Derby Business School

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Education with the personal touch Week 8 - Designing and developing a project – managing obstacles and risk

The 5 Phase Project Life Cycle DEFINE PLAN ORGANISE CONTROL CLOSE State the problem Identify project goals List the objectives Determine preliminary resources Identify assumptions and risks Identify activities Estimate time & cost Sequence activities Identify critical activities Write project proposal Define management style Establish control tools Prepare status report Review project schedule Issue change orders Obtain client acceptance Install deliverables Document the project Issue final report Conduct project audit Determine personnel needs Recruit Project Manager Recruit Project Team Organise team Assign work packages IMPLEMENTATION PLANNING

A Project Charter – PIDOften called a Project Proposal – Scoping Document – Project Initiation Doc etc Problem Statement (15 words max)……………… Goals……………………….. Business Opportunity………………. Scope…………………………… Cost/Benefit Projection…………………. Milestones for Completion: ………………………… Roles and Responsibilities:……………………………..

The Project Proposal • A statement of the objective, the process being applied and the expected results / benefits. • A description of the project activities, timetable, and resource requirements on which a decision can be taken to proceed. • A tool for the Project Manager and team to use to support / facilitate decision making for the duration of the project.

The key reference document for • control of the project. • A development facility and induction tool • for new project team members. • A communication mechanism to inform the • organisation of progress of the project.

The Project Control Cycle Revise / update Baseline plan Decision making Authorise work Circulate reports Expedite Evaluate & forecast Change control Monitor progress Burke (1999)

The Nine Key Areas for Planning • Integration • Scope • Time • Cost • Quality • Human Resources • Communications • Risk • Procurement

Breakdown Structure Department Discipline Project Team Supplier Contractor Team Member Contractor

Work Breakdown Structure HOUSE Plumbing Electrical Civil Piping Sewerage Foundations Walls / roof Wiring Appliances

Cost Breakdown Structure Project Budget Cost Centre Budget 1 Cost Centre Budget 2 Supplier 1 Supplier 2 Supplier 3 Supplier 4 Labour Materials Hire Labour Materials Hire Labour Materials Hire Labour Materials Hire

Lines of Communication Client General Manager Vendors Contractors Department Manager Department Manager Department Manager Project Team Burke (1999)

Information and Control System Data Capture Data Processing Progress Report Work Execution Project Meetings Information Burke (1999)

Changing Project Goals Changes elsewhere Markets Changing goals Unclear corporate goals Priorities Technical failure or change New information Boddy & Buchanan (1992)

Risk Management A key element of the Project Definition and Design is some assessment of the level of risk involved, and how that could affect the Project. You may have looked at Risk in other modules

What is Risk Management? • ‘The possibility of loss, injury, • disadvantage or destruction’ • Proposal Risks - inherent in the venture • Performance Risks - inherent in the proposed approach

A Hazardous Business “Risk is usually taken to indicate some degree of hazard. For a firm the hazard is mostly financial in nature. While bankruptcy and insolvency are extreme examples, lesser hazards such as a modest earnings decline are more common.” (Bettis 1982) “If it appears that the organisation may be vulnerable, those situations posing a threat to the continued development and achievement of the organisation’s objectives should be monitored and such action as is reasonable should be taken to reduce the likelihood of loss.” (Ritchie & Marshall 1993)

Risk Analysis and Assessment • ‘Analysis is the separation of a whole into its component parts; an examination of a complex, its elements and their relationships’ • ‘Assessment being the estimation of probabilities and the value of an outcome’ • The possibility of suffering harm or loss. (PMI) • Uncertainty inherent in plans and the possibility of something • happening (i.e. a contingency) that can affect the prospects of • achieving business or project goals. (BS 6079)

Issues Resolution Management Risks Issue or Risk?

The EGAP-principle • The World Bank have identified the EGAP principle as a source of problems for many feasibility studies for capital projects • The principle: - “Everything Goes according To Plan” !! • Flyberg suggests instead “MLD – most likely development”

Risk Management Plan risk management Risk Management plan Identify risks Analyse risks Risk register Assess risks Plan risk responses Project Objectives achieved Actions to reduce risks

Risk identification • It is difficult to identify all risks. • Risks should be described succinctly. • Can help to subdivide risks into different categories Risk Categories – Erik Clemens • Financial • Technical • Project • Functional • Systemic 22

Risk Quantification Likelihood: Improbable Highly likely Low <10% : Medium 10-30%: High: >30% Impact: Minor Major Critical Small: by < 5%: Medium: by 5 – 10%: Large: delay project by >10%

The Risk Register or Log • Reference list of risks • Title and description of the risk • Current status of risk • Potential impacts • Risk owner • Actions • Action log

Risk Reporting Impact High Medium Low Likelihood High Medium Low

A variation – Tusler’s risk classification scheme 90% 50% 0% Puppies Tigers Probability Kittens Alligators 0 5 10 Impact

The Benefits of Managing Risk (Maylor) • Providing a vehicle for improving project plans and better reflecting reality • Highlighting areas for attention and contingency planning at the planning stage • Attempting to harness the “gut feel” element of risk assessment • Allowing the quantification of risk to build up experience in a structured way and allowing this factor to be traced historically for future benefit in other projects

Derby Business School