For those who are involved in delivering engineering and construction projects, regardless of their type, size, location among others, understand that they need to make many assumptions to address the many unknowns that could impact the project schedule, cost among other project objectives. By definition, a risk is the possibility of a problem that has not occurred yet, and if it occurs it would have a negative impact on a project budget, schedule and scope.
Managing Projects Risks
To enforce professional project risk management practice, an organization needs to develop and implement a risk management plan that formalizes the processes of risk identification, assessment, response and control. In addition, it should identify how to monitor, control and report project risks. The risk management plan should identify the categories and types of project risks that need to be managed. The risk breakdown structure is an excellent practice for identifying those risk categories and types.
Project Management Information Systems (PMIS) like PMWeb provides a single web-enabled platform to automate the risk identification, assessment and response process as well as monitoring, controlling and reporting the risk management performance. This is of course true to the many other project management processes that will also be managed using PMWeb.
PMWeb custom form builder will be used to design the Risk Form that is specific to meet each organization needs when it comes to managing project risks. The form below is an example of a basic risk input form that was created in PMWeb. In general, the risk form should include as a minimum the likelihood and impact of the risk before taking any risk mitigation actions (pre-mitigation) and the likelihood and impact after risk mitigation (post-mitigation). This will provide the risk score values. In addition, the input form should be aligned with workflow that will be used to involve the authorized project team members in the risk identification, assessment and response steps. It should be noted that different project team members could be involved in this process depending on the risk type, risk score among other risk management attributes.
During the different steps of the risk management process, the project team members involved in this process might find it necessary to upload and attach project and other related documents. For example, this could include specification sections, drawings, progress photographs, weather conditions for the past years, contract agreements, insurance documents among others. Those documents will be uploaded into PMWeb document management repository where they can become available to be attached to the risk form.
In addition, PMWeb allows linking the Risk Form to other PMWeb records like the project schedule, cost estimate, budget, awarded contract among others. This will enable the reviewer to launch that record and review the details. PMWeb also allows linking the Risk Form to websites like the Meteorology and Seismology website of a specific country where the project being executed.
The risk data captured by PMWeb will become the basis for creating the real-time risk register which can be designed in any desired format. The risk register will provide details of each risk along with pre-mitigation and post-mitigation risk scores along with the approved risk mitigation actions. In addition, the risk register could include visuals to group and display the risk score pre-mitigation and post-mitigation as well as the Probability-Impact Matrix that shows the likelihood and impact of each identified risk value pre-mitigation and post-mitigation.
In addition, using PMWeb Business Intelligence (BI) reporting tool, the organization can analyze the volume of reported risks by the risk breakdown structure category and type, project phase, WBS levels, risk owner among others. The granular data captured in the risk management process allows the organization to create different business intelligence reports to dice and slice the risk data.
Another important risk management report is the report that analyzes the additional cost that the organization could incur to treat the identified project risks. This will enable the organization to do a trade-off analysis between the cost that could be incurred due to schedule delays, disruption and other type of damages that could be incurred should the identified risks occur and the cost of treating those risks to reduce their risk score or risk exposure.
Monte Carlo Risk Simulation
The risk data captured in PMWeb can also be aligned with the Project Integrated Schedule where the risk form will include a field to assign the activity that could be affected by the identified risk. This can be used to determine the optimistic, most-likely and pessimistic duration variance for the activity or to identify the probability of this activity occurrence during the project execution.
Using Schedule Monte Carlo Simulation like Oracle Primavera Risk Analysis or Acumen Risk, this schedule risk data can be imported into the software to perform the Monte Carlo simulation. This analysis will provide a number of risk analysis report including Schedule Risk Probability Curve, Tornado Risk Duration Chart, Risk Criticality Drivers among others. Those reports can be generated for the identified risks pre-mitigation and post mitigation. Similarly, and if the PMWeb risk analysis include the cost impact of those identified risks, the Monte Carlo simulation can also analyze and report on the cost risk similar to what done for the schedule risk.
It is a recommended practice to save all the Monte Carlo Analysis reports as PDF and upload them to PMWeb document management repository. Those documents along with the other risk register and analysis reports can be attached to risk review meeting that is held on regular basis to analyze the current project’s risk exposure, new risk identified or risks that are not valid any more, effectiveness of risk treatment measures among other risk related business items that are usually reviewed during those meetings. PMWeb meeting minutes module will be used to capture those meeting minutes and assign responsibility for each action.
Organizations who are involved in delivering engineering and construction projects are now more conscious about the need to manage their projects’ risks. Those organizations understand that for the risk management to be of value, it requires enforcing transparency and accountability when it comes to risk identification, analysis, assessment and response. In addition, those organizations understand that having access to this important risk data that they can trust, they can analyze this data to have better and faster insight on how they can best reduce the threat that those risks could cause the success of their projects delivery.