APEGGA - 2008 CSC Excellence In Risk Management I would not say that the future is necessarily less predictable than the past. I think the past was not predictable when it started… Donald Rumsfeld Panel 4: Managing the Work: Risk & Change APEGGA - 2008 Dave Evans, P. Geol., Sr. Partner, CSC Project Management Services, Calgary www.cscproject.com
Panel 4: Managing the Work: Risk & Change APEGGA - 2008. I would not say that the future is necessarily less predictable than the past. I think the past was not predictable when it started…Donald Rumsfeld. Dave Evans, P. Geol., Sr. Partner, - PowerPoint PPT Presentation
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APEGGA - 2008CSC
Excellence In Risk Management
I would not say that the future is necessarily less predictable than the past. I think the past was not predictable when it started…Donald Rumsfeld
Success depends on the competencies and heroics of individuals
Risk awareness, but no precedents, structures or drive in place for consistent application.
(Qualitative, KT Analysis SWOT)
Risk Management has been implemented into routine business processes.
(Risk Register, Range Estimating, Real Options)
Risk Management Standard and defined processes used
across the organization(Quantitative Risk Analysis)
Risk Management is used to base both individual decisions and strategic planning on quantified values (Integrated, Strategic, Core Competency)
Where are you now?Where do you want to be?
APEGGA - 2008CSC
Excellence In Risk Management
TraditionalProject
RiskAnalysis
Time
Cost Quality
+ =
OptimizedValue
Fit for Purpose
ContinuousImprovement
BreakthroughThinking
“Pick any Two”
Risk Analysis for Project Risk Management
=+
Risk analysis and risk management are applied to maximize project value by testing strategies to find the best or optimum value.
APEGGA - 2008CSC
Excellence In Risk Management
Guiding Principles on the role of Risk Analysis in Decision-Making (ASME*)
No course of action, including taking no action, is risk free. All stakeholders should be identified and involved in process. The process must be open, transparent and rigorous. Assumptions, uncertainties and methods must be understood. Consistent methodologies should be applied throughout the
process. Uncertainties that cannot be readily quantified should not be
exempted. Risk assessment, management and communication should be
an integrated process. There should be complete access to data and information.
Adapted from AMSE (2002)
APEGGA - 2008CSC
Excellence In Risk Management
Cold Eyes Review Team Involvement
Project Team Involvement
Operations Team Involvement
Risk Contractor Involvement
Timely Risk AnalysisEffective Risk Analysis will revisit and re-evaluate the risks on a Project and
throughout the Project Life Cycle. Each phase of the risk analysis may involve a different focus and a different mix of disciplines.
StrategicPlanning
ProjectDefinition
ProjectFinancing
Mid-Construction
ProjectStart Up
Year 1Full
Operations
ProjectExecution
Corporate Planning Involvement
StrategicTactical
APEGGA - 2008CSC
Excellence In Risk Management
Uncertainty changes through the Project Life Cycle
Life Cycle Activity: Business Focus Key Uncertainties
Strategic Planning Environmental RegulationPolitical & Social Risk
Stakeholder Value / GovernanceAlternatives / Locations
Project Definition Balance of PortfolioProject Configuration
Technology AlternativesPolitical & Social RiskMarket Demand
Cumulative Impacts, Market Demand, Environmental and Social Issues
APEGGA - 2008CSC
Excellence In Risk Management
What are some of the Key Questions that a Risk Analysis should answer?
What are the key uncertainties?What are the potential impacts?How much will it cost?How confident are we in cost?How long will it take to complete?Where do we need contingency?What can I do about it?
APEGGA - 2008CSC
Excellence In Risk Management
ProbabilityDistributions
Tornado Diagrams Step DiagramsInterview Issues Model and Test Options
Scheduled, Formal ReviewsUpdated Model Results(Probabilities, Tornados, Steps)Management Risk Reporting
Base Design & Operating Plans
Contingency Plans
Risk Monitoring
System
Project Targets Immediate RiskControl Measures
Risk Analysis
Risk Analysis is the centerpiece of a Risk Management Process
Key outputs from a comprehensive Risk Analysis
APEGGA - 2008CSC
Excellence In Risk Management
The probability distribution illustrates the full range of project uncertainty and is used to set the project targets at appropriate confidence levels.
*Expected
Value
10/90 Range
CAPEX, Schedule, OPEX, etc.
90%
50%
10%
Note:1. Each point on the curve is a result from a single Monte Carlo trial. The expected value represents the average value of all the trials.
2. The slope of the 10/90 range representsthe uncertainty, the flatter the curve, the more uncertainty.
3. The curve below the expected value indicates upside opportunity, the portion above shows the downside risk.
Area 100 Labour Productivity - Multiplier 0.81 1.03
$k
Total Project Expenditures
The Tornado & Step Diagrams Identify the Areas that will be the most effective for Mitigating Cost & Schedule.
Contingency Planning
APEGGA - 2008CSC
Excellence In Risk Management
15-Aug-07
1-Sep-07
15-Sep-07
1-Oct-07
15-Oct-07
1-Nov-07
15-Nov-07
01-Dec-07
15-Dec-07
01-Jan-08
AFE
App
rova
l
+6
Eng
inee
ring
to 6
0%
+13
Prel
imin
ary
Ven
dor
Dat
a
+7
Mod
ule
Stee
l Fab
rica
tion
0
Mod
ule
Pipe
Fa
bric
atio
n D
urat
ion
0
Rac
k/ P
roce
ss
Mod
ule
Ass
embl
y
-3
Las
t Pro
cess
Are
a M
odul
e O
n-si
te to
Con
stru
ctio
n C
ompl
ete
0
Eva
pora
tor
Uni
ts
0V
apou
r C
ompr
esso
rs
0
Site
Pre
p D
urat
ion
+1
Pilin
g
-8
Com
mis
sion
ing
Dur
atio
n
+14
Star
t-up
Dur
atio
n
-3
Con
stru
ctio
n D
urat
ion
+31
Mat
eria
ls D
eliv
ery
+5
Wea
ther
Del
ay
+5
Lab
our
Issu
es
+12
Lon
g L
eads
C
ompl
ete
to M
C
+14
Des
ign
defi
nitio
n C
hang
es
+5
Lab
our
Prod
uctiv
ity
+10
Rew
orks
+3Start Date
Base= 03-Sep-07
EV= 20-Dec-07
The Step Diagram demonstrates where the growth from the base estimate to the Expected Value occurs, and identifies key factors impacting the schedule (cost).
Immediate Risk Control Measures
APEGGA - 2008CSC
Excellence In Risk Management
Planning Definition Execution Start Up
Abi
lity
to in
flu
ence
the
outc
omes
Full
None
Essential Risk Management
Closure
Early risk management and mitigation builds better valued projects
Cos
t of
Mit
igat
ion
Ste
ps
High
Low
APEGGA - 2008CSC
Excellence In Risk Management
Common Characteristics of the Risk Intelligent Organization‘Taken from Managing the Unexpected’
Tracks small failures Resists oversimplification Remains sensitive to operations Maintains capabilities for resilience Takes advantage of shifting locations of expertise