introduction to risk management - texas a&m university0 risk management process overview 0 value...
TRANSCRIPT
Introduction to Risk Management
0 The Basics
0 Observed Challenges
0 Risk Management Process Overview
0 Value Proposition
0 Implementation Plan
Introduction to Risk Management
0 The Basics
0 Observed Challenges
0 Risk Management Process Overview
0 Value Proposition
0 Implementation Plan
Risk Management: Not New, But Different
0 Risk Management is fundamentally what TxDOT Managers do every day
0 Development of a formal Risk Management Practice transitions from implicit to explicit risk management
“It’s not what you know, it’s how fast you can find out.”
Risk Management: Consideration of Both Bad & Good
Negative = Threats Positive = Opportunities
0 Reduce Probability
0 Reduce Magnitude of Impact
0 Required Project Accommodations: 0 Contingency
Assurance
0 Inefficiency or Interruption Considerations
0 Increase Probability 0 Increase Magnitude of
Impact 0 Desired Project
Accommodations: 0 Contingency
Retirement 0 Production Rate
Assurance (improved Performance Indicators)
Overview of Prevailing Knowledge
0 Professional Groups 0 PMI Project Risk
Management Community of Practice
0 NCHRP Research 0 Report 574: Guidance for
Cost Estimation & Management…
0 Report 658: Guidebook on Risk Analysis Tools & Management Practices…
0 Federal Guidance
0 FHWA IDP
0 Other States
0 Washington
0 Minnesota
0 TxDOT
0 SPD Document
0 TTI Estimating Pilot
0 i-Way Training
Introduction to Risk Management
0 The Basics
0 Observed Challenges
0 Risk Management Process Overview
0 Value Proposition
0 Implementation Plan
Overcoming Development Challenges
Risk Management is not a panacea, but it can address certain challenges to all levels of management such as:
0 Overprogramming erodes ability to develop additional projects
0 Underestimating causes cost overruns and delays
Overprogrammed Upper Limit: Budget > Base Estimate + Contingency
Underestimated Lower Limit: Budget < Base Estimate + Contingency
Risk Management & Project Maturity
Introduction to Risk Management
0 The Basics
0 Observed Challenges
0 Risk Management Process Overview
0 Value Proposition
0 Implementation Plan
Basic Risk Management Process
0 Identification
0 What Risks?
0 Analysis
0 How Likely & To What Effect?
0 Response
0 How to React?
0 Monitoring
0 What ROI?
Process Features
0 Scalable to Project Size/Complexity/Rigor
0 Any project requires the four key components!
0 Iterative Process
0 Risk Register is a living document from cradle (planning & programming) to grave (operations & maintenance)
Risk Identification
Tabulation of Uncertainties Based on:
0 Description
0 Categorization
0 Trigger or Measurable Presence
0 Discipline(s) to Further Analyze
Risk Analysis
Qualitative or Quantitative Assessment of:
0 Probability of Occurrence
0 “Low” to “High”
0 0% (never) to 100% (certain)
0 Magnitude of Impact
0 “Low” to “High”
0 Estimated Cost [$] or Time [d]
Risk Response
Develop a plan for responding based on relative economic consideration for four different types: 0 Avoid by a change to the project
scope to reduce the impact of a risk 0 Transfer to another party who is
more capable at handling the risk (such as a contractor or insurance company)
0 Mitigate to lessen the impact of specific risk items, which may involve the consumption of additional time and/or money
0 Accept to not take action to deal with the risk
Risk Monitoring
Evaluate and control the response to a risk to assure the effectiveness of the response
0 Avoid or mitigate
0 Does the probability/magnitude of negative impact of a risk truly go down through the aversion/mitigation effort?
0 Transfer or accept
0 Does the project have the budget/schedule capacity to bear the impacts of a risk?
Introduction to Risk Management
0 The Basics
0 Observed Challenges
0 Risk Management Process Overview
0 Value Proposition
0 Implementation Plan
Value Proposition #1: Benefits to PM’s
Establishment and quantification of uncertainties earlier in the process facilitates mitigation opportunities earlier in the project development life cycle when the “cost of change” is less per unit of effort
Ability and Cost to respond to material impacts are inversely
related!
Change Mechanism Comparisons
Pre-Letting Post-Letting
0 Alternatives Analysis
0 Schematic Adjustments
0 Material Selection
0 Comment Review Dispensation
0 Performance Out of Specification
0 Proposed Change Orders
0 Force Account Work
0 Claims & Litigation
Risk Management Process Feedback Loop
0 Post-Monitoring (for Project A) 0 Input of ROI for a given
categorized Risk = Economical Reaction for the Current Project?
0 Pre-Identification (for
Project B) 0 Evaluation of ROI for a
given Risk = Material Consideration for Action in Estimating for New Project?
Value Proposition #2: Benefits to Agency
Reduction of the unknown in the estimating process facilitates project contingency management focused on the known and quantifiable, which may make those resources available for programming by the Agency Converting the Unknown-Unknowns to
Known-Unknowns and Known-Unknowns to Known-Knowns!
Introduction to Risk Management
0 The Basics
0 Observed Challenges
0 Risk Management Process Overview
0 Value Proposition
0 Implementation Plan
PMO Risk Management Next Steps
0 On-Going Initiatives
0 Launch Cost Estimating Best Practices & Pilots (TTI)
0 Develop RMP on Strategic Projects
0 FY 2013 Activities
0 Improve Processes with Risk Considerations 0 Change Control
0 Baseline Policy
0 Create Post-Project Implementation Assessment
Creating Developing
Launching Improving
Introduction to Risk Management
0 The Basics
0 Observed Challenges
0 Risk Management Process Overview
0 Value Proposition
0 Implementation Plan