portfolio, programme and project risk (peter campbell)

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Peter Campbell FAPM MIRM MBCS MIET Society for Risk Analysis

Director: Risk Advantage LimitedChairman: Risk SIG

Portfolio, Programme and Project Risk Management

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Biography

Risk Management consultant in the Defence, Communication, Aviation, Transportation, Construction, Local and Central Government and Nuclear sectors.Implementation of quantitative and qualitative risk management processes and delivery of Risk Management training.

Working with NEC Engineering and Construction Contract (Thomas Telford) to provide guidance on implementing Risk Management in an NEC environment.  Chairman of the APM Risk Management SIG and a British Standards Institution Risk Management committee member.

Author for guides and books such as ‘Integrating Risk and Earned Value Management’, the ‘Project Risk Analysis and Management Guide’, the APM ‘Body of Knowledge’, the Cabinet Office Management of Risk Guide and the BS31100 Code of Practice. Additionally; author of papers on the application and benefits of quantitative Risk Management.

Provide risk and estimating training, workshops and presentations for academic, professional bodies and commercial clients.

Gain the Advantage

Measure the RiskWhat is Risk ?

What are the problems ?

Success Criteria:• Risk Controlled.• Objectives Achieved.• Deliver the agreed

Scope.

Objectives:• To compete?• Complete the course?• Be the Best?

What are the advantages ?

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BoK (V6) now includes Portfolio. Programme and Project (P3) Risk Management.

PRAM (Edition 3) will include P3 Risk Management.

I’ve been on my ‘soap box’ pushing the application of Risk Management from concept to termination/replacement (Whole Life Management) for years.

Why Portfolio, Programme Project Risk?

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Concept

Implementation

Definition

Handover and Closeout

Operation

Termination

Project Life Cycle

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Product Life Cycle

Project Life Cycle

Whole Life Cycle

Replacement

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Life Cycle (The front end)

Business/Sponsor Requirements

Programme/Project Team

Budget set.

Delivery time set.

Performance requirements defined.

Has risk been accounted for?

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Risk Adjusted

UncertaintyUncertainty + Risk Risk +

Project

Project How do we

account for this ??

Set Targets

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Life Cycle (Tail end)

The Mersey Tunnel

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The government wanted the original Mersey Tunnel to be Toll free but it agreed to pay half of the original estimated cost of £5 million providing that any tolls would only be for a limited period (initially set as for a maximum of 20 years). A large part of the building cost and the running costs were supposed to come from rates in Liverpool and Birkenhead. The two councils managed to claw most of this back and after 1947 were getting all their contributions refunded.When a second crossing was needed, the consultants initially recommended a 6 lane bridge. The authorities instead decided to build a 2 lane tunnel, and then 3 years later decided to add another 2 lane tunnel. The actual construction costs turned out 50% higher than estimated.Due to the construction overspending, high interest rates and lower than expected traffic, the Tunnels were now losing money at a staggering rate. Tolls were increased 500% in stages, but the losses continued. The losses were just added to debt and had to be borrowed for creating bigger losses.

The Mersey Tunnel

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Business Strategy and Objectives

Investigate situation

Analyseneeds

Definerequirements

Considerperspective

Evaluateoptions

Portfolio Risk Analysis

Supported by the Risk Management Process

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Project objectives focus on deliverables and outputs.

Programme objectives focus on benefits and outcomes.

For example:

Project:

Construction of a new building is an example of a Project and provides an output, a facility to:

• Sell goods.• Store items.• Provide business accommodation.

Programme:

Once in use the building can deliver benefit through revenue stream.

Project and Programme

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Measure the RiskProject Risk

Management Process

Initiate

Risk Management Plan.

What is required from the Risk Management Process.

Risk to Objectives. (Threat and Opportunity).

Structure.

Ownership.

Estimate.

Evaluate.Response.

Action dates.

Owners.

Effect the Plan.

Monitor result.

Identify

Assess

Plan

Implement

Manage the Process

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Measure the RiskProgramme Risk

Management Process

Initiate

Risk Management Plan.

What is required from the Risk Management Process.

Risk to Objectives. (Threat and Opportunity).

Structure.

Ownership.

Estimate.

Evaluate.Response.

Action dates.

Owners.

Effect the Plan.

Monitor result.

Identify

Assess

Plan

Implement

Manage the Process

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Gain the Advantage

Measure the RiskPortfolio Risk

Management Process

Initiate

Risk Management Plan.

What is required from the Risk Management Process.

Risk to Objectives. (Threat and Opportunity).

Structure.

Ownership.

Estimate.

Evaluate.Response.

Action dates.

Owners.

Effect the Plan.

Monitor result.

Identify

Assess

Plan

Implement

Manage the Process

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Measure the RiskThe ‘Real’ Risk

Risk Taxonomy Because of <cause> a <risk> may occur, which would lead to <effect>.

Example:

Cause: Loss of specialist staff through Company budget constraints………

Risk: May lead to greatly reduced product output………

Effect: Many clients may not receive deliveries which could lead to loss of contracts with significant financial and reputational damage to the Company.

Using “There is a risk…” could easily, and typically, turn this into:

“There is a risk that clients may not receive deliveries”

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Measure the RiskRisk Management

Process

Portfolio

Programme

Project

External Influence

Stakeholders Management

Board

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Measure the RiskRisk Management

Process

Portfolio

Programme

Project

Escalation Process

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Measure the RiskProject Risk

Management

Technical

Project

Stakeholders

Supply Chain

Project RiskLogistics

Delivery

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Requirements

Environmental

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Measure the RiskProgramme Risk

Management

Reputation

Technical

Supporting Projects

Stakeholders Supply Chain

Licensing

Operational

Regulation

Programme

Legislation

Risk

Business Socio-Economic

LegalLogistics

Delivery

FundingEnvironmental

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Gain the Advantage

Measure the RiskPortfolio Risk

Management Regulators

Owners

Government

Financial

Community

Political

Environment

PublicCustomers

International

Community

Pressure Groups

Competitors

Strategic

Commercial/Financial

Production/Operations

Tactical

Supply Chain

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Measure the RiskProject and Programme Risk

21

Portfolio

Programme

Project

Portfolio Risk: New Markets, Economic Conditions, Legal Requirements, Number of Programmes to Deliver, Central and Local Government requirements, Employment Regulations.

Programme Risk: Interdependencies of Projects, Public Inquiry, Supplier Relationships, Resource Allocation, Infrastructure requirements.

Project Risk: Meeting User Requirements, Design, Environmental conditions.

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Measure the RiskWhat can go Wrong?

• Same Risk addressed by many:

• Environmental conditions appearing in 5 Project Risk Registers all with control action funding. This was on same site.

• Project trying to control a Risk not within their authority.

• Risk of Regulation change funded in Project.

• Insufficient Management Reserve as full risk exposure not known.

• Projects/Programmes sanctioned when Portfolio Risk not considered.

• Risk identification limited to Project Risk.

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}

Management Reserve

Baseline Budget

Time

Cost

Budget Overspend!!

Specific Risk Reserve

Risk Control Cost

Unidentified/Uncontrolled Risk

Non-Specific Risk Reserve

Risk Exposure

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“Only those who will risk going too far can possibly find out how far one can go”

TS Elliot

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Peter Campbell

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peter.campbell@riskadvantage.co.uk

Mobile: 07900 24 80 60

Questions

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