Dr. Alexia Nalewaik FRICS CCP CCA November 2015

Transcription

1 Dr. Alexia Nalewaik FRICS CCP CCA November 2015

2 Framing the project success problem Risk assessment and management Types of risk Auditing risk Questions and Answers

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4 Projects are often unique, complex, complicated, dynamic Projects rely on people Change is a constant Different stakeholders have different definitions of success Risk exists There are many variables in projects and project management that are difficult to capture especially the people part

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6 Risk: vulnerability to the possibility of loss, as a consequence of inherent uncertainty when undertaking an endeavor or course of action Risk is 1. A hazard, danger; exposure to mischance or peril. 2. The chance or hazard of commercial loss. 3. An allowance made to cover accidental deficits. (OED, 2015) Something bad could happen (Hubbard, 2009)

7 Multi-faceted Inter-dependent Constantly changing Any action has more than one possible outcome and impact Any action may affect existing risks or generate subsequent risks

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9 Risks may be project-specific, or related to the organization Risk can be objective or subjective Risks can be unknown, then become known Black swans can become grey swans Risk requires professional judgment regarding severity and consequence that s the problem

10 Risk quantification tends not to focus on extremeimpact statistically-unlikely events such as: war, terrorism, political instability, corruption, earthquake, tsunami, stock market crash extreme operational risks of the type discussed in Basel II (et seq.) space alien invasion, zombie apocalypse

11 Technical Internal Related to the design of the project, and the materials & equipment needed to make that design a reality Financial / Economic Internal and external Related to the economic environment, market factors, financing Statutory / Political External Related to the political, cultural, and regulatory environment of the project and players

12 Technical risk proven/unproven technology implementation methodology equipment & material performance planning & design complexity commissioning & testing evolving requirements tie-in to existing project or interface scope change engineering & design change metric vs imperial measurement differing standards specialized equipment & materials long-lead equipment project in an operating facility design conflict / interference information technology systems scalability security vulnerabilities Financial & economic risk inflation funding/financing market forces labor & material costs labor & material availability interest rate currency fluctuation bankruptcy alternative approaches to insurance Statutory & political risk local law or government policy government influence on disputes environmental regulations property acquisition permitting external stakeholder influence testing & certification official and unofficial holidays religious observance customs (import / export) visas (immigration)

13 Organizational Internal Related to the structure of the organization, culture, relationships, management, and capability Contractual Internal Related to the structure and language of legal agreements implements on the project Other Internal and external

14 Organizational risk project team capability contractor failure contractor/vendor/consultant failure or default mergers & acquisitions staff turnover stakeholder turnover degree of unfamiliarity schedule acceleration gaps in responsibility or scope communication executive support of project business processes delegated authority organizational culture Contractual risk contractual liability warranties liquidated / consequential / punitive damages construction defect risk transfer conflicting contract language inadequate contract protections intellectual property new contract / delivery method Other risk climate safety unknown conditions archaeological findings contamination local customs infrastructure theft translation error productivity competition

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16 Reg ID Impact Maj Cat Type Description Consequence % Cost Time Score Rank Priority Business Risk 14 Labor New employee integration Difficulty in hiring quality/skilled people, efficiency decrease, delayed startup, no budget to advance hire, management issues High 2 46 Planning & Scheduling Failure to meet scheduled down time windows and / or overrun of down time schedule Production loss. No more downtime is available. Need to accelerate, increase overtime High Design Planning & Scheduling Quality issue - pumping hot product over long distance Mech/Electrical permits not received on time Cost/schedule impact to fix contamination and mold Medium Delay to construction causing delayed completion and increased overtime costs Medium 30 Planning & Scheduling GMP's (existing lines) Contamination, air flow change when areas are partitioned ; BUSINESS ISSUES Medium YES 42 Design Inadequate floor loading to take new Fermentation tanks Additional rebar / structure Low 2 Generic Risk Changing market forecast Scope change, equipment layout affected Low 1 35 Design Inadequate fire main capacity with increase of potable water requirements Fire pump needed to increase pressure Low

17 A B E G H I M MARK # SUBSYSTEM ORIGINAL ESTIMATE MIN. M.L. MAX. Probability 15 BUILDING 13,365,000 13,111,952 13,763,739 15,023, Site Works 495, , , , % 1505 Excavation 342, , , , % 1505 Paving 626, , , , % 1510 New Building 823, , , , % 1510 Precast Concrete 3,600,000 3,600,000 3,750,000 4,125, % 1510 Cast-in-Place Concrete 0 1,087,750 1,145,000 1,259, % 1510 Foundations & Curbs 710, , , , % 1510 CMU 419, , , , % 1510 Structural Steel & Metal Platforms 296, , , , % 1510 Roofing & Weatherproofing 381, , , , % 1510 Flooring, Tiles 600, , , , % 1510 Freight Elevator 80,350 76,333 80,350 92, % 1510 Dock Equipment 171, , , , % 1510 Building Electrical 448, , , , % 1510 Building Lighting 552, , , , % 1515 HVAC 832, , , , % 1515 HVAC Electrical 155, , , , % 1520 Storm Water 20,000 20,000 20,000 40, % 1525 Sanitary Sewer 400, , , , % 1530 Utility Rooms 137, , , , % 1535 Fire Protection 185, , , , % 1545 Raw CIP Room 40,000 37,000 40,000 60, % 1565 Recycle & Compactor Area 60, , , , % 1580 Bulk Bag Unloading Area 0 104, , , % 1585 Process Area (Batch Tanks) 0 157, , , % 1599 Building Expense 205,000 97, , , % Risk 44 Danger of trucks hitting columns 75,000 87, ,000 90% Risk 32 NPDES storm run-off requirements 250, , , % Risk 13 Addiitional building foundation too shallow 200, , , % Risk 11 Public utility Commission approval delay 50,000 75, ,000 50% Risk 21 Packaging flow materials capacity 100, , ,000 25% Risk 7 Seismic Issues (investigative works only) 67,000 67,000 67, % Risk 12 Capped oil well 25,000 75, ,000 10% Risk 45 Insufficient strength in roof to take loads 50, , ,000 10% Risk 52 Fire hydrants needed at back of building 30,000 40,000 50,000 80%

18 Cost Risk Analysis Probability 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Values $ Million Base Estimate Base Estimate With Contingency Risk

19 Deming cycle of identification, quantification, modeling, management, and monitoring Risk Management Plan should include: risk description likelihood of occurrence potential impact consequences risk owners root causes early warning signs action plans

20 Risk Entry Form Date : Risk # : Risk Owner : Current Impact Risk Description Probability (Percentage) Consequence Time Impact (1 to 3) Current Mitigation Cost Impact (1 to 3) Notes Field Business Impact (Yes/No) Fallback Plan Risk Reduction Measures Action #: Action Manager Description Target Date Actual Date Status

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22 Results generated from compliance audit more frequently surface human error than fraud Review scope can be fine-tuned to address the specific needs of the project Directs team resources to areas that can benefit the most Tailored to the specific needs of the project at key milestones in the project lifecycle Focus on obtaining value and return on investment from the review process Risk-based methodology includes evaluation of any activity that consumes program resources

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24 Largest school district in the country Knew they had monies in contingency & reserves for old projects Wanted to fund new projects Issues Quantify needed contingency and reserves Formalize processes Find existing contingency, reserves, & other monies

25 Infrastructure project with global impact Client wanted to develop a five year audit plan Performance review done at the time of bid award Issues Risk Governance Additional concerns

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