Project Risk Management Essential Methods for Project Teams and Decision Makers

Drawing from the author's work with several major and mega capital projects for Royal Dutch Shell, TransCanada Pipelines, TransAlta, Access Pipeline, MEG Energy, and SNC-Lavalin, Project Risk Management: Essential Methods for Project Teams and Decision Makers reveals how to implement a consistent application of risk methods, including probabilistic methods. It is based on proven training materials, models, and tools developed by the author to make risk management plans accessible and easily implemented.

• Written by an experienced risk management professional
• Reveals essential risk management methods for project teams and decision makers
• Packed with training materials, models, and tools for project management professionals

Risk Management has been identified as one of the nine content areas for Project Management Professional (PMP®) certification. Yet, it remains an area that can get bogged down in the real world of project management. Practical and clearly written, Project Risk Management: Essential Methods for Project Teams and Decision Makers equips project managers and decision makers with a practical understanding of the basics of risk management as they apply to project management.

(PMP and Project Management Professional are registered marks of the Project Management Institute, Inc.)

Dr. YURI RAYDUGIN is an experienced risk management professional who has developed and implemented successful risk systems for several major energy companies, including Royal Dutch Shell, SNC-Lavalin, and TransCanada Pipelines. He provides risk management coaching and training as well as risk assessment services and has published white papers and articles for a number of journals, including the International Journal of Risk and Contingency Management.

Foreword

Preface

Acknowledgments

Part I: Fundamental Uncertainty of a Project Outcome

Chapter 1: Nature of Project Uncertainties

Phases of Project Development and Project Objectives

Quest for Predictability of Project Outcome

Sources and Types of Deviations from Project Objectives

Key Objects of Risk (or Uncertainty?) Management: Do We Really Know What We Try to Manage?

Uncertainty Exposure Changers

Conclusion

Notes

Chapter 2: Main Components of a Risk Management System

Risk Management Plan

Organizational Framework

Risk Management Process

Risk Management Tools

Three Dimensions of the Risk Management and Uncertainty Repository Concept

Tools for Probabilistic Analyses

Tools for Cost Escalation and Currency Exchange Rate Modeling

Conclusion

Notes

Chapter 3: Adequacy of Methods to Assess Project Uncertainties

Review of Deterministic Qualitative (Scoring) Methods

Review of Deterministic Quantitative Methods

Review of Probabilistic Qualitative Methods

Review of Probabilistic Quantitative Methods

Conclusion

Note

Part II: Deterministic Methods

Chapter 4: Uncertainty Identification

When Risk Management Becomes Scary or Boring

Three Dimensions of Risk Management and Uncertainty Identification

Risk Identification Workshops

Sources of Uncertainties and Risk Breakdown Structure

Bowtie Diagrams for Uncertainty Identification

Three-Part Uncertainty Naming

Role of Bias in Uncertainty Identification

Room for Unknown Unknowns

Conclusion

Notes

Chapter 5: Risk Assessment and Addressing

Developing a Risk Assessment Matrix

Using a Risk Assessment Matrix for Assessment “As-is”

Five Addressing Strategies

Assessment after Addressing

Project Execution through Risk Addressing (PETRA)

Role of Bias in Uncertainty Assessment

Conclusion

Notes

Chapter 6: Response Implementation and Monitoring

Merging Risk Management with Team’s Work Plans

Monitor & Appraise

When Uncertainties Should Be Closed

When Should Residual Uncertainties Be Accepted?

Conclusion

Note

Chapter 7: Risk Management Governance and Organizational Context

Risk Management Deliverables for Decision Gates

Ownership of Uncertainties and Addressing Actions

Risk Management of Supercritical Risks

Risk Reviews and Reporting

Bias and Organizational Context

Conclusion

Notes

Chapter 8: Risk Management Tools

Three Dimensions of Risk Management and Structure of Uncertainty Repository

Risk Database Software Packages

Detailed Design of a Risk Register Template in MS Excel

Commercial Tools for Probabilistic Risk Analyses

Conclusion

Notes

Chapter 9: Risk-Based Selection of Engineering Design Options

Criteria for Engineering Design Option Selection

Scoring Risk Method for Engineering Design Option Selection

Decision Tree for Engineering Design Option Selection (Controlled Options)

Conclusion

Note

Chapter 10: Addressing Uncertainties through Procurement

Sources of Procurement Risks

Quantitative Bid’s Evaluation

Package Risk Management Post-Award

Conclusion

Notes

Chapter 11: Cost Escalation Modeling

Overview of Cost Escalation Approach

Example of Cost Escalation Modeling

Selecting the Right Time to Purchase

Conclusion

Notes

Part III: Probabilistic Monte Carlo Method

Chapter 12: Applications of Monte Carlo Methods in Project Risk Management

Features, Value, and Power of Monte Carlo Methods

Integration of Deterministic and Probabilistic Assessment Methods

Uncertainty Objects Influencing Outcome of Probabilistic Analyses

Origin and Nature of Uncertainties

Role of Correlations in Cost and Schedule Risk Analyses

Project Cost Reserve

Project Schedule Reserve

Anatomy of Input Distributions

Probabilistic Branching

Merge Bias or Additional Reason Why Projects are Often Late

Integrated Cost and Schedule Risk Analysis

Including Unknown-Unknown Allowance in the Probabilistic Models

Conclusion

Notes

Chapter 13: Preparations for Probabilistic Analysis

Typical Workflows of Probabilistic Cost and Schedule Analyses

Planning Monte Carlo Analysis

Baselines and Development of Proxies

Why Using Proxies Is a Right Method?

Mapping of Uncertain Events

Building and Running Monte Carlo Models

Conclusion

Notes

Chapter 14: Using Outputs of Monte Carlo Analyses in Decision Making

Anatomy of Output Distributions

Overall Project Uncertainty and Confidence Levels of Baselines

Project Reserve Criteria

Uncertainty of Cost Outcome and Classes of Base Estimates

Cost Reserve Draw-down

Sensitivity Analysis

Using What-if Scenarios for Advanced Sensitivity Analysis

Are We Ready for Construction, Logistics, or Turnaround Windows?

Validating Results and Closing Probabilistic Analysis

Conclusion

Notes

Part IV: Risk Management Case Study of Project Curiosity

Chapter 15: Putting the Project Curiosity Case Study Together

Scope of the Case Study

Project Curiosity Baselines

Project Risk Management System Adopted by Project Curiosity

Overview of Project Uncertainty Exposure of Project Curiosity

Templates for Probabilistic Cost and Schedule Analyses

Building and Running Project Probabilistic Cost and Schedule Models

Three What-if Scenarios

Conclusion

Notes

Chapter 16: Decision Making

Key Points of Probabilistic Analysis Report

Decision Gate Review Board Findings and Recommendations

Conclusion

Notes

About the Author

Index

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