Creating Risk Intelligence A High Level “How To” Guide for Program Managers Nathan Houser & Sean Conlin, Deloitte November 2006 This presentation is incomplete without the accompanying discussion Agenda What’s in it for me!? A day-in-the-life…can we make this better? Making it happen…
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Nathan Houser & Sean Conlin, Deloitte
This presentation is incomplete without the accompanying discussion
Contractor Project ManagersDoE’s World of Risk Management
Leaders, managers, and staff alike benefit from risk management.
Specific objectives dictate desired level of risk sophistication.
Built into decision-making
Risk interactions are managed with incentives
Intelligent risk taking
“Risk management is everyone’s job”
Integrated response to adverse events
Performance linked metrics
Cultural transformation underway
Tone set at the top
Policies, procedures, risk authorities defined and communicated
Reaction to adverse events by specialists
Discrete roles established for small set of risks
Typically finance, insurance, compliance
Ad-hoc / chaotic;
depends primarily on individual heroics, capabilities and verbal wisdom
1: Tribal & Heroic
2: Specialist Silos
5: Risk Intelligent
Daily life is chaotic, ad-hoc; heroics carry the day.
Project assessments in a reactive culture.
“The risk assessment performed does not adequately distinguish amount of contractor risk and government risk.”
“The risk contingency is considered marginal at best.”
“The potential for substantial changes in the project design as a consequence of external reviews is an unrecognized risk.”
Senior Leadership imposes top-down risk controls
Risk Intelligence proactively a part of all activities
Structured methods, tools, and reporting provide predictable results.
Human CapitalFive-step Risk Management Lifecycle
The risk lifecycle applies across all parts of a program or project. .
Assess & Measure Risks
Respond to Risks
4. Design & Test Controls
5. Monitor, Assure & Escalate
Hundreds of insignificant risks can easily distract from a few critical.
Evaluate each risk and its impact on cost, scope, and schedule.
major weather event
dominate party change
reduction in supplyavailability ↓
constituent priority shift
Reduction in available funding ↑↓
reduction inavailable funding ↓
Changes solution ↑↓
Objective: Complete entire Project by 2010 within budget
Infr. not avail. ↓
Union contract expires ↑↓
Inadequate projectmonitoring ↓
Improved constructionmethods ↑
Choose the corrective actions, execute, and evaluate effectiveness.
Identify corrective actions
Monitor effectiveness of actions
Corrective actions result in mitigated risk, but come with a cost.
Sample risk: Technology advances and innovation require design changes.
Incremental Mitigated Risk(Perform Cost/Benefit Analysis)
Risk reduced to an acceptable level
Risk reduction occurring, not complete
Further action requiredStep 5. Monitor, Assure, and Escalate
Complete set of risks must be considered to understand the risk profile.
Inherent (Gross) Risk
Current Residual (Net) Risk
Everyone has a role to play in making risk management part of the culture.