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Project Issue and Risk Registers

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									Project Risk Management
            for

Senior Responsible Officers,
   Project Directors, and
     Project Managers
Project Risk Management


‘Experience has shown that risk management must be of critical concern
 to project managers, as unmanaged or unmitigated risks are one of the
                    primary cause of project failure’

              P.S. Royer (Proactive Risk Management, USA)


‘Risk is the chance of something happening that will have an impact on
                              objectives’

                    Australian Standard AS/NZ 4360
 Gateway Findings


                                                 Gateway Review Recommendations by Category as at 30 June 2007
‘Project Risk
Management’                                 STAKEHOLDER MANAGEMENT                                                                                                                                  91

features as one of                                  RISK MANAGEMENT                                                                                                                     86
                                                         GOVERNANCE                                                                                          69
the highest areas
                                                        PROJECT PLAN                                                                                    63
                     Recommendation Type



of concern in                                     PROJECT RESOURCES                            37
gateway reviews:                              PROCUREMENT STRATEGY                            35                                       Lessons Learnt Jan-June 2007
                                                                                                                                                    0        2     4            6           8        10
                                                       PROJECT SCOPE                          34
                                                                                                                         Stakeholder Management                                                 8
                                                     OPTIONS ANALYSIS                    30




                                                                                                   Recommendation Type
                                                                                                                            Procurement Strategy                                        7
                                                   FINANCIAL ANALYSIS                   28                                        Business Case                                     6

                                                  PROJECT OBJECTIVES                   27                                            Project Plan                                   6

                                                                                                                               Project Resources                                    6
                                                     PROJECT COSTING               24
                                                                                                                                   Project Scope                       4
                                            CRITICAL SUCCESS FACTORS              22
                                                                                                                                                                  Frequency
                                           ALIGNMENT WITH GOVT POLICY         20

                                                                        10   20         30         40                           50           60              70            80               90            100
                                                                                                                         Frequency
Gateway Findings

Gateway Review teams consistently identify project risk management as an
issue. Specifically in the following areas:

     Comprehensive identification of project/ program risks
     Thorough analysis and assessment of identified project/ program risks
      by key stakeholders
     Identification and development of risk treatment & strategies
     Effective allocation of risk roles and responsibilities
Gateway Findings

Continued:

 Regular monitoring, evaluate and update risk management plans
  and risk registers, and maintain risk management processes for the
  duration of the project/ program
 Understanding the risk management processes (AS/NZS4360) and
  application in a project management context
 Awareness that risk management is an iterative process throughout
  the lifecycle of a project, where some risks will disappear and new
  ones will emerge
Project Risk Management
Essentially, projects are like organisations. They have project governance,
internal management systems, a number of staff, external stakeholders, an
external environment and goals, objectives and deliverables. However,
project delivery in the construction industry comes with a higher degree of
uncertainty due to:
          Industrial factors
          complexity & changing technologies                      Quality

          uniqueness of projects
          OH&S and industrial relations
                                                                    Scope
          dynamic nature
                                                            Time              Cost
          skill shortage
          different team compositions for each project
          Multiple organisational interests/goals/objectives
Project Risk Management

Absence of sound Project Risk Management is likely to result in:
     Failure to keep within the cost estimate
     Failure to achieve the required completion date
     Failure to achieve the specified quality standard
     Failure to meet purpose or stakeholder expectations

With the potential for the following consequences:
     Damage to Government image and prestige
     Loss of ministerial support
     Reduced funding for future projects
     Failure to achieve ‘value for money’
     Pressure for further investment
Project Risk Management
Famous examples:
   Sydney Opera House took more than 16 years to
    construct, original cost estimate $50 million, final cost $102
    million, due to the roof design changing a number of times,
    adverse relationships, with the final product not meeting the
    quality standard as specified.


   Federal Parliament Building
    Auditor General’s report noted that the project was not managed
    properly by the Parliament House Authority, the architect or the
    construction manager, partly due to un-clear responsibilities and
    lack of knowledge regarding the fast-track method.
Project Risk Management (PRM)

Possible reasons for lack of project risk management:


       Informal risk management considered by SRO as sufficient
       Incomplete application of project management methodologies
       Lack of risk management skills
       Lack of risk management resources
       General lack of resources
       Lack of managerial support
       Lack of effective risk management tools
       No ‘risk culture’
Project Risk Management (PRM)



"We all consider risk implicitly in our decision making and thinking. However,
by discussing each step with other interested parties it becomes a conscious
   and formal discipline. It provides a mechanism to help ensure that the
                lessons of the past are taken into account."

                  Australian Standard – Guidance Manual
                    ‘HB436:2004 (page 22, para 3.3.2)
Project Risk Management

Benefits of Project Risk Management:

 Increases likelihood of success, fewer surprises!
 SRO obtains greater knowledge of the inherent nature of the project
 Optimises project performance
 Provides SRO with confidence that all strategic risks to the project’s
  objectives have been identified, and are monitored
 Protects reputation of project and department
 Makes life more comfortable !
Project Risk Management

Benefits of Project Risk Management: (continued)

 Provides a defensible position
 Promotes mutual understanding of the project’s objective by all
  stakeholders
 Risks are allocated to the party which is best suited to carry/manage
  the risk
 Increases likelihood of funding approval
 Growing of historical data – supports ‘lesson’s learnt’
 Prioritisation of risks enables effective resource allocation
Project Risk Management

Key Messages:

 Australian Standard AS/ NZ4360: 2004

 PMBoK and Prince2 (include project risk management process)

 Project risk management needs to be fully integrated into the project
  management methodology.

 Project Management methodologies have made provisions to deal with
  ‘known’ and ‘unknown’ risks.
Project Risk Management

Key messages: continued

   Project Management methodologies absolutely require sound project
    risk management.

   Need for consistent Project Risk management across all stages of the
    project’s lifecycle.

   Capture ‘lesson’s learnt’ !
Project Risk Management
Further reading:
1. Gateway Website
   www.gatewayreview.dtf.vic.gov.au
2. DHS Documents and CMB Capital Project development
   guidelines link and processes
  www.capital.dhs.vic.gov.au/CapitalProjectLifecycle/
3. OGC - Office of Govt Commerce in the UK
  www.ogc.gov.uk/guidance_managment_of_risk_4441.asp
4. Performance Audit of Government funded Capital projects
  www.audit.vic.gov.au/speeches/agspeech_26.html#TopOfPage
Developed for the Gateway Supervisory Committee



For further information, please contact:
                                      VMIA
The Victorian Managed Insurance Authority (VMIA) is the statutory
     authority, reporting through the Department of Treasury and
   Finance, established to provide insurance for state assets and
  risks, to deliver risk management services to State departments
        and agencies and to monitor the effectiveness of risk
                   management across government.



                             www.vmia.vic.gov.au

								
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