Managing Project Risks

444 Pages·2019·5.359 MB·English

by  Edwards, Peter J;Serra, Paulo Vaz(Contributor);Edwards, Michael(Contributor)

Managing Project Risks
Managing Project Risks
Peter J Edwards
RMIT University
Australia
Paulo Vaz Serra
University of Melbourne
Australia
Michael Edwards
This edition first published 2020
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Library of Congress Cataloging-in-Publication Data
Names: Edwards, Peter J. (Peter John), 1940- | Vaz Serra, Paulo, 1966-
author. | Edwards, Michael, 1969- author.
Title: Managing project risks / Peter J. Edwards, Paulo Vaz Serra, Michael
Edwards.
Description: Hoboken, NJ : Wiley-Blackwell, 2020. | Includes bibliographical
references and index. |
Identifiers: LCCN 2019010837 (print) | LCCN 2019016405 (ebook) | ISBN
9781119489764 (Adobe PDF) | ISBN 9781119489733 (ePub) | ISBN 9781119489757
(hardcover)
Subjects: LCSH: Risk management. | Project management.
Classification: LCC HD61 (ebook) | LCC HD61 .E3744 2019 (print) | DDC
658.4/04--dc23
LC record available at https://lccn.loc.gov/2019010837
Cover Design: Wiley
Cover Image: © Vijay Patel / iStockphoto
Set in 10/12pt WarnockPro by SPi Global, Chennai, India
10 9 8 7 6 5 4 3 2 1
v
Contents
List of Tables xv
List of Figures xvii
Preface xix
Acknowledgements xxiii
Glossary xxv
1 Introduction 1
1.1 Introduction 1
1.2 The Project Perspective 1
1.3 The Project Stakeholder Perspective 2
1.4 Overview of Contents 3
1.5 Limitations Caveat 5
2 An Overview of Risk 7
2.1 Introduction 7
2.2 Risk Definitions 7
2.3 Threat and Opportunity 9
2.4 Risk and Uncertainty 11
2.4.1 Uncertainties in the Type of Risk Trigger Events 13
2.4.2 Uncertainties in the Occurrence of Risk Events 14
2.4.3 Uncertainties in the Period of Exposure to Risk Events 14
2.4.4 Uncertainty in the Type of Consequences of Risk Events 15
2.4.5 Uncertainty in the Magnitude of Risk Consequences 15
2.4.6 Uncertainty in Periods of Exposure to Risk Consequences 16
2.5 The Dynamic Nature of Risk 16
2.6 Psychology and Perceptions of Risk 17
2.7 Risk Awareness 18
2.8 Classifying Risk 19
2.8.1 A Generic Source‐Event Risk Classification System 20
2.8.2 Natural Systems Risks 21
2.8.3 Human Risks 22
2.8.4 Risk Classification Based upon Organisational Structure 24
2.8.5 Risk Classification Based upon Project Phases 25
2.8.6 Customised Hybrid Approaches to Risk Classification 26
2.8.7 Multisystem Risk Classification 27
vi Contents
2.9 Risk Communication 28
2.10 Summary 28
References 29
3 Projects and Project Stakeholders 31
3.1 Introduction 31
3.2 The Nature of Projects 31
3.3 Project Objectives 32
3.3.1 Procurement Objectives 33
3.3.2 Operational Objectives 35
3.3.3 Strategic Objectives 36
3.4 Project Phases 39
3.5 The Composition of Projects 41
3.6 Processes of Project Implementation 43
3.7 IT Project Example 44
3.7.1 Ideation and Concept Development 45
3.7.2 Project Development Stage 45
3.7.3 Project Deployment and Operation 46
3.7.4 Operational Maintenance 46
3.8 Organisational Structures for Projects 46
3.9 Project Stakeholder Relationships 47
3.10 Stakeholder Organisational Structures 55
3.10.1 Simple Structures 55
3.10.2 Machine Bureaucracies 55
3.10.3 Professional Bureaucracies 57
3.10.4 Divisionalised Forms 59
3.10.5 Adhocracies 60
3.11 Modes of Organisational Management 60
3.12 Project Stakeholder Decision Making 61
3.13 ‘Risky’ Projects 65
3.14 Summary 67
References 68
4 Project Risk Management Systems 69
4.1 Introduction 69
4.2 Risk Management 70
4.3 Risk Management Systems 72
4.4 Risk Management Standards and Guides 73
4.5 A Cycle of Systematic Project Risk Management 75
4.5.1 A: Establish the Context 77
4.5.2 B: Identify Risks 77
4.5.3 C : Analyse Risks 77
1
4.5.4 C : Evaluate Risks 77
2
4.5.5 D: Respond to Risks 78
4.5.6 E: Monitor and Control Risks 78
4.5.7 F: Capture Project Risk Knowledge 79
4.6 Project Stages and Risk Management Workshops 79
Contents vii
4.6.1 Construction Project Example 79
4.6.1.1 The Design‐Bid Stage 81
4.6.1.2 The Build Stage 83
4.6.2 IT Project Example 84
4.7 A Project Risk Register Template 86
4.8 Summary 88
References 88
5 Project Risk Contexts and Drivers 91
5.1 Introduction 91
5.2 The Contextualising Process 92
5.3 Internal Contexts as Risk Drivers 93
5.4 External Contexts as Risk Drivers 94
5.4.1 Physical Contexts 96
5.4.2 Technical Contexts 97
5.4.3 Economic Contexts 98
5.4.4 Social Contexts 99
5.5 Using Contextual Information 100
5.6 Summary 101
Reference 101
6 Approach to Project Risk Identification 103
6.1 Introduction 103
6.2 Approach to Risk Identification 104
6.3 Workshop Timing 105
6.4 Types of Risk Identification Techniques 110
6.4.1 Activity‐Related Techniques 112
6.4.2 Analytical Techniques 112
6.4.3 Associated Representative Techniques 113
6.4.4 Functional Value Technique 114
6.4.5 Matrices 115
6.4.6 Simulation and Visualisation Techniques 115
6.4.7 Speculative Techniques 115
6.4.8 Structural and Management Tools 116
6.5 Summary 116
Reference 117
7 Project Risk Identification Tools 119
7.1 Introduction 119
7.2 Activity‐Related Tools 120
7.2.1 Work Breakdown Structures 120
7.2.2 Bar Charts 124
7.2.3 Critical Path Networks 125
7.3 Analytical Tools 128
7.3.1 Decision Tree Analysis 128
7.3.2 Event Tree Analysis 130
7.3.3 Fault Tree Analysis 131
viii Contents
7.3.4 Failure Modes and Effects Criticality Analysis 133
7.3.5 Hazard and Operability Studies 134
7.3.6 Safety Hazard Analysis (SHA) 135
7.4 Associated Representative Tools 137
7.4.1 Contextualisation 138
7.4.2 Checklists 138
7.4.3 Financially Related Tools 140
7.4.4 Procedural Tools 140
7.4.5 Design/Cost Related Tools 144
7.4.6 Risk Related Tools 146
7.5 Matrix Tools 149
7.6 S imulation and Visualisation Tools 149
7.7 Speculation Tools 153
7.7.1 Scenario Testing 153
7.7.2 Stress Testing 155
7.8 Structural and Management Tools 155
7.9 Risk Identification Statements 156
7.10 Summary 158
References 160
8 Project Risk Analysis and Evaluation 161
8.1 Introduction 161
8.2 Qualitative Analysis 163
8.3 Assessing Likelihood 164
8.4 Assessing Impacts 167
8.5 Evaluating Risk Severity 168
8.6 Quantitative Analysis 172
8.7 Risk Mapping 179
8.8 Summary 181
References 182
9 Risk Response and Treatment Options 183
9.1 Introduction 183
9.2 Risk Attitudes and Appetites 184
9.3 Existing Risk Controls 187
9.4 Risk Response Options 188
9.4.1 Risk Avoidance 188
9.4.2 Risk Transfer 190
9.4.3 Risk Reduction and Retention 192
9.4.4 Risk Retention 192
9.4.5 Combination Responses to Risk 193
9.5 Risk Treatment Options 194
9.6 Risk Mitigation Principles 195
9.7 Strategic Use of ALARP (‘As Low as Reasonably Practical’) 197
9.8 Reassessment 198
9.9 Recording Decisions 198
9.10 Summary 198
References 199
Contents ix
10 Risk Monitoring and Control 201
10.1 Introduction 201
10.2 Assigning Responsibility 202
10.3 Monitoring Procedures 204
10.3.1 Negligible Risks 205
10.3.2 Low Risks 205
10.3.3 Medium Risks 205
10.3.4 High Risks 206
10.3.5 Extreme Risks 206
10.4 Control Measures 207
10.4.1 Negligible Risks 207
10.4.2 Low Risks 207
10.4.3 Medium Risks 207
10.4.4 High Risks 207
10.4.5 Extreme Risks 207
10.5 Reporting Processes 209
10.6 Dealing with New Risks 210
10.7 Disaster Planning and Recovery 211
10.8 Capturing Project Risk Knowledge 212
10.9 Summary 213
References 213
11 Project Risk Knowledge Management 215
11.1 Introduction 215
11.2 Knowledge Definitions and Types 216
11.3 Knowledge Transformation 217
11.4 Types and Forms of Knowledge 218
11.5 Organisational Culture and Knowledge Management 219
11.6 The Knowledge Creation Cycle 220
11.6.1 Stage 1 (Tacit to Tacit): Use and Validate 221
11.6.2 Stage 2 (Tacit to Explicit): Identify and Capture 221
11.6.3 Stage 3 (Explicit to Explicit): Codify and Store 221
11.6.4 Stage 4 (Explicit to Tacit): Share and Update 221
11.6.5 Using and Validating Knowledge 222
11.6.6 Identifying and Capturing Knowledge 222
11.6.7 Codifying and Storing Knowledge 224
11.6.8 Sharing and Updating Knowledge 225
11.7 Additional Issues of Organisational Culture 226
11.8 KMS Alignment and Information Redundancy 226
11.9 Tools and Techniques for Eliciting Risk Knowledge 227
11.9.1 Brainstorming Sessions 227
11.9.2 Storytelling 227
11.9.3 Communities of Practice 230
11.9.4 Networking 230
11.9.5 Project Reviews, Project Debriefings, and ‘Lessons Learned’ 230
11.9.6 Mentoring and Apprenticeships 231
11.9.7 Induction and Training Courses 231
11.9.8 Workplace Design 231
x Contents
11.9.9 People Finders 231
11.9.10 Intranets and IT Platforms 232
11.9.11 Internet Search Engines and Alerting Services 232
11.9.12 Organisational Culture 232
11.9.13 PRMS‐Related Tools 232
11.10 Developing Organisational Risk Wisdom 233
11.11 Project and Organisational Risk Register Architecture 233
11.11.1 Capturing Project Risk Experiences 234
11.11.2 Project Risk Registers 234
11.11.3 Organisational Risk Registers 235
11.12 Challenges for Implementing Risk Knowledge Management
Systems 237
11.12.1 Issues Relating to Knowledge Itself 237
11.12.2 Storing, Accessing, and Using Knowledge 238
11.12.3 Knowledge System Development and Implementation Costs 238
11.12.3.1 Concern with Financial Issues and Return on Investment 239
11.12.3.2 Concern with Time Management and ‘Unproductive Tasks’ 239
11.13 Communication and Risk Knowledge Management 240
11.14 Summary 242
References 243
12 Cultural Shaping of Risk 245
12.1 Introduction 245
12.2 Culture in Society 246
12.3 Organisational Cultures 247
12.3.1 Organisational Scans 249
12.3.2 The Organisational Scanning Process 252
12.4 External Cultures as Project Risk Shapers 253
12.4.1 Media Scans 253
12.5 Organisational Cultures of Other Project Stakeholders 254
12.6 Applying Cultural Shaping in Project Risk
Management 255
12.7 Summary 259
Reference 260
13 Project Complexity and Risk 261
13.1 Introduction 261
13.2 The Concept of Complexity 261
13.2.1 Differentiation 264
13.2.2 Interdependency 267
13.3 Relative Complexity 268
13.4 Uncertainty and Project Complexity 270
13.5 Identifying and Mapping Complexity 272
13.6 Influence of Complexity on Risk Management 273
13.7 Complexity and Mega‐projects 273
13.8 Summary 276
References 276