Lecture Two Risk Management PDF

10/23/2024 Lecture Two Risk Management 21 Risk Management Risk Appetites and Thresholds These terms refer to the level o...

10/23/2024 Lecture Two Risk Management 21 Risk Management Risk Appetites and Thresholds These terms refer to the level of risk an individual or group is willing to accept. Risk appetite (risk tolerance) is a general, high-level description of the level of risk acceptable to an individual or an organization. For example, a sponsor is willing to accept little risk to the schedule on this project. Risk threshold refers to the specific point at which risk becomes unacceptable. For example, the sponsor will not accept a risk of the schedule being delayed 15 22 days or longer. 22 11  10/23/2024 Risk Management Risk appetites and thresholds vary depending on the individual or organization and the risk area. For example, an organization may have more tolerance for cost-related risks than for risks that affect customer satisfaction or their reputation in the marketplace. Risk areas can include any project constraints (scope, schedule, cost, quality, etc.), as well as risks to reputation, customer satisfaction, and other intangibles. Risk Averse 23 Someone who does not want to be negatively impacted by threats is risk averse. 23 Risk Management processes Perform Perform Plan Risk Plan Risk Identify Risks Qualitative Risk Quantitative Control Risks Management Responses Analysis Risk Analysis Implementing risk response Prioritizing Developing plans, tracking risks for further Defining how Determining Numerically options and identified risks, analysis or to conduct which risks analyzing the actions to monitoring action by risk may affect the effect of enhance residual risks, assessing and project and identified risks opportunities identifying new management documenting combining on overall and to reduce risks, and activities for their their project threats to evaluating risk a project. probability of characteristics. objectives. project process occurrence objectives. effectiveness and impact. throughout the project. 24 24 12  10/23/2024 Risk Management Plan The risk management plan describes how each of the risk processes (Risk Identification, Qualitative Risk Analysis, Quantitative Risk Analysis, Risk Response Planning, and Risk Monitoring and Control) will be implemented, monitored, and controlled throughout the life of the project. 25 25 Risk Management Plan The primary elements of a risk management plan are as follows: 1- Methodology This describes what methods you’ll use to perform risk management. For example, how you’d describe the types of techniques you’ll use to identify risks, how you’ll document your risk information, how you’ll tackle determining risk response plan strategies. It also describe how newly identified risks are reported to the project manager. 26 26 13  10/23/2024 Risk Management Plan The primary elements of a risk management plan are as follows: 2- Roles and responsibilities This includes the roles of all the major stakeholders as it pertains to risk identification and control and, most important, the roles of the risk owners, including their responsibilities in implementing and monitoring response plans. 27 27 Risk Management Plan The primary elements of a risk management plan are as follows: 3- Budget Medium-to-large-sized projects, or those with an extraordinary amount of risks with high impacts, may have a special budget for managing risk. If a risk budget exists, it’s documented here. 4- Risk scoring Qualitative and quantitative analysis processes are used to rank and score risks. This section includes a description of the scoring method you’ll use, how you developed the scoring method, and the thresholds. 28 28 14  10/23/2024 Risk Management The primary elements of a risk management plan are as follows: 6- Risk categories ( Risk Breakdown Structure): (RBS) Is a hierarchical framework of potential sources of risk to a project. 29 29 Risk Management Plan The primary elements of a risk management plan are as follows: 6- Reporting formats: This section should detail how the risk management information will be maintained, updated, and reported to project participants. 7- Tracking: This includes a description of the how risk activities will be recorded, tracked and audited. 8- Definitions of risk probability and impact. 9-Probability and impact matrix. 30 30 15  10/23/2024 Risk Management Plan Outputs 1. Probability and impact matrix 2. Stakeholder risk appetite and risk thresholds 3. Reporting Formats 4. Tracking 31 31 Identify Risks Identify Risks: Is the process of Identifying project risks and documenting their characteristics. The purpose is to identify risks so we can analyze them for their impact on the project and determine which ones need response plans. Additionally, risk identification involves identifying Risk Triggers, which are signs or symptoms that tell you a risk event is about to occur. 32 16  10/23/2024 Identify Risks Tools and Techniques (TT) Interviews: Risk identification interviews require the participation of all key stakeholders and should be conducted by an independent skilled interviewer using a structured agenda. Disadvantage: It is a time-consuming process. 33 33 Identify Risks Tools and Techniques (TT) Brainstorming Brainstorming is a common technique used in risk identification. Effective application of this technique requires the participation of relevant stakeholders of the project and good facilitation to manage group dynamics. Disadvantages: The technique requires attendance of all key stakeholders at a workshop which may be difficult and expensive. 34 34 17  10/23/2024 Identify Risks Tools and Techniques (TT) Checklists Risk checklists are developed based on historical information and knowledge that has been accumulated from similar past projects. listing project risks that have occurred previously and that may be relevant to this project. Quick and simple to use. Disadvantages: Checklists can grow to become unwieldy. They often miss opportunities and include only threats. 35 35 Identify Risks Tools and Techniques (TT) Root cause analysis (Ishikawa Diagram) : Used to discover the underlying causes that lead to a problem. For example, The project might be (delayed or over budget) and exploring which threats might result in that problem occurring (Early delivery or under budget) and exploring which opportunities might result in that benefit. Disadvantage: The diagram may become too complex and irrelevant potentiel causes can cause 36 confusion 36 18  10/23/2024 Identify Risks Tools and Techniques (TT) 37 37 Identify Risks Tools and Techniques (TT) Assumption and constraint analysis: Explores the validity of assumptions and constraints to determine which pose a risk to the project. Threats may be identified from the inaccuracy, instability, inconsistency, or incompleteness 38 Disadvantage: hidden assumptions or constraints are often missed. 38 19  10/23/2024 Identify Risks Tools and Techniques (TT) Prompt Lists: A prompt list provides a predetermined list of risk categories that might give rise to project risks Disadvantage: Topics in the prompt list might become too high level. 39 39 Identify Risks Tools and Techniques (TT) SWOT Analysis: Identify opportunities that are result of organization strength as well as threats that are result of organization weakness Disadvantage: The technique tends to produce high-level generic risks that are not project-specific. 40 40 20  10/23/2024 Identify Risks Example of a SWOT Analysis Structure Tools and Techniques (TT) SWOT Analysis: 41 41 Identify Risks Tools and Techniques (TT) Document analysis: Risks may be identified from a structured review of project documents. The following are some of the project planning documents and elements, should be examined when identifying risks: Scope statement Resource assignments Activity list Organizational structure Quality plan Procurement procedures Project schedule Work breakdown structure Project budget 42 Disadvantage: Only those risks which are contained in project documentation can be identified through this technique. 42 21  10/23/2024 Identify Risks Tools and Techniques (TT) Nominal Group Technique: Delphi Technique: 43 43 Identify Risks Outputs: (Risk Register) The risk register captures details of identified project risks, and the risk register may include: 1- List of identified risks. 2- Potential risk owners. Where a potential risk owner has been identified during the Identify Risks process. This will be confirmed during the Perform Qualitative Risk Analysis process. 3- List of potential risk responses. Where a potential risk response has been identified during the Identify Risks process, it is recorded in the risk register. 44 44 22  10/23/2024 Course Project 45 23 Caltrans Sample Risk List (Caltrans 2007) Technical Risks Design incomplete Right-of-Way analysis in error Environmental analysis incomplete or in error Unexpected geotechnical issues Change requests because of errors Inaccurate assumptions on technical issues in planning stage Surveys late and/or surveys in error Materials/geotechnical/foundation in error Structural designs incomplete or in error Hazardous waste site analysis incomplete or in error Need for design exceptions Consultant design not up to Department standards Context sensitive solutions Fact sheet requirements (exceptions to standards) External Risks Landowners unwilling to sell Priorities change on existing program Inconsistent cost, time, scope, and quality objectives Local communities pose objections Funding changes for fiscal year Political factors change Stakeholders request late changes New stakeholders emerge and demand new work Influential stakeholders request additional needs to serve their own commercial purposes Threat of lawsuits Stakeholders choose time and/or cost over quality Environmental Risks Permits or agency actions delayed or take longer than expected New information required for permits Environmental regulations change Water quality regulation changes Reviewing agency requires higher-level review than assumed Lack of specialized staff (biology, anthropology, archeology, etc.) Historic site, endangered species, wetlands present EIS required Controversy on environmental grounds expected Environmental analysis on new alignments is required Formal NEPA/404 consultation is required Formal Section 7 consultation is required Section 106 issues expected  Project in an area of high sensitivity for paleontology Section 4(f) resources affected Project in the Coastal Zone Project on a Scenic Highway Project near a Wild and Scenic River Project in a floodplain or a regulatory floodway Project does not conform to the state implementation plan for air quality at the program and plan level Water quality issues Negative community impacts expected Hazardous waste preliminary site investigation required Growth inducement issues Cumulative impact issues Pressure to compress the environmental schedule Organizational Risks Inexperienced staff assigned Losing critical staff at crucial point of the project Insufficient time to plan Unanticipated project manger workload Internal “red tape” causes delay getting approvals, decisions Functional units not available, overloaded Lack of understanding of complex internal funding procedures Not enough time to plan Priorities change on existing program New priority project inserted into program Inconsistent cost, time, scope and quality objectives Project Management Risks Project purpose and need is poorly defined Project scope definition is poor or incomplete Project scope, schedule, objectives, cost, and deliverables are not clearly defined or understood No control over staff priorities Too many projects Consultant or contractor delays Estimating and/or scheduling errors Unplanned work that must be accommodated Communication breakdown with project team Pressure to deliver project on an accelerated schedule Lack of coordination/communication Lack of upper management support Change in key staffing throughout the project Inexperienced workforce/inadequate staff/resource availability Local agency issues Public awareness/support  Agreements Right-of-Way Risks Utility relocation may not happen in time Freeway agreements Railroad involvement Objections to Right-of-Way appraisal takes more time and/or money Construction Risks Inaccurate contract time estimates Permit work windows Utility Surveys Buried man-made objects/unidentified hazardous waste Regulatory Risks Water quality regulations change New permits or new information required Reviewing agency requires higher-level review than assumed Sample Risk Checklist from the Minnesota DOT: No. of lanes Traffic volumes Level of Service LOS analysis Lane continuity High-occupancy vehicle, single-occupancy vehicle, etc. Policies, purpose, and need Access Functional classification of roadways Traffic volumes Traffic movements Traffic forecasts Right-of-way impacts Environmental issues Existing interchange/conditions Municipal land use planning Design speed/engineering standards Access category Bike/Pedestrian Crash data Horizontal Right-of-Way impacts  Environmental issues Soils Utilities Existing conditions Topography Pavement condition Staging/Detour Municipal community planning Design speed Enforcement issues Engineering standards Park & Ride HOV/Transit elements Vertical Design speed/engineering standards Soils – rock, muck, water Utilities Topography Bridges Municipal community planning Noise Adjacent land use Drainage Airports Bridge Cross section – mainline Cross section – cross street Profiles Skew Type selection Aesthetics Bike/Pedestrian trails Airport location Lighting & signing Soils/Foundations Waterway analysis Bridge clearance (overlays) Utilities Staging/Detour Bridge approach costs Temps and shoo fly Retaining walls Type  Cross sections Aesthetics Drainage Right-of-Way impacts Utilities Soils/Foundations Traffic Design speed Functional classification Roadway type Access locations Traffic movements Traffic volumes LOS analysis Signal warrant analysis Crash data Safety systems Lighting warrants Signing Striping determination Airports Foundation analysis WRE Alignments Profiles Cross sections Drainage areas Existing conditions Impervious areas Banking Waterway analysis DNR Corps Watersheds/WCA/BWSR NPDES/PCA/MS4 City/County coordination Right-of-Way impacts Soils Drinking water areas Airports Ponding Pavement Soils  Cross sections Traffic volumes Vehicle classification Profiles Water table Drainage Pavement selection Shoulder use Traffic staging/control Dynamic shoulders Transit shoulders Pavement condition Utilities As-builts (Mn/DOT and city) Surveys Gopher 1 Aerial photography R/W maps Plats Site plans Coordinate with city/county Permits Alignments Profiles Cross sections Drainage elements Retaining walls Noise walls Bridges Construction staging Railroad Aerial photos Alignments Profiles Cross sections Drainage Retaining walls Noise walls Bridges R/W maps Plats Railroad office coordination Construction staging Earthwork Alignments Profiles Soil borings Intersections Drainage elements Subsurface drains Foundation analysis Contaminated soils – remediation Noise walls Alignments Profiles Land use maps Traffic volumes LOS Traffic classifications Utilities R/W impacts Municipal consent Historic property review Drainage elements Airports Aesthetics Wall type Foundation analysis Maintenance Maintenance elements/issues Drain tile Anti-icing HOV bypass Snow storage Snow control Transportation Management System TMS, ITS, IVHS elements Construction Innovative construction services Detours Staking Extraordinary enforcement Extraordinary public relations Seasonal impacts Vibration and noise Surveys Survey Tips This method is only truly useful when the project team members think about every item on the list as a jumping off point for further risks. Each item must be thought about in detail to ensure that the risk is truly a project risk. The thought process should be documented in order to build on this in future discussions of the risks. Resources Caltrans Office of Statewide Project Management Improvement (2007). Project Risk Management Handbook: Threats and Opportunities, 2nd ed., May 2007, Caltrans, Sacramento, CA. http://www.dot.ca.gov/hq/projmgmt/guidance_prmhb.htm. Molenaar, K. R. (2005). “Programmatic Cost Risk Analysis for Highway Mega- Projects,” Journal of Construction Engineering and Management, Vol. 131, No. 3.