Managing Project Risks

PETER J EDWARDS, PHD, is an Adjunct Professor at RMIT University in Melbourne, Australia. He has authored and co-authored more than 150 peer-reviewed journal and conference papers, two books, and five book chapter contributions. PAULO VAZ SERRA, PHD, is a Senior Lecturer in the Faculty of Architecture, Building and Planning at the University of Melbourne, Australia, with more than 20 years of experience working in the construction industry in Europe. He coordinates the "Risk in Construction" and other courses within a Master of Construction Management degree program. MICHAEL EDWARDS, B.SC., has worked for the Australian Commonwealth Government for over 20 years initiating and managing projects for services and service improvements.

• List of Tables xvList of Figures xviiPreface xixAcknowledgements xxiiiGlossary xxv1 Introduction 11.1 Introduction 11.2 The Project Perspective 11.3 The Project Stakeholder Perspective 21.4 Overview of Contents 31.5 Limitations Caveat 52 An Overview of Risk 72.1 Introduction 72.2 Risk Definitions 72.3 Threat and Opportunity 92.4 Risk and Uncertainty 112.5 The Dynamic Nature of Risk 162.6 Psychology and Perceptions of Risk 172.7 Risk Awareness 182.8 Classifying Risk 192.9 Risk Communication 282.10 Summary 28References 293 Projects and Project Stakeholders 313.1 Introduction 313.2 The Nature of Projects 313.3 Project Objectives 323.4 Project Phases 393.5 The Composition of Projects 413.6 Processes of Project Implementation 433.7 IT Project Example 443.8 Organisational Structures for Projects 463.9 Project Stakeholder Relationships 473.10 Stakeholder Organisational Structures 553.11 Modes of Organisational Management 603.12 Project Stakeholder Decision Making 613.13 ‘Risky’ Projects 653.14 Summary 67References 684 Project Risk Management Systems 694.1 Introduction 694.2 Risk Management 704.3 Risk Management Systems 724.4 Risk Management Standards and Guides 734.5 A Cycle of Systematic Project Risk Management 754.6 Project Stages and Risk Management Workshops 794.7 A Project Risk Register Template 864.8 Summary 88References 885 Project Risk Contexts and Drivers 915.1 Introduction 915.2 The Contextualising Process 925.3 Internal Contexts as Risk Drivers 935.4 External Contexts as Risk Drivers 945.5 Using Contextual Information 1005.6 Summary 101Reference 1016 Approach to Project Risk Identification 1036.1 Introduction 1036.2 Approach to Risk Identification 1046.3 Workshop Timing 1056.4 Types of Risk Identification Techniques 1106.5 Summary 116Reference 1177 Project Risk Identification Tools 1197.1 Introduction 1197.2 Activity‐Related Tools 1207.3 Analytical Tools 1287.4 Associated Representative Tools 1377.5 Matrix Tools 1497.6 Simulation and Visualisation Tools 1497.7 Speculation Tools 1537.8 Structural and Management Tools 1557.9 Risk Identification Statements 1567.10 Summary 158References 1608 Project Risk Analysis and Evaluation 1618.1 Introduction 1618.2 Qualitative Analysis 1638.3 Assessing Likelihood 1648.4 Assessing Impacts 1678.5 Evaluating Risk Severity 1688.6 Quantitative Analysis 1728.7 Risk Mapping 1798.8 Summary 181References 1829 Risk Response and Treatment Options 1839.1 Introduction 1839.2 Risk Attitudes and Appetites 1849.3 Existing Risk Controls 1879.4 Risk Response Options 1889.5 Risk Treatment Options 1949.6 Risk Mitigation Principles 1959.7 Strategic Use of ALARP (‘As Low as Reasonably Practical’) 1979.8 Reassessment 1989.9 Recording Decisions 1989.10 Summary 198References 19910 Risk Monitoring and Control 20110.1 Introduction 20110.2 Assigning Responsibility 20210.3 Monitoring Procedures 20410.4 Control Measures 20710.5 Reporting Processes 20910.6 Dealing with New Risks 21010.7 Disaster Planning and Recovery 21110.8 Capturing Project Risk Knowledge 21210.9 Summary 213References 21311 Project Risk Knowledge Management 21511.1 Introduction 21511.2 Knowledge Definitions and Types 21611.3 Knowledge Transformation 21711.4 Types and Forms of Knowledge 21811.5 Organisational Culture and Knowledge Management 21911.6 The Knowledge Creation Cycle 22011.7 Additional Issues of Organisational Culture 22611.8 KMS Alignment and Information Redundancy 22611.9 Tools and Techniques for Eliciting Risk Knowledge 22711.10 Developing Organisational Risk Wisdom 23311.11 Project and Organisational Risk Register Architecture 23311.12 Challenges for Implementing Risk Knowledge Management Systems 23711.13 Communication and Risk Knowledge Management 24011.14 Summary 242References 24312 Cultural Shaping of Risk 24512.1 Introduction 24512.2 Culture in Society 24612.3 Organisational Cultures 24712.4 External Cultures as Project Risk Shapers 25312.5 Organisational Cultures of Other Project Stakeholders 25412.6 Applying Cultural Shaping in Project Risk Management 25512.7 Summary 259Reference 26013 Project Complexity and Risk 26113.1 Introduction 26113.2 The Concept of Complexity 26113.3 Relative Complexity 26813.4 Uncertainty and Project Complexity 27013.5 Identifying and Mapping Complexity 27213.6 Influence of Complexity on Risk Management 27313.7 Complexity and Mega‐projects 27313.8 Summary 276References 27614 Political Risk 27714.1 Introduction 27714.2 Political Spheres 27914.3 Dimensions of Political Risk Factors 28014.4 Examples of Political Risks 28114.5 Political Stakeholders 28414.6 Managing Political Risks 28414.7 In‐house Political Risks 28814.8 More Extreme Political Threat Risks 28814.9 Summary 290Reference 29115 Opportunity Risk Management 29315.1 Introduction 29315.2 Concept of Opportunity Risk 29415.3 Opportunity Risk in Projects 29515.4 Examples of Opportunity Risks 29615.5 Managing Opportunity Risks 29815.6 Summary 306Reference 30716 Strategic Risk Management 30916.1 Introduction 30916.2 Strategic Issues for Project Risk Management 31016.3 PRMS Process Strategies 32116.4 Summary 325References 32617 Planning, Building, and Maturing a Project Risk Management System 32717.1 Introduction 32717.2 PRMS Objectives 32817.3 Planning and Designing the PRMS 32917.4 Risk Management Maturity 33317.5 Building the PRMS 33917.6 PRMS Performance Review and Improvement Cycle 34317.7 Summary 348References 34918 Computer Applications 35118.1 Introduction 35118.2 Project Risk Management System (PRMS) Software Applications 35218.3 Other Information Technologies and Tools 35918.4 Summary 36019 Communicating Risk 36319.1 Introduction 36319.2 Communication Theory and Models 36419.3 Components in the Communication Process 36619.4 Communicating Risk in the PRMS Cycle 37019.5 Communicating Project Risk Beyond the Project Stakeholder Organisations 37219.6 Evaluating Risk Communication 37419.7 Summary 374References 37520 Conclusions 37720.1 Introduction 37720.2 Current State of Project Risk Management 37820.3 Future Project Risk Management 38120.4 Checking Your Reading Satisfaction 38320.5 Closing Remarks 391Case Study A: Public–Private Partnership (PPP) Correctional Facilities Project 393Case Study B: Rail Improvement Project 403Case Study C: PM Consultant and a Government Aid–Funded Pacific Rim Project 409Case Study D: High‐Capacity Metropolitan Train Mock‐up Project 415Case Study E: Hot‐Rod Car Project 417Case Study F: Aquatic Theme Park Project 421Index 425