Risk Informed Project Management & Risk Assessments. John Holak Risk Assessment Manager Urban Engineers, Inc. (PMOC) Philadelphia, PA

Transcription

1 Risk Informed Project Management & Risk Assessments John Holak Risk Assessment Manager Urban Engineers, Inc. (PMOC) Philadelphia, PA

2 Overview Why Risk Assessments? Risk Assessments the Basics Challenges to Project Sponsors Lessons Learned Best Practices

3 Risk Assessment Why The fundamental authority for Federal provision of funds to various transit agencies is based in Federal law, which requires that: the proposed project plan provides for the availability of Contingency amounts reasonable to cover unanticipated cost increases or funding shortfalls, with reliable forecasting methods used to estimate costs and revenues Thus, the FTA and the Project Sponsor must come to an understanding of risk inherent in the project

4 Risk Assessment Why Most project scoping, budgeting, and timing is expressed as single targets ( deterministic ) Finishing a project as close as possible to those targets builds confidence and allows for better budgeting and enduser planning The existence of risk and uncertainty threatens confidence and planning A fundamental assumption is that the Project Sponsor may decrease the level of uncertainty by studying the problem, exposing the risks, and taking actions to mitigate known risks

5 Risk Assessment Why As with many large, public projects, FTA experienced a significant amount of project cost and schedule overruns In this environment of overrun risk, planning a cost budget and reliable schedule forecast has been difficult; so use of risk-informed probabilistic models and ranges of likely cost and schedule outcomes is recommended

6 Risk Assessment the Basics The Project Sponsor s risk management process should consist of four important parts: 1. Identifying risk situations for which outcomes are likely to vary in amounts that may significantly affect the project s goals 2. Assessing the likelihood and magnitude of such variance 3. Responding by developing plans for minimizing hazard and maximizing gain 4. Managing the execution of those plans

7 Risk Assessment the Basics Risk is the probability that an unexpected event may occur, causing an outcome that varies from the project s goals Opportunities are unexpected events that positively affect the project s goals Project expectations are captured in the plans, estimate, and schedule for the project Before moving into the risk review, these important project elements must be accurate and in sync All assumptions should be documented If these elements are flawed or incomplete, risk assessment may be undermined before it even begins Evaluating and chosen an appropriate Project Delivery Method if very important

8 Risk Assessment the Basics Project Risk is the likelihood that a project outcome will vary from its original goal Goals are usually categorized in the project scope, cost, and time Rarely does a project conclude with meeting its original goals; this indicates that risk exists in all projects Project risk is the sum of virtually an infinite number of possible risk events

9 Risk Assessment the Basics The Project Sponsor s risk management process: Identifies assumptions and soft-spots in the project plans Provides a basis for risk reduction action plans Establishes a range of cost/schedule expectations Causes the project team to think about risk mitigation at all project stages

10 Risk Assessment the Basics The FTA s Risk Review, typically through use of a Project Management Oversight Consultant (PMOC) is designed to add value to the Project Sponsor s risk planning: Adding an arms-length evaluation Team performance is a significant source of risk Standardizing risk assessment across FTA projects Including, but not limited to, using broad historical factors Providing a methodology for tracking risk management The FTA risk assessment models are designed to use simplified parameters and modeling to aid in collaborative risk discussions

11 Risk Assessment Challenges Many agencies have skeptical staff, thinking that Risk Assessment is practiced by doomsday thinkers and breeds pessimism onto a project Owners almost always have inherent optimistic bias towards their project estimates Internal conflicts are often encountered Risk assessments, planning, and management require a dedicated effort and take time Predicting unforeseen events and likely outcomes of these unknowns is challenging

12 Risk Assessment Challenges External stakeholders can dramatically affect project plans and cost/schedule estimates An ever-changing political climate can interfere with the best laid plans Many agencies comply only because the FTA requires; risk assessments/management is Good Management and needs to be actively employed throughout the project s life

13 Risk Assessment Lessons Learned Project Sponsors should conduct internal meetings at each major design and construction milestone Confirm goals, environmental conditions, inter-governmental requirements Confirm design assumptions Confirm estimate with contingencies exposed Confirm schedule with contingencies exposed If these plans or elements are flawed or incomplete, risk review may be undermined before it even begins Early in Project Development or Engineering, evaluate the best Project Delivery Method and Contracting Plans for your project

14 Risk Assessment Lessons Learned Understanding the primary stakeholders involved and partnering with them as a team leads to successful communication It s important to time your risk review so design can move forward as a risk assessment is occurring Plan ahead; the availability of information and disagreement on outcomes are significant holdups to moving forward

15 Risk Assessment Lessons Learned All identified risks should be noted, but a means to prioritize among them is helpful The Risk Identification and Assessment process should be a collaborative process, involving active participation of many internal and external stakeholders As the Risk Register (a database of risks) is developed, it is helpful, while risks are discussed, to capture potential mitigation activities

16 Risk Assessment Lessons Learned Employ a combination of Mitigation and Contingency Strategies following Risk Assessment Qualitative information is used to develop mitigation action plans for the Sponsor to undertake, through the use of Primary Mitigation Quantitative information is used to establish Risk Protection against the inherent project risk through the use of Contingencies and Secondary Mitigation

17 Risk Assessment Lessons Learned Project protection is vital to the health of the project Contingencies are budgeted amounts to overcome normal overruns It is important to ensure sufficient Contingency amounts are available as the project moves toward completion A Contingency Draw-Down Curve provides management control over Contingency use Secondary Mitigations are plans to recover cost or schedule overruns using redesign techniques where Contingency is insufficient

18 Risk Assessment Lessons Learned Having a defined Risk & Contingency Management Plan (RCMP) is good business Documentation of the various analyses Listing of major project risks, their description, and the nature of their consequences How they are to be handled (by whom, when) Watch List of secondary and/or residual minor risks that need to be kept an eye on Organization responsibilities for Contingency control Coordination of risk management and timing of future reviews

19 Risk Assessment Best Practices Engaging an team of outside experts brings objectivity An independent Risk Facilitator helps remove bias and resolve inherent differences of opinion Involving the FTA generally speeds up the risk review and builds trust in the process Don t overlook the importance of an objective Management Capacity & Capabilities review Succession and/or Attrition plans are very important

20 Risk Assessment Best Practices Make the Risk process a collaborative effort, involving project staff, support services, extended stakeholders, and having the support of executive management The earlier in a project s evolution that the initial risk assessment takes place, the better more opportunity to implement affective mitigations or management strategy Then, periodically refresh or revisit the Risk Register and risk process throughout the project s life cycle Don t forget the importance of a RCMP or Management Plan to be able to monitor the effectiveness of risk mitigation and contingency plans

21 Questions? John Holak Risk Assessment Manager Urban Engineers, Inc. (PMOC) Philadelphia, PA