Management of Organisational and Project Risk in a major Government Transport Portfolio

Transcription

1 Management of Organisational and Project Risk in a major Government Transport Portfolio Not an event but a continuous process Les Wielinga

2 LES WIELINGA RELEVANT EXPERIENCE More than 35 years experience in the management of transport issues, strategic planning, development, design and delivery of infrastructure, program and project management Recent Senior roles include: Director General of Transport for NSW Chief Executive of the Sydney Metro Authority Chief Executive of NSW Roads and Traffic Authority Significant Project experience including being the NSW Government s Project Director on the Pacific Highway Program, Westlink M7, Lane Cove Tunnel and Cross City Tunnel 1

3 TODAY S PRESENTATION The intention is to cover the following: Accountability and process for risk in a major Transport Department The roles of the Board/project steering committee, the business and the Project Team in the governance of risk and how this can contribute to the success or failure of a project. The evolution in thinking over the last 10 years from the Government side on the allocation of risk in major contracts. Some thoughts on managing project risks in today s environment. 2

4 Initial thoughts on risk management Risk Management is the economic protection of the Company s assets, earnings and liabilities Risk Management must be a continuous process that involves: Identification of the risks Various methods for assessing the quantum and probability of the risk Use of both quantitative and qualitative approaches Ranking of risks according to the frequency of loss and the potential severity of loss Understanding of the company and the industry Financial reasonableness Good record keeping An amount of imagination and the right attitude 3

5 Initial thoughts continued Principle : Need a degree of control over a risk before accepting the risk Retain a risk if: It is possible to charge losses against normal operating costs A contingency fund is available You can borrow against the cost of any loss, repaying over an agreed period Where possible transfer risk to insurance Must have an ongoing plan to avoid circumstances that can cause loss and to minimise the operational and financial impact of loss, if it occurs 4

6 TfNSW Governance of Risk 5

7 TfNSW Major Divisions 6

8 Some comment s on experience in TfNSW Establishing an effective risk management process in a new agency is tough going. Challenges include: Defining and describing the right risk is not an easy thing to do Doing risk management properly is essential but is time consuming and requires skills and experience Many need to be convinced of its benefits Often treated as an event rather than a continuous process Process gets subsumed by day to day management crisis 7

9 Setting a context Project Failure Most believe that in order to succeed, a project must deliver the benefits promised in the Business Case and do so to cost, to quality, and on time. Although this must be achieved, unfortunately, it's not that clear and absolute because the project must also be delivered in line with the expectations of the stakeholders Post mortems on failed projects tends to identify common problems which can be loosely grouped into the following areas: Poor alignment with the Strategic context Inadequately defined business requirements Poor governance Poor implementation of the project management basics A change in the external environment 8

10 Project Failure brings consequences In boardroom, the debate goes on about accountability, what to do differently and how to avoid repeat scenarios Hard questions must be and are asked. These include: Who was accountable? Were post mortems conducted to identify source(s) of failure? Were their professional service/consultant reviews and recommendations at key stages in the project life cycle? Were the project risks adequately identified and were they managed effectively Could the problem have been avoided? Did the Board do its job? 9

11 Important Issues These include: The Organisation and projects Governance framework (accountability and decision making) The roles of Key Stakeholders and their interaction I will now consider this by examining the vulnerability of the Board 10

12 The Vulnerability of the Board An independent review of the Board s role around the administration of a failing project is likely to identify a list of problematic issues and behaviour in the boardroom that looks something like this: the board often make decisions in isolation due to lack of context for informed debate; the board treats project approval as an event without strategic context; the board relies on the capability of a key senior executive rather than ensuring good governance is in place; the board holds the key senior executive accountable for the failure of business projects; the board digs into detail and misses the big picture; project risk monitoring can get lost in the overall risk profile of the business; and planning and delivering major technically oriented projects is sometimes not the core strength for most board members, so the key project issues can get passed by very quickly. 11

13 Project Success Key Components of success: Achieve a strong link between the project and the strategic context Create an achievable business case Establish effective project governance Get the project management fundamentals right including risk Management Focus on the delivery of the project benefits Manage the expectations of stakeholders Monitor the external environment 12

14 Evolving the thinking on Risk Management Important factors have been: Experience in using new forms of contract (use of one or more of Finance, Design, Construct, Maintain and Operate Components) Market conditions and the preparedness to accept risk More experience in sophisticated risk management processes The various obligations legislation places on companies and individuals Significant project failures Better understanding of Organisation and Project Governance. 13

15 Some final thoughts Current views on these forms of Contract Construct only Design and Construct Design, construct and maintain Alliances PPPs Risk needs a greater prominence and more discipline in administration Benefits and risks require a continual focus during the life cycle of a project Organisation wide risk management needs strengthening (introduce financial governance discipline and project management type processes) 14