risk management and project management partnership

7/29/2019 Risk Management and Project Management Partnership

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By:

Dr. Mohammed Farid Abdulghany AhmedFathalbab

Financial & Management Consultant

Ph.D, DBA, MBA, IRCA, CPhM, CPES, CWM, CSSBB

CPA, PMP, SAQC, SOCPA. PMI

Dr. Mohammed Farid Abdulghany Ahmed Fathalbab

>>Risk creates opportunity,

>>Opportunity creates value,

>>Value ultimately creates

shareholder wealth.

"Todays business climate is both dynamic and complex. Management faces many risk

challenges due to changing requirements and increasing demands, as well as tight budgets

and fast turnaround demands. Organizations are struggling to do more with less fewer

resources, including less money, and, in many cases a reduced workforce. Therefore, it is

essential to optimize every aspect of business, particularly project management. "

Dr. Mohammed Farid

Acquire knowledge from Cradle to Grave

--Prophet Muhammad (PBUH)


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Risk management and Project management Partnership

Introduction

Risk management have never been a

choice for project management or any

other types of management but it is a

must, we are all risk managers somehow, the rapid

changes in the environmental condition (for both internal

and internal) and the consequence change in the

requirements and specification which reflected on the

continuous shrinking of product life cycle PLC , which

added extra uncertainty , instability and poor ability for

appropriate forecasting and planning, being more

subjective depending on qualitative and not quantitative

techniques in decision making added more importance to

a dynamic risk management. Pivot

RM

A risk management approach is applicable throughout the project life cycle, the

earlier in the project life cycle the risks are recognized; the more realistic the

project plan and expectation results will be. RM continues to add value all over

the project life cycle.

If there is a single key to making project risk management stick in yourorganization, it is to make it an integral part of all project phases and to treat it

just as seriously or more than you do to project scope, budgeting, scheduling and

resources location and allocation.

The simplest means of building project risk management into your project is to

ensure that the early steps, identification, analysis, prioritization and mapping,

and risk resolution planning are a normal part of all the project phases, processes

and activities.

Organizations often build risk identification into the beginning of the project and

require a list of a risk as deliverable at the first project review. But since they do

not continue with full range of risk management activities, they merely identify

risks without receiving the benefits that can be gained from effective risk

management through the later phases of product development.

Risk & Risk management

Riskis a measure of the potential inability to achieve overall project objectives

within defined cost, schedule, and technical constraints. It has two components:

1) The probability/likelihood of failing to achieve a particular outcome,

and

2) The consequences/impacts of failing to achieve that outcome.

Risk events are elements of an acquisition that should be assessed to

determine the level of risk, i.e., things that could go wrong in a project. The



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events should be defined to a level where an individual can comprehend the

potential impact and its causes. For example, a potential risk event for a turbine

engine could involve a turbine blade vibration. Related to this vibration could be

a series of potential risk events that should be selected, examined, and assessed

by subject-matter experts.

The relationship between the two components of riskprobability andconsequence/ impact is complex. To avoid obscuring the results of anassessment, the risk associated with an event should be characterized in termsof its two components. As part of the assessment, there is also a need for backupdocumentation containing the supporting data and assessment rationale.

Risk management is the act or practice of dealing with risk. It includes planningfor risk, assessing (identifying and analyzing) risk areas, developing risk-handlingoptions, monitoring risks to determine how risks have changed, and documentingthe overall risk management program.

1. Risk planning is the process of developing and documenting an

organized, comprehensive, and interactive strategy and methods for

identifying and tracking risk areas, developing risk handling plans,

performing continuous risk assessments to determine how risks have

changed, and assigning adequate resources.

2. Risk assessment is the process of identifying and analyzing

project areas and critical technical process risks to increase the

probability/likelihood of meeting cost, schedule, and performance

objectives. Risk identification is the process of examining the project areas

and each critical technical process to identify and document the associated

risk.

a) Risk analysis is the process of examining each identified risk

area or process to refine the description of the risk, isolating the

cause, and determining the effects. It includes risk rating and

prioritization in which risk events are defined in terms of their

probability of occurrence, severity of consequence/impact, and

relationship to other risk areas or processes.

b) Risk Identification is Determining which risks are likely to

affect the project and documenting them, it is Performed on a

regular basis; address internal and external risks, Identify causeand effect and effects and causes; what could happen vs. what

outcomes should be avoided.

3. Risk handling is the process that identifies, evaluates, selects, and

implements options in order to set risk at acceptable levels given project

constraints and objectives. This includes the specifics on what should be

done, when it should be accomplished, who is responsible, and the

associated cost and schedule. The most appropriate strategy is selected

from these handling options. For purposes of this Practice, risk handling is

an all-encompassing term whereas risk mitigation is one subset of riskhandling.



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4. Risk monitoring is the process that systematically tracks and

evaluates the performance of risk-handling actions against established

metrics throughout the acquisition process and develops further risk-

handling options, as appropriate. It feeds information back to the other risk

management activities of planning, assessment, and handling as shown in

Figure 1.

5. Risk documentation is recording, maintaining, and reporting

assessments, handling analysis and plans, and monitoring results. It

includes all plans, reports for the PD/PM and decision authorities, and

reporting forms that may be internal to the PD/PM.

Risk management Success Factors:

1) Recognize the values of project management as a positive

potential ROI for organizational management, Project stakeholders

(both internal and external, project management and team

members.

2) Individual commitment and responsibility for all project

stakeholders for risk management activities.

3) Open and honest communication as everyone in the

organization are somehow involved in the risk management

activities, any action or attitude that hinder communication about

project risk reduce the effectiveness of PRM in terms of proactive

and effective decision making.

4) Organizational commitment through the alignment of Project

risk management with the organizational goals and values. It is

Important to know that the risk management required a higher levelmanagerial support.

5) Risk effort scaled to project as project risk management

activities should be consistent with the value of the project to the

organization and with its level of project risk.

6) Integration with project management as risk management are

involved with all the project management phases.


Figure 1. Project Risk Management structure


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Figure 2. Project Risk Management success factors

Risk management and Project management phases

The Project management phases are classified into five consequence phases as

follows:

1. Initiation phase

2. Planning phase

3. Execution phase

4. Control phase

5. Close phase

Figure 3. Project Management

Phases

Figure 3. Project Management Phases





If there is a single key to making project risk management stick in your

organization, it is to make it an integral part of all project phases and to treat it



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The involvements of risk management are vary from one phase to another and

from one process to another in the same phase as the type of risk and its impact

vary from one phase to another and from process to another as well which will beexplained in this paper.

1. Initiation phase:

The Project Initiation Phase is the first phase in the project lifecycle and is thepredecessor to the Project Planning Phase. The following diagram, figure 3 candescribe the flow of processes and the sub phases within this phase.

Figure 4. Project Management initiation

phase breakdown

a) The Define sub phase:

The first activity in the initiation phase is to define the project by developing theproject description statement. The project description statement is an informal,high-level statement that describes the characteristics of the product or serviceexpected from the project. It explains the business purpose of the new product orservice and identifies why the product or service is needed. District

b) Analyze: Project Analysis

The purpose of the analysis activity is to identify the best solution to solve theidentified business need or issue. The project analysis activity involves:

Analysis of the business problem; Identification of potential solutions; Studies to determine technical and economic feasibility of potentialsolutions; Comparison of potential solutions; and, Identification of the best solution to recommend.

A feasibility study: is a preliminary study which investigates the deliverables ofthe proposed project and determines the resource requirements, costs, benefits,



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and feasibility of a proposed project. Feasibility studies typically involve

cost/benefit analysis including the level of risk as " high risk = high return. If

costs & benefits can be quantified, they are called "tangible" i.e. increase in

revenue if not they are called "intangible", i.e. increase in customer satisfaction.

The feasibility of a proposed system can be evaluated in terms of 2-major

categories:

1) Organizational feasibility: How well the proposed Project supports

the strategic objectives of the organization.

2) Economic feasibility : is concerned with whether:

a) Expected cost savings,b) Increased revenue.c) Increased Profits,d) Reduction in required investment, ande) Other types of benefits which exceed the costs of developing

& operating a proposed system.

3) Technical feasibility can be demonstrated if reliable resources arecapable of meeting the needs of the proposed Project or can be

acquired or even developed by the business in the required time.

c) Recommend: Project Proposal

The project proposal describes the project in detail and ensures that the projectis consistent with the organizations Strategic Plan As a formal projectdeliverable, it identifies project objectives, provides a project description, definesthe approach, and supplies other top level planning information which, takentogether, establish the scope of the project. Ideally, the project proposal provides

decision makers with information necessary to make project initiation decisions.The project proposal is the foundation for initiation of the project, throughissuance of the project charter. Specifically the document defines:

What is to be done? Why it is to be done? How it is to be done?

How much risk is involved?A Project Proposal Template and Project Proposal Preliminary Risk AssessmentWorksheet are provided to assist in development of the project proposal.

d) Decide: Project Charter

The project charter formally authorizes a project. Approval of the project chartermarks the end of the Project Initiation Phase and the beginning of the ProjectPlanning Phase. Information in the project charter comes from the projectanalysis documents, the project proposal, and other documents that identifybusiness requirements and establish senior management commitment. In orderto complete the charter, an informal plan is required to detail the projectmanagement tasks for completing the initiation phase and conducting theplanning phase of the project.Normally a plan for this purpose can be a simple schedule of tasks or a Gantchart and should include:

A task list required to complete the Project Initiation Phase and theProject Planning



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Phase, (Include any anticipated procurement activities if the projectplanning will be done by a contractor).

A time estimate to complete the Project Initiation Phase and ProjectPlanning Phase

The resources needed to complete the Project Initiation Phase and

Project Planning Phase. A cost estimate to complete the Project Initiation Phase and ProjectPlanning Phase

Information on the cost and time required for project planning will also beimportant if the agency needs to fund these phases outside of the project funds.A Project Charter Template is provided to insure that essential elements requiredto begin a project are included in the charter.

2. Planning Phase Overview

Project planning is the process of defining an orderly arrangement of activities

and resources to deliver a unique product or service. The project plan is the

primary document developed during the planning phase and communicates

project activities in terms of:

a) What tasks will be performed; who will perform the tasks;

b) When will the tasks be performed;

c) What resources will be applied to accomplish the tasks; and

d) How the tasks will be sequenced.

Time spent developing the appropriate structure for organizing and managing

project activities reduces risk through improves performance in the Executionand Control Phase.

Project Plan components and risk management partnership

There are exponential relation between risk discovery during PLC and the cost, as

the late risk discovered during the PLC the higher the cost will be. The Work

break down structure WBS which represents the first planning activity are

actually a risk management technique where project are dissolved into a more

clearer pieces which can easily be understood and resources can efficiently beassigned .The planning phase components and risk management partnership can

be explained clearly as follows:

1. Business Problem (BP) risk assessment BP As stated in the Project

Charter. The risk of poor business problem definition may lead to waste of scarce

resources as it will propagate to the coming phases and lead to the whole project

failure.

2. Assumptions risk assessment - List of the Assumptions made about the

project in the Project Charter. List of any identified changes to the original

assumptions or additional assumptions made during project planning. The risk of



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poor Assumptions definition or update may lead to waste of scarce resources due

to wrong conclusions.

3. Project Description risk assessment Project description shows the

project approach, specific solution, customer(s), and benefits. The Project

Description is stated in the Project Charter. If there are changes to thedescription because of project planning, clearly identify the changes or additions

made to the project description. The risk of poor project approach definition or

updates negatively affects the Project planning processes and will definitely lead

to waste of scarce resources.

4. Project Scope risk assessment a detailed description of the Project Scope

found in the Project Charter and a detailed description of any new identified

scope additions or changes resulting from detailed project planning. The risk of

poor translation of requirements and specification in to appropriate scope and

the needed updates will definitely lead to waste of scarce resources.

5. Performance Plan risk assessment Measures of success are metrics that

measure the success or failure of a project. The measures of success are based

on the project scope and objectives. The risk of wrong selection of the right

measurement tools or scales that measures what really needed to be measured

will l definitely lead to misleading conclusions and waste of valuable resources.

6. Critical Milestone risk assessment Summarizing the Project Schedule by

listing the Milestones or Events on the critical path of the Project Schedule may

be a way to mitigate the risk accompanied with this process, but still there is a

risk of either the appropriate assessment of the critical millstone or the

occurrence of new critical paths due to the detailed project planning.

7. Budget Planning risk assessment Provide a summary in table form of the

expenditures and source of funding for the project during the life of the project.

Identify and explain deviations from the approved funding outlined in the Project

Charter. There are many types of risks in this regards such as the wrong

budgeting implemented technique which lead to a creation of tool that will either

lead to wrong definition funds requirement or being a serious barrier for project

progress technique.

8. Procurement Plan risk assessment Summarize the Procurement Plan for

this project. Include information about major procurements, procurement

strategies, and projected dates for critical procurement activities. The risks in this

regards are many such as suppliers commitments and capabilities, the

appropriate calculation of lead period, the changes of supplies specification and

prices.

9. Risk Planning Summarize the Risk Management Strategy for the project.

Describe the process for identification of risk, evaluation and prioritization of risk,

identification of options for mitigating risk, the process for maintaining the risk



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plan and risk monitoring, and the responsibilities of individuals all over the

project life cycle.

Figure 5. Project Management Knowledge Areas, Lifecycle, Recurring Activities, and over whole

PRM

3. Project Execution and Control Phase Overview

The Project Execution and Control Phase is the part of the project and productlifecycle where the tasks that build the deliverables are executed. The Project

Execution and Control Phase begin when the project plan is approved and theresources necessary for executing the starting task are assembled. Projectexecution should be in accordance with the approved project plan.

a) Executing the Project

Execution is the act of carrying out planned activities. The execution of theproject plan is simply the act of performing task and activities that result in theproduction of the project deliverables. Task and activities performed must becompleted effectively and efficiently and here will be the risk. The project planserves as a road map and a common frame of reference for all members of the

project team. The project plan is therefore, the foundation for successful deliveryof projects. In a perfect world, plans are executed precisely as written. In reality



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the risk is, no plan is ever performed with such precision. Plans are forwardlooking documents that cannot anticipate all eventualities.During execution, the project team to mitigate the risk must continuouslymonitor its performance in relation to the baselined project plan. By measuringand evaluating the actual execution of project activities against the baselineplan, the project team and stakeholders can gauge the progress of the project.

b) Start Up

Moving from planning into execution can be a major obstacle in successfulproject delivery. A project kick off meeting is a valuable risk management tool asit mitigates risks through facilitating the transition from planning activities andtasks to executing them. A kick off meeting enhances execution by focusing theteam on the project and by defining a starting point for beginning projectexecution. Additionally, it is a milestone when all resources needed to beginexecution are assembled and available to the team.

The kick-off meeting mitigates risks as well through providing an opportunity for

communication and establishing the commitment of the team and stakeholdersto the success of the project. The focus of the meeting is communications,identification of team members and stakeholders, reviewing the project scopeand business objectives, identifying the challenges, and identifying the next stepin getting the project underway. At this point, team members and team leadsmust, at a minimum, have copies of the schedule. The schedule must identify toeach person his specific tasks and dates for starting and completing them.

c) Project Performance Monitoring

Performance monitoring is a risk mitigating techniques as it can provideassurance that the project is progressing as planned or reveal the need to

intervene and take action to ensure the achievement of the desired businessobjectives. The execution of project task and activities occur in a cycle were thetask is executed, execution is measured, the results are reported, andmanagement controls needed are applied. Performance monitoring involves thecollecting, analyzing, and reporting project performance information to providethe project team and stakeholders with information on the status of projectexecution. The right Measurements, or metrics, are used to monitor projectprogress and are based on information or data collected about the status ofproject activities or tasks.



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Figure 6. Project Execution and Control Phase Processes

4. Project Closeout Phase

The Project Closeout Phase is the last phase in the project lifecycle. Closeout

begins when the user accepts the project deliverables and the project oversightauthority concludes that the project has meet the goals established. The majorfocus of project closeout is administrative closure and logistics. Project closeoutincludes the following key elements which can be viewed as source of riskselements:

a) Turnover of project deliverables to operationsb) Redistributing resourcesstaff, facilities, equipment, andautomated systemsc) Closing out financial accountsd) Completing, collecting, and archiving project recordse) Documenting the successes of the project

f) Documenting lessons learnedg) Planning for Post Implementation Review



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Figure 7. Project close out Processes

a) Turnover to Operations

The most important aspect (risk) of project closeout is the physical turnover ofcontrol of the product, good, or service delivered by the project. All projectdeliverables will need to be maintained and supported after the project teamdisbands. An operational unit of the organization (for which the deliverable isdeveloped) assumes responsibility for the support of the deliverable. Proceduresfor this turnover and acceptance by the operational unit must be determined.

Turnover and acceptance activities include but are not limited to knowledgetransfer, documentation transfer, and physical transfer of the deliverable. Theknowledge transfer and documentation is a risk management technique tomitigate the chance of occurrence or reoccurrence of the undesired events infuture.A formal acknowledgement of receipt (acceptance) of the project deliverable isexecuted by the operations and project managers.

b) Administrative Closure

Administrative closure involves the preparation of administrative documentation,collection of project documentation, disposition of project documents, and logistics

activities that ensure that the project resources are redistributed. Administrativeclosure includes, but is not limited to, task such as archiving, financial accountclosure, facilities turnover (or closure), contract closure, and personnelreassignment.

1) Collecting Project Archive Data - Historic project data is animportant source of information to help improve future projects. As a riskmanagement technique a Summary of technical information should beelectronically stored for historical reference to facilitate later review. Theproject archive should include a description of the files being submitted, theapplication (including version) used to create the archived materials, and apoint of contact.

2) Personnel - If personnel have been committed to the project full-time, it is important to get the people back into the available resource pool



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as quickly as possible. This will ensure that the staff stays busy and thatthere is no risk of other projects within the organization do not fall short ofresources.

3) Facilities - If the project team has occupied agency facilities for along period of time during the project, it is a good idea to let the controllingfacilities personnel know that the space used for the project will becomeavailable again. Be sure to check facilities guidance documentation todetermine whether changes made to the project team area (structure,equipment, or technical modifications) are the responsibility of the projectteam after the project is complete. Returning the facility and equipment toits original state could add unanticipated cost and manpower to a project.

4) Financial Account Closure - Financial closure is the process ofcompleting and terminating the financial and budgetary aspects of theproject. Financial closure includes both (external) contract closure and(internal) project account closure. All expenditures must be accounted for

and reconciled with the project account. When financial closure iscompleted, all expenditures made during the project have been paid asagreed to in purchase orders, contracts, or inter-agency agreements.

5) Contract closure - Contract closure is the process of terminatingcontracts with external organizations or businesses. These contracts may bevehicles for providing technical support, consulting, or any number ofservices supplied during the project that the agency decided not to performwith internal resources. Contracts can be brought to closure for a variety ofreasons, including contract completion such as early termination, or failureto perform which represents a source of risk to the project. Contract closure

is a typical but important part of project management. It is a simple process,but close attention should be paid so that no room is left for furtherliabilities of the agency.

Conclusion

Todays business climate is both dynamic and complex. Management faces

changing requirements and increasing demands, as well as tight budgets and

fast turnaround demands. Organizations are struggling to do more with less

fewer resources, including less money, and, in many cases a reduced workforce.



15/16

Therefore, it is essential to optimize every aspect of business, particularly project

management.

Risk management have never been a choice for project management or any

other types of management but it is always a must, we are all risk managers

somehow, the rapid changes in the environmental condition (for both internaland internal) and the consequence change in the requirements and specification

which reflected on the continuous shrinking of product life cycle PLC , which

added extra uncertainty , instability and poor ability for appropriate forecasting

and planning, being more subjective depending on qualitative and not

quantitative techniques in decision making added more importance to a dynamic

risk management.





If there is a single key to making project risk management stick in yourorganization, it is to make it an integral part of all project phases and to treat it



The simplest means of building project risk management into your project is to

ensure that the early steps, identification, analysis, prioritization and mapping,

and risk resolution planning are a normal part of all the project phases, processes

and activities.

It clear that Project risk management delivers the following values:1) Contributes to project success;2) Recognizes uncertainty and provides forecasts of possible outcomes;3) Produces better business outcomes through more informed decisionmaking;4) Is a positive influence on creative thinking and innovation;5) Offers better control less overhead and less time wasted, greaterfocus on benefits;6) Helps senior management to understand what is happening with theproject and the challenges the project has to overcome.

It is proved that Project risk management is an integral component of projectmanagement and represents the heart for all Project Management processes. Riskmanagement is also a key component of project cost estimating and scheduling.



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References

ITRM Guideline CPM 110-01 , Date: January 23, 2006

Practice Standard Project Risk Management: 2009 Project management institute

Product development best practice, October 2002, volume 9 Issue 10 Dealing with PRM successfully,special series on risk management: By Preston G.Smith and Guy M. Merritt,


risk management and project management partnership

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