Government Office for the North WestObjective 2

24/25th February 2003

APPs Risk Training Workshops

Introduction

Steve Martin

The need for better risk and programme management

Imminent & continuing threat of decommitment

Urgent requirement to mitigate risks and reallocate funding to minimise funds lost

Need for a more proactive approach to programme management

Opportunity to improve programme management capability within GONW & APPs

Context: Reebok event, mid-term review

Risk management information system

Focus on spend; ultimate importance of outputs

Shared resource: only as good as information inputted

Co-owned system: need feedback from partners to improve

Realistic forecasts: measure of project management capability

Normal part of project management: more systematic structured approach

Objectives of workshop

To establish the basis for inputting to the new management information

To develop a common understanding of risk assessment and its role in project management

To provide some good practice benchmarks and guidance on its use in an APP context

Agenda

Richard Caseley The risk form

Heather Heaton Risk assessment and its role in project management

Glyn Roberts Risk in the context of APPs

Working session

The Risk Form

Richard Caseley

Risk Form

Overview Inputs – clarification of requirements Practical usage issues Outputs / benefits for active management

Overview

Claim profile &decommitment risk

Clear & timely

management info

RISK FORMClaim Form Risk Register

Improved project management

capability

Inputting

Web-based tool using GONW server and linked to interactive claim form (ICF) to avoid double-entry

Claims not outputs are main focus Inputs to come from projects via APs:

Each AP will have 1 password with which it can access all of its projects

Each project will have its own password Data input by project AP reviews data and issues to EPS

Inputs required

Data imported from Interactive Claim Form – inputs to Risk Form minimised

Basic input for all projects, more details for approved projects

informs on delivery and pipeline Input level

P1, P2 - project level P3 - claim element

Monthly input

MilestonesMilestone Phase

0 – project synopsis (project identified, described and quantified in terms of cost and outputs)

Unallocated money

1 – completed ERDF form submitted to AP

Projects in pipeline

2 – AP issue signed offer letter to project, with contracted claim profile

Projects delivering but not yet claiming

3 – 1st financial claim

Projects delivering and claiming

4 – last claim

Spend profile variability

010,00020,00030,00040,00050,00060,00070,00080,00090,000

100,000

Mar

-03

Jun-

03

Sep-0

3

Dec-03

Mar

-04

Jun-

04

Sep-0

4

Dec-04

Mar

-05

Sp

end Min

Most likely

Max

Benefits - general

Reports at AP, county/sub-region, priority and programme level

Regular management reporting Most probable claim Minimum and maximum possible spend Forecast vs actual Focuses on biggest variances Claim profile Timeline for projects (and claim elements for P3) Visibility of pipeline

Introduction to risk

Heather Heaton

The Risk Register

Decisions about spend variability in the Risk Form are based on the degree of risk inherent in a project

A Risk Register is a tool for Understanding the nature and level of risk Managing risk effectively

Risk management – the basics

The concept of risk Its role and relevance in project management Assessment of risk Management of risk

What is risk?

… any potential threat or occurrence which may prevent objectives being achieved in terms of:

- Timescale

- Cost

- Quality/benefits

Risk Management Process for each project

Brainstorm Risk Identification RiskRegister

Risk Analysis

Risk Management

•Eliminate•Mitigate•Transfer•Accept

Risk tools

Risk register Advisory Helps to prepare for the risk form Useful management & review tool Can be used at different levels of sophistication

Risk form Required Will be used to assess likely spend profile Will assist in reallocation decisions

Brainstorming the risk register

Think of all the possible risks which the project faces

Note them down, being careful to define them clearly

Note the phase of the project they are most likely to impact

Risk Time (T) Cost © Quality (Q) Impact (I) Probability (P) Severity Rankingnext 1/4 Dec-03 whole life 1-5 1-5 1-5 T+C+Q 1-5 I x P

Stage

Assessment of Risk

IMPACT Risk’s effect on cost/time/quality, if it occurs An impact is an effect on £ or days or deliverables

PROBABILITY Likelihood of the risk occurring Expressed as a % chance

Assessments are input to the risk register

Classify impacts as VL / L / M / H / VH on scale 1-5 Risks around outcomes & outputs should be

considered but are not relevant to the risk form at this stage

Risk Time (T) Cost © Quality (Q) Impact (I) Probability (P) Severity Rankingnext 1/4 Dec-03 whole life 1-5 1-5 1-5 T+C+Q 1-5 I x P

Stage

Combined impact

A simple sum of the time cost & quality effects

Risk Time (T) Cost © Quality (Q) Impact (I) Probability (P) Severity Rankingnext 1/4 Dec-03 whole life 1-5 1-5 1-5 T+C+Q 1-5 I x P

Stage

Consider the likelihood of the risk occurring

Very low Low Moderate High Very High

Risk Time (T) Cost © Quality (Q) Impact (I) Probability (P) Severity Rankingnext 1/4 Dec-03 whole life 1-5 1-5 1-5 T+C+Q 1-5 I x P

Stage

Impact and likelihood combined are used to rank risk

Impact

of

Risk

High Medium High High

Medium Low Medium High

Low Low Low Medium

Low Medium High

Likelihood of risk occurring

Risk ranking & prioritisation

Impact x probability = score Higher score = higher risk Rank and prioritise actions accordingly

Risk Time (T) Cost © Quality (Q) Impact (I) Probability (P) Severity Rankingnext 1/4 Dec-03 whole life 1-5 1-5 1-5 T+C+Q 1-5 I x P

Stage

Linking project risk assessment to risk form inputs

Take an overview of the project’s risk register Consider the overall degree of risk around the

project’s delivery In terms of the value of claims In terms of timetable

Greater risk will mean greater variability In claim forecasts In delays and durations

eg greater difference between max & min claim forecasts for higher risk projects

Spend profile variability

010,00020,00030,00040,00050,00060,00070,00080,00090,000

100,000

Mar

-03

Jun-

03

Sep-0

3

Dec-03

Mar

-04

Jun-

04

Sep-0

4

Dec-04

Mar

-05

Sp

end Min

Most likely

Max

Management of risk

Identifying mitigation Allocating responsibility The importance of regular review

Risk management

Identify reasonable mitigation action Allocate a risk owner Set a date for review

Risk Ranking Mitigation Owner Review

1234

Questions to ask at review Each month consider:

Are all risks still relevant? Are there any new risks? Have they been mitigated as far as possible? Has mitigation reduced their likelihood or impact?

Update risk register Update risk form

Risk review is an essential component of good project management

Risk Review Allows:- Tracking of risk mitigation actions

- Up-to-date accurate forecasting

Risk Review May:- Lead to project modification / re-structuring

- Lead to project cancellation

Risk in the context of APPs

Glyn Roberts

APPLYING RISK ASSESSMENT/MANAGEMENT

The Task Key risk principles Other funds risk requirements Typical Risks Key Stages for Assessment/Management Dealing with Common Risks Timing & extent of process

 

        Delivery of Action Plan contract

        Partnerships responsible for PROACTIVE management

        … and report back to EPS if problems

       Does Action Plan need adjustment?

Objectives

Key Principles

        Understand risk assessment

        Understand the projects

        Risk Awareness

        Common Sense (not rocket science!)

Consider risks to:       Claim levels/profile (underspend/overspend/delays)

       Outputs (undershoot)       Outcomes - quality

Other Funders’ Requirements

 • Match funds require risk assessment in appraisal • Not much detailed guidance• Tend not to emphasise risk management • SRB Appraisal Guidance:

• identify & consider each component of risk• take steps to minimise 'downside risks' (that make

project under-perform)

• Similar - RDA, Lottery Funds, EP Gap Funding

Generic Risk categories Funding e.g. no & types of sources Political risks/approvals Management capacity/capability Accommodation & equipment Cost escalation & overruns Market risk e.g. insufficient demand

Typical Risk Categories

Typical Risk Categories

 Additional Priority 3 Risk Categories-         Land acquisition -         Unanticipated Site Issues -         Legal Risk -         Contractual Risk  Other risks - examples:-         3rd Party actions-         Underspend-         Overspend-         No claim-         Weather-         Costs associated with transfer to private sector

Project risk process

-         Risk register (guidance approach/other)

-         Identify risks for each element of project

-         Plan of action – risk plan

-         Take action

-         Performance review to track results

Ongoing risk assessment in project management

Start early for greatest benefit Part of project appraisal

Identify mitigation and allocate clear ownership within project team

Project Manager to manage risk and review regularly (monthly)

APs may need to take more of a lead for Priority 2 projects

 

Dealing with Common Risks

 APPs & EPS should consider:- Any pattern of common risks in groups of projects?

- Ask questions

- Collaborative or across the board actions to mitigate common risks? (as started from Reebok)

Even with good assessment unforeseen risks often arise therefore…

Risk assessment & mitigation a continuous process -         To project completion/exit/succession-         Not just at development & appraisal

 Link to monitoring and evaluation-         Feedback experience

Build capability to deal with risk

Process Outputs

Pulling it all together

Risk analysis software combines all the project level information to provide An overview at AP level An overview at GO level

At Action Plan level

Report will show profile and variability of total AP spend

AP will be able to target mitigation actions appropriately

Overprogramming decisions can be made on the basis of robust analysis

AP may choose to reallocate funds between projects

AP may voluntarily decommit funds for redistribution

At EPS level

Level of management intervention will be proportional to capability displayed In forecasting In delivery

Programme wide analysis will inform decisions about Reallocation of funds between APs Decommitment Overprogramming

Next steps

Risk Analysis ProgrammeDate Activity

Now APs undertake risk assessment at project level

mid March Risk Form website goes live

Early April Completed risk forms required back from APs for all projects

Late April EPS issue management reports (output from risk analysis) to APs

Ongoing Process repeated each month ie APs complete Risk Form, EPS run risk analysis and issue reports to APs, APs use them to actively manage their projects

Outcomes of workshop

A basis for inputting to the new management information

A common understanding of risk assessment and its role in project management

Some good practice benchmarks and guidance on its use in an APP context

 

       Co – owned system; shared benefits

       Partner feedback; continuing support from Scott Wilson and GO-NW

       Information system reflects quality

of risk management

       Immediate need , but long-term capacity

building

Conclusion: some key points