyze the source and consequences of a risk
• Have an alternative plan (plan B)

Summary

• Project risk management involves identifying, analyzing, and responding to risk during the life of a project in order to benefit the project objectives.