Project Risk & Opportunity Management

- Usually Ignored In Project Environment - A Significant Cause for Project Failures -

Definitions
Project - Scheme for for Something to Be Done - Outcome, Work, Time & Cost Risks - Chance, Degree of Probability of Loss, Damage, Hazard or Injury Opportunities - Combination of Circumstances Favorable for Purpose Management - Manner for Handling, Controlling, Directing, ...

Risks & Opportunities Management (ROAM)

Important Part of Planning Process Uniqueness of Associated Techniques & Tools Identification and Evaluation of Both R & O Determine & Manage Planned Actions to Mitigate Risks Enhance Opportunities

Can Be Encountered at Any Point in Cycle

Integration Management
Work of Project Must be Integrated With Other Work of Organization(s) Scope of Project & Scope of Deliverables Deliverables from Various Functions (Technical, Business, Operations, ...) Plans, Designs, Resources, Contracts, Handling Risks & Uncertainties

Risks & Opportunities Management

Identification - Likely, Character & Effects
Technical - State of Art, Innovative, Leading Edge, ... Schedule - Most Likely, Pessimistic, Optimistic Cost - Unknowns, Stretch-Out, Work-Around

Quantification - Evaluation & Interactions that

Could Effect Outcomes Response Development Control

Risks & Opportunities Management

Map of Project Cycle - Define or Wander Sequence Models - Reviewing Progress Activities & Events - Disciplined, Orderly & Methodical Customer Needs & User Requirements Contracts for Product or Services Champion & Core Team

Risks & Opportunities Management

Determine - Scope, Timing & Funding Specification - Appropriate, Over or Under Define - Methods, Participants, Commitments Design - Operations, Allocations & Details Development - Functions, Model, Configuration Verification - Operations, Environments, Interfaces, Compatability, Interchangeability, Limitations, etc. Production & Delivery - Products & Services

Risks & Opportunities Management

Control Gates Requirements Review Design Reviews & Corrective Actions Readiness Reviews
Test & Verification - Correct & Redo Production - Accept, Reject & Rework Operations - Feedback, Correct & Improve Support - Materials, Manuals & Training

Risks & Opportunities Management

Society Values Risk Taking Not Gambling Risks - Chances of Not Achieving Results Opportunities - Chances for Progress and Advancement, and Improving Value Deciding To do Nothing To Take Preventive or Causative Action To Take Contingency Action Later if Triggered

Risks Management
0 Probability of Failure - Pf 1.0

Mitigate Probability & Consequence Toward Zero

Low

Adverse Consequence - Cf

High

Opportunities Management
0 Probability of Success - Ps 1.0

Manage to Enhance High Benefit & High Probability

Low

Benefit - Bf

High

Risk & Opportunity Assessment Model (ROAM)

High

Project Opportunity

Medium

Low

Low

Medium

High

Risk Assessment

Risk & Opportunity Assessment Model (ROAM)

High

Project Opportunity

Medium Marginal Opportunity Low Risk Low Low Medium High

Risk Assessment

Risk & Opportunity Assessment Model (ROAM)

High

Project Opportunity

Excellent Opportunity Low Risk

Medium Marginal Opportunity Low Risk Low Low Medium High

Risk Assessment

Risk & Opportunity Assessment Model (ROAM)

High

Project Opportunity

Excellent Opportunity Low Risk

Medium Marginal Opportunity Low Risk Low Low Medium

Excellent Opportunity High Risk

High

Risk Assessment

Risk & Opportunity Assessment Model (ROAM)

High

Project Opportunity

Excellent Opportunity Low Risk

Medium Marginal Opportunity Low Risk Low Low Medium

Excellent Opportunity High Risk

Marginal Opportunity High Risk High

Risk Assessment

Risk & Opportunity Assessment Model (ROAM)

High

Project Opportunity

Excellent Opportunity Low Risk

Medium Marginal Opportunity Low Risk Low Low Medium

Excellent Opportunity High Risk

Marginal Opportunity High Risk High

Risk Assessment

Risk & Opportunity Assessment Model (ROAM)

High

Project Opportunity

Medium

Low

Low

Medium

High

Risk Assessment

Risk & Opportunity Assessment Model (ROAM)

High

Project Opportunity

Medium

Low

Low

Medium

High

Risk Assessment

Project Risks
Implementation Risks
External Risks
Funding, Political Support Shared Technology & Associate Performance

Internal Risks
Planning, Resources, Tools Skills, Subcontractors Performance

Project Risks
Product Risks
Risks of Failure Single Point Failure Modes & Untestables Limited Life Items & Expendables Process Sensitivities

Risks of Hazards Explosives, Flamables, Radiation High Voltage, Toxins, Potential Energy

Project Opportunities
Strategic Opportunities
New Markets & Products New Approach & Repositioning

Tactical Opportunities
Shorten Schedule or Reduce Cost Improve Processes or Value of Output Eliminate Unnecessary Activities Leverage R&D

ROAM Techniques Based on Analysis

Checklists Rules of Thumb/Standards of Performance System Decomposition Failure Mode & Effects Analysis Hazard Analysis, Fault Tree Interviews & Audits with Experts

Planning Techniques
Project Interaction Networks Critical Path & Configuration Items Schedule Slack Similar Efforts & Lessons Learned Technical Surveys Development Test Results Correction and Retest Completions

Planning Scenario
What if .? followed by then what? What Could Go Wrong? What Opportunities Might Become Available? Build a Decision Tree Market Situation Economic Trends

Failure Mode & Effect Analysis

Select Ranking Technique Identify All Single Point Failure Modes Analyze Failures & Mission Effect Determine Those Require Correction Implement Corrective Action Emphasize Doing Early in Project Cycle

Fault Tree Analysis

Select Most Significant Hazards to System/People Identify All Single & Series Failure Modes Analyze Failures & Mission Effect Correction Design and/or Invoke Procedures Limitations Define Boundaries for Safe Use Restrictions Define Not to Exceeds

Assess Probability & Impact

Weighted Value (ML & EL)
Probability of Occurrence Benefit of Opportunity Calculate Value

Examples of Prevention
Redundancy to Eliminate Single Point Failure Use Std. or Higher Quality/ Margin Parts

Quality Tools & Techniques Applied to Risk/Optun Mgmt.

Benefit/Cost & Cost Effectiveness Benchmarking Flowcharting - System or Process Cause & Effect, Fishbone, Decision Diagrams Failure Mode & Effect, Fault Tree Inspection, Sampling, Pareto Control Charts & Trends

Examples of Contingencies
Yellow Line or Area Limits Red Lines or Area Restrictions Establish Thresholds
Variance Analysis Triggers for Corrective Action Competitions Actions Use of Overtime & Expertise Supplements

Over-design for Reliability & Growth

At & a e fi lcn a e t R la M m s o i o n n g ok v ocp iC t e an T t r y a

y r r a R t Sln nt i t h p g tc so u i C o k e p o

H i g h
F F P

L o w
C P F F

F FF P F i i dc Pr x r - m i e e C-o l F F P C ux e F s s e e F t P id

At & a e fi lcn a e t R la M m s o i o n n g ok v ocp iC t e an T t r y a

r R t Cou i t hi t B so ln y k ee r e

L o w
F F P

H i g h
C P F F

F FF P F i i dc Pr x r - m i e e C-o l F F P C ux e F s s e e F t P id

Ca y - a A t o c p W lc nt e y l a t Ts r t o o e & aR Me k a n i gs
1 0 0 0 F P % %F F P E F P R F P I S F P I F C P I F C P A F C P F F C S C O S T 1 0 0 0 L O NES % I E R S RK N O M I % C T CU R P UR RC I OE S D RK

SELER

BUYER

Ca y ocp nt e t Ts r
C l % t lgn G m o u ooI a U v e s s f s l l S e n t P C ei ( on t r ) F-xP ( Pu S) i F r F( m r i d c FL u m e i e ) pm F i E mc d m F t co P Ate Pho i r j w nci e u n s t F - i Ievi Tt P i d cnter a ( I xP c i F r F) er e n me F g C Ch g o o a s t &- r s t i Sn C l Ieve P o uc i F I s s n e F t P nte ( ) C Cl A F P o u a e A s sw e F t P r ( d C) Cl F F P o ux e F s s e e F t P id ( C) I ei DrR T I ei # n n e yes p d t ) d t le( q y n n f e i i v ' t e f e , i T& rs i e Ml m ai ta e BAmB eua r d g a g e (a t r s On s r n l k ce ri ) i c e t nP e s ho e r

Contract Administration Risks Constructive Changes

Defective Specifications Impossibility to Perform Erroneous Interpretation Act of Over-inspection Failure to Disclose Superior Knowledge Acceleration of Performance

Contract Administration Risks Disputes & Default

Default
Failure to Deliver Failure to Make Progress Failure to Perform Contract Provisions "Cure" or Receive "Show Cause" for "Termination" Compensation? Repayment?

Disputes
Relief & Remedies Negotiation & Resolve Judicial/Legislative Terminate for Convenience Interpret/Resolve Ambiguity Eliminates or Changes Requirements Technology Advances Budgetary Considerations