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- Herausgeber: John Wiley & Sons
- Kategorie: Wissenschaft und neue Technologien
- Sprache: Englisch
A comprehensive overview of project risk management, providing guidance on implementing and improving project risk management systems in organizations This book provides a comprehensive overview of project risk management. Besides offering an easy-to-follow, yet systematic approach to project risk management, it also introduces topics which have an important bearing on how risks are managed but which are generally not found in other books, including risk knowledge management, cultural risk-shaping, project complexity, political risks, and strategic risk management. Many new concepts about risk management are introduced. Diagrams and tables, together with project examples and case studies, illustrate the authors' precepts and ideas. Each chapter in Managing Project Risks begins with an introduction to its topic and ends with a summary. The book starts by providing an understanding and overview of risk and continues with coverage of projects and project stakeholders. Ensuing chapters look at project risk management processes, contexts and risk drivers, identification, assessment and evaluation, response and treatment options, and risk monitoring and control. One chapter focuses entirely on risk knowledge management. Others explore the cultural shaping of risk, political risk in projects, computer applications, and more. The book finishes by examining the current state and potential future of project risk management. In essence, this book: * Effectively communicates a conceptual and philosophical understanding of risk * Establishes the nature of projects and the stakeholders involved in them * Presents a systematic and logically progressive approach to the processes of project risk management * Demonstrates how to recognize the drivers of project risks and the factors which shape them * Emphasizes the importance of capturing and exploiting project risk knowledge * Provides guidance about implementing and building (or improving) project risk management systems in organizations Managing Project Risks will benefit practitioners and students of project management across a wide range of industries and professions.
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Table of Contents
Cover
List of Tables
List of Figures
Preface
Reference
Acknowledgements
Glossary
1 Introduction
1.1 Introduction
1.2 The Project Perspective
1.3 The Project Stakeholder Perspective
1.4 Overview of Contents
1.5 Limitations Caveat
2 An Overview of Risk
2.1 Introduction
2.2 Risk Definitions
2.3 Threat and Opportunity
2.4 Risk and Uncertainty
2.5 The Dynamic Nature of Risk
2.6 Psychology and Perceptions of Risk
2.7 Risk Awareness
2.8 Classifying Risk
2.9 Risk Communication
2.10 Summary
References
3 Projects and Project Stakeholders
3.1 Introduction
3.2 The Nature of Projects
3.3 Project Objectives
3.4 Project Phases
3.5 The Composition of Projects
3.6 Processes of Project Implementation
3.7 IT Project Example
3.8 Organisational Structures for Projects
3.9 Project Stakeholder Relationships
3.10 Stakeholder Organisational Structures
3.11 Modes of Organisational Management
3.12 Project Stakeholder Decision Making
3.13 ‘Risky’ Projects
3.14 Summary
References
4 Project Risk Management Systems
4.1 Introduction
4.2 Risk Management
4.3 Risk Management Systems
4.4 Risk Management Standards and Guides
4.5 A Cycle of Systematic Project Risk Management
4.6 Project Stages and Risk Management Workshops
4.7 A Project Risk Register Template
4.8 Summary
References
5 Project Risk Contexts and Drivers
5.1 Introduction
5.2 The Contextualising Process
5.3 Internal Contexts as Risk Drivers
5.4 External Contexts as Risk Drivers
5.5 Using Contextual Information
5.6 Summary
Reference
6 Approach to Project Risk Identification
6.1 Introduction
6.2 Approach to Risk Identification
6.3 Workshop Timing
6.4 Types of Risk Identification Techniques
6.4.8 Structural and Management Tools
6.5 Summary
Reference
7 Project Risk Identification Tools
7.1 Introduction
7.2 Activity‐Related Tools
7.3 Analytical Tools
7.4 Associated Representative Tools
7.5 Matrix Tools
7.6 Simulation and Visualisation Tools
7.7 Speculation Tools
7.8 Structural and Management Tools
7.9 Risk Identification Statements
References
8 Project Risk Analysis and Evaluation
8.1 Introduction
8.2 Qualitative Analysis
8.3 Assessing Likelihood
8.4 Assessing Impacts
8.5 Evaluating Risk Severity
8.6 Quantitative Analysis
8.7 Risk Mapping
8.8 Summary
References
9 Risk Response and Treatment Options
9.1 Introduction
9.2 Risk Attitudes and Appetites
9.3 Existing Risk Controls
9.4 Risk Response Options
9.5 Risk Treatment Options
9.6 Risk Mitigation Principles
9.7 Strategic Use of ALARP (‘As Low as Reasonably Practical’)
9.8 Reassessment
9.9 Recording Decisions
9.10 Summary
References
10 Risk Monitoring and Control
10.1 Introduction
10.2 Assigning Responsibility
10.3 Monitoring Procedures
10.4 Control Measures
10.5 Reporting Processes
10.6 Dealing with New Risks
10.7 Disaster Planning and Recovery
10.8 Capturing Project Risk Knowledge
10.9 Summary
References
11 Project Risk Knowledge Management
11.1 Introduction
11.2 Knowledge Definitions and Types
11.3 Knowledge Transformation
11.4 Types and Forms of Knowledge
11.5 Organisational Culture and Knowledge Management
11.6 The Knowledge Creation Cycle
11.7 Additional Issues of Organisational Culture
11.8 KMS Alignment and Information Redundancy
11.9 Tools and Techniques for Eliciting Risk Knowledge
11.10 Developing Organisational Risk Wisdom
11.11 Project and Organisational Risk Register Architecture
11.12 Challenges for Implementing Risk Knowledge Management Systems
11.13 Communication and Risk Knowledge Management
11.14 Summary
References
12 Cultural Shaping of Risk
12.1 Introduction
12.2 Culture in Society
12.3 Organisational Cultures
12.4 External Cultures as Project Risk Shapers
12.5 Organisational Cultures of Other Project Stakeholders
12.6 Applying Cultural Shaping in Project Risk Management
12.7 Summary
Reference
13 Project Complexity and Risk
13.1 Introduction
13.2 The Concept of Complexity
13.3 Relative Complexity
13.4 Uncertainty and Project Complexity
13.5 Identifying and Mapping Complexity
13.6 Influence of Complexity on Risk Management
13.7 Complexity and Mega‐projects
13.8 Summary
References
14 Political Risk
14.1 Introduction
14.2 Political Spheres
14.3 Dimensions of Political Risk Factors
14.4 Examples of Political Risks
14.5 Political Stakeholders
14.6 Managing Political Risks
14.7 In‐house Political Risks
14.8 More Extreme Political Threat Risks
14.9 Summary
Reference
15 Opportunity Risk Management
15.1 Introduction
15.2 Concept of Opportunity Risk
15.3 Opportunity Risk in Projects
15.4 Examples of Opportunity Risks
15.5 Managing Opportunity Risks
15.6 Summary
Reference
16 Strategic Risk Management
16.1 Introduction
16.2 Strategic Issues for Project Risk Management
16.3 PRMS Process Strategies
16.4 Summary
References
17 Planning, Building, and Maturing a Project Risk Management System
17.1 Introduction
17.2 PRMS Objectives
17.3 Planning and Designing the PRMS
17.4 Risk Management Maturity
17.5 Building the PRMS
17.6 PRMS Performance Review and Improvement Cycle
17.7 Summary
References
18 Computer Applications
18.1 Introduction
18.2 Project Risk Management System (PRMS) Software Applications
18.3 Other Information Technologies and Tools
18.4 Summary
19 Communicating Risk
19.1 Introduction
19.2 Communication Theory and Models
19.3 Components in the Communication Process
19.4 Communicating Risk in the PRMS Cycle
19.5 Communicating Project Risk Beyond the Project Stakeholder Organisations
19.6 Evaluating Risk Communication
19.7 Summary
References
20 Conclusions
20.1 Introduction
20.2 Current State of Project Risk Management
20.3 Future Project Risk Management
20.4 Checking Your Reading Satisfaction
20.5 Closing Remarks
Case Study A: Public–Private Partnership (PPP) Correctional Facilities Project
Case Study B: Rail Improvement Project
Case Study C: PM Consultant and a Government Aid–Funded Pacific Rim Project
Part 2
Case Study D: High‐Capacity Metropolitan Train Mock‐up Project
Case Study E: Hot‐Rod Car Project
Case Study F: Aquatic Theme Park Project
Index
End User License Agreement
List of Tables
Chapter 2
Table 2.1 A certainty/uncertainty matrix for project risk management.
Table 2.2 Generic source‐event risk classification.
Table 2.3 Examples of natural category risk events.
Table 2.4 Examples of human category risk events.
Table 2.5 Risk classification by organisational structure.
Table 2.6 Customised hybrid approach to risk classification.
Table 2.7 Typical internal category risks for a customised classificati...
Chapter 3
Table 3.1 Procurement objectives for a public high school project.
Table 3.2 Operational objectives for café website project.
Table 3.3 Client objectives for the Singapore Gardens by the Bay (SGBB)...
Table 3.4 Key elements to decision making.
Chapter 4
Table 4.1 Project risk register template (part 1).
Table 4.2 Project risk register template (part 2).
Chapter 6
Table 6.1 A typology of risk identification techniques.
Chapter 7
Table 7.1 Typical activities for reinforced concrete floor slab casting...
Table 7.2 Resourced slab casting cycle activity schedule.
Table 7.3 Bar chart for product personalisation IT project.
Table 7.4 Task list for room renovation project.
Table 7.5 Failure modes and effects criticality analysis (FMECA) exampl...
Table 7.6 Hazard and operability studies (HAZOPS) example.
Table 7.7 Safety hazard analysis (SHA) example.
Table 7.8 Typical architect's preliminary checklist for a construction ...
Table 7.9 Schedule for botanic gardens display event.
Table 7.10 Botanic gardens display event: opening ceremony schedule.
Table 7.11 Typical list of design elements for a construction project.
Table 7.12 An IT project attributes checklist for assessing project ris...
Table 7.13 Resourced WBS/generic risk category matrix.
Table 7.14 Project risk item record.
Chapter 8
Table 8.1 Three‐point risk assessment measures.
Table 8.2 Five‐point measures of likelihood.
Table 8.3 Alternative five‐point measures of likelihood.
Table 8.4 Five‐point measures of impact.
Table 8.5 Multiple‐impact risk assessment measures.
Table 8.6 Three‐point measure of risk severity.
Table 8.7 Five‐point measure of risk severity.
Table 8.8 Franchise first‐year trading loss EMV.
Table 8.9 Comparative project risk severity assessments.
Chapter 11
Table 11.1 Correlation matrix between tools and activities for risk kno...
Table 11.2 A project risk debriefing record template.
Table 11.3 Strengths and weaknesses of small and medium‐sized enterpris...
Chapter 12
Table 12.1 Typical areas for culturally influenced organisational pract...
Table 12.2 Negative and positive organisational cultures.
Chapter 13
Table 13.1 An uncertainty/resolution space complexity matrix for projec...
Table 13.2 Differentiation complexity in projects.
Chapter 14
Table 14.1 Spheres commonly associated with politics.
Table 14.2 Factors associated with political risks.
Chapter 15
Table 15.1 Five‐point interval scale for opportunity risk financial imp...
Table 15.2 Multiple measures of opportunity risk impact.
Table 15.3 Three‐point opportunity risk potential matrix.
Table 15.4 Five‐point opportunity risk potential matrix.
Table 15.5 Comparison between threat and opportunity risk treatment opt...
Chapter 16
Table 16.1 Strategic PRM issues.
Chapter 17
Table 17.1 PRMS design framework.
Table 17.2 PRMS performance review criteria.
Chapter 18
Table 18.1 PRMS computer software application types.
Table 18.2 Conditional statements for three‐point risk severity rating.
Case Study 1
Table A.1 D&C Contractor's project risk management processes and proced...
Table A.2 Contextual issues explored by D & C contractor.
Table A.3 ‘Top 10’ contractor risks identified for correctional facilit...
Case Study 2
Table B.1 Level crossing site packages and procurement systems.
Case Study 6
Table F.1 Functional management for aquatic theme park project.
Table F.2 Company–project alignment policy.
List of Illustrations
Chapter 2
Figure 2.1 Threat and opportunity risk.
Figure 2.2 Project information/uncertainty symmetry.
Chapter 3
Figure 3.1 A hierarchy of project objectives.
Figure 3.2 Project phases.
Figure 3.3 Project elements.
Figure 3.4 Project interphase decision making effects.
Figure 3.5 Project stakeholders.
Figure 3.6 Project stakeholder coalitions.
Figure 3.7 Hospital project organogram.
Figure 3.8 Settlement upgrading project organogram.
Figure 3.9 Electrical substation project organogram.
Figure 3.10 Residential development project organogram.
Figure 3.11 Construction company organisational structure.
Figure 3.12 Engineering consultancy organisational structure.
Figure 3.13 A project decision making process.
Chapter 4
Figure 4.1 Approaches to managing project risks.
Figure 4.2 The dynamic cycle of project risk management.
Figure 4.3 A design‐build (DB) project's design‐bid stage: information, un...
Figure 4.4 A design‐build (DB) project's build stage: information, uncerta...
Figure 4.5 An IT project's concept development stage: information, uncerta...
Figure 4.6 An IT project's development stage: information, uncertainty, an...
Chapter 5
Figure 5.1 Project system boundaries.
Figure. 5.2 Project risk driver contexts.
Chapter 6
Figure 6.1 Design consultant risk management workshops in a construction p...
Figure 6.2 Bidder's risk management workshops in the construction project ...
Figure 6.3 Contractor's risk management workshops and the project construc...
Chapter 7
Figure 7.1 Screenshot (MS Project) of critical path network (CPN) example....
Figure 7.2 Decision tree analysis (DTA) example.
Figure 7.3 Event tree analysis (ETA) example.
Figure 7.4 Fault tree analysis (FTA) example.
Chapter 8
Figure 8.1 Expected utilities for DTA of travel outcomes.
Figure 8.2 Outcome probabilities for ETA of ferry vehicle loading door inc...
Figure 8.3 FTA causal factor probabilities for chute deployment failure.
Figure 8.4 Risk severity spider chart.
Chapter 9
Figure 9.1 Strategic risk responses.
Chapter 10
Figure 10.1 The risk severity–management responsibility relationship.
Chapter 11
Figure 11.1 A knowledge transformation sequence.
Figure 11.2 The knowledge creation cycle.
Figure 11.3 An interactive project risk management knowledge process.
Chapter 12
Figure 12.1 Elements of organisational culture.
Figure 12.2 Stakeholder‐to‐project cultural risk shaping and management.
Chapter 13
Figure 13.1 Project elements, environments, and complexity factors.
Chapter 17
Figure 17.1 Risk management maturity levels.
Figure 17.2 Level 2 organisational project risk management maturity.
Figure 17.3 Level 3 organisational project risk management maturity.
Figure 17.4 Level 4 organisational project risk management maturity.
Chapter 19
Figure 19.1 A hybrid multi‐model of human and project risk communication....
Guide
Cover
Table of Contents
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Managing Project Risks
Peter J Edwards
RMIT University Australia
Paulo Vaz Serra
University of Melbourne Australia
Michael Edwards
Copyright
This edition first published 2020
© 2020 John Wiley & Sons Ltd
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by law. Advice on how to obtain permission to reuse material from this title is available at http://www.wiley.com/go/permissions.
The right of Peter J Edwards, Paulo Vaz Serra and Michael Edwards to be identified as the authors of this work has been asserted in accordance with law.
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John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, UK
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While the publisher and authors have used their best efforts in preparing this work, they make no representations or warranties with respect to the accuracy or completeness of the contents of this work and specifically disclaim all warranties, including without limitation any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives, written sales materials or promotional statements for this work. The fact that an organization, website, or product is referred to in this work as a citation and/or potential source of further information does not mean that the publisher and authors endorse the information or services the organization, website, or product may provide or recommendations it may make. This work is sold with the understanding that the publisher is not engaged in rendering professional services. The advice and strategies contained herein may not be suitable for your situation. You should consult with a specialist where appropriate. Further, readers should be aware that websites listed in this work may have changed or disappeared between when this work was written and when it is read. Neither the publisher nor authors shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.
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‐‐dc23LC record available at https://lccn.loc.gov/2019010837
Cover Design: Wiley
Cover Image: © Vijay Patel / iStockphoto
List of Tables
Table 2.1 A certainty/uncertainty matrix for project risk management.
Table 2.2 Generic source‐event risk classification.
Table 2.3 Examples of natural category risk events.
Table 2.4 Examples of human category risk events.
Table 2.5 Risk classification by organisational structure.
Table 2.6 Customised hybrid approach to risk classification.
Table 2.7 Typical internal category risks for a customised classificati...
Table 3.1 Procurement objectives for a public high school project.
Table 3.2 Operational objectives for café website project.
Table 3.3 Client objectives for the Singapore Gardens by the Bay (SGBB)...
Table 3.4 Key elements to decision making.
Table 4.1 Project risk register template (part 1).
Table 4.2 Project risk register template (part 2).
Table 6.1 A typology of risk identification techniques.
Table 7.1 Typical activities for reinforced concrete floor slab casting...
Table 7.2 Resourced slab casting cycle activity schedule.
Table 7.3 Bar chart for product personalisation IT project.
Table 7.4 Task list for room renovation project.
Table 7.5 Failure modes and effects criticality analysis (FMECA) exampl...
Table 7.6 Hazard and operability studies (HAZOPS) example.
Table 7.7 Safety hazard analysis (SHA) example.
Table 7.8 Typical architect's preliminary checklist for a construction ...
Table 7.9 Schedule for botanic gardens display event.
Table 7.10 Botanic gardens display event: opening ceremony schedule.
Table 7.11 Typical list of design elements for a construction project.
Table 7.12 An IT project attributes checklist for assessing project ris...
Table 7.13 Resourced WBS/generic risk category matrix.
Table 7.14 Project risk item record.
Table 8.1 Three‐point risk assessment measures.
Table 8.2 Five‐point measures of likelihood.
Table 8.3 Alternative five‐point measures of likelihood.
Table 8.4 Five‐point measures of impact.
Table 8.5 Multiple‐impact risk assessment measures.
Table 8.6 Three‐point measure of risk severity.
Table 8.7 Five‐point measure of risk severity.
Table 8.8 Franchise first‐year trading loss EMV.
Table 8.9 Comparative project risk severity assessments.
Table 11.1 Correlation matrix between tools and activities for risk kno...
Table 11.2 A project risk debriefing record template.
Table 11.3 Strengths and weaknesses of small and medium‐sized enterpris...
Table 12.1 Typical areas for culturally influenced organisational pract...
Table 12.2 Negative and positive organisational cultures.
Table 13.1 An uncertainty/resolution space complexity matrix for projec...
Table 13.2 Differentiation complexity in projects.
Table 14.1 Spheres commonly associated with politics.
Table 14.2 Factors associated with political risks.
Table 15.1 Five‐point interval scale for opportunity risk financial imp...
Table 15.2 Multiple measures of opportunity risk impact.
Table 15.3 Three‐point opportunity risk potential matrix.
Table 15.4 Five‐point opportunity risk potential matrix.
Table 15.5 Comparison between threat and opportunity risk treatment opt...
Table 16.1 Strategic PRM issues.
Table 17.1 PRMS design framework.
Table 17.2 PRMS performance review criteria.
Table 18.1 PRMS computer software application types.
Table 18.2 Conditional statements for three‐point risk severity rating.
1
Table A.1 D&C Contractor's project risk management processes and proced...
Table A.2 Contextual issues explored by D & C contractor.
Table A.3 ‘Top 10’ contractor risks identified for correctional facilit...
2
Table B.1 Level crossing site packages and procurement systems.
6
Table F.1 Functional management for aquatic theme park project.
Table F.2 Company–project alignment policy.
List of Figures
Figure 2.1 Threat and opportunity risk.
Figure 2.2 Project information/uncertainty symmetry.
Figure 3.1 A hierarchy of project objectives.
Figure 3.2 Project phases.
Figure 3.3 Project elements.
Figure 3.4 Project interphase decision making effects.
Figure 3.5 Project stakeholders.
Figure 3.6 Project stakeholder coalitions.
Figure 3.7 Hospital project organogram.
Figure 3.8 Settlement upgrading project organogram.
Figure 3.9 Electrical substation project organogram.
Figure 3.10 Residential development project organogram.
Figure 3.11 Construction company organisational structure.
Figure 3.12 Engineering consultancy organisational structure.
Figure 3.13 A project decision making process.
Figure 4.1 Approaches to managing project risks.
Figure 4.2 The dynamic cycle of project risk management.
Figure 4.3 A design‐build (DB) project's design‐bid stage: information, un...
Figure 4.4 A design‐build (DB) project's build stage: information, uncerta...
Figure 4.5 An IT project's concept development stage: information, uncerta...
Figure 4.6 An IT project's development stage: information, uncertainty, an...
Figure 5.1 Project system boundaries.
Figure. 5.2 Project risk driver contexts.
Figure 6.1 Design consultant risk management workshops in a construction p...
Figure 6.2 Bidder's risk management workshops in the construction project ...
Figure 6.3 Contractor's risk management workshops and the project construc...
Figure 7.1 Screenshot (MS Project) of critical path network (CPN) example....
Figure 7.2 Decision tree analysis (DTA) example.
Figure 7.3 Event tree analysis (ETA) example.
Figure 7.4 Fault tree analysis (FTA) example.
Figure 8.1 Expected utilities for DTA of travel outcomes.
Figure 8.2 Outcome probabilities for ETA of ferry vehicle loading door inc...
Figure 8.3 FTA causal factor probabilities for chute deployment failure.
Figure 8.4 Risk severity spider chart.
Figure 9.1 Strategic risk responses.
Figure 10.1 The risk severity–management responsibility relationship.
Figure 11.1 A knowledge transformation sequence.
Figure 11.2 The knowledge creation cycle.
Figure 11.3 An interactive project risk management knowledge process.
Figure 12.1 Elements of organisational culture.
Figure 12.2 Stakeholder‐to‐project cultural risk shaping and management.
Figure 13.1 Project elements, environments, and complexity factors.
Figure 17.1 Risk management maturity levels.
Figure 17.2 Level 2 organisational project risk management maturity.
Figure 17.3 Level 3 organisational project risk management maturity.
Figure 17.4 Level 4 organisational project risk management maturity.
Figure 19.1 A hybrid multi‐model of human and project risk communication....
Preface
If ‘project’ is part of your daily vocabulary, then this book is aimed at you. It is intended to appeal to practitioners of project management across a wide range of industries and professions; to people working in the private and public sectors, and those in the arts and entertainment; as well as to business organisations, service providers, and manufacturers. Students are very much included in our target readership as they pursue their academic journeys on the way to entering hopefully satisfying and rewarding careers.
An overview of the content is provided in Chapter 1. Besides offering a systematic approach to project risk management that we hope is easy to follow and understand, we have introduced topics generally not found in other books on this subject but which have an important bearing on how risks are managed, particularly those associated with today's projects. The additional matters we have dealt with include risk knowledge management, cultural risk‐shaping, project complexity, and political risks. Strategic risk management is also considered. These topics are based upon our own project experiences, and reflections on how they might influence project risk management practice. Six project case studies (located as Appendices) are used to exemplify many of the points we make, together with many examples within the chapters.
We have adopted generic and multi‐stakeholder perspectives of projects. This means that, whatever the types of projects in which you are involved, and whatever role you play in them, you should be able to apply the principles and processes of systematic and effective risk management in your work without constantly having to recontextualise them.
If you are a practitioner, as either a project manager or someone who specialises in risk management, we concede that you probably just want to get on with managing your projects and the risks associated with them. The inevitable time constraints for all projects will almost certainly already impact severely on the opportunities you have for reading. If this is so, then the arrangement of topics should help you. While they are predominantly sequential (in a flow process sense), the topics are distinguished as separate chapters, easily enabling you to dip in and out of them in a convenient way. The contents should meet several needs: as a refresher for your current risk management processes; as a guide to benchmarking them; or as a framework for replacing informal, reactive, and intuitive ways of dealing with project risks with a more formal, systematic, and proactive approach.
If you are a student, whatever your academic discipline, you will almost certainly be expected to take a project‐oriented approach to your studies, and will also experience the pressure of time. You have to read and investigate so much about so many matters, and to demonstrate your knowledge acquisition through examinations and assignments, that what looks to be a ‘quick fix’ solution to learning about project risk management may look very attractive. You are right – it is! The ‘dipping’ topic arrangement should also suit you, but we suggest only after you have read and reflected upon the basics of risk management in the early chapters. Risk and risk management are big learning topics (as is project management), so dealing with them is never going to be just a quick process. We offer no easy solutions, but rather a systematic and comprehensive approach to project risk management that will serve you well in study and eventually in practice. Our book will not only provide you with a fundamental grasp of the principles and processes of project risk management, but should also help you to maximise the value of the experiential learning you gain from your own projects, now and in the future.
Instructors will find the structure of the book useful for preparing programmed reading guides for their students.
It is fashionable these days to argue that the internet will completely replace the need for books. While the Web is a huge and useful resource, it does come with its own risks. In Chapter 18 (Computer Applications), we note the vast number of hits following the entry of a risk‐related term into an internet search engine. Not only would this result impose a huge task in sifting what is relevant from what is not, but there is also a substantial risk of finding information that is simply incorrect – the Web offers no certain guarantees for accuracy, reliability, and authenticity. We hope our book satisfies all three criteria.
Our aim is to provide an introduction to, and comprehensive treatment of, project risk management that will guide and assist people and organisations tasked with dealing with those risks.
As authors, our objectives are to:
Effectively communicate a conceptual and philosophical understanding of risk.
Establish the nature of projects and the stakeholders involved in them.
Present a systematic and logically progressive approach to the processes of project risk management.
Discover the drivers of project risks and the factors which shape them.
Emphasise the importance of capturing and exploiting project risk knowledge.
Provide guidance about implementing and building (or improving) project risk management systems in organisations.
We are friends, colleagues, and family, coming from different generations and different backgrounds and professions. We think those differences contribute much to the strength of the book.
Peter J Edwards trained originally as a quantity surveyor in the construction industry in the United Kingdom, and holds a Master of Science degree from the University of Natal and a PhD awarded by the University of Cape Town. Although now in retirement, he is currently an Adjunct Professor at Royal Melbourne Institute of Technology (RMIT) University in Melbourne, Australia and continues to be active in research and writing. He has authored and co‐authored more than 170 peer‐reviewed journal and conference papers, two books, and five book chapters. Many of these publications relate to project management and risk management. He has worked in the United Kingdom, South Africa, the USA, Australia, and South East Asia, and has taught undergraduate and postgraduate project risk management courses at universities in several of those countries. He has also undertaken consultancy work in project risk management.
Paulo Vaz Serra is a civil engineer with over 20 years of experience in construction management, including operational, research, and development responsibilities in construction companies in Portugal and Spain. He holds a Master of Science degree in Construction and a PhD in Civil Engineering with a focus on knowledge management. Paulo is currently a Senior Lecturer in the Faculty of Architecture, Building and Planning at the University of Melbourne, where he coordinates the courses Risk, Means and Methods and Procurement Methods in Construction within a Master of Construction Management degree programme. Paulo is a Senior Member of the Order of Portuguese Engineers, and a Chartered Member of the Institution of Civil Engineers (MICE) of the United Kingdom.
Michael Edwards has a Bachelor of Science degree, majoring in Mathematics, awarded by Monash University in Melbourne. Over more than 20 years, his work in a large department of the Australian federal government has involved initiating and managing projects for services, and service improvements, implemented not only within the department but also offered on a tender or fee‐for‐service basis to other government departments and to private sector organisations. He is thus experienced in stakeholder management.
Peter J Edwards was a co‐author in an earlier book about project risk management (Edwards and Bowen 2005) which is no longer in print. While some of the material of that book has been included in this one, sufficient new material (and thinking about project risk management) has emerged over the past decade to justify describing this as a new book (with a new publisher) rather than a revised edition of the old one.
We hope this book meets with your expectations, and that it will provide a solid foundation and guidance for your practice in project risk management.
Reference
Edwards, P.J. and Bowen, P.A. (2005).
Risk Management in Project Organisations
. Sydney, NSW: University of New South Wales Press. ISBN: 0868405744.
Acknowledgements
We offer sincere thanks to the many people who have helped us with this book. Their contributions have enriched the content in ways that always exceeded our expectations.
In particular we thank Mike King, Andy Kwek, Peter Lawther, Sean McGoohan, and Gary Ullmann, not only for their willingness to contribute their knowledge and wisdom, but also for their time and patience in doing so. The information contributed by postgraduate students Moses Chiropa, Donald Matjuda, Lisalokuhle Mbobo, and Dube Ndabezinhle is gratefully acknowledged.
Our gratitude is also due to Rozanne Edwards for her comprehensive text editing work and design suggestions. It was a huge support for us.
Of course, none of our writing effort would have been possible without the encouragement and forbearance of our beloved families.
Glossary
Term
Amplification
Explanation
AI
Artificial intelligence
A process whereby knowledge is generated automatically through learning algorithms incorporated into a computer‐based application.
AS/NZS
Australian Standard/New Zealand Standard
Previous joint publishers of standards for Australia and New Zealand (see their replacement, SA/SNZ).
BOO; BOOT
Build‐own‐operate; Build‐own‐operate‐transfer
Building procurement system alternatives which define larger and longer project roles for the construction contractor.
CAD
Computer‐aided design
Computer application with graphic design interface capability.
CPN
Critical path network
An analytic project scheduling technique.
DB
Design‐build
A procurement system for construction projects (see also D & C) in which the contractor has responsibility for both design and construction.
DBFO
Design‐build‐finance‐operate
See DB and D & C. A procurement system whereby the contractor not only has responsibility for project design and construction, but also has an equity share in the investment and will operate the completed facility.
D & C
Design and construct
A procurement system for construction projects (see also DB).
DCF
Discounted cash flow
A mathematical technique for modelling the effects of time on the cash flows occurring over the life cycle of an investment.
DTA
Decision Tree Analysis
A quantitative decision support tool.
ECP
Elemental cost planning
A technique, based upon quantitative measures of the discrete design elements, used by professional quantity surveyors to estimate the probable tender price for a proposed construction project or to achieve a balanced distribution of element costs by comparing them to historic projects.
EMV
Expected monetary value
A quantitative financial decision support tool.
EOI
Expression of interest
Issued as an invitation to participate in a project bidding process.
EPM
Enterprise project management
Total in‐house responsibility for managing the delivery of projects in an organisation (see also PMO).
ETA
Event Tree Analysis
A quantitative decision support tool.
FM
Facilities management
The ongoing management of activities relating to maintenance, repair, component replacement, and energy efficiency during the operational phase of a facility.
FMECA
Failure Mode and Events Criticality Analysis
An engineering technique used in manufacturing to analyse the causes and seriousness of component failure.
HAZOPS
Hazard and Operability Study
An engineering technique, using predetermined conditional statements, to explore operational cause and effect situations during the project design stage.
HSE
Health and Safety Executive
Quasi‐government authority in the United Kingdom responsible for establishing and administering national health and safety compliance requirements.
IP
Intellectual property
Rights to the legal ownership of ideas.
IRR
Internal rate of return
A form of DCF modelling which finds the percentage rate that will discount all cash flows occurring over the life cycle of an investment to a zero net present value for the whole investment (also known as the ‘yield rate’).
ISO
International Standards Organisation
Publisher of worldwide standards.
IT; ICT
Information technology; information and computer technology
Technologies (usually computer‐based) that deal with the processing of data and information.
KMS
Knowledge management system
The arrangement of explicit knowledge in an organisation in order to facilitate inputs and access.
NLP
Natural language programming
The use of computers to understand and process natural language (text or speech) in order to carry out required functions.
OHS
Occupational health and safety
A term used to typify situations pertaining to the workplace health and safety of people.
OR
Opportunity risk
Uncertainty with beneficial effect upon project objectives.
ORR
Organisational risk register
An interactive collection of risk information and knowledge at the organisation level.
PM
Project manager
The person given responsibility for managing all activities and processes required to bring a project from inception to completion.
PMI
Project Management Institute
US‐based organisation for professional project managers.
PMO
Project Management Office
A unit within an organisation that is made responsible for managing the delivery of its projects (see also EPO).
PPP
Public‐Private‐Partnership
A procurement system for integrating the delivery and operation of public infrastructure and services projects.
PRM
Project risk management
Activities at the project level pertaining to the management of project risks.
PRMS
Project risk management system
A structured, organised, and documented system established by an organisation for the purpose of dealing with project risks (see also RMS).
PRR
Project risk register
An interactive collection of risk information and plans for risk management activity at the project level.
RFID
Radio frequency identification device
A wireless‐enabled electronic identification tag or marker.
RFT
Request for tender
Issued as an invitation to participate in a project bidding process.
RKMS
Risk knowledge management system
A knowledge management system separately dedicated to project risks and not incorporated with an organisation's general knowledge management systems (see also ORR).
RM
Risk manager
The person responsible for ensuring that the risks an organisation faces are managed proactively as far as possible.
RMS
Risk management system
A structured, organised, and documented system for dealing with risks (see also PRMS).
SA/SNZ
Standards Australia/Standards New Zealand
Joint publishers of standards for Australia and New Zealand (see also the earlier AS/NZS).
SGBB
Singapore Gardens by the Bay
Botanical gardens project in Singapore.
SHA
Safety hazard analysis
A prescribed format for analysing and recording potential threats to work safety and the responses proposed to avoid or mitigate them.
TR
Threat risk
Uncertainty with adverse effect upon project objectives.
VCE
Virtual constructed environment
A dynamic computerised graphical simulation, usually three‐dimensional, of a building design or construction process.
VE
or
VM
Value engineering
or
Value management
A management technique used in the project design stage and based upon identifying required functions for project components and then speculating about alternatives that could deliver the same function at lower cost, better function at the same cost, or better function at lower cost. Value is defined as a measure of worth calculated from the delivered function and the cost to achieve it.
WBS
Work Breakdown Schedule
A project planning technique which analyses a project by the activities required to undertake and complete it.
1Introduction
1.1 Introduction
In this introductory chapter, we describe the project and project stakeholder perspectives that we have adopted to frame this book. Since we cover a range of topics and readers will have different levels of knowledge and experience about projects, project risks, and their management, we also provide a brief overview of the contents of the book. The chapter synopses will guide you in choosing the actual sequence you wish to follow for individual reading, but we recommend that you do follow the order for Chapters 4–10, as these chapters embrace the sequential and systematic application of project risk management processes.
1.2 The Project Perspective
We live in a world that is highly focused on ‘development’ and has become increasingly ‘project‐driven’. This is largely because projects are seen to be more ‘containable’ than other methods of achieving development goals. Projects are perceived as having clearly identifiable beginnings and finite endings (although sometimes these are hard to pinpoint precisely). The fulfilment of sought‐for objectives is intended to deliver desirable (and hopefully measurable) outcomes. It is thus assumed that the project approach is more manageable than other ways of doing things, although that assumption may not always translate easily or fully into reality.
Projects are endeavours usually surrounded by uncertainty and often cloaked in risk. While we tend to regard them as exclusively human undertakings, projects do occur in the natural world. Beavers build dams across watercourses; termites construct elaborate edifices to shelter themselves from harsh extremes of weather; birds build nests to accommodate their young. These creatures also face risks as they go about their ‘project’ work.
Managing risks is an important part of managing projects, as much for human society as for natural fauna. This book describes a comprehensive and systematic approach to the management of project risks. Whilst we have no plans for further references to animals and insects, their potential contribution to risk management should not be ignored. Biomimicry has become an important source of innovation for contemporary society in many fields, and there is every reason to suppose that it could also contribute to risk management.
Project management, as an art and a science (hence its vulnerability to many interpretations), stems largely from the construction industry, which has been project‐based since human beings first attempted to create shelter for themselves. Since then, we have become increasingly aware of the need to organise the ways in which our building activities are planned, resourced, and carried out in order to satisfy our need to develop our physical environment. Traditionally, therefore, project management has been associated with building projects, and many books (including those on risk management) retain that perspective exclusively.
In this book, however, we have tried to embrace the project‐driven nature of contemporary society more fully and have deliberately adopted a generic project perspective.
All projects are exposed to risks. While particular risks will be different for varying projects and project environments, we intend to demonstrate that it is possible to adopt a systematically uniform approach in order to deal with those risks. Thus, while many of the examples presented in this book are taken from projects in the construction industry, we have sought to include others from a range of different fields. The actual risks will not be identical (although many will be similar), but the risk management principles remain the same.
1.3 The Project Stakeholder Perspective
All projects involve stakeholders: those people or entities that have capacity to influence the decision making associated with projects. We explore this concept in greater depth later in this book. Suffice it to say here that every project involves multiple stakeholders (or at least more than one). I may decide to embark on a renovation project on my house. While it is ‘my’ project, it is likely that other family members will be involved, that tradesmen will be engaged and external suppliers sourced. I may have to approach consultants for advice or even apply for permits from local authorities. To a greater or lesser extent, each and all of these will influence the decision making that inevitably surrounds the project. Anyone with that capacity has to be regarded as a stakeholder. How much influence they have will determine the nature, level, and treatment of the risks involved.
Similarly, you may propose a project to write a book as a sole author. However, if you want others to read it and if you want to earn royalties from its publication, other people will become involved in and help to make decisions about the publication process. The same scenario applies to artistic and creative works. While the intellectual inputs may be entirely individual on the part of the artist, if the project outcomes are intended to become available to others, or even to just a single end‐user or purchaser, then we might argue that the follow‐up process is also part of the project and thus susceptible to decision making beyond that of the original artist. Few artists can afford to ignore their ‘market’.
A single project stakeholder perspective is thus only tenable if the project outcomes were never meant to be available to anyone other than the project originator.
However, while all may be involved in bringing a project to fruition, each stakeholder is likely to have at least some objectives that are different to those of other stakeholders. By definition, as we shall see in Chapter 3, this means that each stakeholder will be exposed to different risks, albeit possibly of a similar type but of varying uncertainty in terms of likelihood and consequence. Each stakeholder may have to manage its risks in ways that may be subtly different to those of other project stakeholders.
Logically, therefore, whatever the organisational arrangement of stakeholders in a project, any attempt to insist upon a common risk management system for that project is neither practical nor advisable, particularly where the stakeholders are autonomous entities. Even where projects are undertaken ‘in‐house’ by an organisation (e.g. under project management office [PMO] or enterprise project management [EPM] arrangements), there will still be other stakeholders involved, including other departments within the host organisation and external stakeholders supplying goods or services to the project.
In this book, we adopt a stakeholder perspective that assumes that each stakeholder implements its own risk management system for each of the projects in which it is involved. Ideally, each stakeholder will employ an overarching approach that, while dealing individually with all of its risks on each of the projects in which it is involved, will apply common principles of risk management throughout, and will capture risk knowledge from each project to the benefit of the whole stakeholder organisation.
The project and project stakeholder perspectives outlined here provide the essential context for the whole of this book.
1.4 Overview of Contents
As noted in Section 1.1, the chapter synopses in this section should help you to determine the topic sequence you wish to follow. For those who are involved in teaching project risk management, the synopses may help you to formulate a useful reading programme for students.
In Chapter 2, attention is given to understanding risk itself. Definitions of risk are explored, and common risk terms set out. Positive and negative concepts of risk (threat risk and opportunity risk) are presented. The psychology of risk is considered, together with risk awareness. Risk and uncertainty are distinguished, and their association is clarified. The dynamic nature of risk is discussed. Approaches to classifying risks are considered. The important topic of risk communication is introduced here, but it is treated more comprehensively in Chapter 19 (Communicating Risk).
Chapter 3 is all about projects, further consolidating the essential platform upon which the processes of managing project risks can be presented. The nature of projects is considered, in terms of their life cycles and processes. Additional thought is given to project stakeholders and their influence. Project decision making is considered, and the chapter concludes with some wisdom about what may constitute a risky project.
National and international risk management standards are described in Chapter 4, which then presents a systematic approach to project risk management in the form of an experiential learning cycle. This provides an essential precursor for the more detailed presentation of the stages of the risk management process in subsequent chapters.
In Chapter 5, the important preliminary task of establishing the internal and external contexts for a project is presented, together with the importance of considering the risk drivers operating in those contexts.
For risks to be managed, they must first be identified. This process is dealt with in Chapters 6 and 7. Approaches to identifying project risks are first considered and then followed by a presentation of several risk identification tools.
Following identification, risks should be analysed and assessed in terms of their individual and comparative magnitudes or levels. Chapter 8 presents simple ways of doing this so as to provide an informed basis for subsequently deciding what should be done about the risks. The emphasis in this chapter is upon qualitative risk assessment.
The response options and types of proposed treatment actions available for project risks are presented in Chapter 9. At this point, the risk management process usually moves from exploration and planning to the active reality of implementing the project. Most risks are now ‘closer’ in time. Chapter 10 therefore deals with activities related to monitoring and controlling risks during the project delivery process.
It is said that ‘if we do not remember history, we are doomed to repeat it’ (George Santayana, 1863–1952: https://en.wikipedia.org/wiki/George_Santayana). In Chapter 11, the importance of project risk learning is considered, specifically through risk knowledge management. Knowledge about risks, captured from individual projects, is systematically recorded by the stakeholder organisation as a means of gaining important wisdom about risk that can be exploited for future projects. Much of this chapter content is unique in the risk management literature.
While Chapter 11 concludes coverage of the essential processes of systematic project risk management, we believe that our book would be incomplete without some attention to other topics closely associated with risk.
Relatively new to the risk management literature is consideration of the way in which risks are culturally shaped. Chapter 12 explores this concept from the perspectives of society in general and from the organisational characteristics of project stakeholders.
Modern projects are often described as complex, especially when they fall into the category known as ‘mega‐projects’. Complexity and its implications for project risk management are discussed in Chapter 13.
In addition to complexity, many projects (regardless of nature or scope) are beset by political influences that affect how they are conceived and delivered. This has impacts upon the risk management activities of the stakeholders. Political risks are discussed in Chapter 14.
In Chapter 15, opportunity risk is considered as a desirable obverse of the two‐sided coin of risk. Differences in the management of threat and opportunity risks are considered.
Strategic risk management, as a responsibility of senior management that is distinct from the everyday processes of systematic risk management but still highly relevant to them, is discussed in Chapter 16.
Chapter 17 provides guidance about the process of building and maturing a risk management system in a project‐based organisation, and Chapter 18 briefly considers computer‐based risk management software applications. Other information technology (IT)‐based tools are described.
The important topic of communicating risk is expanded in Chapter 19. Starting with a theoretical foundation, this chapter presents a model of communication and its components. The chapter then considers the implications of all this for communicating risk information within a project stakeholder organisation, externally to other project stakeholders, and beyond that to the public. The placing of this chapter late in the book is deliberate, as it allows us to draw on all the various aspects of project risk management and reconsider them from a communication perspective.
Chapter 20 presents conclusions about project risk management and offers some views about its future.
Appendices then present six case study projects:
A correctional facility project
A rail improvement project
An aid‐funded project and project consultant
A train mock‐up project
A hot‐rod car project
An aquatic theme park project.
These studies exemplify topics discussed in earlier chapters, and references to them are made in appropriate places throughout the book. They provide comparisons and contrasts in terms of project risk management principles and processes.
Without wanting to be too radical, may we suggest that you consider reading the case studies first! They will give you a greater awareness of the different contexts for different projects. Then, as you read the rest of the book, you will better appreciate the references we make to them. We are also certain that you will find other instances where no case study references are made but which are highly relevant to your own project risk management experience – that creates a ‘win‐win’ outcome for you and for us!
The case studies, together with the many other examples included in the book, should provide a rich menu of topics for discussion and tutorial groups.
1.5 Limitations Caveat
Our book provides a comprehensive treatment of systematic risk management for projects that is lacking in only two aspects. The synopsis for Chapter 8 does not include comprehensive or sophisticated mathematical techniques for analysing and assessing risks, nor does it provide detailed information about specialised computer applications associated with such decision support analysis. The two omissions are deliberate.
A sound understanding of the concepts of risk and the principles and processes of risk management is an essential prerequisite to all mathematical risk modelling. If risks are not understood conceptually, then no amount of mathematical treatment and analysis will resolve that deficiency, and the data inputs and outputs associated with sophisticated computerised modelling tools are likely to be spurious – a truly ‘black box’ situation that presents a comprehension dilemma. Obtaining adequate and reliable input data to service such models may itself be a difficult and expensive, if not impossible, task.
We do not claim that mathematical modelling has no place in project risk management, but rather that it is not a critical requirement for every project. Where such modelling is needed, the necessary expertise can be acquired or hired separately, as long as the project stakeholder fully appreciates the need for such effort, is willing to commit the resources required for it, and also understands the value, implications, and limitations of what the modelling will deliver.
Highly mathematical approaches in risk management are beyond the purview and objectives for this book, and really warrant a separate treatment.
In practice, most project stakeholders rarely need to undertake complex mathematical risk analysis. What they most want is to identify the risks they face and assess them in order to determine or prioritise resource requirements, explore treatment options, decide upon appropriate responses, and then successfully monitor and control the treated (or untreated) risks as the project proceeds from inception through the procurement process and beyond. The content of this book is therefore based upon these premises and focuses upon the more practical requirements of project risk management.
Although some discussion of computerised systems is presented in Chapter 17, detailed information about currently available risk management software applications is not provided. The frequent upgrading of such applications, and the rapid pace of development in modern IT and artificial intelligence, would almost certainly impact negatively on the ‘shelf life’ of the book.
We hope you will find this book useful in your project work, and that you will enjoy reading it.
2An Overview of Risk
2.1 Introduction
If project risk management is to be effective, the people directly involved with it need to share a common understanding of what risk actually means for that project. This may be easier to say than to achieve, since risk is a ‘social construct’. It is perceived and acted upon (or ignored) by people. Given the vagaries of human nature, it is understandable that perceptions of risk will differ, not only between individuals but also between groups (e.g. organisations and professions) and even among societies.
In this chapter, we explore definitions of risk and how it is perceived. The ‘two‐sided coin’ of risk (i.e. threat and opportunity) is advocated. The association between risk and uncertainty is explored, and we consider the dynamic nature of risk. Theoretical precepts that constitute the psychology of risk – thus making it a ‘psychosocial construct’ – are discussed, together with risk awareness.
The classification of risk is important, as familiarity with different types of risk facilitates shared understanding about them. Achieving shared understanding requires effective communication of risk and risk management.
2.2 Risk Definitions
Risk is sociologically grounded. We derive our general understanding about risks, and our attitudes towards them, largely from the society in which we live and work.
For example, a community that knew nothing about money, as a means of payment for goods and services, would not appreciate financial risk per se, but instead might have a strong awareness of the risks associated with bartering goods and services (i.e. exchange risk). Similarly, a society that had no knowledge of the practice of human surgery could have no understanding of surgical risk, but might have developed a prescient knowledge of the efficacies (and dangers) of natural remedies in the treatment of illness and disease. A religious sect with particular values and beliefs might even understand the risk of dying through an outbreak of food poisoning by ascribing it to the divine disposition of some higher being or force.
For most of our encounters with risk, the concept of risk as a social construct makes little difference to the way in which we respond but, if you are working in a multicultural environment, the various ways in which risk is understood cannot be ignored entirely. For example, the approach to occupational health and safety risks on a construction project in a country such as Singapore, with its different ethnic cultures and its extensive use of foreign labour drawn from many countries, needs to be carefully considered, especially in terms of inculcating safe working practices among on‐site workers. Increasing globalisation in many aspects of human endeavour means that achieving mutual understanding of risk, particularly in a project context, is also increasing in importance.
