By: Esra Tepeli, Ph.D., PMP
Risk management is a growing concern in project management. Nowadays, we understand more the importance of having a robust risk management strategy. Due to uncertainties, project managers have difficulties reaching project objectives in terms of time, resource, cost, quality and safety. The most difficult part is to identify and assess the uncertainties with their possible impacts on the project objectives. However, “risk” can have another dimension called “opportunity”. For this reason, structuring a risk management strategy that includes not only risk events, but also opportunities will be beneficial for the corporate strategy.
Developing a strong and reliable risk management strategy can be quite difficult for complex projects. Complex projects may have a long and complex life-cycle, multiple stakeholders with a complex organizational plan, and contractual complexities. For these types of projects, identifying and assessing risks is a tough task, depending on the project’s characteristics and the environmental conditions, also feedback on similar risks can be inadequate.
In addition, a gap can be observed in the application of risk management methods in practice. For instance, in the field of construction projects, risk management is underestimated because project managers do not always have enough time to devote to risk management. However, the loss can be very critical for companies if a bad strategic decision has been made due to a lack of risk analysis, especially before the contracting phase.
For complex and strategic projects, it is important for the project stakeholders to identify and assess all the potential risks throughout the project life-cycle and establish an effective risk allocation framework. An objective, reliable and practical risk management process is essential for successful project implementation.
Taking into account the above facts, we have developed a formalized and systematic risk management approach in order to identify and assess project risks in a dynamic way and to take adequate action plans throughout the life-cycle of complex and strategic projects. The findings should enable the project stakeholders to establish a more efficient risk management framework in parallel with project management and to achieve project objectives.
The formalized and systematic risk management process has been developed on the careful analysis of complex projects to ensure its ability to deal with real projects in operational conditions. Besides, the views of a wide range of experts from all major players in complex and strategic projects have also been considered. The process will enable users to identify and assess project risks in a dynamic vision covering the entire project life-cycle, in parallel with project management, and to propose a response plan for risks deemed critical. The identification of risk events is based on a multidimensional and formalized project analysis, which intends to make a more objective, reliable and effective risk identification because each project is unique, has specific factors and needs to be analyzed separately in its case.
In summary, the formalized and systematic risk management process has several added values:
- The process covers the entire life-cycle of a complex and strategic project and is adapted to the very long project life-cycle.
- It proposes a dynamic risk management approach, adapted to the evolving nature of complex projects. The elements of risk identification and assessment are updated with the project’s progress in a dynamic approach.
- It proposes a formalized and systematic approach of risk management with identification of risks, assessment of risk impacts in terms of cost delay, quality, safety and, the proposition of action plans during all the project life-cycle in order to mitigate and eliminate negative risks or transfer them to another project stakeholder.
- The risk management process is undertaken in parallel with the project management process and the risk assessment data is integrated into the project simulation, which provides a real-time project simulation with cost, time, quality, safety risk impacts in comparison with the project objectives.
- The model is designed and developed in partnership with the final users (practitioners) to favor its use in real operation conditions and to ensure its efficiency by integrating their expectations from a risk management tool.
The method and tools were developed in close collaboration with project stakeholders, and their applicability was tested on several projects. The process has been tested by a variety of stakeholders to improve its use under different operating conditions and develop rich feedback for a variety of complex and strategic projects. In particular, the systematic approach for (Risk Identification), proposed in the model, in combination with the multidimensional project analysis received good feedback from practitioners. The ability of the prototype to approach with real context and to provide useful answers, such as a risk response plan, has been verified.
If you are interested in adopting new risk management models and tools in a dynamic and systematic approach, connect with me during my course Formalized and Systematic Risk Management Process for Complex Projects at SeminarsWorld® Virtual on 5-7 October. I look forward to discussing Risk and Opportunity Management with you!