Clayton - Risk happens!: managing risk and avoiding failure in business projects

MIKE CLAYTON

RISK

Happens!

MANAGING RISK AND AVOIDING FAILURE

IN BUSINESS PROJECTS

Copyright 2011 Mike Clayton

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A CIP record for this book is availablefrom the British Library

eISBN 9789814351805

Cover design by OpalWorks

For my father, Gerald Clayton,
whose attitude to risk still affects my every decision.

Contents

Tables

Table 1.1 Why Crises Happen

Table 2.1 Estimating Techniques

Table 2.2 Common Estimating Errors and Omissions

Table 3.1 Variables of Scale and Complexity for Your Risk Management Process

Table 3.2 Drivers of Scale and Complexity for Your Risk Management Process

Table 3.3 Sample Rolesand Responsibilities for Project Risk Management

Table 3.4 Reasons for Documenting Aspects of Your Risk Management Process

Table 3.5 Typical Contents of a Risk Management Plan

Table 4.1 Core Project Documents

Table 4.2 Typical Considerations for a Project Risk Potential Review

Table 4.3 Indicative Risk Kick-off Workshop Agenda

Table 4.4 Risk Identification Using Personal Experience

Table 4.5 SPECTRES

Table 4.6 Risk Categories

Table 4.7 Risk Register Part 1

Table 4.8 Formal Description of a Risk

Table 5.1 Typical Descriptors for Likelihood

Table 5.2 Typical Probability Ranges for Likelihood

Table 5.3 Suggested Probability Ranges for Likelihood

Table 5.4 Suggested General Scales for Impact

Table 5.5 Suggested Scales for Schedule Impact

Table 5.6 Suggested Scales for Financial Impact

Table 5.7 Suggested Scales for Quality Impact

Table 5.8 Suggested Scales for Scope Impact

Table 5.9 Suggested Scales for Reputational Impact

Table 5.10 Suggested Scales for Health, Safety or Security Impact

Table 5.11 Suggested Scales for Environmental Impact

Table 5.12 Frequently Used Numerical Scale for Likelihoods and Impacts

Table 5.13 Example of an Exponential Numerical Scale for Likelihoods and Impacts

Table 5.14 Failings of Risk Scoring Systems

Table 5.15 Traffic Light Status Definitions

Table 5.16 (a) RMS Method Risk 1

(b) RMS Method Risk 2

(c) RMS Method Calculation

(d) RMS Method Results

Table 5.17 Risk Register Part 2

Table 6.1 Tactics to Remove Project Risk

Table 6.2 Tactics to Reduce the Likelihood of Project Risk

Table 6.3 Tactics to Reduce the Impact of Project Risk

Table 6.4 Contingency Planning Process

Table 6.5 Elements of a Contingency Plan for Project Risk

Table 6.6 Risk Response Plan

Table 6.7 Risk Register Part 3

Table 7.1 Risk Register Part 4

Table 8.1 Leading Indicators of Project Risk

Table 8.2 Crashing the Timeline

Table 9.1 Scenario Planning Process

Table 9.2 Business Continuity Management Process

Table 10.1 The Stages of Resistance to Change

Table 10.2 Examples of Project Stakeholders

Table 10.3 Factors Affecting Stakeholders Attitudes to Risk

Table 10.4 Project Communication Strategy

Table 10.5 Stakeholder Communication Plan

Table 11.1 Typical Factors leading to a High Risk Project

Table 13.1 Typical Benefits of a Strong Risk Management Culture

Table 13.2 Elements of a Strong Organisational Risk Culture

Table 13.3 Steps in Creating a Strong Organisational Risk Culture

Table 13.4 Risk Management Maturity Levels

Table 13.5 Lessons Learned Register

Table 13.6 Post-Project Risk Review

Figures

Figure 1.1 Risk Mirror

Figure 1.2 Project Risk Management

Figure 2.1 Project Cost-Risk Profile

Figure 2.2 Time-Cost-Quality Triangle

Figure 2.3 Time-Cost-Quality-Scope

Figure 2.4 Scope

Figure 2.5 Risk Breakdown Structure

Figure 2.6 Scope Creep and Defining Scope

Figure 2.7 Work Breakdown Structure

Figure 2.8 Product Breakdown Structure

Figure 2.9 RACI Chart

Figure 2.10 PERT Estimates

Figure 2.11 Slippage in Highly Dependent Tasks

Figure 2.12 Islands of Stability in a Project Schedule

Figure 2.13 Cost and Organisational Breakdown Structure

Figure 3.1 The Risk Management Process/span>

Figure 3.2 Core Risk Management Documents

Figure 4.1 Periodic Review to Identify New Risks

Figure 4.2 Starting Place for Identifying Project Risks

Figure 4.3 SWOT Analysis

Figure 4.4 Fishbone Diagram

Figure 4.5 Fishbone Diagram Stage 2

Figure 4.6 Process Decision Programme Chart

Figure 4.7 The Formal Structure of a Risk

Figure 5.1 Likelihood versus Impact Chart

Figure 5.2 Likelihood versus Impact Chart, with Scoring

Figure 5.3 Risk Dependency Map

Figure 5.4 Likelihood versus Impact Chart, with Colour Zones

Figure 5.5 Time to Impact versus Likelihood, with Bubble Size Representing Impact

Figure 5.6 Time to Impact versus Complexity, with Bubble Size Representing Impact

Figure 5.7 Likelihoods of 2 Independent Events, with Bubble Size Representing Impact of Combined Outcome

Figure 5.8 Likelihoods of 2 Independent Events, with Bubble Size Representing Impact of Combined Outcome

Figure 5.9 Decision Tree Example

Figure 5.10 The Beta Function

Figure 5.11 Examples of Statistical Distributions

Figure 5.12 The "Sleep at Night Test" Results

Figure 6.1 When to Do Risk Planning

Figure 6.2 Contingency Planning Process

Figure 6.3 More Research in Your Risk Management Process

Figure 7.1 Take Action on Risks

Figure 7.2 Consequential Risks Arise from Treating an Existing Risk

Figure 8.1 Risk Monitoring and Control

Figure 8.2 Earned Value Analysis