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Project Risk Management: Overview P A R T 1 Part 1 Objectives The chapters in this part address the following questions: ⢠What is project risk management? ⢠When is project risk management performed? ⢠Who performs project risk management? Chapter 1. Introduction .................................................................................................................3 Chapter 2. The Risk Management Process ..................................................................................11
3 1.1 Background All projects involve risk. No matter how small, large, simple, or complex a project, some uncer- tainties will likely remain that, if realized, could affect the project budget, schedule, or scope. As a result, projects often exceed initial cost estimates, extend beyond their scheduled completion dates, or experience some other unwelcome complications toward meeting their goals. Although airports often undertake significantly complex projects that can be laden with uncertainty, the literature suggests that they are not unique in facing risks and consequences during project development and delivery. For example, a 2002 study of 167 transportation infra- structure projects constructed over the previous 70 years found that large capital projects were initially underestimated by an average of 20%, with a small percentage of projects even being overestimated (Flyvbjerg et al., 2003). Poor predictions of project performance can in turn lead to other negative consequences, including: ⢠Poor planning of design requirements and project deliverables that can result in scope, sched- ule, and budget changes; ⢠Underestimating costs, which can result in project teams having to make changes to project scope, which results in changes to schedule and budget; ⢠Changes to design efforts causing changes to phasing of project deliverables, which can result in resource conflicts, schedule impacts, and, ultimately, budget changes; and ⢠Impacts to quality and timely completion of project work. Sources of poor project performance are often tied to the following general risk sources: ⢠Cost risk: Will the initial cost estimates prove accurate as the project progresses? ⢠Funding risk: Will the funding profile remain constant throughout the life of the project? ⢠Schedule risk: Will scheduled milestones and completion date be met? ⢠Scope or technical risk: Will the technology needed to complete the project mature at the expected time? Lost opportunities are also a risk due to poor project planning. An aspect of project risk man- agement is also to look at the opportunities available to increase the benefit of project activities through responses such as to capitalize, accept, grow, or enhance an activity. Each of the previ- ous bullet points can also have an opportunity associated to them, such as: ⢠Cost opportunity: Can costs be reduced by leveraging buying power from multiple projects simultaneously? ⢠Funding opportunity: Can year-end timing of available funding be taken advantage of to ask for more and do more as a result? C H A P T E R 1 Introduction
4 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects ⢠Schedule opportunity: Can similar activities be combined in order to be completed in a more expedient way? ⢠Scope or technical opportunity: Are there aspects of the scope that could lead to additional opportunities to complete enhancements for other projects? Figure 1.1 depicts these general project risk sources and associated common risks. 1.1.1 What Is Project Risk? Project risk or opportunity is an uncertain future event or condition that, if it occurs, has a positive or negative effect on achieving the project objectives of cost, schedule, scope, or quality. To fully define risk, three elements are needed: ⢠A future event, which, if eliminated or corrected, would prevent a potential consequence from occurring. ⢠A probability (or likelihood) assessed at the present time of that future event occurring. ⢠The impact (or effect) of that future event. Typical project risk categories are summarized in Table 1.1. 1.1.2 Project Risk Management Overview Implicit in the previous definition of project risk is the concept that risks are future events; that is, they are potential problems creating uncertainty in the projectâs success. (In contrast, issues are problems that have already occurred and require resolution.) Figure 1.1. General project risk sources.
Introduction 5 The focus of project risk management is therefore not just on eliminating risk, but rather on managing itâthrough the iterative steps of project risk management planning, identification, analysis, response planning, and monitoring and controlâto cost-effectively keep risk exposure at an acceptable level. Note that project risk can also relate to opportunities that may help the project team deliver the project with lower costs, shortened schedules, or enhanced scope or quality. Where risk management seeks to understand what might negatively affect a project, the focus of oppor- tunity management is on what could be done to capitalize on additional aspects of the project scope, schedule, or budget that could be beneficial to the organization as a result of the project. Realizing midway through a project that a superior alternative exists is not useful since it is typi- cally too late at that point to act on the opportunity. The process of managing risk at the project level has been described by various organiza- tions, such as the Project Management Institute (2008) for generic projects, the U.S. Depart- ment of Energy (2008) for nuclear plant operation and construction, the U.S. Department of Defense (2006) for defense system acquisition, and the Federal Highway Administration proj- ects (Molenaar et al., 2010 and Ashley et al., 2006) for transportation construction. Despite the diversity in the types of projects these organizations pursue, their general approach to project risk management closely follows the cyclical process depicted in Figure 1.2, with differences limited primarily to industry-specific terminology and common risks. The steps of the project risk management process are described in Table 1.2. 1.1.3 Benefits of Project Risk Management The need for a formal project risk management process arises from the nature of risk and the typical complexity of projects. The numerous risks that may arise in a typical project are often interrelated and change organically during the course of the project. A formal, repeatable approach allows project teams to sort through numerous risk events; identify the risks, opportunities, and their interrelationships; pinpoint those that are the most critical; and identify cost-effective ways to reduce those risks or capitalize on those opportunities, consistent with the overall project goals. Project risk management is an integral part of the overall project delivery process. When a disciplined, comprehensive risk management program is implemented throughout a programâs Technical Operational External Organizational Commercial Scope definition Requirements Design Quality Complexity Site conditions Safety Security Interfaces Site conditions Customer Political Public relations Market conditions Weather Environmental Property acquisition Permitting Regulatory changes Resources Dependencies Financial capacity Contractual terms and conditions Suppliers and vendors Procurement process Contractors Table 1.1. General project risk categories.
6 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects life cycle, critical program risks are properly identified and suitable handling plans are developed and implemented. A well-executed life-cycle risk management process is essential for balancing cost, schedule, and performance goals, especially for programs with designs that approach or exceed the state-of-the-art. A structured process can facilitate project management by defining a consistent approach by which risk and opportunity can be assessed, handled, monitored, and communicated to stakeholders. Having a systematic process helps provide a reliable way to ensure objectivity and minimize any unwarranted optimism, bias, or self-interest. The project risk management process helps project sponsors and project teams make informed decisions regarding alternative approaches to achieving their objectives and the relative risks involved in each in order to increase the likelihood of success in meeting or exceeding the most important objectives (e.g., time), sometimes at the expense of other objectives (e.g., cost). Risk management encourages the project team to take appropriate measures to: ⢠Realistically plan the project activities given the desired scope, schedule, and budget; ⢠Realize potential conflicts in resource utilization early to avoid conflicts proactively; ⢠Maximize opportunities to improve the projectâs objectives with lower cost, shorter schedules, enhanced scope, and higher quality; and ⢠Establish consistent project practices and communication strategies to create predictability in project activities and minimize management by crisis. Project risk management is primarily performed to improve the chance of projects achieving their goals. Benefits include: ⢠Providing better information to support decisions regarding project direction and the setting of schedule and cost targets and contingencies. ⢠Identifying actions that can be taken to help improve technical, schedule, and cost performance. ⢠Creating a credible foundation for each project by showing it is possible, or, alternatively, demonstrate that the project is not feasible so that it can be avoided or transformed. Figure 1.2. Project risk management process.
Introduction 7 ⢠Capitalizing on opportunities. Reveal opportunities for improving projects early enough to realize them. ⢠Providing project priority and management support. Support and commitment are more easily won when projects are based on thorough, understandable information. ⢠Providing project portfolio management. Achieving and maintaining an appropriate mix of ongoing projects depends on risk data. The ideal portfolio would include both lower- and higher-risk projects that are consistent with business objectives. ⢠Refining plans to reduce risk. Risk analysis uncovers weakness in a project plan and triggers changes, new activities, and resource shifts that improve the project. Needed shifts in overall project structure or basic assumptions may also be revealed. Project Risk Management Step Description Project Risk Management Planning The identification of the optimal level of risk management to apply to a particular project. The planning step includes establishing objectives for risk analysis aligned with project goals and the identification of resources desired rather than resources available for project activities. This step includes a comprehensive review of project scope, cost, and schedule to validate reasonableness of the project plan and incorporates risk management activities to create the project risk management plan. Project Risk Identification The process of identifying and documenting the risks and opportunities that could significantly affect project performance. The identification process could range from an informal brainstorming exercise to a more structured and facilitated work session in which project team members and independent subject matter experts are solicited for information and issues of concern. Risk identification begins as early as possible in successful programs and continues throughout the program with regular review and analysis. Project Risk Analysis The process of evaluating the attributes of each identified risk in terms of the probability of occurrence and the impact (consequences) on cost, schedule, and other project performance goals. By analyzing project uncertainties through either qualitative or quantitative analysis activities, project teams can proactively manage risk exposure and make risk-informed decisions about the cost/benefit of responses. Possible outputs from the risk analysis include probabilistic estimates of project cost and schedule, considering all uncertainties, and prioritized lists of risks and opportunities, including an assessment of their likelihood of occurrence and impacts if they were to occur. Project Risk Response Planning The process that identifies, evaluates, selects, and implements options in order to set risks at acceptable levels given program constraints and objectives. This includes the specifics on what should be done, when it should be accomplished, who is responsible, and the cost and schedule impact. Opportunities identified may require additional investment. Project Risk Monitoring and Control The process of tracking and reporting project performance against the project risk management plan. Effective risk tracking helps to identify what planning and budget requirements and contractual changes may be needed, and provides a coordination vehicle with management and other stakeholders to reevaluate risk response strategies as appropriate. Risk monitoring and control documents the change history and can be used as lessons learned for application on future projects. Table 1.2. Project risk management process steps and description.
8 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects ⢠Establishing reserves or contingencies. Project risk analysis demonstrates the uncertainty of project outcomes and is useful for justifying contingencies for schedule and/or resources. Project risk analysis data provide both the rationale and the magnitude for the required contingency. ⢠Assisting in project communication. Communication is most effective when there is a solid credible plan. Risk data can also be useful in negotiations with project sponsors. Using infor- mation about the likelihood and consequences of potential events gives the project team more influence in defining objectives, determining budgets, obtaining staff, setting deadlines, and negotiating project changes. ⢠Increasing institutional knowledge. Using lessons learned from documented project risk management practices creates a database of institutional knowledge to demonstrate continu- ous improvement in project management. 1.2 Purpose of the Guidebook This guidebook is based on the principle that risk management must be forward-looking, structured, informative, and continuous. It is also grounded in the philosophy that all projects delivered by an organization, regardless of size, type, or funding source, can benefit from some level of project risk management activity, and the results will be demonstrated in a more efficient use of the limited resources of time, people, and money in an organization. This guidebook: ⢠Provides practical, consistent, and repeatable methods for ease in integration into existing programs and processes within an organization; ⢠Provides flexible tools that are simple to use and apply to any type of project (construction, maintenance, capital, operating, technology, systems, etc.); ⢠Provides a reusable framework that can be scalable to the complexity of a specific project; ⢠Provides an adaptable flow for project risk management steps to increase or reduce risk management activities as project complexity changes; and ⢠Is written for a wide audience and broken into parts so that readers can use those aspects that apply to their current circumstances and environment. This guidebook has been structured to provide a basic understanding of risk management concepts and processes. It offers clear descriptions and concise explanations of core steps to assist in managing project risk. 1.3 Overview and Organization of the Guidebook As an outgrowth of the ACRP Project 01-22 research effort, this guidebook was prepared to assist project teams with the implementation of project risk management. The guidebook presents a flexible framework that allows for tailoring based on project size, complexity, devel- opment phase, and duration, as well as the availability and skill level of personnel performing the risk analysis. An example of the flexibility of the framework in the guidebook is the ability to navigate the amount of risk management to apply to a specific project by using the project risk manage- ment flowchart (Figure 2.1). While working through the identification step, activities could range from an informal brainstorming exercise to a more structured and facilitated work ses- sion in which project team members and independent subject matter experts are solicited for
Introduction 9 information based on their expertise if the amount of risk management was determined to be moderate or high rather than minimal. Likewise, the analysis of these risks and opportunities could range from a qualitative prioriti- zation of risks based on the combined effect of their probabilities and impacts to more rigorous analytical methods involving uncertainty reduction through quantitative decision-tree analysis and probabilistic modeling. The selected method(s) will ultimately involve a trade-off between sophistication (and hence, defensibility) and the methodâs ease of use. The tools and techniques included in this guidebook are intended to be a starting point for project risk management and have been developed using recognized project risk management methods. These methods can be integrated into existing programs like project management, program management, enterprise risk management, strategic planning, capital improvement, operating and maintenance, and other organization-wide business practices. 1.3.1 Organization of the Guidebook The guidebook is divided into four parts. Each part has a specific purpose, and objectives are outlined on individual part title pages. The purpose and content of each part is as follows: Part 1âProject Risk Management Overview This is an introduction to project risk management and describes an overview of the project risk management process. This section includes key terms, definitions, and the purpose of the guidebook. It answers questions about project risk management such as: What is project risk management? When is project risk management performed? Who performs project risk management? The audience for this part of the guidebook may be sponsors of projects as well as project managers managing all aspects of projects. Part 2âProject Risk Management: Step-by-Step Process This part provides a step-by-step description of each of the steps included in the project risk management process. Each step is described in its own chapter, which includes the key activities of the step, the inputs used in completing the step, the tools and techniques that can be used throughout the step, and the outputs expected to be developed as a result of the efforts. The tools described include reference to the set of tools included in Part 3 of the guidebook as well as additional resources to research as the organization finds the need to expand the project risk management activities. The intended audience for this section is the project managers and project team members performing project risk management. Each chapter with its corresponding step is depicted in Table 1.3. Part 3âProject Risk Management Toolbox This part provides a usable, practical application of the contents of the guidebook. Organi- zations with project management practices looking to incorporate a level of risk management may choose to leverage the toolbox and embed it into existing project management practices. Organizations that need additional learning for the application of the tools will need to use Parts 2 and 3 together in implementing a program. The toolbox contains four risk management tools: the project risk management plan, the project risk checklist, the probability and impact matrix, and the risk register. Each tool is provided with a blank template, an instruction guide, and a filled-in example showing its intended use. The intended audience for this section is the project managers and project team members performing project risk management.
10 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects Part 4âProject Risk Management Implementation The final section of the guidebook includes suggestions for successful implementation of a project risk management process into existing practices and cultures. This section discusses characteristics of successful project risk management, barriers to implementation, and fostering a risk-based culture. The intended audience for this section is the project sponsors and senior managers establishing project risk management within the organization. 1.4 Summary Using this guidebook to implement a project risk management program will provide benefits from standardized, predictable project practices, increased communication, and identification of both risks and opportunities as they relate to specific projects. Capturing lessons learned through debriefing sessions can institutionalize knowledge for continuous improvements, which will elevate the operations of the organization. Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Step Project Risk Management Planning Project Risk Identification Project Risk Analysis Project Risk Response Planning Project Risk Monitoring and Control Table 1.3. Project risk management steps.
11 C H A P T E R 2 2.1 What Is Project Risk Management? Risk management can occur at multiple levels in an organization, as summarized in Table 2.1. The highest level, the enterprise level [as described in ACRP Report 74: Application of Enter- prise Risk Management at Airports (Marsh Risk Consulting, 2012)], focuses on managing those uncertainties that can affect an organizationâs strategic goals. The second level, the program level, entails managing risks (e.g., material price escalation, regulatory changes, standard design changes) across multiple business units or projects. The third level, which is the focus of this guidebook, pertains to managing the risks unique to a particular project. At the project level, risks specific to individual projects are evaluated, and response strategies are established within the scope and guidance of program and enterprise risk strategies. 2.2 Overview of Project Risk Management The methods selected for this guidebook support easily integrating project risk manage- ment into other existing processes in an organization. Using common practices such as risk identification, risk analysis, risk response planning, and risk monitoring and control creates links to existing risk management programs such as safety risk management and security risk management (see Table 2.2). These existing programs use similar practices that will allow users to capitalize on common language, processes, and tools to make integration more seamless. The project risk management process contains five steps. Each step includes key activities that can be performed. These key activities can be determined based on the attributes of the organization, such as organizational risk tolerance, operational maturity, and time and resources available. The activities can also be determined based on project attributes such as size, type, exposure, and complexity. Table 2.3 describes each step and the key activities included. 2.3 When to Perform Project Risk Management Risk management planning should be applied early in the project planning process, ideally at the conceptual design phase, to help identify risks and opportunities in time to incorpo- rate any necessary response actions into final designs and to help refine schedule and budget estimates. The Risk Management Process
12 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects Figure 2.1 contains the complete flowchart of project risk management activities with decision points throughout the process. The flowchart depicts the flexibility of project risk management as well as the adaptability to add risk management activities along the course of a project as new information becomes available. Capital and maintenance projects typically follow common phases for design and construc- tion, although some may be more formal than others, depending on the size, type, and complex- ity of the project. Risk management practices can be integrated into project phases, and typical Level Responsibility Type ofUncertainty Management Strategy Enterprise Executive/senior managers Risks with implications across multiple organizational functions Manage risks in a way that optimizes the success of the organization rather than the success of a single business unit or project Program Program managers Risks that are common to clusters of projects or entire business units Manage risk in a way that optimizes the aggregate result of multiple projects or the end-state of a program Project Project managers Risks that are specific to individual projects Manage risks through advanced analysis techniques, contingency planning, and consistent risk response strategies with the perspective that risks are managed in projects Source: DâIgnazio et al., 2011 Table 2.1. Relationship between enterprise, program, and project risk management. Type of Risk Management Description Sample Objectives Generic Any uncertainty that, if it occurred, would affect one or more objectives N/A Project Risk Management Any uncertainty that, if it occurred, would affect one or more project objectives Time, cost, performance, quality, scope, client satisfaction Business Risk Management Any uncertainty that, if it occurred, would affect one or more business objectives Profitability, market share, competitiveness, internal rate of return, reputation, repeat work, share price Safety Risk Management Any uncertainty that, if it occurred, would affect one or more safety objectives Low accident rate, minimal lost days, reduced insurance premiums, regulatory compliance Technical Risk Management Any uncertainty that, if it occurred, would affect one or more technical objectives Performance, functionality, reliability, maintainability Security Risk Management Any uncertainty that, if it occurred, would affect one or more security objectives Information security, physical security, access security, personnel security Table 2.2. Types of risk management.
The Risk Management Process 13 Step Key Activities Project Risk Management Planning Establish objectives for risk analysis aligned with project goals Identify resources desired versus resources available Scale effort according to expected benefit Perform comprehensive review of project scope, cost, and schedule to validate reasonableness Project Risk Identification Evaluate all project elements for risks and opportunities Establish a non-overlapping list of all possible risks and opportunities related to project success Project Risk Analysis Qualitative and quantitative analysis Evaluate risk and opportunity events in terms of the probability of their occurrence and their impacts Prioritize major risks for further analysis or risk planning Project Risk Response Planning Identify feasible mitigation strategies for high- priority risks Allocate risks to the parties best able to manage them Project Risk Monitoring and Monitor effectiveness of mitigation measures Reevaluate risk response strategies as appropriate Control to improve outcomes Document lessons learned for application on future projects Table 2.3. Project risk management process and key activities.
14 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects Figure 2.1. Project risk management flowchart.
The Risk Management Process 15 risk issues and objectives can apply. Table 2.4 outlines project risk management characteristics relative to project phases. 2.4 Determining Project Risk Management Effort Determining how much project risk management to perform is an important aspect of the process, requiring balance between investing in some amount of effort versus not knowing the potential outcome. Too little effort can translate into costly impacts to the scope, schedule, and budget of a project. It can also translate into negative exposure, reputational issues, or even secu- rity or safety risks. Too much of a risk assessment effort can have diminishing returns on the investment of resources and creates a negative perception of the process. Determining just the right amount of project risk management can take practice and discipline in documenting efforts, debriefing results, and translating them into lessons learned to apply continuous improvement to the process. Gaining buy-in to the implementation of some project risk management is the correct first step in the process. Figure 2.1 depicts the process of project risk management, including the decision points that indicate when to perform project risk management. The project risk management process is adapt- able to the complexity of any project and can be performed iteratively throughout the life of a project. In Chapter 3, Table 3.2 describes typical characteristics of low-, medium-, and high-risk projects. A project manager can use this table to determine an appropriate level of risk associated with a project based on the typical characteristics and then reference Table 3.3 to select a path for how much risk management to apply. Table 3.3 provides guidance for low or high project risk activities with the associated tools in order to navigate a specific path. This path would translate to Project Phase General Project State Typical Risk Issues Objectives of Risk Analysis Conceptual Design Project details not fully defined Funding possibly not committed Order-of-magnitude cost estimate Uncertain support from key stakeholders Competing interests and projects Funding uncertainty Cost relative to benefits Identify implementation challenges â political, tenants, public Identify major design and construction risks and opportunities Reach go/no-go decision on project Preliminary Design Initial approvals received but long- term funding commitment may still be under review Design approximately 30% complete High cost and schedule uncertainties remain Changes to project scope and budget Changes in design requirements Market conditions Prepare list of major project risks and opportunities Create preliminary risk management plan, focused on design and constructability risks Determine type of project delivery method Final Design Project scope, cost, and schedule well-defined Changes to project scope and budget Errors or omissions Changes in design requirements Market conditions Delays in final approvals List prioritized critical risks and opportunities based on impacts (combined likelihood and consequence) to total project cost, schedule, or other key project goal Determine costs/benefits of risk mitigation strategies Create risk management plan, focused on mitigation of unacceptable risks Perform validation of reasonableness of contingencies and allowances in project budget and schedule Construction Design complete Funding in place Contract executed Contractor performance Construction quality Unforeseen site conditions Field design changes Construction safety Contractor coordination Cash flow Perform monitoring and analysis of specific event, causes, and potential cost/schedule impact Determine cost/benefit of possible corrective actions or response strategies Table 2.4. Project phase risk characteristics.
16 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects the project risk management plan. If a more moderate approach is determined to be needed, the project manager can select a blend of the tools for low and high risk in order to create a medium- risk approach. These two tables along with the project risk management flowchart can assist a proj- ect manager in determining a path and the associated activities for a project risk management plan. Key decision points follow paths designated as being either of minimal risk or moderate to high risk. A project may begin down one path and revert to the other as new information reveals itself in the project cycle. Note that an organizationâs interpretation or definition of minimal, moderate, and high risk may vary depending on that organizationâs risk tolerance. Typical char- acteristics of low-, medium-, and high-risk projects are shown in Table 3.2. Key decision points for low-risk projects include: ⢠How much risk management to apply? ⢠Do existing processes adequately mitigate risk? Key decisions points for medium- to high-risk projects include: ⢠How much risk management to apply? ⢠Do risks require analysis? ⢠What level of analysis is required? ⢠Are identified risks acceptable without a further response strategy? The project risk management flowchart can help a project manager navigate the challenges of managing project risk throughout the life of the project regardless of its complexity. Navigating the flowchart aligns directly to the project risk management steps, which define the correspond- ing key activities and then identify the tools to use to support the process. Determining the answers to these key decisions will lead the project manager to the selection of the tools to be used to implement the overall process of project risk management. Table 2.5 represents the key activities and associated tools to execute the project risk management activities associated with each step of the process. This table can be used in conjunction with the flowchart to navigate the application of project risk management practices to specific projects, and can be flexible to scale to the project size, type, and complexity as well as to the organizationâs tolerance for risk. 2.5 Who Performs Project Risk Management Table 2.6 shows typical roles and responsibilities of project members for the project risk man- agement process. This table can be customized with roles and responsibilities specific to the unique environment of each organization as well as for each project. Table 3.4 describes detailed responsibilities and activities associated with each role described in Table 2.6. Additionally, each chapter in Part 2 contains a table that shows the specific responsibilities associated to each step for each role identified. 2.6 Summary Project risk management is a beneficial process that can be applied to any type, size, or com- plexity of project within an organization. The amount of project risk management can vary based on attributes such as risk tolerance, resources, and organization maturity along with spe- cific project attributes. Any amount of project risk management can be a benefit to a project, although balance needs to be used to avoid wasting time and energy on excessive or costly activi- ties that provide only diminishing returns. Use of the right amount of project risk management by the correct roles with a clear level of responsibility will return benefits in better management of project scope, schedule, and budget.
The Risk Management Process 17 Step Key Activities Tools (1) Project Risk Management Planning Establish objectives for riskanalysis aligned with project goals Identify resources desired versus resources available Scale effort according to expected benefit Perform comprehensive review of project scope, cost, and schedule to validate reasonableness Risk management plan Project Risk Identification Evaluate all project elements for risks and opportunities Establish a non-overlapping list of all possible risks to project success Risk checklist Risk register Project Risk Analysis Qualitative and quantitative analysis Evaluate risk events in terms of the probability of their occurrence and their impacts (consequences) on cost, schedule, and other project performance goals Prioritize major risks for further analysis or risk planning Risk register Probability and impact matrix Project Risk Response Planning Identify feasible mitigation strategies for high-priority risks Allocate risks to the parties best able to manage them Risk register Project Risk Monitoring and Control Monitor effectiveness of mitigation measures Reevaluate risk response strategies as appropriate to improve outcomes Document lessons learned for application to future projects Risk register Risk management plan 1 Tools listed are not exhaustive. Other tools may be appropriate and are discussed in the text. Table 2.5. Project risk management process and associated tools.
18 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects Role Typical Responsibilities Senior Management Establishes the threshold for risk tolerance for the organization. Establishes the level of rigor and discipline at which project risk management will be performed through the organization. Establishes level of importance to the process. Project Sponsor Establishes the threshold for risk tolerance on a given project and approves the risk management plan. Validates scope, schedule, and budget reasonableness. Project Manager Oversees the risk management process for the project and organizes all risk management planning sessions. Creates a team culture to the appropriate thresholds set and communicates progress to all project members. Project Team Members Provide information, including approvals, endorsements, communication, and progress of tasks. Participate in risk process, proactively identifying and managing risks in their areas of responsibility. Risk Owner Identifies and implements any response strategies and tracking of their outcomes. Regularly reports on current risk status. Risk Analyst Conducts quantitative and/or qualitative risk analysis for identified risks. This role may be filled by the project team members. Table 2.6. Project risk management roles and responsibilities.
