MANG 6143 Project Risk Management Chris Chapman

1. MANG 6143Project Risk ManagementChris Chapman

2. Some introductory comments • What do you want to take away from this course? • The four part structure for this course. • Some background to the book Enlightened Planning (Chapman, 2019). Why you need to read this book and the role of Chapman and Ward (2011). • Other reading, and how to address it. • The role of the Transcon and Samdo case studies. • Some key assessment issues. • Questions and other issues?

3. Our agenda for part one – setting the scene An unrestrictive view of some basic definitions and concepts. A broad view of projects. Project lifecycle frameworks – a foundation framework. The seven Ws as a second key framework. Goals-plans relationships as a third key framework. The estimation-efficiency spectrum. Process frameworks – the fourth framework which completes the four Fs (four foundation frameworks) – in generic, specific and universal forms. The ‘universal process (UP)’ concept which underlies all the ‘process’ concepts employed by the ‘enlightened planning (EP)’ approach, and the associated ‘systematic simplicity’ concept. An overview critique of common practice.

4. An unrestrictive overview of three basic definitions • Uncertainty – lack of certainty. • Risk – possible unfavourable outcomes or any of their possible sources. • Opportunity – possible favourable outcomes or any of their possible sources. See Enlightened Planning (Chapman, 2019) chapter 1 for elaboration and seven more basic definitions. Basic definitions of terms as foundation concepts, the need for generality, and the particular need to avoid some key common practice definitions.

5. An unrestrictive view of three basic concepts • Risk efficiency – a minimum level of risk for any given level of expected outcome in terms of any relevant attribute of ‘reward’ (like profit, cost, or the number of people whose potential deaths are avoided as a result of a course of action). • Clarity efficiency – a maximum level of clarity (insight which can be communicated) for any given level of cost/effort expended to acquire clarity. • Opportunity efficiency – risk efficiency plus clarity efficiency in terms of all relevant attributes plus appropriate trade-offs between risk and reward for all relevant attributes plus appropriate trade-offs between all relevant attributes. Opportunity efficiency is what ‘best practice’ ought to be. The overall goal of this course is clarifying and helping you and the organisations of interest to you achieve ‘best practice’ in this sense.

6. Projects Turner (1992) provides a useful basic mainstream definition of a project: an endeavour in which human, material and financial resources are organised in a novel way, to undertake a unique scope of work of given specification, within constraints of cost and time, so as to achieve unitary, beneficial change, through the delivery of quantified and qualitative objectives. We need to generalise (make less restrictive) this kind of mainstream project concept to address ‘the management of change’. We also need to include all ‘programme’ and ‘portfolio of projects or programmes’ perspectives in our ‘project’ concept.

7. component Time (a) Chain configuration: stages in a primary project may be managed as a chain of component projects. Project system examples primary project component component Time primary project (b) Parallel configuration: aspects of a primary project may be managed as a set of parallel component projects. component project component project component project Time primary project secondary project tertiary project (c) Project hierarchy: the primary project as a three-level hierarchy of component projects. component component component secondary project tertiary project tertiary project

8. Three Interdependent Aspects of Management Corporate management, operations management and project management should involve three interlocking perspectives, because all three require coordinated approaches in compatible frameworks.The full set of key parties directly involved in project lifecycle frameworks should understand the implications of all three perspectives, and this issue needs explicit attention. These three perspectives can be associated with three interdependent aspects of management which need coordinated treatment in terms of formal planning processes and associated frameworks.

9. A traditional four stage project lifecycle for ‘clients’ with the dominant management aspects identified

10. Decomposing the front-end of the conceptualisation stage plus the planning stage as advocated in Enlightened Planning (Chapman, 2019) ,with detail taken from Chapman and Ward (2011)

11. Further decomposition of strategic planning

12. The importance of getting strategy clarified in ‘fit for purpose’ terms using a clarity efficient set of interdependent processes before worrying about most of the tactical planning.Using the D&A strategy gateway stage as an overall ‘watershed’ strategy gateway stage after four strategy progress stages plus three earlier gateway stages. Strategy/tactics boundary concerns

13. Implementation tactics planning stages

14. Execution and delivery stage decomposition

15. Utilisation stage decomposition

16. Key project definition questions – the seven Ws

17. Key project definition questions – the seven Ws whichway who plans for relationships and contracts all project parties ultimately involved why when plans for business case purposes project motives: profit and other motives integration of all plan-based timetables what resource plans for operations plans for operations the design of the product of the project resource plans for activities plans for activities where - the location of the project and all the relevant wider context issues wherewithal

18. Key portrayals of uncertainty • Event uncertainty • Inherent variability uncertainty • Systemic uncertainty • Ambiguity uncertainty • Capability-culture uncertainty Event uncertainty on its own is a seriously inadequate portrayal of all relevant uncertainty, and being comfortable using all five portrayals as appropriate is a crucial and central issue.

19. Most of what this course usually refers to as ‘sources of uncertainty’, to distinguish them from what are commonly referred to as ‘risks’, are composites of two or more lower level components of uncertainty.Sometimes different ‘sources of uncertainty’ are usefully seen using different portrayals of uncertainty.Decomposition of uncertainty raises key questions about what structure and portrayals are best suited to the task in that particular context.‘Events’ or ‘conditions’ is never the exclusive or universal answer to the question of portrayals – ‘sources of uncertainty’ are sometimes best viewed using one of the other four possible portrayals.‘Keep it simple systematically’ is the central mantra for all issues of this kind, avoiding a common bias towards simplicity which is simplistic. That is, keep it simple in the ‘right way’, avoiding the ‘wrong way’. Key aspects of uncertainty as seen by this course

20. Using a performance lens plus a knowledge lens how does this project fit our overall strategy and operations plans? do we want to continue to develop this project? ‘the project’ performance lens knowledge lens uncertainty about the achievement of objectives what else do we need to know to get to the next stage? opportunity and risk all other views of uncertainty uncertainty what do we need to do to get to the next stage? how should we shape our plans to get to the next stage?

21. The role of the goals-plan relationship framework • Plans for activities have obvious duration and cost implications. • Resource plans for activities also have cost and duration effects. • Plans for operations have further duration and cost effects. • Resource plans for operations are also relevant. • Plans for relationships and contracts are crucial. • Integration of all plan-based timetables clearly matters. • The design of the product of the process is fundamental. • All the motives for being involved in the project matter. • All the parties involved with relevant plans have relevant motives. • Plans for business case purposes should reflect all the above.

22. Our estimation-efficiency spectrum exploration agenda • The minimum clarity to maximum clarity spectrum concept. • The clarity efficiency concept. • The risk efficiency concept. • The opportunity efficiency concept. • ‘Best practice’ in these terms. • Clarifying degrees of ‘bad practice’ and ‘common practice’. • Using an initial focus on a ‘primary attribute’. • Multiple attribute trade-offs as integrated concerns. • The need for a process to achieve ‘best practice’.

23. Minimum clarity estimation: a simple MoD example probability (density) probability density format 0.05 0 0 2 10 18 20 outcome value in weeks 1.0 cumulative probability cumulative probability format 0.9 0.5 the median (P50) is equal to the expected value and both are 10 weeks 0.1 0 2 10 18 20 0 outcome value in weeks

24. The approximation involved: a density portrayal

25. Interval estimates and the ABCs of targets • Using a P10 estimate as a default aspirational target, and alternatives. • Using a P90 estimate as a default commitment target, and alternatives. • Expected values as balanced targets, and alternatives. • Provisions defined by balanced targets less aspirational targets. • Contingencies defined by commitment targets less balanced targets. • Range estimates as the default choice, and point estimate alternatives. • Expected values as an opportunity/risk datum, and alternatives. • Clarifying relationships between opportunity, risk and uncertainty. • Clarifying relationships between plans and outcomes.

26. A basic probability-impact grid (PIG) p3 = 1 high r3 r4 r5 Probability p2 r2 r3 r4 medium p1 low r1 r2 r3 p0 = 0 i0 = 0 i1 i2 i3 low medium high Impact

27. Sensitivity diagrams: a high clarity BP example

28. Sensitivity diagrams: Highways Agency example

29. Clarity efficiency: ‘efficient frontier’ portrayal

30. Risk efficient options: ‘efficient frontier’ portrayal

31. Decision diagrams: one risk efficient choice example

32. Decision diagrams: two risk efficient choices example

33. Simple decision diagrams: three options example

34. An extract from Sally’s BCS cost estimate and contract This is a Chapman and Ward (2011) example used to illustrate very simple modest clarity approaches.

35. Approximate ‘macro-phase’ alignments for three processes

36. The basic SPP (specific process for projects) This is the basic process for all four strategy progress stages. A different process is need for the strategy gateway stages, and modifications to the basic SPP and strategy gateway stages are needed for later progress and gateway stages.

37. from project initiation or a gateway stage Flowchart for the basic SPP capability-culture liabilities capability-culture assets capture the context with appropriate clarity select & focus the process for appropriate clarity create & enhance plans for all relevant concerns shape base plans using models of some key issues identify all relevant sources, responses & conditions structure all uncertainty clarify ownership quantify some uncertainty evaluate all the relevant implications to the appropriate gateway stage

38. A bar chart for the first pass of the SPP phase start of the process end of the first complete cycle capture select & focus create & enhance shape base plans identify structure ownership quantify evaluate no effort or intermittent effort intense effort on-going effort key:

39. a trigger in some other process Flowchart for the universal process (UP) which underlies the basic SPP capability-culture assets capability-culture liabilities capture the context with appropriate clarity select & focus the process for appropriate clarity create &enhance the plans for all relevant concerns shape the plans using models of key issues test the plans to ensure robustness interpret the plans to exploit creativity implement the plans as and when appropriate return to an appropriate process A brief overview of the development of this process, elaborated in Enlightened Planning (Chapman, 2019) chapter 2.

40. Ten key shortcomings of many common practice project risk management processes are provided now to indicate where this course is going, using two lists of five. You should understand the nature all ten of these concerns, and how to resolve them, by the conclusion of the course, but explanations will have to emerge as the course proceeds.

41. The first five

42. The second five

43. Part one review, questions and discussion

44. Part two – the basic SPP phase by phasewith a high clarity initial focus • Most of the time we will assume a high clarity approach is required, but we will also explore directly related lower clarity approaches and the way high clarity approaches can inform lower clarity choices, using high clarity examples in a manner which is comparable to the way some people employ ‘useful theory’. • For related reasons, most of the time we will assume that the project of interest is in the E&D (execution and delivery) strategy stage. But we will also explore the DOT (design, operation and termination) strategy stage and the concept strategy stage in a preliminary manner, with a focus on the nature of key interdependencies and their importance. • Also for related reasons, most of the time we will assume a client’s perspective, but we will explore a contractor’s perspective as well, with a focus on the nature of key contractor-client interdependencies and their importance.

45. The process as a programme of projects • Within each stage each phase is a project – you can use the linked bar chart (Gantt chart) portrayal to manage phases within stages and the activities (tasks) within phases. • At a project stage level ‘the programme’ is a portfolio of 9 projects. • At a complete full lifecycle level the portfolio needs holistic management. • Everything we know about good project, programme and portfolio management can be brought to bear on managing the process. • This includes uncertainty management in a project management context. • Portfolio, programme and project uncertainty management distinctions are a question of degree for present purposes, a process ‘driver’. • Most of the time our discussion will focus on high clarity management of an asset delivery project involving a physical asset for illustrative clarity, but all of the course concepts also apply to managing processes.

46. Process ‘drivers’ and linked assumptions When looking at each phase in detail, what is involved is a function of process ‘drivers’, so we have to make assumptions for discussion purposes. Some key process drivers (and the related assumptions) are: strategy / tactical level of the project (strategic), perspective and motives (client wanting holistic insight), learning curve position (low down, more generally those involved have limited capability-culture development so far in this area), decisions of interest (shaping strategic plans for the assumed stage).

47. The process phases, explored one phase at a time We will start with the ‘basis of analysis’ part of the process, then consider the rest of the ‘qualitative analysis’ part of the process, and finish with the ‘quantitative analysis’ part of the process.

48. The capture the context phase • The capability-culture issues are always important in all phases, in terms of those doing the analysis and those interpreting it to make decisions. • This phase involves problem structuring ‘craft skills’ (like knowing when and how to decompose activities), a key aspect of the modelling skills required by the person in charge of leading and shaping the process, the ‘process manager’. • All ‘process staff’ require basic ‘facilitator’ interpersonal skills. • The importance of anticipating a very simple strategic level activity (task) structure and other seven Ws structures aligned with the nature of the sources of uncertainty involved, revising these structures as the analysis proceeds if appropriate, and generalising this to all aspects of the project context. • The need to move from an E&D task orientation to an objectives orientation addressing all seven Ws. • The multiple key roles of the project lifecycle framework and the role of the seven Ws plus the goals-plans relationships frameworks.

49. Key project definition questions – the seven Ws whichway who plans for relationships and contracts all project parties ultimately involved why when plans for business case purposes project motives: profit and other motives integration of all plan-based timetables what resource plans for operations plans for operations the design of the product of the project resource plans for activities plans for activities where - the location of the project and all the relevant wider context issues wherewithal

50. start the process Capture phase specific tasks consolidate the project lifecycle the project context the project parties the project objectives the project design the whichway plans the wherewithal plans the project timing no elaborate and resolve deliverables fit for purpose? yes complete the focus phase