7/29/2019 Risk Management and Project Management Partnership
1/16
By:
Dr. Mohammed Farid Abdulghany AhmedFathalbab
Financial & Management Consultant
Ph.D, DBA, MBA, IRCA, CPhM, CPES, CWM, CSSBB
CPA, PMP, SAQC, SOCPA. PMI
Dr. Mohammed Farid Abdulghany Ahmed Fathalbab
>>Risk creates opportunity,
>>Opportunity creates value,
>>Value ultimately creates
shareholder wealth.
"Todays business climate is both dynamic and complex. Management faces many risk
challenges due to changing requirements and increasing demands, as well as tight budgets
and fast turnaround demands. Organizations are struggling to do more with less fewer
resources, including less money, and, in many cases a reduced workforce. Therefore, it is
essential to optimize every aspect of business, particularly project management. "
Dr. Mohammed Farid
Acquire knowledge from Cradle to Grave
--Prophet Muhammad (PBUH)
7/29/2019 Risk Management and Project Management Partnership
2/16
Risk management and Project management Partnership
Introduction
Risk management have never been a
choice for project management or any
other types of management but it is a
must, we are all risk managers somehow, the rapid
changes in the environmental condition (for both internal
and internal) and the consequence change in the
requirements and specification which reflected on the
continuous shrinking of product life cycle PLC , which
added extra uncertainty , instability and poor ability for
appropriate forecasting and planning, being more
subjective depending on qualitative and not quantitative
techniques in decision making added more importance to
a dynamic risk management. Pivot
RM
A risk management approach is applicable throughout the project life cycle, the
earlier in the project life cycle the risks are recognized; the more realistic the
project plan and expectation results will be. RM continues to add value all over
the project life cycle.
If there is a single key to making project risk management stick in yourorganization, it is to make it an integral part of all project phases and to treat it
just as seriously or more than you do to project scope, budgeting, scheduling and
resources location and allocation.
The simplest means of building project risk management into your project is to
ensure that the early steps, identification, analysis, prioritization and mapping,
and risk resolution planning are a normal part of all the project phases, processes
and activities.
Organizations often build risk identification into the beginning of the project and
require a list of a risk as deliverable at the first project review. But since they do
not continue with full range of risk management activities, they merely identify
risks without receiving the benefits that can be gained from effective risk
management through the later phases of product development.
Risk & Risk management
Riskis a measure of the potential inability to achieve overall project objectives
within defined cost, schedule, and technical constraints. It has two components:
1) The probability/likelihood of failing to achieve a particular outcome,
and
2) The consequences/impacts of failing to achieve that outcome.
Risk events are elements of an acquisition that should be assessed to
determine the level of risk, i.e., things that could go wrong in a project. The
Dr. Mohammed Farid Abdulghany Ahmed Fathalbab
7/29/2019 Risk Management and Project Management Partnership
3/16
events should be defined to a level where an individual can comprehend the
potential impact and its causes. For example, a potential risk event for a turbine
engine could involve a turbine blade vibration. Related to this vibration could be
a series of potential risk events that should be selected, examined, and assessed
by subject-matter experts.
The relationship between the two components of riskprobability andconsequence/ impact is complex. To avoid obscuring the results of anassessment, the risk associated with an event should be characterized in termsof its two components. As part of the assessment, there is also a need for backupdocumentation containing the supporting data and assessment rationale.
Risk management is the act or practice of dealing with risk. It includes planningfor risk, assessing (identifying and analyzing) risk areas, developing risk-handlingoptions, monitoring risks to determine how risks have changed, and documentingthe overall risk management program.
1. Risk planning is the process of developing and documenting an
organized, comprehensive, and interactive strategy and methods for
identifying and tracking risk areas, developing risk handling plans,
performing continuous risk assessments to determine how risks have
changed, and assigning adequate resources.
2. Risk assessment is the process of identifying and analyzing
project areas and critical technical process risks to increase the
probability/likelihood of meeting cost, schedule, and performance
objectives. Risk identification is the process of examining the project areas
and each critical technical process to identify and document the associated
risk.
a) Risk analysis is the process of examining each identified risk
area or process to refine the description of the risk, isolating the
cause, and determining the effects. It includes risk rating and
prioritization in which risk events are defined in terms of their
probability of occurrence, severity of consequence/impact, and
relationship to other risk areas or processes.
b) Risk Identification is Determining which risks are likely to
affect the project and documenting them, it is Performed on a
regular basis; address internal and external risks, Identify causeand effect and effects and causes; what could happen vs. what
outcomes should be avoided.
3. Risk handling is the process that identifies, evaluates, selects, and
implements options in order to set risk at acceptable levels given project
constraints and objectives. This includes the specifics on what should be
done, when it should be accomplished, who is responsible, and the
associated cost and schedule. The most appropriate strategy is selected
from these handling options. For purposes of this Practice, risk handling is
an all-encompassing term whereas risk mitigation is one subset of riskhandling.
Dr. Mohammed Farid Abdulghany Ahmed Fathalbab
7/29/2019 Risk Management and Project Management Partnership
4/16
4. Risk monitoring is the process that systematically tracks and
evaluates the performance of risk-handling actions against established
metrics throughout the acquisition process and develops further risk-
handling options, as appropriate. It feeds information back to the other risk
management activities of planning, assessment, and handling as shown in
Figure 1.
5. Risk documentation is recording, maintaining, and reporting
assessments, handling analysis and plans, and monitoring results. It
includes all plans, reports for the PD/PM and decision authorities, and
reporting forms that may be internal to the PD/PM.
Risk management Success Factors:
1) Recognize the values of project management as a positive
potential ROI for organizational management, Project stakeholders
(both internal and external, project management and team
members.
2) Individual commitment and responsibility for all project
stakeholders for risk management activities.
3) Open and honest communication as everyone in the
organization are somehow involved in the risk management
activities, any action or attitude that hinder communication about
project risk reduce the effectiveness of PRM in terms of proactive
and effective decision making.
4) Organizational commitment through the alignment of Project
risk management with the organizational goals and values. It is
Important to know that the risk management required a higher levelmanagerial support.
5) Risk effort scaled to project as project risk management
activities should be consistent with the value of the project to the
organization and with its level of project risk.
6) Integration with project management as risk management are
involved with all the project management phases.
Dr. Mohammed Farid Abdulghany Ahmed Fathalbab
Figure 1. Project Risk Management structure
7/29/2019 Risk Management and Project Management Partnership
5/16
Figure 2. Project Risk Management success factors
Risk management and Project management phases
The Project management phases are classified into five consequence phases as
follows:
1. Initiation phase
2. Planning phase
3. Execution phase
4. Control phase
5. Close phase
Figure 3. Project Management
Phases
Figure 3. Project Management Phases
A risk management approach is applicable throughout the project life cycle, the
earlier in the project life cycle the risks are recognized; the more realistic the
project plan and expectation results will be. RM continues to add value all over
the project life cycle.
If there is a single key to making project risk management stick in your
organization, it is to make it an integral part of all project phases and to treat it
Dr. Mohammed Farid Abdulghany Ahmed Fathalbab
7/29/2019 Risk Management and Project Management Partnership
6/16
just as seriously or more than you do to project scope, budgeting, scheduling and
resources location and allocation.
The involvements of risk management are vary from one phase to another and
from one process to another in the same phase as the type of risk and its impact
vary from one phase to another and from process to another as well which will beexplained in this paper.
1. Initiation phase:
The Project Initiation Phase is the first phase in the project lifecycle and is thepredecessor to the Project Planning Phase. The following diagram, figure 3 candescribe the flow of processes and the sub phases within this phase.
Figure 4. Project Management initiation
phase breakdown
a) The Define sub phase:
The first activity in the initiation phase is to define the project by developing theproject description statement. The project description statement is an informal,high-level statement that describes the characteristics of the product or serviceexpected from the project. It explains the business purpose of the new product orservice and identifies why the product or service is needed. District
b) Analyze: Project Analysis
The purpose of the analysis activity is to identify the best solution to solve theidentified business need or issue. The project analysis activity involves:
Analysis of the business problem; Identification of potential solutions; Studies to determine technical and economic feasibility of potentialsolutions; Comparison of potential solutions; and, Identification of the best solution to recommend.
A feasibility study: is a preliminary study which investigates the deliverables ofthe proposed project and determines the resource requirements, costs, benefits,
Dr. Mohammed Farid Abdulghany Ahmed Fathalbab
7/29/2019 Risk Management and Project Management Partnership
7/16
and feasibility of a proposed project. Feasibility studies typically involve
cost/benefit analysis including the level of risk as " high risk = high return. If
costs & benefits can be quantified, they are called "tangible" i.e. increase in
revenue if not they are called "intangible", i.e. increase in customer satisfaction.
The feasibility of a proposed system can be evaluated in terms of 2-major
categories:
1) Organizational feasibility: How well the proposed Project supports
the strategic objectives of the organization.
2) Economic feasibility : is concerned with whether:
a) Expected cost savings,b) Increased revenue.c) Increased Profits,d) Reduction in required investment, ande) Other types of benefits which exceed the costs of developing
& operating a proposed system.
3) Technical feasibility can be demonstrated if reliable resources arecapable of meeting the needs of the proposed Project or can be
acquired or even developed by the business in the required time.
c) Recommend: Project Proposal
The project proposal describes the project in detail and ensures that the projectis consistent with the organizations Strategic Plan As a formal projectdeliverable, it identifies project objectives, provides a project description, definesthe approach, and supplies other top level planning information which, takentogether, establish the scope of the project. Ideally, the project proposal provides
decision makers with information necessary to make project initiation decisions.The project proposal is the foundation for initiation of the project, throughissuance of the project charter. Specifically the document defines:
What is to be done? Why it is to be done? How it is to be done?
How much risk is involved?A Project Proposal Template and Project Proposal Preliminary Risk AssessmentWorksheet are provided to assist in development of the project proposal.
d) Decide: Project Charter
The project charter formally authorizes a project. Approval of the project chartermarks the end of the Project Initiation Phase and the beginning of the ProjectPlanning Phase. Information in the project charter comes from the projectanalysis documents, the project proposal, and other documents that identifybusiness requirements and establish senior management commitment. In orderto complete the charter, an informal plan is required to detail the projectmanagement tasks for completing the initiation phase and conducting theplanning phase of the project.Normally a plan for this purpose can be a simple schedule of tasks or a Gantchart and should include:
A task list required to complete the Project Initiation Phase and theProject Planning
Dr. Mohammed Farid Abdulghany Ahmed Fathalbab
7/29/2019 Risk Management and Project Management Partnership
8/16
Phase, (Include any anticipated procurement activities if the projectplanning will be done by a contractor).
A time estimate to complete the Project Initiation Phase and ProjectPlanning Phase
The resources needed to complete the Project Initiation Phase and
Project Planning Phase. A cost estimate to complete the Project Initiation Phase and ProjectPlanning Phase
Information on the cost and time required for project planning will also beimportant if the agency needs to fund these phases outside of the project funds.A Project Charter Template is provided to insure that essential elements requiredto begin a project are included in the charter.
2. Planning Phase Overview
Project planning is the process of defining an orderly arrangement of activities
and resources to deliver a unique product or service. The project plan is the
primary document developed during the planning phase and communicates
project activities in terms of:
a) What tasks will be performed; who will perform the tasks;
b) When will the tasks be performed;
c) What resources will be applied to accomplish the tasks; and
d) How the tasks will be sequenced.
Time spent developing the appropriate structure for organizing and managing
project activities reduces risk through improves performance in the Executionand Control Phase.
Project Plan components and risk management partnership
There are exponential relation between risk discovery during PLC and the cost, as
the late risk discovered during the PLC the higher the cost will be. The Work
break down structure WBS which represents the first planning activity are
actually a risk management technique where project are dissolved into a more
clearer pieces which can easily be understood and resources can efficiently beassigned .The planning phase components and risk management partnership can
be explained clearly as follows:
1. Business Problem (BP) risk assessment BP As stated in the Project
Charter. The risk of poor business problem definition may lead to waste of scarce
resources as it will propagate to the coming phases and lead to the whole project
failure.
2. Assumptions risk assessment - List of the Assumptions made about the
project in the Project Charter. List of any identified changes to the original
assumptions or additional assumptions made during project planning. The risk of
Dr. Mohammed Farid Abdulghany Ahmed Fathalbab
7/29/2019 Risk Management and Project Management Partnership
9/16
poor Assumptions definition or update may lead to waste of scarce resources due
to wrong conclusions.
3. Project Description risk assessment Project description shows the
project approach, specific solution, customer(s), and benefits. The Project
Description is stated in the Project Charter. If there are changes to thedescription because of project planning, clearly identify the changes or additions
made to the project description. The risk of poor project approach definition or
updates negatively affects the Project planning processes and will definitely lead
to waste of scarce resources.
4. Project Scope risk assessment a detailed description of the Project Scope
found in the Project Charter and a detailed description of any new identified
scope additions or changes resulting from detailed project planning. The risk of
poor translation of requirements and specification in to appropriate scope and
the needed updates will definitely lead to waste of scarce resources.
5. Performance Plan risk assessment Measures of success are metrics that
measure the success or failure of a project. The measures of success are based
on the project scope and objectives. The risk of wrong selection of the right
measurement tools or scales that measures what really needed to be measured
will l definitely lead to misleading conclusions and waste of valuable resources.
6. Critical Milestone risk assessment Summarizing the Project Schedule by
listing the Milestones or Events on the critical path of the Project Schedule may
be a way to mitigate the risk accompanied with this process, but still there is a
risk of either the appropriate assessment of the critical millstone or the
occurrence of new critical paths due to the detailed project planning.
7. Budget Planning risk assessment Provide a summary in table form of the
expenditures and source of funding for the project during the life of the project.
Identify and explain deviations from the approved funding outlined in the Project
Charter. There are many types of risks in this regards such as the wrong
budgeting implemented technique which lead to a creation of tool that will either
lead to wrong definition funds requirement or being a serious barrier for project
progress technique.
8. Procurement Plan risk assessment Summarize the Procurement Plan for
this project. Include information about major procurements, procurement
strategies, and projected dates for critical procurement activities. The risks in this
regards are many such as suppliers commitments and capabilities, the
appropriate calculation of lead period, the changes of supplies specification and
prices.
9. Risk Planning Summarize the Risk Management Strategy for the project.
Describe the process for identification of risk, evaluation and prioritization of risk,
identification of options for mitigating risk, the process for maintaining the risk
Dr. Mohammed Farid Abdulghany Ahmed Fathalbab
7/29/2019 Risk Management and Project Management Partnership
10/16
plan and risk monitoring, and the responsibilities of individuals all over the
project life cycle.
Figure 5. Project Management Knowledge Areas, Lifecycle, Recurring Activities, and over whole
PRM
3. Project Execution and Control Phase Overview
The Project Execution and Control Phase is the part of the project and productlifecycle where the tasks that build the deliverables are executed. The Project
Execution and Control Phase begin when the project plan is approved and theresources necessary for executing the starting task are assembled. Projectexecution should be in accordance with the approved project plan.
a) Executing the Project
Execution is the act of carrying out planned activities. The execution of theproject plan is simply the act of performing task and activities that result in theproduction of the project deliverables. Task and activities performed must becompleted effectively and efficiently and here will be the risk. The project planserves as a road map and a common frame of reference for all members of the
project team. The project plan is therefore, the foundation for successful deliveryof projects. In a perfect world, plans are executed precisely as written. In reality
Dr. Mohammed Farid Abdulghany Ahmed Fathalbab
7/29/2019 Risk Management and Project Management Partnership
11/16
the risk is, no plan is ever performed with such precision. Plans are forwardlooking documents that cannot anticipate all eventualities.During execution, the project team to mitigate the risk must continuouslymonitor its performance in relation to the baselined project plan. By measuringand evaluating the actual execution of project activities against the baselineplan, the project team and stakeholders can gauge the progress of the project.
b) Start Up
Moving from planning into execution can be a major obstacle in successfulproject delivery. A project kick off meeting is a valuable risk management tool asit mitigates risks through facilitating the transition from planning activities andtasks to executing them. A kick off meeting enhances execution by focusing theteam on the project and by defining a starting point for beginning projectexecution. Additionally, it is a milestone when all resources needed to beginexecution are assembled and available to the team.
The kick-off meeting mitigates risks as well through providing an opportunity for
communication and establishing the commitment of the team and stakeholdersto the success of the project. The focus of the meeting is communications,identification of team members and stakeholders, reviewing the project scopeand business objectives, identifying the challenges, and identifying the next stepin getting the project underway. At this point, team members and team leadsmust, at a minimum, have copies of the schedule. The schedule must identify toeach person his specific tasks and dates for starting and completing them.
c) Project Performance Monitoring
Performance monitoring is a risk mitigating techniques as it can provideassurance that the project is progressing as planned or reveal the need to
intervene and take action to ensure the achievement of the desired businessobjectives. The execution of project task and activities occur in a cycle were thetask is executed, execution is measured, the results are reported, andmanagement controls needed are applied. Performance monitoring involves thecollecting, analyzing, and reporting project performance information to providethe project team and stakeholders with information on the status of projectexecution. The right Measurements, or metrics, are used to monitor projectprogress and are based on information or data collected about the status ofproject activities or tasks.
Dr. Mohammed Farid Abdulghany Ahmed Fathalbab
7/29/2019 Risk Management and Project Management Partnership
12/16
Figure 6. Project Execution and Control Phase Processes
4. Project Closeout Phase
The Project Closeout Phase is the last phase in the project lifecycle. Closeout
begins when the user accepts the project deliverables and the project oversightauthority concludes that the project has meet the goals established. The majorfocus of project closeout is administrative closure and logistics. Project closeoutincludes the following key elements which can be viewed as source of riskselements:
a) Turnover of project deliverables to operationsb) Redistributing resourcesstaff, facilities, equipment, andautomated systemsc) Closing out financial accountsd) Completing, collecting, and archiving project recordse) Documenting the successes of the project
f) Documenting lessons learnedg) Planning for Post Implementation Review
Dr. Mohammed Farid Abdulghany Ahmed Fathalbab
7/29/2019 Risk Management and Project Management Partnership
13/16
Figure 7. Project close out Processes
a) Turnover to Operations
The most important aspect (risk) of project closeout is the physical turnover ofcontrol of the product, good, or service delivered by the project. All projectdeliverables will need to be maintained and supported after the project teamdisbands. An operational unit of the organization (for which the deliverable isdeveloped) assumes responsibility for the support of the deliverable. Proceduresfor this turnover and acceptance by the operational unit must be determined.
Turnover and acceptance activities include but are not limited to knowledgetransfer, documentation transfer, and physical transfer of the deliverable. Theknowledge transfer and documentation is a risk management technique tomitigate the chance of occurrence or reoccurrence of the undesired events infuture.A formal acknowledgement of receipt (acceptance) of the project deliverable isexecuted by the operations and project managers.
b) Administrative Closure
Administrative closure involves the preparation of administrative documentation,collection of project documentation, disposition of project documents, and logistics
activities that ensure that the project resources are redistributed. Administrativeclosure includes, but is not limited to, task such as archiving, financial accountclosure, facilities turnover (or closure), contract closure, and personnelreassignment.
1) Collecting Project Archive Data - Historic project data is animportant source of information to help improve future projects. As a riskmanagement technique a Summary of technical information should beelectronically stored for historical reference to facilitate later review. Theproject archive should include a description of the files being submitted, theapplication (including version) used to create the archived materials, and apoint of contact.
2) Personnel - If personnel have been committed to the project full-time, it is important to get the people back into the available resource pool
Dr. Mohammed Farid Abdulghany Ahmed Fathalbab
7/29/2019 Risk Management and Project Management Partnership
14/16
as quickly as possible. This will ensure that the staff stays busy and thatthere is no risk of other projects within the organization do not fall short ofresources.
3) Facilities - If the project team has occupied agency facilities for along period of time during the project, it is a good idea to let the controllingfacilities personnel know that the space used for the project will becomeavailable again. Be sure to check facilities guidance documentation todetermine whether changes made to the project team area (structure,equipment, or technical modifications) are the responsibility of the projectteam after the project is complete. Returning the facility and equipment toits original state could add unanticipated cost and manpower to a project.
4) Financial Account Closure - Financial closure is the process ofcompleting and terminating the financial and budgetary aspects of theproject. Financial closure includes both (external) contract closure and(internal) project account closure. All expenditures must be accounted for
and reconciled with the project account. When financial closure iscompleted, all expenditures made during the project have been paid asagreed to in purchase orders, contracts, or inter-agency agreements.
5) Contract closure - Contract closure is the process of terminatingcontracts with external organizations or businesses. These contracts may bevehicles for providing technical support, consulting, or any number ofservices supplied during the project that the agency decided not to performwith internal resources. Contracts can be brought to closure for a variety ofreasons, including contract completion such as early termination, or failureto perform which represents a source of risk to the project. Contract closure
is a typical but important part of project management. It is a simple process,but close attention should be paid so that no room is left for furtherliabilities of the agency.
Conclusion
Todays business climate is both dynamic and complex. Management faces
changing requirements and increasing demands, as well as tight budgets and
fast turnaround demands. Organizations are struggling to do more with less
fewer resources, including less money, and, in many cases a reduced workforce.
Dr. Mohammed Farid Abdulghany Ahmed Fathalbab
7/29/2019 Risk Management and Project Management Partnership
15/16
Therefore, it is essential to optimize every aspect of business, particularly project
management.
Risk management have never been a choice for project management or any
other types of management but it is always a must, we are all risk managers
somehow, the rapid changes in the environmental condition (for both internaland internal) and the consequence change in the requirements and specification
which reflected on the continuous shrinking of product life cycle PLC , which
added extra uncertainty , instability and poor ability for appropriate forecasting
and planning, being more subjective depending on qualitative and not
quantitative techniques in decision making added more importance to a dynamic
risk management.
A risk management approach is applicable throughout the project life cycle, the
earlier in the project life cycle the risks are recognized; the more realistic the
project plan and expectation results will be. RM continues to add value all over
the project life cycle.
If there is a single key to making project risk management stick in yourorganization, it is to make it an integral part of all project phases and to treat it
just as seriously or more than you do to project scope, budgeting, scheduling and
resources location and allocation.
The simplest means of building project risk management into your project is to
ensure that the early steps, identification, analysis, prioritization and mapping,
and risk resolution planning are a normal part of all the project phases, processes
and activities.
It clear that Project risk management delivers the following values:1) Contributes to project success;2) Recognizes uncertainty and provides forecasts of possible outcomes;3) Produces better business outcomes through more informed decisionmaking;4) Is a positive influence on creative thinking and innovation;5) Offers better control less overhead and less time wasted, greaterfocus on benefits;6) Helps senior management to understand what is happening with theproject and the challenges the project has to overcome.
It is proved that Project risk management is an integral component of projectmanagement and represents the heart for all Project Management processes. Riskmanagement is also a key component of project cost estimating and scheduling.
Dr. Mohammed Farid Abdulghany Ahmed Fathalbab
7/29/2019 Risk Management and Project Management Partnership
16/16
References
ITRM Guideline CPM 110-01 , Date: January 23, 2006
Practice Standard Project Risk Management: 2009 Project management institute
Product development best practice, October 2002, volume 9 Issue 10 Dealing with PRM successfully,special series on risk management: By Preston G.Smith and Guy M. Merritt,
Dr. Mohammed Farid Abdulghany Ahmed Fathalbab