Managing Project Risks

A comprehensive overview of project risk management, providing guidance on implementing and improving project risk management systems in organizations This book provides a comprehensive overview of project risk management. Besides offering an easy-to-follow, yet systematic approach to project risk management, it also introduces topics which have an important bearing on how risks are managed but which are generally not found in other books, including risk knowledge management, cultural risk-shaping, project complexity, political risks, and strategic risk management. Many new concepts about risk management are introduced. Diagrams and tables, together with project examples and case studies, illustrate the authors’ precepts and ideas. Each chapter in Managing Project Risks begins with an introduction to its topic and ends with a summary. The book starts by providing an understanding and overview of risk and continues with coverage of projects and project stakeholders. Ensuing chapters look at project risk management processes, contexts and risk drivers, identification, assessment and evaluation, response and treatment options, and risk monitoring and control. One chapter focuses entirely on risk knowledge management. Others explore the cultural shaping of risk, political risk in projects, computer applications, and more. The book finishes by examining the current state and potential future of project risk management. In essence, this book:  Effectively communicates a conceptual and philosophical understanding of risk Establishes the nature of projects and the stakeholders involved in them Presents a systematic and logically progressive approach to the processes of project risk management Demonstrates how to recognize the drivers of project risks and the factors which shape them Emphasizes the importance of capturing and exploiting project risk knowledge Provides guidance about implementing and building (or improving) project risk management systems in organizations Managing Project Risks will benefit practitioners and students of project management across a wide range of industries and professions. 

Table of Contents:
List of Tables xv List of Figures xvii Preface xix Acknowledgements xxiii Glossary xxv 1 Introduction 1 1.1 Introduction 1 1.2 The Project Perspective 1 1.3 The Project Stakeholder Perspective 2 1.4 Overview of Contents 3 1.5 Limitations Caveat 5 2 An Overview of Risk 7 2.1 Introduction 7 2.2 Risk Definitions 7 2.3 Threat and Opportunity 9 2.4 Risk and Uncertainty 11 2.5 The Dynamic Nature of Risk 16 2.6 Psychology and Perceptions of Risk 17 2.7 Risk Awareness 18 2.8 Classifying Risk 19 2.9 Risk Communication 28 2.10 Summary 28 References 29 3 Projects and Project Stakeholders 31 3.1 Introduction 31 3.2 The Nature of Projects 31 3.3 Project Objectives 32 3.4 Project Phases 39 3.5 The Composition of Projects 41 3.6 Processes of Project Implementation 43 3.7 IT Project Example 44 3.8 Organisational Structures for Projects 46 3.9 Project Stakeholder Relationships 47 3.10 Stakeholder Organisational Structures 55 3.11 Modes of Organisational Management 60 3.12 Project Stakeholder Decision Making 61 3.13 ‘Risky’ Projects 65 3.14 Summary 67 References 68 4 Project Risk Management Systems 69 4.1 Introduction 69 4.2 Risk Management 70 4.3 Risk Management Systems 72 4.4 Risk Management Standards and Guides 73 4.5 A Cycle of Systematic Project Risk Management 75 4.6 Project Stages and Risk Management Workshops 79 4.7 A Project Risk Register Template 86 4.8 Summary 88 References 88 5 Project Risk Contexts and Drivers 91 5.1 Introduction 91 5.2 The Contextualising Process 92 5.3 Internal Contexts as Risk Drivers 93 5.4 External Contexts as Risk Drivers 94 5.5 Using Contextual Information 100 5.6 Summary 101 Reference 101 6 Approach to Project Risk Identification 103 6.1 Introduction 103 6.2 Approach to Risk Identification 104 6.3 Workshop Timing 105 6.4 Types of Risk Identification Techniques 110 6.5 Summary 116 Reference 117 7 Project Risk Identification Tools 119 7.1 Introduction 119 7.2 Activity‐Related Tools 120 7.3 Analytical Tools 128 7.4 Associated Representative Tools 137 7.5 Matrix Tools 149 7.6 Simulation and Visualisation Tools 149 7.7 Speculation Tools 153 7.8 Structural and Management Tools 155 7.9 Risk Identification Statements 156 7.10 Summary 158 References 160 8 Project Risk Analysis and Evaluation 161 8.1 Introduction 161 8.2 Qualitative Analysis 163 8.3 Assessing Likelihood 164 8.4 Assessing Impacts 167 8.5 Evaluating Risk Severity 168 8.6 Quantitative Analysis 172 8.7 Risk Mapping 179 8.8 Summary 181 References 182 9 Risk Response and Treatment Options 183 9.1 Introduction 183 9.2 Risk Attitudes and Appetites 184 9.3 Existing Risk Controls 187 9.4 Risk Response Options 188 9.5 Risk Treatment Options 194 9.6 Risk Mitigation Principles 195 9.7 Strategic Use of ALARP (‘As Low as Reasonably Practical’) 197 9.8 Reassessment 198 9.9 Recording Decisions 198 9.10 Summary 198 References 199 10 Risk Monitoring and Control 201 10.1 Introduction 201 10.2 Assigning Responsibility 202 10.3 Monitoring Procedures 204 10.4 Control Measures 207 10.5 Reporting Processes 209 10.6 Dealing with New Risks 210 10.7 Disaster Planning and Recovery 211 10.8 Capturing Project Risk Knowledge 212 10.9 Summary 213 References 213 11 Project Risk Knowledge Management 215 11.1 Introduction 215 11.2 Knowledge Definitions and Types 216 11.3 Knowledge Transformation 217 11.4 Types and Forms of Knowledge 218 11.5 Organisational Culture and Knowledge Management 219 11.6 The Knowledge Creation Cycle 220 11.7 Additional Issues of Organisational Culture 226 11.8 KMS Alignment and Information Redundancy 226 11.9 Tools and Techniques for Eliciting Risk Knowledge 227 11.10 Developing Organisational Risk Wisdom 233 11.11 Project and Organisational Risk Register Architecture 233 11.12 Challenges for Implementing Risk Knowledge Management Systems 237 11.13 Communication and Risk Knowledge Management 240 11.14 Summary 242 References 243 12 Cultural Shaping of Risk 245 12.1 Introduction 245 12.2 Culture in Society 246 12.3 Organisational Cultures 247 12.4 External Cultures as Project Risk Shapers 253 12.5 Organisational Cultures of Other Project Stakeholders 254 12.6 Applying Cultural Shaping in Project Risk Management 255 12.7 Summary 259 Reference 260 13 Project Complexity and Risk 261 13.1 Introduction 261 13.2 The Concept of Complexity 261 13.3 Relative Complexity 268 13.4 Uncertainty and Project Complexity 270 13.5 Identifying and Mapping Complexity 272 13.6 Influence of Complexity on Risk Management 273 13.7 Complexity and Mega‐projects 273 13.8 Summary 276 References 276 14 Political Risk 277 14.1 Introduction 277 14.2 Political Spheres 279 14.3 Dimensions of Political Risk Factors 280 14.4 Examples of Political Risks 281 14.5 Political Stakeholders 284 14.6 Managing Political Risks 284 14.7 In‐house Political Risks 288 14.8 More Extreme Political Threat Risks 288 14.9 Summary 290 Reference 291 15 Opportunity Risk Management 293 15.1 Introduction 293 15.2 Concept of Opportunity Risk 294 15.3 Opportunity Risk in Projects 295 15.4 Examples of Opportunity Risks 296 15.5 Managing Opportunity Risks 298 15.6 Summary 306 Reference 307 16 Strategic Risk Management 309 16.1 Introduction 309 16.2 Strategic Issues for Project Risk Management 310 16.3 PRMS Process Strategies 321 16.4 Summary 325 References 326 17 Planning, Building, and Maturing a Project Risk Management System 327 17.1 Introduction 327 17.2 PRMS Objectives 328 17.3 Planning and Designing the PRMS 329 17.4 Risk Management Maturity 333 17.5 Building the PRMS 339 17.6 PRMS Performance Review and Improvement Cycle 343 17.7 Summary 348 References 349 18 Computer Applications 351 18.1 Introduction 351 18.2 Project Risk Management System (PRMS) Software Applications 352 18.3 Other Information Technologies and Tools 359 18.4 Summary 360 19 Communicating Risk 363 19.1 Introduction 363 19.2 Communication Theory and Models 364 19.3 Components in the Communication Process 366 19.4 Communicating Risk in the PRMS Cycle 370 19.5 Communicating Project Risk Beyond the Project Stakeholder Organisations 372 19.6 Evaluating Risk Communication 374 19.7 Summary 374 References 375 20 Conclusions 377 20.1 Introduction 377 20.2 Current State of Project Risk Management 378 20.3 Future Project Risk Management 381 20.4 Checking Your Reading Satisfaction 383 20.5 Closing Remarks 391 Case Study A: Public–Private Partnership (PPP) Correctional Facilities Project 393 Case Study B: Rail Improvement Project 403 Case Study C: PM Consultant and a Government Aid–Funded Pacific Rim Project 409 Case Study D: High‐Capacity Metropolitan Train Mock‐up Project 415 Case Study E: Hot‐Rod Car Project 417 Case Study F: Aquatic Theme Park Project 421 Index 425