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CRGP FUNCTION OF BUSINESS STRUCTURE AND BUSINESS PROCESSES IN MAJOR INFRASTRUCTURE PROJECT RISK ASSESSMENT

CRGP - Major Project Risk Assesment - R. Burt - 5/10/06. 2. PROJECT RISK ASSESSMENT. Pre-Execution Activities for a Business Participating in a Major ProjectFind/develop the project opportunity

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CRGP FUNCTION OF BUSINESS STRUCTURE AND BUSINESS PROCESSES IN MAJOR INFRASTRUCTURE PROJECT RISK ASSESSMENT

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    1. CRGP FUNCTION OF BUSINESS STRUCTURE AND BUSINESS PROCESSES IN MAJOR INFRASTRUCTURE PROJECT RISK ASSESSMENT

    2. CRGP - Major Project Risk Assesment - R. Burt - 5/10/06 2 PROJECT RISK ASSESSMENT Pre-Execution Activities for a Business Participating in a Major Project Find/develop the project opportunity – first screen: Does the project fit with business objectives? Is the project “winnable”? Is the project “doable”?

    3. CRGP - Major Project Risk Assesment - R. Burt - 5/10/06 3 PROJECT RISK ASSESSMENT Pre-Execution Activities for a Business Participating in a Major Project Structure and carry out project “win” plan Understand the customer Understand competitive position Build/reinforce customer relationship

    4. CRGP - Major Project Risk Assesment - R. Burt - 5/10/06 4 PROJECT RISK ASSESSMENT Pre-Execution Activities for a Business Participating in a Major Project ASSESS PROJECT RISK MAJOR PROJECTS CARRY MAJOR RISKS Causes- Execution Customer Capability Vendor Capability Political Consequences Financial Operational/Organizational Reputation Political

    5. CRGP - Major Project Risk Assesment - R. Burt - 5/10/06 5 PROJECT RISK ASSESSMENT -AVOID THE UNINTENDED ASSUMPTION OF RISK DEVELOP A DEEP UNDERSTANDING OF THE RISKS BEING ASSUMED AND HOW THE BUSINESS WILL MANAGE THEM PUT A FAIR PRICE ON THE RISKS ASSUMED AND GET PAID FOR ASSUMING THEM

    6. CRGP - Major Project Risk Assesment - R. Burt - 5/10/06 6 PROJECT RISK ASSESSMENT RISK ASSESSMENT TOOLS & ISSUES Technical Analysis Design Engineering Constructability Commercial Analysis Cost Analysis Financial Political Cultural Legal Operational Management Availability Labor Availability and Capability Logistical Capability Probability Analysis

    7. CRGP - Major Project Risk Assesment - R. Burt - 5/10/06 7 PROJECT RISK ASSESSMENT FUNCTION OF BUSINESS STRUCTURE IN PROJECT RISK ASSESSMENT “BUSINESS STRUCTURE” – The Organization and Relationship to One Another and the Enterprise as a Whole of the Operational Units of the Enterprise In Terms of Their Responsibilities For Achieving the Business Objectives of the Enterprise and Carrying Out the Functions Necessary to Achieve Those Objectives.

    8. CRGP - Major Project Risk Assesment - R. Burt - 5/10/06 8 PROJECT RISK ASSESSMENT FUNCTION OF BUSINESS STRUCTURE IN PROJECT RISK ASSESSMENT BUSINESS STRUCTURE– Examples Regional – Each Business Unit Is Responsible for All Business Activities and Functions Within a Geographical Area. Customer Focused – Each Business Unit is Responsible for All Business Activities and Functions Relating to a Specified Group of Customers. Service or Product Focused – Each Business Unit is Responsible for All Business Activities Relating to Providing a Specified Group of Related Services or Products. Centralized, or Functionally Focused – There Are No Separate Business Units With Overall Regional, Customer or Service or Product Responsibility. Each Functional Business Unit is Responsible for Providing its Output for All of the Services and Products the Enterprise Offers to to All Customers in All Regions.

    9. CRGP - Major Project Risk Assesment - R. Burt - 5/10/06 9 PROJECT RISK ASSESSMENT FUNCTION OF BUSINESS STRUCTURE IN PROJECT RISK ASSESSMENT With All Business Structures The Magnitude of the Risk/Opportunity Presented by a Major Project Requires that The Final Decision to Participate in a Major Project be Made at or Very Near the Highest Authority Level of the Enterprise. Thus the Data Gathering, Analysis and Judgments that Constitute the Risk Assessment Will Occur at Business Units; the Final Assessment (“Go/No Go”) Will Occur at Headquarters or the Board of Directors. The Function of Business Structure in Project Risk Assessment is Therefore to Provide the Framework in Which the Risk Assessment is Developed, Processed, Considered and Finally Evaluated. That Framework Must Facilitate an Objective, Thorough, Balanced Risk Assessment, Bringing to Bear All the Abilities and Experience of the Enterprise. The Goal is for the Risk Assessment To Accurately Predict the Enterprise’s Capability to Comprehend and Manage the Risk and to Balance the Risk With the Benefits the Project Can Provide.

    10. CRGP - Major Project Risk Assesment - R. Burt - 5/10/06 10 PROJECT RISK ASSESSMENT FUNCTION OF BUSINESS STRUCTURE IN PROJECT RISK ASSESSMENT The Specific Framework provided by the Business Structure for Risk Assessment Will Vary With the Type of Business Structure of the Enterprise, and Other Factors Specific to Each Enterprise, But Some General Principles Appear to be Applicable. The Business Units That Find/Develop The Opportunity and Prepare the “Win Plan” (the “Selling Units”) Take Primary responsibility for Risk Assessment. Risk Factors With Enterprise Wide Impact – Financial, Legal, Political, Reputation – Must be Assessed at a Point in the Business Structure Outside the Selling Units. The Final Risk Assessment as Presented to HQ/Board Must be Developed in a Collaboration Among Selling Units, Functional Experts and Senior Management.

    11. CRGP - Major Project Risk Assesment - R. Burt - 5/10/06 11 PROJECT RISK ASSESSMENT FUNCTION OF BUSINESS PROCESSES IN PROJECT RISK ASSESSMENT “Business Process” - A series or group of interrelated activities that produce an output in terms of production of goods, services, information, or other action or status that is part of or in furtherance of the objectives of the business.

    12. CRGP - Major Project Risk Assesment - R. Burt - 5/10/06 12 PROJECT RISK ASSESSMENT FUNCTION OF BUSINESS PROCESSES IN PROJECT RISK ASSESSMENT The Business Process of Project Risk Assessment A Project Risk Assessment Process Is A Core Business Process for Any Enterprise that Participates in Major Projects . The Factors Considered in a Project Risk Assessment Process Will be Very Similar Across Enterprises Participating in Major Projects. The Quality of the Project Risk Assessment Process Will in General Reflect the Overall Quality of the Enterprise’s Business Processes.

    13. CRGP - Major Project Risk Assesment - R. Burt - 5/10/06 13 PROJECT RISK ASSESSMENT FUNCTION OF BUSINESS PROCESSES IN PROJECT RISK ASSESSMENT Business Process Quality Standardized – Same factors Analyzed in the Same Format, Each Time the Process is Executed. Builds in experience base. Provides reference point. Permits new participants in the process to quickly become proficient in the process. Formalized – The steps required for the Process are Clearly Defined and Mandatory. Adequate time for Review.

    14. CRGP - Major Project Risk Assesment - R. Burt - 5/10/06 14 PROJECT RISK ASSESSMENT FUNCTION OF BUSINESS PROCESSES IN PROJECT RISK ASSESSMENT Business Process Quality Complex Business Processes Must Be Conducted at Different Points or Levels in the Business Structure (see discussion of Function of Business Structure in Risk Assessment, above.) Data Driven – No Analysis Accepted Unless Based on Best Available Data. All Necessary Expertise Brought to Bear – External Sources, if Appropriate. More than One Source, if Warranted.

    15. CRGP - Major Project Risk Assesment - R. Burt - 5/10/06 15 PROJECT RISK ASSESSMENT FUNCTION OF BUSINESS PROCESSES IN PROJECT RISK ASSESSMENT Elements of the Quality of a Project Risk Assessment Process Communication is Essential to an Effective Risk Assessment Process – Management Leading the Process Must take Responsibility for Full Open Communication: What Happens in the Project Risk Discussion, Stays in the Project Risk Discussion. Shooting at Messengers Prohibited. Playing “Gotcha” Prohibited.

    16. CRGP - Major Project Risk Assesment - R. Burt - 5/10/06 16 PROJECT RISK ASSESSMENT The Business of Major Projects is a Business of Taking and Managing Risks –It is a Very Substantial Aspect of What an Enterprise in this Business is Paid to Do. To Avoid All Risk of Participating in Major Projects, Limit the Enterprise’s Participation to Running the Lunch Wagon (Risk of Unsold Hot Dogs Unavoidable).

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