UNIQUE NATURE OF PROJECT RISK MANAGEMENT

Transcription

1 Presentation to: National Treasury Risk Forum UNIQUE NATURE OF PROJECT RISK MANAGEMENT Treten Enterprise Support Infinite solutions Infinite possibilities

2 Significance of project management A framework for project risk management Closing

3 Strategic fit for project management Programme management comprises a group of related projects managed in a coordinated way to obtain benefits and control not available from managing them individually. Programs may include elements of related work outside scope of the discrete projects in the program. PMBOK pg 368 The state of the nation address 3 June Excerpts:..Community Work Programme...Infrastructure Development Cluster R787 billion budget FIFA Soccer World Cup...the BRT system...digital broadcasting & signal distribution infrastructure...national Health Insurance scheme..the urgent rehabilitation of public hospitals. 3

4 Link between strategy and projects No two projects are ever the same, so a typical project management approach should allow for some degree of flexibility Treten ES Strategic Objectives Programme1 Programme2 Project A Project B Project C 4

5 What is a project? Project management is a formalised and structured method of managing change in a rigorous manner. It focuses on producing specifically defined deliverables by a certain time, to a defined quality and with a given level of resources so that planned outcomes are achieved. Group of inter-related activities Planned and executed in a certain sequence Create a unique product or service Within a specific time frame Projects are often critical components of an organisation's business strategy or relate directly to policies and initiatives of the Government. 5

6 Typical project life cycle Risk should be managed through scenario planning. A scenario that has become reality is beyond risk. It s a crisis. -- Treten ES Benefits Realisation Implementation Design Concept & Initiation 6

7 Why projects fail There s an old saying about how there are a million ways to fail, but only one way to be right. When it comes to projects, nothing s further from the truth. Projects fail the same few ways over and over again. 1. Project sponsors are often not committed to the objective. 2. Some projects do not meet the strategic vision of the company. 3. Projects are started for the wrong reasons. 4. Inadequate staffing and skills for projects 5. Incomplete project scoping. 6. Lack of formal and practical project planning. 7. Poor financial management in projects. 8. Insufficient funding and incorrect budgeting. 9. No formal project management methodologies and practices. 10.Not all projects are going through a formal sign-off process. 7

8 Impact of risk on projects Nobody sets out to fail, but for some reason people just accept that flawless success in projects is a myth. Talking about failure causes discomfort, because nobody wants to give or take that kind of criticism. Risks can result in four types of consequences: Benefits are delayed or reduced; Timeframes are extended; Outlays are advanced or increased; and/or Output quality (fitness for purpose) is reduced. 8

9 The case of Tacoma Narrows Bridge Not all failures are catastrophic and easy to notice 2. The Tacoma Narrows project failed the moment the first block of concrete was laid 3. Although, to plain sight there was nothing wrong with the bridge, excessive cost cutting led to the inevitable 9

10 A more personal case for risk management PROJECT MANAGER VIEW 1. Innovative technology to be introduced for passenger flights 2. Save on energy 3. R50bn in sales by 2015 RISK MANAGER VIEW 1. Is technology tested? 2. What backup energy source? 3. Are there any potential law-suits if we sell faulty planes? 10

11 Significance of project management A framework for project risk management Closing

12 Components of project risk management Take calculated risks. that is quite different from being rash. -- George Patton Project Control Environment & Governance Project Planning Risk Identification Risk Assessment Risk Response Strategy Ongoing Communication Issues management Monitoring & review Risk Management Plan To drive project risk and issue management, a formal risk management plan should be formulated at project business plan stage. 12

13 3 pillars of project risk management "Whatever name they put on it-- business... holistic... strategic... enterprise--leading organizations around the world are breaking out of the 'silo mentality' and taking a comprehensive approach to dealing with all the risks they face." -Towers Perrin 13

14 Initiation stage: Initial assessment When you want to test the depths of a stream, don't use both feet. -- Chinese Proverb Detailed questions listed under each category Sections/ categories should be weighted depending on project These checklists can provide guidance to Internal Audit for projects to focus on Checklist sections should be adapted to organisation as relevant 14

15 Initial assessment: look & feel Risk should be managed through scenario planning. A scenario that has become reality is beyond risk. It s a crisis. -- Treten ES # Questions and possible considerations 3001 Has the Project leader's authority been established? 3002 Is the core team appointed? Answer (Y/N) 3003 Does the core team understand the project purpose? 3004 Have the project stakeholders been clearly identified? Simple yes/ no answer questions Answers given drive risk rating Possible impact and risks are pre-empted and relevant responses suggested Checklist questions should be adapted to organisation 15

16 Design stage + ongoing: project risk assessment Risk should be managed through scenario planning. A scenario that has become reality is beyond risk. It s a crisis. -- Treten ES 16

17 Project risk assessment: look & feel Risk should be managed through scenario planning. A scenario that has become reality is beyond risk. It s a crisis. -- Treten ES Risk Likelihood Impact Low Med. High Low Med. High Loss of funding X X Influenza epidemic X X The Risk Register should cover: A unique identifier for each risk; A description of each risk and how it will affect the project; An assessment of the likelihood & impact per risk; A description of the mitigation strategies that can include preventative (to reduce the likelihood), and contingency actions (to reduce the impact); Who is allocated responsibility; and In larger projects, costings of each mitigation strategy. 17

18 Implementation: issue and problem mgt Take calculated risks. that is quite different from being rash. -- George Patton 18

19 Issue & problem management: look & feel Risk should be managed through scenario planning. A scenario that has become reality is beyond risk. It s a crisis. -- Treten ES Issue Description Number 1.1 Lack of Business Unit representation on Project Working Group. Raised By Working group Date Priority Responsible Officer Actions Progress Notes & Status 11/09/08 High Amma Letter of Open invitation from Project Manager to Business Units who are not represented Date Resolved Tips for issues management: Solve the root cause of the issue Resolve issues quickly to proceed as quickly as possible. It is good practice to encourage people to help identify solutions along with the Issues. Engage the Project Sponsor/Steering Committee in the resolution of issues from very early in the project. If a large issue looks too difficult to be resolved in a timely manner, break it down into logical sub-issues. Inter-related issues should be resolved simultaneously Resolve major issues before POINT OF NO RETURN 19

20 Roles & responsibilities A common misconception is that ERM transfers the responsibility for risk from the line managers to a centralized, bureaucratic unit. In fact, the opposite is true. A universal principle of ERM is that risk must be managed by the business unit that incurs it. -- Treten ES 1. The project manager - monitoring and managing all aspects of the risk management process, including: the development of the risk register and plan; the continual monitoring of the project to identify any new or changed risks; continual monitoring of the effectiveness of the risk management plan; and regular reports on status of risks to the Project Sponsor and the Steering Committee. 2. The other project team members can assist with the identification, analysis and evaluation of risks and can assist in the development of the risk management plan. They can also be responsible for risk mitigation actions. 3. The steering committee oversees the risk management plan and its periodic review. They are responsible for ensuring an effective risk management plan is in place. 4. The project sponsor has ultimate accountability for risk management. 5. Remember, risk management cannot be entirely the responsibility of one person and that it is a communal activity involving a range of stakeholders. 20

21 Significance of project management A framework for project risk management Closing

22 Closing remarks We have presented to the nation our programme for the next five years. Attached to each commitment we make is a detailed project plan, with targets and critical milestones. -The Presidency 3 June One of the major government spend categories is programme/ project spend 2. Formalise project risk & governance (framework) 3. Build strategic relevance and position yourselves 4. Get involved earlier in projects/ programmes say it now, document later 5. Tell the truth all the time no matter how inconvenient 6. Always test everything 7. The fastest way through the project should be the right way 8. Our problems have, in the past been solved over and over again. 9. Lets learn from history & stop ignoring the solutions. 22

23 End of Presentation Thank you Take calculated risks. that is quite different from being rash. -- George Patton CONTACT DETAILS: Treten Enterprise Support: Specialists in Strategy and Risk Advisory Name Terence Murasiki : terence.murasiki@tretengroup.com Mobile : +27 (0) Don t limit yourself Belief becomes reality. Many people limit themselves to what they believe they can achieve. Treten Enterprise Support Infinite solutions Infinite possibilities 23