Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects (2014)

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P A R T 3 Project Risk Management Toolbox Chapter 8. Project Risk Management Toolbox ...........................................................................69 Part 3 Objectives Part 3 provides the toolbox that contains the tools used to support perform­ ing the steps associated with the project risk management process. The tools included in this part are: • Project risk management plan, • Project risk checklist, • Probability and impact matrix, and • Risk register.

69 C H A P T E R 8 8.1 Overview The tools in this chapter are provided to support the project risk management process described in Part 2 of this guidebook. The tools have been developed to meet the needs of airports with little or no formal project risk management practices in place and can be used to develop a rigorous program to follow regardless of the complexity or type of project being performed. The tools are intended to be customized to the unique requirements of each project as well as according to the project risk management formality necessary. 8.2 How to Use This Toolbox The inventory of tools included in this part of the guidebook includes three versions of each: • A blank template, which may be customized with the language and information appropriate to the unique needs of each airport; • A template with instructions, which is an annotated template with instructions for filling in the template; and • An example template filled in with sample, representative project information. Table 8.1 describes the inventory of tools and the intended purpose by step in the project risk management process. 8.3 Project Risk Management Plan 8.3.1 Overview The project risk management plan is a document created at the start of a project to determine the level of project risk management to perform. The document captures how much project risk management will be performed for a specific project and provides structured, clear account- ability and a record of the process. The project risk management plan includes documenta- tion tracking, roles and responsibilities, strategy, and milestone tracking. This plan should be updated as project risk management activities occur, and attachments should be added as appro- priate throughout the life of the project. The project risk management plan (see Exhibit 8.1) is typically used in the project risk plan- ning step of project risk management. Project Risk Management Toolbox

70 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects 8.4 Project Risk Management Checklist 8.4.1 Overview The project risk management checklist guides identification of specific and generic risks asso- ciated with a project. This tool can be used as an informational job aid to increase the ability to identify risks in preparation for the planning and management of the scope, schedule, and budget of the project. It ensures consistency and completeness in reviewing risks and can be used before or after a brainstorming session to ensure all risks were identified. The project risk management checklist (see Exhibit 8.2) is typically used in the project risk identification step of project risk management. 8.5 Probability and Impact Matrix 8.5.1 Overview The P-I matrix provides a clear, simple interpretation of which risks are significant and which risks do not merit immediate time and attention. This tool can be used to qualitatively assess both sets of criteria—probability and impact—of risks identified for a specific project. The assessment creates the ability to visually display risks on a matrix to quickly and easily identify which risks rank higher than others and then discuss the need to explore additional strategies for response. Table 8.1. Project risk management toolbox. Step: Project Risk Planning Tool Description Project Risk Management Plan Document created at the start of a project to determine the level of project risk management to perform. Describes how project risk management will be structured and performed. The project risk management plan includes documentation tracking, roles and responsibilities, strategy, and milestone tracking. This plan should be updated as activities occur, and attachments should be added as appropriate throughout the life of the project. Step: Project Risk Identification Tool Description Risk Checklist Guides identification of risks associated with a project. Can be used as a checklist to identify risks associated with a project or after a brainstorming session to ensure all risks were identified. Risk Register Formal document to capture risks for tracking and assignment to resources. Typically is a deliverable resulting from a facilitated session/risk workshop that is shared with the project team and project stakeholders. Step: Project Risk Analysis Tool Description P-I Matrix Provides a clear, simple interpretation of which risks are significant and which risks do not merit immediate time and attention. Step: Project Risk Response Planning Tool Description Risk Registers with Response Plan Initiated in the risk identification step, the risk register captures risk response plans, including the response to the risk, the actions to be taken, and the cost to respond. Status is updated as the project progresses. The risk register is updated with additional information and maintained for the life of the project. Step: Project Risk Monitoring and Control Tool Description Updated Risk Registers Initiated in risk identification step and updated at various points in the project life cycle. Updated risk registers, including risk response planning, become a structured approach to tracking project progress updates and reporting risk through documenting the monitoring and control activities.

Project Risk Management Toolbox 71 Exhibit 8.1. Sample project risk management plan. PROJECT RISK MANAGEMENT PLAN – PAGE 1 Project Risk Management Plan Purpose This project risk planning document describes how project risk management will be structured and performed. The project risk management plan includes documentation tracking, roles and responsibilities, strategy, and milestone tracking. This plan should be updated as activities occur, and attachments should be added as appropriate throughout the life of the project. Project Name: Project Scope: Project Schedule (start and end dates): Project Budget: Current Engineering Estimate: Project Risk Management Roles and Responsibilities Role Responsibilities Project Manager: Project Sponsor: Project Approvals: Contractor: Project Team Members: Documents Available for Project Risk Management: (To be updated throughout life of project; as you complete steps and add documents, attach or include in package with this plan.) Project Risk Tolerance The project team will rate the probability of each risk on a scale of ________ and the impact of those risks on a scale of ___________. The acceptable level of risk for the scope, schedule, and budget of this project is _____________.

72 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects Project Risk Management Strategy Define the risk management methodology to be used, the risk assumptions, the roles and responsibilities, the time frames, and risk rating/scoring techniques, establish risk thresholds, define risk communications, and develop a risk tracking process. Project Risk Management Step Document or Activity Used Person Responsible Planned Date Completed Date Comments Risk Identification: Generate list of possible risks Workshop Checklist Risk Register Other Risk Analysis: Prioritize list of risks, recommend schedule and cost contingencies Qualitative Matrix Quantitative Modeling Update Risk Register Other Risk Response Planning: Determine responses to identified risks Update Risk Register Other Risk Monitor and Control: Monitor risk activity Update Risk Register Other Milestones: Comments: Date: Project Risk Management Plan Approved Risks Identified Risk Analysis Performed Risk Responses Documented Risk Monitoring and Control Performed Date Plan Completed: Last Updated: By PROJECT RISK MANAGEMENT PLAN – PAGE 2 Exhibit 8.1. (Continued).

Project Risk Management Toolbox 73 PROJECT RISK MANAGEMENT PLAN INSTRUCTIONS – Page 1 This document is an annotated version of the project risk management plan template and outlines the type of information to be included in the template. Customize the template with appropriate language and content for the unique needs of the airport environment and each project specifically. Fill in the appropriate information to describe the project, including name, scope, schedule, budget, and estimates. Fill in the appropriate information to describe the roles and responsibilities associated with the project described above. Roles may be added or removed and responsibilities outlined to ensure accountabilities. Fill in the names of the documents created and used in the life of the project. List of document names is filled in here; the actual documents may be attached to the plan as well. Project manager determines the risk scale for probability and impact as well as an acceptable level of risk and fills in blanks. Exhibit 8.1. (Continued).

74 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects PROJECT RISK MANAGEMENT PLAN INSTRUCTIONS – Page 2 This section documents the level of project risk management applied to specific project described on page 1. Check the boxes in this column if document or activity will be used. Identify the person responsible for completing the activity. Fill in additional or other techniques, activities, or documents used for the specific needs of each project. Identify the date the activity is scheduled to occur. Identify the date the activity actually occurs. Document any comments relative to the activity or other information included. This section captures comments and dates completed for milestone activities outlined above. Milestones can be customized to appropriate activities for each project. Fill in the dates and names corresponding to origination and updates to the document. Use the Save As function to manage multiple versions of the document throughout the life of the project. Exhibit 8.1. (Continued).

Project Risk Management Toolbox 75 PROJECT RISK MANAGEMENT PLAN EXAMPLE The following is an example of the project risk management plan with an airport project example. Project Risk Management Plan Purpose This project risk planning document describes how project risk management will be structured and performed. The project risk management plan includes documentation tracking, roles and responsibilities, strategy, and milestone tracking. This plan should be updated as activities occur, and attachments should be added as appropriate throughout the life of the project. Project Name: Terminal Utilization Study Project Scope: Evaluate current use of terminal versus future terminal needs Project Schedule (start and end dates): March – August Project Budget: $125,000 Current Engineering Estimate: $105,000 Project Risk Management Roles and Responsibilities Role Responsibilities Project Manager: ROBERT JOHNSON Project Sponsor: SUE MOORE Project Approvals: RANDY ROSE Contractor: HILL INTERNATIONAL Project Team Members: TODD JAMES, BETH JONES, CAROL WILLIAMS MIKE SMITH, WILL ROBINSON, CHARLIE PRICE Documents Available for Project Risk Management: (To be updated throughout life of project; as you complete steps and add documents, attach or include in package with this plan.) RFP PROCUREMENT CONTRACT PROBABILITY AND IMPACT MATRIX Project Risk Tolerance The project team will rate the probability of each risk on a scale of 1–5 and the impact of those risks on a scale of 1– 5. The acceptable level of risk for the scope, schedule, and budget of this project is MODERATE. Exhibit 8.1. (Continued).

76 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects Date Plan Completed: Last Updated: By Project Risk Management Strategy Define the risk management methodology to be used, the risk assumptions, the roles and responsibilities, the time frames, and risk rating/scoring techniques, establish risk thresholds, define risk communications, and develop a risk tracking process. Project Risk Management Step Document or Activity Used Person Responsible Planned Date Completed Date Comments Risk Identification: Generate list of possible risks Workshop RJ Checklist Risk Register Other Risk Analysis: Prioritize list of risks, recommend schedule and cost contingencies Qualitative Matrix N/A Quantitative Modeling Update Risk Register Other Risk Response Planning: Determine responses to identified risks Update Risk Register Other Risk Monitor and Control: Monitor risk activity Update Risk Register Other Milestones: Comments: Date: Project risk management plan approved PLAN APPROVED BY SUE MOORE 2/1/2013 Risks identified RISKS IDENTIFIED IN WORKSHOP 2/13/2013 Risk analysis performed P-I MATRIX COMPLETED 4/12/2013 Risk responses documented ADDITIONAL RISKS IDENTIFIED, PERFORMED SECOND RISK WORKSHOP TO UPDATE LIST 5/20/2013 Risk monitoring and control performed REGULARLY SCHEDULED STATUS MEETINGS OCCUR ON TUESDAYS AT 10:00 PROJECT RISK MANAGEMENT PLAN EXAMPLE – Page 2 Exhibit 8.1. (Continued).

Project Risk Management Toolbox 77 Exhibit 8.2. Sample project risk management checklist. PROJECT RISK MANAGEMENT CHECKLIST – PAGE 1 Project Name: Checklist Completed by: Date Completed: Project Manager: Date Updated: PROJECT MANAGEMENT RISKS COMMENTS Area Risks 1 Contract Management Project SCOPE Risks Requirements are incomplete or not identified Requirements are unrealistic Requirements are unstable Project SCHEDULE Risks Project has fixed deadline for completion Workdays are restricted for project activities Potential for work stoppages Lengthy decision/approval chains Lengthy permitting process Project BUDGET Risks Funding sources are not determined Availability of cash flow not certain Funding delays, or reduced funding available Expiration of capital, operations, and maintenance funding affects schedule and scope 2 Regulatory, Safety, and Security Risks Barrier for secure area project work impedes project work access Vehicle/aircraft incursion causes a work stoppage Noncompliance or violation of regulatory standards stops work progress Regulatory changes require redesign or rescoping 3 Environmental Risks Environmental protection/approval causes delay in schedule Environmental impact and nuisances (smells, noise, spills) cause delay in schedule Streams and wetlands and wildlife require additional oversight Erosion control/storm water impact cause additional scope to be defined

78 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects Exhibit 8.2. (Continued). PROJECT RISK MANAGEMENT CHECKLIST – PAGE 2 PROJECT MANAGEMENT RISKS COMMENTS 4 Staffing and Vendor Risks Staffing for the size, complexity, and/or challenges of the project is inadequate, causing budget increase or schedule delay Competing priorities for the same project team members cause schedule delay or rephasing of project Contractor has limited familiarity with airport, causing schedule and cost impacts for training and education Limited availability of vendors increases cost 5 Market- and Community- Related Risks Limited vendor/contractor availability and/or interest due to external market conditions Material availability/volatility of pricing affects budget Community disrupted by construction causes rephasing of project Passenger traffic disrupted, causing rephasing of project Noise concerns from construction work area cause change in work schedule 6 Site Risks Unknown site conditions are encountered, affecting scope, schedule, and budget Need to coordinate with other construction activities constrains schedule or affects scope and budget 7 Operational Risks Natural disaster/weather affect schedule and cost Airfield traffic for construction vehicles limited by airline traffic, causing rephasing Lack of coordination of external and internal stakeholders, contractors, and customers interrupts operations

Project Risk Management Toolbox 79 Exhibit 8.2. (Continued). PROJECT RISK MANAGEMENT CHECKLIST INSTRUCTIONS – Page 1 This document is an annotated version of the project risk management checklist template and outlines the type of information to be included in the template. Customize the template with appropriate language and content for the unique needs of the airport environment and each project specifically. Check all boxes that apply as possible risks. Include specific comments that pertain to each risk individually. Fill in this section with information about the specific project. Include dates for completion and update if appropriate. Customize additional information as needed.

80 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects Exhibit 8.2. (Continued). PROJECT RISK MANAGEMENT CHECKLIST INSTRUCTIONS – Page 2 Add additional categories and risks specific to a project or the unique needs of the airport. Add additional risks to a category for the specific needs of a project or the unique needs of the airport.

Project Risk Management Toolbox 81 Exhibit 8.2. (Continued). PROJECT RISK MANAGEMENT CHECKLIST EXAMPLE – Page 1 The following is an example of the project risk management checklist with an airport project example. Project Name: Triturater Replacement Checklist Completed by: George Glover Date Completed: 2/1/2013 Project Manager: Troy Valentine Date Updated: 5/9/2013 PROJECT MANAGEMENT RISKS COMMENTS Area Risks 1 Contract Management Project SCOPE Risks Requirements are incomplete or not identified Requirements are unrealistic Requirements are unstable Project SCHEDULE Risks Project has fixed deadline for completion Workdays are restricted for project activities Potential for work stoppages Lengthy decision/approval chains Lengthy permitting process Need to get Robert to make phone calls in advance Project BUDGET Risks Funding sources are not determined Availability of cash flow not certain Funding delays, or reduced funding available Expiration of capital, operations, and maintenance funding affects schedule and scope 2 Regulatory, Safety, and Security Risks Barrier for secure area project work impedes project work access Vehicle/aircraft incursion causes a work stoppage Noncompliance or violation of regulatory standards stops work progress Regulatory changes require redesign or rescoping 3 Environmental Risks Environmental protection/approval causes delay in schedule Environmental impact and nuisances (smells, noise, spills) cause delay in schedule Streams and wetlands and wildlife require additional oversight Erosion control/storm water impact causes additional scope to be defined

82 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects PROJECT RISK MANAGEMENT CHECKLIST EXAMPLE – Page 2 4 Staffing and Vendor Risks Staffing for the size, complexity, and/or challenges of the project is inadequate, causing budget increase or schedule delay Escalate issues Competing priorities for the same project team members cause schedule delay or rephasing of project Contractor has limited familiarity with airport, causing schedule and cost impacts for training and education Use George for training Limited availability of vendors increases cost 5 Market- and Community- Related Risks Limited vendor/contractor availability and/or interest due to external market conditions Material availability/volatility of pricing affects budget Community disrupted by construction causes rephasing of project Passenger traffic disrupted, causing rephasing of project Noise concerns from construction work area cause change in work schedule 6 Site Risks Unknown site conditions are encountered, affecting scope, schedule, and budget Need to coordinate with other construction activities constrains schedule or affects scope and budget 7 Operational Risks Natural disaster/weather affect schedule and cost Airfield traffic for construction vehicles limited by airline traffic, causing rephasing Lack of coordination of external and internal stakeholders, contractors, and customers interrupts operations Exhibit 8.2. (Continued). The probability and impact matrix (see Exhibit 8.3) is typically used in the project risk analysis step of project risk management. 8.6 Risk Register 8.6.1 Overview The risk register is a formal document used to capture risks for tracking and assignment to resources. It is typically a deliverable resulting from a facilitated session/risk workshop and is used to communicate status back to the project team and project stakeholders. While initiated in the risk identification step, the risk register may capture risk response plans, including the response to the risk, the actions to be taken, and the cost to respond. Status is updated as the project progresses. The risk register is updated with additional information and maintained for the life of the project. The risk register (see Exhibit 8.4) is typically initiated in the project risk identification step of project risk management and is updated and used throughout the remaining steps in the process for the life of the project.

Project Risk Management Toolbox 83 Exhibit 8.3. Probability and impact matrix. PROBABILITY AND IMPACT MATRIX – Page 1 Project Name: Matrix Completed by: Date Completed: Project Manager: Probability Scale ~10% Not Probable ~30% Low Probability ~50% Probable ~70% Highly Probable ~90% Near Certain Impact Scale Very Low Low Medium High Very High Step 1 – Determine Risk Score for Documented Project Risks Risk Number Risk Description Summary Probability Value Impact Value

84 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects Exhibit 8.3. (Continued). PROBABILITY AND IMPACT MATRIX – Page 2 Step 2 – Plot Probability/Impact Values for All Documented Risks Plot each documented risk by the value of its probability and impact in the matrix. 5 4 3 2 1 1 2 3 4 5 Step 3 – Assign Risk Levels to Plotted Matrix Based on Organization’s Risk Tolerance Color code the risk ranking matrix boxes by assigning risk level values according to the organization’s risk tolerance. The color coding here can be used as a starting point and can be customized. Create a key for the custom ranges. Sample Key: Risk Level Low Moderate High Draw a line to differentiate high risks from low risks in the matrix. Determine whether additional steps should be taken to respond to the results. Impact Pr ob ab ili ty

Project Risk Management Toolbox 85 Exhibit 8.3. (Continued). PROBABILITY AND IMPACT MATRIX INSTRUCTIONS – Page 1 This document is an annotated version of the project risk management checklist template and outlines the type of information to be included in the template. Customize the template with appropriate language and content for the unique needs of the airport environment and each project specifically. Fill in this section with the information about the specific project. Use this scale to select a numerical level of probability associated to each risk in the list below. Scale may be customized by reducing to 3 or 4 points and will need to correlate to the matrix on page 2. Use this scale to select a numerical level of impact associated to each risk in the list below. Enter the numerical representation of the impact for the specific risk. Enter the numerical representation of the probability for the specific risk. Number the risks in the list. This numbering will be used to plot the matrix on page 2. Describe the risks identified.

86 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects Exhibit 8.3. (Continued). PROBABILITY AND IMPACT MATRIX INSTRUCTIONS – Page 2 Plot each risk from the list according to the probability and impact score. Label them using the risk number. 1 Color code the matrix based on a threshold specific to the project and customized to the unique needs of the airport. Draw the line to designate risk thresholds visually.

Project Risk Management Toolbox 87 Exhibit 8.3. (Continued). PROBABILITY AND IMPACT MATRIX EXAMPLE – Page 1 The following is an example of the probability and impact matrix for an airport project. Project Name: Internal Workspace Build-Out Matrix Completed by: Floyd Crook Date Completed: 11/29/2013 Project Manager: Floyd Crook Probability Scale ~10% Not Probable ~30% Low Probability ~50% Probable ~70% Highly Probable ~90% Near Certain Impact Scale Very Low Low Medium High Very High. Step 1 – Determine Risk Score for Documented Project Risks Risk Number Risk Description Summary Probability Value Impact Value 1 Customer slow in making decisions about design, which affects schedule 4 4 2 Competing priorities for project work team will affect schedule and budget 4 2 3 Unforeseen conditions found in demolition impact scope may cause redesign 2 4 4 Need for permits to perform construction activities may affect schedule 2 1 5 Long lead time for selected materials causes delay in start of project 1 2

88 Guidebook for Successfully Assessing and Managing Risks for Airport Capital and Maintenance Projects Exhibit 8.3. (Continued). PROBABILITY AND IMPACT MATRIX EXAMPLE – Page 2 Step 2 – Plot Probability/Impact Values for All Documented Risks: Plot each documented risk by the value of its probability (y-axis) and impact (x-axis) on the matrix. 5 4 3 2 1 1 2 3 4 5 Step 3 – Assign Risk Levels to Plotted Matrix Based on Organization’s Risk Tolerance Color code the risk ranking matrix boxes by assigning risk level values according to the organization’s risk tolerance. The color coding included here can be used as a starting point and can be customized. Create a key for the custom ranges. Sample Key: Risk Level Low Moderate High Draw a line to differentiate high risks from low risks in the matrix. Determine whether additional steps should be taken to respond to the results. Impact Pr ob ab ili ty 1 2 3 4 5

Project Name: Checklist Completed by: Date Completed: Project Manager: Date Updated: Risk Identification Risk Analysis Response Planning Monitoring and Control Date, Status, and Review Comments # Risk Description Owner Date Identified P r o b a b i l i t y I m p a c t R i s k R a n k i n g Response Action to Be Taken Cost to Respond Status Exhibit 8.4. The risk register.

RISK REGISTER INSTRUCTIONS This document is an annotated version of the risk register template and outlines the type of information to be included the template. Customize the template with appropriate language and content for the unique needs of the airport environment and each project specifically. Fill in project name and review date for specific project. Insert an identification number for tracking. Provide detailed description of the risk, describing the consequences of the risk to scope, schedule, budget, quality, safety, or other goals. Identify the person or office responsible for managing the risk event. For example, 8/29/2013, during scoping meeting. Assessment of the likelihood of occurrence. Multiply probability and impact values for ranking. Severity of the risk’s effect on the project objectives. Risk or opportunity response. Develop options and determine actions to be taken in response to the risk event. Immediate action may be required at the time of identification. Estimate value of risk and estimate cost to respond. What is the cost for the response estimate in order to determine cost benefit of responding? Update on actions taken. For example, were the risks addressed? Based on new information, should the ratings be revised? What are the residual risks, cost, etc.? Exhibit 8.4. (Continued).

PROJECT RISK REGISTER EXAMPLE The following is an example of the risk register for an airport project. Risk Identification Risk Analysis Response Planning Monitoring and Control Date, Status, and Review Comments # Risk Description Owner Date Identified P r o b a b i l i t y I m p a c t R i s k R a n k i n g Response Action to Be Taken Cost to Respond Status 1 Regulatory change affects design, affecting project scope, budget, and schedule John Smith 10/27/2012 2 3 6 Accept Liaison with FAA to remain apprised of upcoming changes None Meeting with FAA held on 2/13/2013 As of 2/13/2013, FAA advised of changes to paving requirements on taxiways. Will require descoping because budget is fixed. Circular #? 2 Limited number of local bidders, resulting in higher cost and schedule uncertainty Paul Jones 10/27/2012 4 2 8 Mitigate Industry outreach to energize bidder pool None 3 Competing priorities among current project, ongoing airport operations, and other projects result in schedule delays Sue Johnson 10/27/2012 4 4 16 Mitigate Formal prioritization of projects at program level Stakeholder outreach Negligible Standing program review meetings set for every Monday 4 Construction vehicle access and traffic flow may be limited to accommodate ongoing airport operations, resulting in schedule delays and inefficiency Sue Johnson 10/27/2012 5 3 15 Mitigate Minimize traffic disruption by optimizing construction phasing plan Negligible 5 Unforeseen conditions delay schedule and affect budget John Norman 10/27/2012 1 4 4 Mitigate Additional field investigation $40,000 As of 3/14/2013, additional field investigations indicated underground utility line, prompting redesign 6 Airfield incursion resulting in work stoppage Mike Allen 10/27/2012 3 5 15 Avoid Training, barriers, markings $100,000 Training completed on 11/30 Exhibit 8.4. (Continued).