Do you really know what your project s risks are? Fran Ackermann, Curtin Business School, Curtin University Background Extensive experience of mega projects 20+ years: Involved in 12 disruption and delay projects totalling ~US$1.5 billion Covering railway, aerospace, civil engineering and shipbuilding sectors Residing in US, Europe & Canada Involving well established and reputable companies Plus a wide range of projects requiring proactive methods for risk management in; Energy (smart grids, renewables, oil and gas) Civil Engineering Construction Marine Transportation 1
Background Developed a suite of tools to support risk management Risk Filter Risk (and objectives) elicitation & structuring workshops CASCADE methodology combining directed graphs (maps) and system dynamics causality and quantum Identified potential interacting significant limitations: 1. Lack of comprehensive risk coverage 2. Lack of involvement & consideration of stakeholders 3. Lack of attention to systemicity 4. Lack of attention to the dynamics of risks 5. Inadequate understanding of project life cycle (DBOM/DBFO) Mastering Complex Projects: Principles for success and reliable performance Project leadership and collaboration 2.2.1: Engaging in project definition to avoid excessive changes and subsequent project failure, the project leader must ensure that all stakeholders come to a consensus on the definition of project success (goals) 2.2.2: Aligning stakeholder expectations to be effective it requires ongoing negotiation, communication and monitoring throughout project execution (dynamic and project life cycle) Risk management (Engineers Australia white paper 2014) 3.2 Identifying and treating critical risks through workshopping risk an effective approach is to provide a forum that encourages participants to combine creative and logical thinking and confidence to offer views about the project and accept the views of others (stakeholder engagement) 3.3. Managing ambiguity and uncertainty critical risks are often known to a project stakeholder but not adequately communicated to project leaders (comprehensiveness of risk capture) 3.4 Allocating risk once risks have been identified, analysed and evaluated they must be treated (systemicity for analysis) 2
Limitation 1: Lack of comprehensive risk coverage Tendency to focus on technical and financial risks CASE: NINES ''Currently risk management has been commonly applied across the construction sector, however it very rarely includes the effects of human factors. Thevendran, V., Mawdesley, M.J. ''a complete risk management analysis must include not only the technical factors but also a realistic assessment of environmental and social risks de Lemos et al. THUS consider wide range of factors Limitation 2: Lack of involvement and consideration of Stakeholders Omission of practical means for undertaking stakeholder analysis and management CASE: JFK light rail Conflicts between project team and owner are often neglected Krane et al Project managers do not have unlimited resources for interacting with stakeholders. You must decide carefully how to spend the time and resources which you have available for this task Eskerod and Jepsen THUS involve wider range of stakeholders in risk identification 3
Limitation 3 Lack of attention to systemicity Risks don t operate in isolation risks impact risks CASE: Canadian Paper Mill 'including developing project risk management frameworks that inform teams about likely crossimpacts' Williams THUS capture relationships Limitation 3 Lack of attention to systemicity cont. Projects grow amoebic like - is not easy to pin down what drove the total cost overrun CASE Chunnel ''Project risks are not always independent, yet current risk management practices do not clearly manage dependencies between risks.' (Kwan and Leung) THUS: recognise interacting effect of triggers A F D C E B 4
Limitation 3 Lack of attention to systemicity inability to freeze design pressure of increased workload & schedule slippage unnecessary rework procurement delays inability to instruct vendors in a timely manner work on designs in wrong order work-around actions NOTE: this situation only occurs if managerial action is taken to keep the project on schedule i.e. compression Limitation 4: Lack of attention to the dynamic risks Risks (and stakeholders) change over time regular reviews CASE: NINES requires broad involvement and collaboration across all segments of the project team and its environment, and sophisticated methods for assessing feasibilities and usability early and frequently during the project life cycle Thamhain THUS: revisit project risks and relationships regularly and collaboratively 5
Limitation 5 Inadequate appreciation of project life cycle Shift from D&B to DBOM and DBFO CASE: PFI hospital project reducing the design specification to meet construction cost goals was found to have a multiplicative effect on the cost of attending to defects experienced during the operating phase. implication for practitioners is that project decisions should be made in light of the full suite of project goals (for example design, construction, operation goals). Alexander 2015 THUS: engineers consider maintenance in design & project management teams recognise duration of contract So what does this mean for me?! Think systemically What causes/triggers this risk (links in) What might result from this risk or be affected by this risk (links out) Where are the hot spots => priorities Think widely Avoid top down only consideration Go beyond finance/technical PESTLE?! Find out where possible what others think identify & manage stakeholders Consider all stages of the project life cycle Think regularly Remember risks change in salience, new risks emerge, other risks fade away Refresh mental models and enhance learning 6
Some relevant papers Ackermann, F. Howick, S. Quigley, J, Walls, L. and Houghton, T. (2014) Systemic risk elicitation: Using causal maps to engage stakeholders and build a comprehensive view of risks. European Journal of Operational Research Ackermann, F., Eden, C., Williams, T. and Howick, S. (2007) Systemic Risk Assessment: A Case Study, Journal of Operational Research Society, 58 (1), 39-51 Williams, T.M., Ackermann, F.R. and Eden, C.L. (1997) Project risk: systemicity, cause mapping and a scenario approach. In, K.Kahkonen and K.A.Artto (Eds) Managing Risks in Projects. E&FN Spon, London. pp 343-352. Howick, S., Ackermann, F., Andersen, D. (2006). Linking event thinking with structural thinking: methods to improve client value in projects. System Dynamics Review. 22, 113-140 Howick, S., Eden, C., Ackermann, F., and Williams, T. (2008). Building Confidence in Models for Multiple Audiences the Modelling Cascade. European Journal of Operational Research, 186, 1068-1083 Howick, S.; Ackermann, F.; Eden, C., and Williams, T. (2009) System dynamics and disruption and delay in complex projects. Meyers, R., Ed. Encyclopaedia of Complexity & System Science. New York: Springer; pp. 1845-1864 Ackermann, F. and Eden, C. (2010) The Role of Group Decision Support Systems: Negotiating Safe Energy. Eden, C. and Kilgour, D. M., (Eds). The Handbook of Group Decision and Negotiation. Dordrecht: Springer; pp. 285-299. Williams, T., Ackermann, F. and Eden, C (2003) Structuring a delay and disruption claim: An application of cause-mapping and system dynamics, European Journal of Operational Research, 148, 192-204 Eden, C., Williams, T., Ackermann, F. and Howick, S. (2000). On the nature of disruption and delay, Journal of Operational Research. 51, 291-300 Eden, C., Williams, T. and Ackermann, F. (1998) Dismantling the Learning Curve: the role of disruptions on the planning of development projects. International Journal of Project Management 16 (3), 131-138 Ackermann, F., Eden, C. and Williams, T.M. (1997) A persuasive approach to Delay and Disruption using "mixed methods". Interfaces 27, 48-65 Eden, C. Williams T Ackermann F. (2005) Analysing Project Cost Overruns: Comparing the Measured Mile Analysis and System Dynamics Modelling. International Journal of Project Management. 23(2), 135-139. Thank you Any Questions? 7