How to manage project opportunity and risk : why uncertainty management can be a much better approach than risk management

519 Pages·2011·3.71 MB·English

by  Chapman

How to Manage
Project Opportunity and Risk
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How to Manage
Project Opportunity and Risk
Why uncertainty management can be
a much better approach than risk management
The updated and re-titled
3rd edition of Project Risk Management:
Processes, Insights and Techniques
Chris Chapman and Stephen Ward
University of Southampton
School of Management
A John Wiley and Sons, Ltd, Publication
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This edition fi rst published 2011
© 2011 John Wiley & Sons Ltd
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Library of Congress Cataloging- in- Publication Data
Chapman, C. B.
How to manage project opportunity and risk: why uncertainty management can be a much better
approach than risk management /Chris Chapman and Stephen Ward.—3rd ed.
p. cm.
Rev. ed. of : Project risk management, c 2003.
Summary: “Based on a sound conceptual foundation yet developed to meet practical concerns, Project
Risk Management has become recognized as a standard work on its subject”—Provided by publisher.
ISBN 978-0-470-68649-2 (hardback)
1. Project management. 2. Risk management. I. Ward, Stephen (Stephen C.) II. Chapman,
C. B., Project risk management. III. Title.
T56.8.C52 2012
658.4'04 —dc23
2011035194
A catalogue record for this book is available from the British Library.
ISBN 978-0-470-68649-2 (hbk) ISBN 978-1-119-96263-2 (ebk)
ISBN 978-1-119- 96666-1 (ebk) ISBN 978-1-119-96665-4 (ebk)
Set in 9/13pt Kuenstler by MPS Limited, a Macmillan Company, Chennai, India
Printed and bound by CPI Group (UK) Ltd., Croydon, CRO 4YY
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For pessimists who want to release their inner optimist,
optimists who want to fully exploit their inner pessimist,
analysts who want to keep in touch with their common sense,
decision makers who want to understand their advisors.
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Contents
Foreword to this edition by Mike Nichols ix
Foreword to the second edition with an update by Tony Ridley xi
Foreword to the fi rst edition by Peter Wakeling xiii
Preface and overview by the authors xv
Acknowledgements xxv
PART I Setting the scene 1
1 Uncertainty in and around projects 3
2 Uncertainty, risk and opportunity 43
3 Key motives for uncertainty management 73
4 An overview of generic process frameworks 101
PART II The generic process in one key lifecycle stage 131
5 Defi ne the project 133
6 Focus the process 153
7 Identify all the relevant sources of uncertainty,
response options and conditions 171
8 Structure all uncertainty 215
9 Clarify ownership 235
10 Quantify some uncertainty 251
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viii CONTENTS
11 Evaluate all the relevant implications 289
PART III The generic process in all lifecycle stages 325
12 Fully integrating the strategy shaping stages 327
13 Fully integrating the strategy implementation stages 365
PART IV Key corporate implications 389
14 Developing PUMP capability as a project 391
15 Contracts and governance as frameworks for enlightened
relationship management 411
16 A corporate capability perspective 435
References 463
Glossary 473
Index 479
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Foreword to this edition
I am surely in a large majority in welcoming this new and substantially revised edition of the
1997 classic on risk management by Chris Chapman and Stephen Ward, two eminent authorities
on the subject.
As mentioned in the book, Chris Chapman and I have worked together on a number of strategic
consulting assignments and with Stephen Ward and others have collaborated in the d evelopment of
RAMP and other risk management initiatives. From this I have gained a high degree of respect for
Chris and Stephen’s deep and wide understanding of risk management in all its forms.
Like the earlier editions, this book is wide ranging and thorough in its treatment of all aspects
of the subject, particularly in regard to project risk management. It responds to the need for an
update to refl ect this fast developing fi eld of risk management.
I am delighted to see that the focus has moved on to management of opportunities as well as risks,
and that the book emphasises the crucial importance of uncertainty. Chris and I may differ on the
precise defi nition of ‘uncertainty’ (which I describe as ‘incomplete or imperfect knowledge’ —i.e.
lack of required information for decision making), but we are at one in believing that to date risk
management has unduly and prematurely concentrated on identifying and analysing risk events.
A much better return from the effort involved is fi rst to assess systematically the information
needed for decisions in pursuit of objectives; and only after this has been done to move on to
evaluating risk events. The book makes a valuable contribution by putting management of uncer-
tainty at the core of the recommended approach to risk management.
I am also pleased the book refers to the value of range estimating (based on confi dence
intervals) rather than spot estimates, which we recommended and helped to implement in the
Highways Agency. This can help to avoid creating false expectations about the out- turn costs of
projects when they are at an early stage where there is a high degree of uncertainty about their
fi nal scope and hence any single cost estimate is likely to be unreliable.
Three other points made which I particularly applaud are:
(cid:129) decomposing all relevant uncertainty in a structured way which can avoid relying on opti-
mism bias with its crude adjustment factors;
(cid:129) the erroneous idea held by many that a defi ned or common approach in risk management is
suffi cient, when frequently it is neither best nor even good practice;
(cid:129) increased reference to ‘risk effi ciency’, and its extension to cover ‘opportunity effi ciency’ and
‘clarity effi ciency’.
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