Risk Management and Project Initiation EM 4003 Class

Risk Management and Project Initiation EM 4003 Class #6

What we will be looking at Risk Management Resource Scheduling Reducing Project Duration These three items are all very much linked

Eurofighter Typhoon Multi-role combat fighter 4 nation project – UK, Italy, Germany, Spain Single largest defence investment in the UK UK – 37. 5% of production – 232 planes £ 19. 7 bn total program cost

Eurofighter Typhoon £ 4. 4 bn R+D £ 50. 5 m per plane Entered service with RAF in summer 2003 4. 5 years late, £ 2. 3 bn over budget Why did this happen?

Defence Projects Eurofighter £ 2. 3 bn 4. 5 years Astute Submarine £ 1. 2 bn 4 years Nimrod £ 394 m 6 years Now scrapped Brimstone Missile £ 139 m 2. 5 years

Public Accounts Committee ‘Failing to manage the projects properly’ ‘Spending too little on the assessment phase of each project’ ‘Operating in a culture based on the apportionment of blame’ October 2004

HC 383 - 21 st October 2004 © The Stationary Office Ltd

HC 383 - 21 st October 2004 © The Stationary Office Ltd

Delay What are the consequences?

What is risk? “Great deeds are usually wrought at great risk” Herodotus, Greek historian Risk is the chance that an undesirable event will occur and the consequences of all its possible outcomes.

Uncertainty in Projects Estimate variability Uncertainty about basis of estimate Uncertainty about design and logistics Uncertainty about objectives and priorities Uncertainty about relationships between parties From Chapman and Ward, ‘Project Risk Management’, Wiley, 2003

Risk Management Recognize and manage potential and unforeseen problems 4 steps n n Identify Assess Develop response Control At the planning stage

Risk Event Graph

Risk Management Process

Risk Severity Matrix

Class Task Develop a Risk Severity Matrix for the XThrill Ride Project

Assessment Tools Ratio Analysis (new v old project) Experience / Rules Of Thumb Scenario Analysis Failure Mode and Effects Analysis (FMEA) Probability Analysis (PERT) Risk Management Frameworks

FMEA Risks are assessed to produce a score Risk Value = Impact x Probability x Detection 5 point scale for each 125 – high impact, high probability, impossible to detect Prioritise for action Risk Priority Number (RPN)

PERT Technique originated in the 1950’s – US Polaris Missile Project te = a + 4 m + b 6 te = average activity time a = optimistic activity time b = pessimistic activity time m = most likely activity time Expected duration, TE = Σ te (critical path) Software calculates probability of meeting the project deadline

Frameworks Shape, Harness and Manage Project Uncertainty (SHAMPU) – 2003 Project Risk Analysis and Management Guide (PRAM) – 1997 Project Management Body of Knowledge (PMBOK) – 2000 Risk Analysis and Management of Projects (RAMP) – 1998 and 2002

SHAMPU Define the project Focus the process Identify the issues Structure the issues Clarify ownership Estimate variability Evaluate implications Harness the plans Manage implementation

Response Reduce risk Transfer risk Share risk Retain risk – contingency plan / funds Risks – technical, schedule, costs, funding, resources, environment

Control Manage Risk = Manage Change Discipline Communicate Document Be vigilant Look for opportunities

Resources Project Definition, Time + Cost Estimation, WBS, Plan, Understand Risks, now… ADD THE RESOURCES

Issues to consider There are never enough resources Resources need to be protected Use resources efficiently Understand the constraints Use software, if at all possible, to aid scheduling

Constraints Technical Physical Resource n n People Equipment Materials Money Problem classified as time or resource constrained

Resource Allocation The Rules No splitting activities Level of resource for an activity cannot be changed

Time Constrained Project Increase resource utilization Smooth demand Delay non-critical activities Peak resources reduced Reduces flexibility

Resource Constrained Project Prioritize and allocate resources to minimize project delay without exceeding resource limit or altering network relationships Often many solutions No good mathematical solution Heuristics applied n n n Minimum slack Smallest duration Lowest activity ID number

An Example

An Example

Things to remember Splitting – beware shutdown / start-up No schedule = Problems ahead Assign work to the right people Beware multiple projects

Reducing Project Duration “When do you need it? ” “Yesterday” The most common conversation a Project Manager ever has

What are the issues? Rationale must be sound Cost-time conflicts need to be understood Time-to-market may be critical Incentives Outsource Review specification

Project Cost v Duration Graph

Crashing Shorten activities with smallest cost increase per unit of time Shortest time and maximum cost are crash time and crash cost Cost v Duration plot – slope = rise / run

An Example

An Example

An Example

Options Always review the logic of any analysis / decision If resources aren’t constrained n n n n n Add resources Outsource Allow overtime Create a dedicated team Do It Twice Fast-Track activities Brainstorm Reduce scope / quality Phase delivery

Options (for cost reduction) Reduce scope Customers do more Outsource Brainstorm

Spinnaker Tower

The Detail In Portsmouth 170 m high – tallest outside London £ 21 m budget Actual cost £ 25 m + £ 11 m from taxpayers Opened 18 th October 2005 5 years late Material concerns, protests, poor project handling

Tasks Read Chapter 7 Have a go at some questions XThrill Task 3 for 10/3/17

XThrill Task 3 With your WBS and the new information you have develop the following: n n n a project budget a network chart a Gantt Chart for your project make some initial estimates, based on your budget, about resource needs state any assumptions you make

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