Post on 12-Apr-2017
0
100
Proj
ect P
redi
ctab
ility
Risk Implementation Maturity
Improve project delivery Improve communications Better balance strategic
needs with capital planning
Goal for TodayDiscuss Value of Applying Risk Management to Projects
PMA CONSULTANTS LLC | 2
Agenda
Introductions
What is project risk
Intro to project risk management
The value of risk management
Deploying a risk management process
PMA CONSULTANTS LLC | 3
Presenters
• Dax Ponce de Leon, PMP, LEED AP BD+C– 12 years experience in project management, project controls, planning, scheduling,
risk management
• Dane McBaine, PMP, LEED AP– 11 years experience, including in risk management process on large capital program
• Herschel Baxi, PMP, LEED AP– 20 years experience, including in deployment of risk management process on large
capital program
PMA CONSULTANTS LLC | 5
About PMA Consultants
Top 50 ENR Program / Construction Management Firm
Specializing in owner representation, project controls, claims management, and project risk management Projects in rail, ports, aviation, infrastructure, oil/gas,
pharmaceutical, higher education
RISK EXPERIENCE
PMA CONSULTANTS LLC | 6
15YEARS
250RISK ASSESSMENTS
$50BPROJECT VALUE
Project Risk
Uncertain events that, if occurring, have an impact on one or more project objectives such as scope, schedule, cost, and quality
Project risk collectively causes fluctuation in capital expenditure and forecasting
SOURCE: PMBOK 5TH ED. PMA CONSULTANTS LLC | 8
How Does Risk Affect Projects?
REASONS FOR COST OVERRUN
60%
55%
40%
36%
32%
19%
6%
4%
2%
26%
0% 10% 20% 30% 40% 50% 60% 70%
Material Price Escalation
Poorly Defined Scope
Contractual Disputes
Time Delay
Design Creep
Achieving Productivities
Lack of Approvals
Weather
Industrial Relations
Other
REASONS FOR SCHEDULE DELAY
57%
57%
36%
34%
21%
17%
15%
13%
2%
19%
0% 10% 20% 30% 40% 50% 60%
Poorly Defined Scope
Design Creep
Lack of Approvals
Contractual Disputes
Weather
Time Delay
Achieving Productivities
Material Price Escalation
Commissioning Process
Other
SOURCE: KPMG GLOBAL CONSTRUCTION SURVEY 2008 PMA CONSULTANTS LLC | 9
Project Risk Management Process
PMA CONSULTANTS LLC | 12
PROJECT COMMUNICATION
Risk Management
Planning
Review Process
Risk Identification
Risk Quantification
Risk Response Planning
Summarize
Risk Monitoring & Control
Comprehensive strategy for identifying and controlling risk on a project
Identify Prioritize Model
Summarize
SimulateRange
Possible risks & response plans
Critical & risk-sensitive sequences
Cost breakdown, variables, distributions
Activity durations Cost variables: scope,
price, productivity
PertMaster, NetRisk, @Risk
Report, graphics, options to mitigate risks
Recommended cost/schedule contingencies
Estimate issues, possible risks, response plans
Review
Scope, assumptions Schedules, estimates Execution Plans &
strategy
Risk Management
Plan
QUALITATIVE RISK ANALYSIS QUANTITATIVE RISK ANALYSIS
PMA CONSULTANTS LLC | 13
Typical Risk Assessment Process
Results of Quantitative Cost Risk Analysis
Objective: evaluate likelihood of completing project within a certain cost
Current project estimate (MM) $10
Methodology: Cost Risk Analysis
Likelihood of completion at $10MM 10%
Project cost for 90% confidence (MM) $15
Output: project contingency informs capital planning
New project contingency (MM) $5
PMA CONSULTANTS LLC | 14
Results of Quantitative Schedule Risk Analysis
Objective: evaluate likelihood of completing project within a certain time
Current project schedule (months) 24
Methodology: Schedule Risk Analysis
Likelihood of completion in 24 months 24%
Project duration for 90% confidence (months) 28
Output: project cash flow informs capital planning
Revised schedule contingency (months) 4
Adjust project cash flow for additional 6 months
PMA CONSULTANTS LLC | 15
Distribution of Project Completion Date
The project schedule deterministic date of 16-Sep-14 is in the 24th
percentile of the simulation results
PMA CONSULTANTS LLC | 16
A Risk-Focused Mindset Improves Project Delivery
Clarity in scope assumptions
Better estimates
Better schedules
Improved project controls
Project Document Review
Focus on project agenda
Recognition and transparency in project challenges
Early risk warnings and mitigation strategies
Brainstorming and innovative solutions
Risk Register as a project team’s tool
Key stakeholders to the table
Qualitative Assessment
Risk-based, quantified project contingencies
Support to project change management
Quantitative Analysis
PMA CONSULTANTS LLC | 17
Project Contingency and Capital Planning
Source: Flyvbjerg, B. - Survival of the Unfittest, 2009 PMA CONSULTANTS LLC | 19
45%
34%
20%
0%
10%
20%
30%
40%
50%
RailBridges and TunnelsRoad
Average Co
st Overrun
Budget overruns contingency, which impacts capital planning
In any given period, inadequate or excessive capital dollars are reserved
Risk Workshops – Multiple Benefits
TRANSPARENCY
COLLABORATION
ACTION
Early risk warnings and opportunities
Improves other project management processes
Improves project communication
Collaborative problem solving
Include all stakeholders
No agenda other than project success
Added transparency in project challenges
Probabilistic Simulation is only one component
PMA CONSULTANTS LLC | 20
Service Provider
External Stakeholders
Senior Management
Business Units
Project Risk Management Improves Communications
• Risk process – transparent, collaborative, proactive
• Funding requests include clear view of risks, impacts, and mitigation strategies
PMA CONSULTANTS LLC | 21
The Bottom Line - Improved Capital Planning
Strategic Capital Needs
Annual Capital
Forecast
Judicious Capital
Reserves
Reasonable Annual Spreads
Capital Project Contingencies Based on Cost Risk Analysis
Project Cash Flow Based on Schedule Risk Analysis
PMA CONSULTANTS LLC | 22
Need For A Flexible Project Risk Management Process
PMA CONSULTANTS LLC | 24
Gradual change in processes and organization
Tailored to project size, type, complexity
Need not be expensive!
Phased Scalable
Deploying A Risk Management Program
Risk Management is implemented
piecemeal
Nurture Risk Management
processes
Risk Management becomes a
mature project management
process
Start here
“Low-hanging fruits”Look for quick successes
PMA CONSULTANTS LLC | 25
Independent Analyst vs. Self-Performed by Project Team
• Independent Analyst can bring– Unbiased perspective– Outside perspective– Cold-eyed review of project plan– Standard process
• Usually, project members are willing to share concerns more openly with an independent analyst
• In collaboration with project team, can help to identify challenges
PMA CONSULTANTS LLC | 26
Leveraging An Independent Analyst
Facilitate risk assessments on larger, complex projects
Drive adoption of qualitative risk analysis within project teams (develop & maintain risk registers)
Design, implement, and hand-off a comprehensive risk management process which is phased, scalable, and robust
1 2 3
PMA CONSULTANTS LLC | 27
Value of Applying a Project Risk Management Process
Strategic Capital Needs
Annual Capital
Forecast
Judicious Capital
Reserves
Reasonable Annual Spreads
Transparent, scalable, collaborative risk management process improves project predictability
Funding requests include clear view of risks, impacts, and mitigation strategies
Balanced capital plans
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Proj
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ctab
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Risk Implementation Maturity
PMA CONSULTANTS LLC | 28
Service Provider
External Stakeholders
Senior Management
Business Units