Risk management - The process - Define the project
The Risk Management process
DEFINE (the project)
Risk management needs to carried out in an efficient manner to avoid too much cost for little reward.
If the RISK MANAGEMENT PROCESS is likely to be large, to satisfy a large project, we should give consideration to making the entire RISK MANAGEMENT PROCESS a separate project.
If there are any risks identified that may put the existence of the project in danger this could cause problems as there will be a tendency to want to continue with the project no matter what.
If this is the case it is probable that the risk assessment was not very good in the earlier part of the project. Bear in mind that the risk management process is being instigated at the ‘plan’ phase and we are looking at the earlier ‘design’ or ‘concept’ phases.
In practice, many organisations will run more than one project in parallel and the RISK MANAGEMENT PROCESS can be carried out at a variety of stages.
We will assume that the RISK MANAGEMENT PROCESS is carried out in the planning phase.
The main aim of this phase is to create a firm foundation for the project.
- Current information, data should be collated
- This process may lead to other aspects of the plan that will need consideration
- Document the activity
- Identify all input to the report and circulate it to check it for errors
- Check that the information content in the report is adequate and suitable for the forthcoming RISK MANAGEMENT PROCESS
- Circulate the report and present it as necessary
Based upon Rudyard Kipling’s poem
(they taught me all I know)
Their names are What and Why and When
And How and Where and Who.’
In terms of Rudyard Kipling’s honest serving men we are concerned with identifying:
| WHO: | Interested stakeholders and the resource required |
| WHY: | What are the project objectives and purpose? |
| WHAT: | What is the product design? |
| HOW: | What approach or strategy will be adopted? |
| WHEN: | What is the proposed schedule and timing? |
We can look at these in more detail:
WHO
It is good for the project to clarify what people are ‘involved’ in the project.
This will include the project team and other stakeholders e.g. regulatory and legal bodies.
Who is the ultimate ‘user’ of the product. This may not be the direct customer who in effect is commissioning the product which will be passed on to the ultimate user.
Also, consider other parts of the organisation, partners, contractors and of course competitors.
Whilst many of these bodies will be under the direct control of the client, some, such as subcontractors, will be less so.
It is important to assess the business experience, competence and the future existence of some companies.
For example, if a subcontractor is owned by the government, liabilities which apparently would have fallen on the contractor’s shoulders may well be lost.
It is essential that any contracts and negotiations between two parties are clear and unambiguous.
A complete list of all involved is required.
WHY
All plans will contain objectives. The only way we will know if these have been completed is by using suitable performance criteria.
If at any stage of the project lifecycle the objectives or performance criteria change then the implications for risk will need to be assessed.
The ‘why’ here does not just relate to the product of the project in the sense of ‘why do we bother to make it’ (marketing) but why do the objectives exist. One of the overall aims of this stage is to generate objectives and this stage asks for clarity of their purpose.
Many reasons for objectives may exist which relate to company strategy, for example:
- Improved relations with regulatory and legal bodies
- Better public image both locally and nationally
- Increased profits and improvement against competition thus increasing market share
It is important to give due consideration to these areas and not rely too heavily on the technical aspects of a project.
Some objective criteria can be treated as a constraint, for example ‘quality’. If we say the product will meet a certain ‘hardness’ level then modification of any other criteria must make sure this condition is met.
It is often a useful idea to allocate one of the criteria as a ‘primary’ one and then consider the affect of variations in the others. Although, some, such as ‘quality’ may well be constraints.
Exactly how this is managed and what we set as the ‘primary’ one needs careful consideration and will vary according to the project.
How the criteria are measured also needs adequate consideration. From a contractors perspective they may be more interested in when they will Get their payments. However, the client will be interested in the time taken to reach a satisfactory level of performance of the product.
In other words, delay in a project will have differing affects depending on the point of view of each of the stakeholders.
In another example, we may need to balance capital costs against the overall cost of the project lifecycle.
Of course, if safety of the ‘system’ product is a key issue this may become the ‘primary’ criteria to consider.
WHAT
This is where we can ask the question ‘just what is the product’ in terms of its design.
This is a very important step as the product design will govern and direct the rest of the project.
A close examination of this step will show any inconsistencies and identify any missing areas.
HOW
What is the project strategy to produce the end product?
In order to know this we need some idea of the activities via a project plan or schedule.
It will need to contain the appropriate level of detail but not too much.
A summary plan some where in the region of 25 to 60 activities should suffice.
The level of detail may be such that that some of these activities are, in fact, projects in their own right.
The first pass of risk assessment in this case will need to cover the inter relationships of the activities before attempting to go into the activities themselves.
As we will see elsewhere [see Correlated events] it would be dangerous to assume that the risks between the differing activities are entirely independent.
WHEN
Most people here would generate a Gantt chart to show the project activity timings and their interdependencies.
This is OK particularly if individual personnel are skilled in their interpretation.
It may also be useful to generate simple activity/node diagrams which often have the advantage of clarity.
At this stage the risk management must, by necessity, be very strategic. Too much detail in the Gantt chart schedule can obscure the big picture.
It is important to consider major approaches to the project and their implications and not to get too embroiled in detail.
Examples that we might consider could be:
- If we have a project that is largely out of doors we will be subject to weather windows to maintain momentum. In this situation, it may be preferred to carry out certain operations on site that could be carried out off site and indoors. The latter option may be more expensive but not subject to the whims of the weather.
- It is often the case that particular activities are run in series on the assumption that the required resource / equipment would not be available. However, we may be able to run these in parallel but at an extra cost of resource.
General
We started this phase using a ‘initial’ plan to consider the sum of the current information and any omissions.
As a result of this activity we may wish to modify it before the RISK MANAGEMENT PROCESS begins in earnest.
This will become a ‘reference’ plan.
As a reminder the aim of this phase was to:
- Current information, data should be collated
- This process may lead to other aspects of the plan that will need consideration
- Document the activity
- Identify all input to the report and circulate it to check it for errors
- Check that the information content in the report is adequate and suitable for the forthcoming RISK MANAGEMENT PROCESS
- Circulate the report and present it as necessary