Risk Management (Part 3) Activity Risk Assessment

Author:            Adrian Hepworth

Date:               21^st July 2013

Further to discussing risk management, behaviors and attitudes (Risk Management Part 2), I would like to focus on “Activity Risk Assessment”. For the purpose of this article “Activity Risk Assessment” (ARA) is defined as a scope of work to complete and part of the overall project objective without incident to persons or equipment. From my experience and my perspective there are still many organizations that get this wrong, certainly more so when outsourcing work scopes to contractors.

Communication, integration and aligned processes are contentious areas of concern. Organizations need to learn an adoptive approach of project integration and develop an integration model/framework that creates a clear roadmap of togetherness; that builds trust and motivation, and working towards the common objective goal (PMBOK, 2008). Human resources are the most precious of all resources that organizations have invested in training and molding to the organizational policies and procedures; and must be protected for continuous business strategies and project turnover. Major operating organizations have a vast amount of historical data from past projects and lessons learned that have helped sculptured there Health, Safety, Security & Environmental policies. During project operations there can only be one governance of authority, processes and procedures, and this must be outlined in the contract agreement. Thus integration must include aligned and integrated project processes and one adopted HSSE manual for the duration of the project activities.

Integration must include a significant risk culture building programme that is road-mapped and spearheaded by the top management leadership. For example top management attending and participating in risk assessment meetings (Tadayon, Jaafar & Nasri, 2012). Highlighting the risk awareness and directing members through an effective process to counter act and thoroughly examine activity hazards (Figure 3.0). Too many risk assessments are conducted without the full team of resources who will be conducting the activity, safety and risk is the responsibility of all stakeholders involved or impacted by the activity (Tadayon, Jaafar & Nasri, 2012). Continuous awareness communication and engagement with activity resources will improve the risk culture development, through safety & environmental workshops and seminars that are interactive with the participants and an extension of induction courses, through team activity discussion of the day’s proposed activities, through action and SIMOPS (Simultaneous Operations in Close Proximity) meetings, through on site walk about and engaging with activity resources and discussing any Health, Safety, Security or Environmental concerns.

Building a risk culture has many variables, however clear transparent communications upheld by all, the project vision revisited monthly and a sense of belongingness to the project; builds trust and motivation and again are the common characteristics aiming towards the common objective goal (Kerzner, 2010). A team that feels belongingness to the project is much more likely to succeed in openness and transparency in communication; hence report near misses and correct HSSE statistics opposed to hiding such events in fear of retribution. ARA can only be thoroughly assessed by involvement of all stakeholders impacted by the activity, through brainstorming and decomposition analysis of each activity, and understanding the relationship of other dependent activities associated to the scope (Norris, Perry & Simon, 2000; Williams, 2006).  

In conclusion, the support and commitment from top management is essential to the risk culture development and continuous awareness roadmap. Integration, shared processes and transparent communication improve the effort in ARA and implementing mitigating measures. Resource engagement at the activity level improves togetherness, shared visions and open communications.     

Figure 3.0 Risk Assessment Model
Source: Author

References

Kerzner, H. (2010) Project management best practices: achieving global excellence. 2nd ed. Hoboken, NJ: John Wiley.

Norris, C. Perry, J. & Simon, P. (2000) Project Risk Analysis and Management, APM Guide [Online]. Available from:  http://www.fep.up.pt/disciplinas/PGI914/Ref_topico3/ProjectRAM_APM.pdf (Accessed: 29 May 2013)

Project Management Institute. (2008) A guide to the project management body of knowledge (PMBOK® guide). 4th ed. Newton Square (PA): Author.

Tadayon, M. Jaafar, M. & Nasri, E. (2012) 'An Assessment of Risk Identification in Large Construction Projects in Iran', Journal of Construction in Developing Countries, 17 (1), pp.57-69, EBSCO Host,[Online]. Available from: http://ehis.ebscohost.com.ezproxy.liv.ac.uk/eds/pdfviewer/pdfviewer?sid=22907b10-5f4e-4bbd-b4cb-2e58f968c403%40sessionmgr198&vid=3&hid=7 (Accessed: 21 July 2013).   

Williams, M. (2006) Mastering leadership. University of Liverpool Online Library [Online]. Available from:

http://site.ebrary.com.ezproxy.liv.ac.uk/lib/liverpool/docDetail.action?docID=10141072 (Accessed: 29 May 2013).

 

Methodologies

Fundamentally to implementing a usable project management methodology and optimizing the efficiency in the output are the tools used during each phase of the methodology lifecycle. Furthermore, strictly adhering to the methodology lifecycle and managing the core processes during the execution of the methodology will greatly increase the success rate (Kerzner, 2010). Moreover a critical success factor for any methodology is the commitment and support of senior management and leadership. The methodology outlines the discipline for the individual methodology initiative or the organizational development strategy. KPI’s are tangible performance indicators that during each lifecycle phase and at each milestone review is a measure of overall performance; and the lessons learned during each phase can be implemented into the next lifecycle phase. And thus, improving core processes and performance throughout the methodologies lifecycle and improving the objective delivery success. Methodologies tools need to be flexible to be able to adapt to improving performance and the different types of situations, such as negative & positive risks and objective issues.

The methodology should be developed as to achieve the objectives in the shortest possible time and in addition meeting the constraint criteria. What improves the chances of the methodology succeeding? First and foremost having the sponsor/client and team believing in and committed to the project management methodology. Secondly the gates and/or milestone reviews once passed through cap a completed phase, and no further change to past phases is plausible (Kerzner, 2010). This is particularly relevant when passing through the define and design gate that caps the design and scope. Design changes are the leading inhibiting factor that overruns projects in terms of costs and time (Olawale & Sun, 2010). This derives at the fundamental importance of the review stages and agreeing decisions to move to the next phase or revert back to the previous phase based on review comments. In theory this leads me to believe that the critical gates in a methodology lifecycle are Define and Planning, PMBOK (2008) combines these two in the project management methodology in the planning process see Fig 1.0. Note PMBOK methodologies can be used in multi phased objectives; the methodology is a sequential cycle of process during each phase. (PMBOK, 2008).

The Stage Gate methodology designed in this article for Oil & Gas and civil infrastructure projects is more robust and apt and focuses on stringent decision making practices before proceeding to the next phase. By separating the FEL & design FEED into the Define phase improves the efficiency of Planning phase Fig 1.1. Most scholars will agree the Planning phase is the most critical to any initiative; and by removing the design process from the planning phase increases the plans integrity, having assumed the Define phase is capped, thus scope and design will not change (Zwikael, 2009). Olawale & Sun (2010) offers a framework for mitigating measures for ‘design changes, risks and uncertainties, inaccurate evaluation of project time duration, complexity of works and non-performance of subcontractors. This framework is an adaptable checklist and platform for managing design during the Define phase.

The efficiency of each sequential methodology process enhances the next phase and increases the success of the sequential phase. Hence efficiency during the Appraisal phase will greatly improve the design and deliverables during the Define phase, and thus the Plan, Execution and the Operating phases. Each phase can be designed with process tools for increasing the credibility and completing the phase. The process tools can be scaled, streamlined, added or removed to meet the initiatives objectives and situation, i.e. Value Management may not be needed for all initiatives, however Stakeholder Management should be used for all initiatives. Furthermore integration improves initiative performance and the methodology phases, however owner and contractor relationships and project integration is not always apparent, and lessons have yet to be learned. Literature suggests integration is more efficient in delivering initiatives (Baiden, Price & Dainty, 2006).

Fig 1.0 PMBOK

Fig 1.1 Stage Gate

Davies, Gann & Douglas (2009) article discusses the T5 project and suggests integration as the key success factor followed by the lessons learned from various other industry projects and every international airport project undertaken in the past 15 years. BAA conducted a two year analysis of project success and failures and designed a strategy and methodology that would implement the best practices used on other projects and avoids the pitfalls made by others, the combination of benchmarking was an award winning success, however there was a failing between the transitions from project to operations (Brady & Davies, 2010). In addition the integration was a shared risk ownership policy, a standardization of processes, a win-win T5 agreement and efficient communications (Davies, Gann & Douglas, 2009). T5 selected and combined methodology tools and successful process that greatly improved productivity, safety and quality performances, efficiency and effectiveness of the design and execution processes. Moreover the philosophy of relationships and behaviors was a determining factor see Fig 2.0.

In conclusion – there is no one recipe for a successful methodology, however a common “want to” attitude and organizational culture working towards a common goal, implementing the methodology and making the improvements along the way, using standardized initiative processes and the core successful  project management processes will improve the possibilities of a successful delivery.  

   

Fig 2.0 T5 Integrated Management Model

References:

Baiden, B.K., Price, A.D.F. & Dainty, A.R.J. (2006) ‘The extent of team integration within construction projects’, International Journal of Project Management, 24 (1), pp.13-23, ScienceDirect [Online]. Available from: http://dx.doi.org.ezproxy.liv.ac.uk/10.1016/j.ijproman.2005.05.001 (Accessed: 31 May 2013).

Brady, T. & Davies, A. (2010) ‘From hero to hubris – reconsidering the project management of Heathrow’s Terminal 5’, International Journal of Project Management, 28 (2), pp.151-157,

Davies, A., Gann, D. & Douglas, T. (2009) ‘Innovation in megaprojects: systems integration at London Heathrow Terminal 5’, California Management Review, 51 (2), pp.101-125, [Online]. Available from:
http://search.ebscohost.com.ezproxy.liv.ac.uk/login.aspx?direct=true&db=edswss&AN=000264295600005&site=eds-live&scope=site (Accessed: 31 May 2013).

Kerzner, H. (2010) Project management best practices: achieving global excellence. 2nd ed. Hoboken, NJ: John Wiley.

Olawale, Y.A. & Sun, M. (2010) ‘Cost and time control of construction projects: inhibiting factors and mitigating measures in practice’, Construction Management and Economics, 28 (5), pp.509-526, Informaworld [Online]. Available from: http://www.informaworld.com.ezproxy.liv.ac.uk/smpp/content~content=a923093339~db=all (Accessed: 31 May 2013).

Project Management Institute. (2008) A guide to the project management body of knowledge (PMBOK® guide). 4th ed. Newton Square (PA): Author.

Zwikael, O. (2009) ‘Critical planning processes in construction projects’, Construction Innovation, 9 (4), pp.372-387, Emerald [Online]. Available from: http://dx.doi.org.ezproxy.liv.ac.uk/10.1108/14714170910995921 (Accessed: 31 May 2013).

Risk Management Part 2

Risk philosophy is an important aspect in managing risk; behaviors and attitude are key contributors to improving risk awareness and risk management. All team members and stakeholders are exposed to risk in their everyday activities and future planning’s. What is risk? Risk is an uncertainty that matters and is linked to the objectives we are trying to achieve; hence a risk may delay the time or increase the cost of achieving the objective. However risk opportunities maybe also identified that increase the objectives delivery time and reduce the cost. Thus if mindsets are functioning towards a risk culture, positive and negative risks can be identified, reduced, mitigated and planned response put into place should the risk trigger and escalate (Lester, 2007; Williams, 2006). Qualitative assessment identifies and categories the risk, and is a must to be conducted; however Quantitative analysis is the optional path that exposes the risks impact in terms of time and cost. Risk analysis models such as Monte Carlo, offer scenario simulations, such as “what if” by analyzing frequency over time and testing many options (Sanghera, 2010).

Risks are inherent, emergent and developing over project time, risk links uncertainty to the objectives, and risk is a continuous assessment and review over the project lifecycle, and not a onetime application (Norris, Perry & Simon, 2000). Furthermore risk categorization has many forms such as organizational, operational political and financial etc. hence the uncertainty is linked to any objective i.e. organizational risk will affect organizational objectives, financial risk will affect financial objectives (Kerzner, 2010). Risk models are adaptable to the size of the objective and can be scaled accordingly to the amount of data detail that is gathered and actions taken.

Risks are measured during risk assessment against their probability and impact using a PI Matrix, however further to the risk management model and reducing risk through various means of mitigation, contingency and response plans. What is left after reducing risk? Risk residual, this is the remaining risk that needs to be monitored and managed (PMBOK, 2008). In addition and in some circumstances residual or secondary risk is unavoidable and counter measures need to be in place to manage risks once triggered. Continuous monitoring and controlling of high and low priority risks and monitoring triggers that activate residual risk are key indicators. Reverse analysis is a good tool that will indicate the remaining contingency or budget allowed to manage risks and should be monitored and reviewed periodically and reported regularly to key stakeholders (PMBOK, 2008).

Include risk philosophy planning into your risk models because more things may happen in the future than anticipated. With a risk culture embedded and mindsets changed towards risk awareness, objectives can be delivered in time and within budget, and reputations improved through continuous quality performances.   

References

Kerzner, H. (2010) Project management best practices: achieving global excellence. 2nd ed. Hoboken, NJ: John Wiley.

Lester, A. (2007) Project management, planning and control: managing engineering, construction and manufacturing projects to PMI, APM and BSI standards. 5th ed. Oxford: Butterworth-Heinemann.

Norris, C. Perry, J. & Simon, P. (2000) Project Risk Analysis and Management, APM Guide [Online]. Available from:  http://www.fep.up.pt/disciplinas/PGI914/Ref_topico3/ProjectRAM_APM.pdf (Accessed: 29 May 2013)

Project Management Institute. (2008) A guide to the project management body of knowledge (PMBOK® guide). 4th ed. Newton Square (PA): Author.

Sanghera, P. (2010) PMP® in depth: project management professional study guide for the PMP® exam. 2^nd  ed. Boston: Course Technology/Cengage Learning.

Williams, M. (2006) Mastering leadership. University of Liverpool Online Library [Online]. Available from:

http://site.ebrary.com.ezproxy.liv.ac.uk/lib/liverpool/docDetail.action?docID=10141072 (Accessed: 29 May 2013).

 

Risk Management

I have developed this risk management model that identifies the phases for application from project start up and inception. Risk management can be implemented during all project processes and overlaps in most. Risk can affect the overall project outcomes and has positive and negative values. Capital projects investment have a duty to focus on the initiative, client and adopt risk management techniques at the earliest opportunity during the appraisal and discovery stage of the initiative. In addition client and project management teams should be integrated during the appraisal stage (Lester, 2007). This will improve risk awareness, risk attitudes and create a risk culture. Stakeholders demand a greater return on investment (ROI) through improved efficiencies, risk reduction and exposure in the early stages, furthermore transparency through all phases of the initiatives lifecycle is demanded from key stakeholders and effected external stakeholders (Ernst & Young, 2012).  

Literature suggests the majority of risk can be reduced and managed in the early stages of the projects lifecycle. Inception and the visualization concept of the end operational product is a key indicator of requirement. The FEL & FEED have the obligation to manage the design and commissioning startup and cap the design before the planning phase; this will reduce the risk of change, cost, quality, safety, project performance and overrun. The implementation of 3D simulation, integration and information sharing will further enhance the design phase, client focus and FEL (Kerzner, 2010). OGC (2012) suggest that organizations moving towards maturity, have adopted project management as a core competence are more likely to manage risk better. In addition I have a theory that organizations that have moved through the transformational process into a leaner streamlined and efficient operator are more efficient in new learning’s and risk management. Moreover organizations improve risk awareness through senior management and leadership commitment in reducing risk and improving environments.    

 

Fig 1.0

 

References

Ernst & Young (2012) Capital Projects Life-Cycle Management for Oil & Gas, Capital Investment Journal [Online]. Available from: http://www.ey.com/Publication/vwLUAssets/Capital_projects_life_cycle_managemant_oil_and_gas/$FILE/Capital_projects_life_cycle_managemant_Oil_and_Gas.pdf (Accessed: 23 May 2012).

Kerzner, H. (2010) Project management best practices: achieving global excellence. 2nd ed. Hoboken, NJ: John Wiley.

Lester, A. (2007) Project management, planning and control: managing engineering, construction and manufacturing projects to PMI, APM and BSI standards. 5th ed. Oxford: Butterworth-Heinemann.

Office of Government Commerce, (2012) Portfolio, Programme and Project Management Maturity Model [Online] Available from: http://www.p3m3-officialsite.com/P3M3Model/P3M3Model.aspxf (Accessed: 23 May 2013).

Project & Asset Capital Investment Management

Project Lifecycle & Methodology Model

PPME Survey

Please take the survey to support improvements to PPME, the survey is based on PPME & multiple projects environments. Survey link

https://www.surveymonkey.com/s/ZJ5QPS7-PPM

Multiple project environments is competitive and high risk, however organizations competing in this environment continue practices of ad hoc decision making for critical resources. Many organization lack commitment to portfolio process systems and continue to shoot from the hip. Top management according to much literature fails in the supporting criteria and duties to successful deliver in the multiple project environments.
This survey sets out to gather data from experts in the field that are involved in project management in the multiple project environments. The aim of this research is to improve project management approaches, organizational commitment and resource allocation.

Your active participation in filling out this questionnaire is much appreciated and all information gathered is strictly confidential and will only be collected and summarized for the analysis.