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Risk Assessment/Analysis Toolsfor Project Managers

State Risk Management Team

Greg Davis, Tim Brock, Rob Quigley, and Frank Chupka

Training Objectives

1. Knowledge of the principles and techniques of risk analysis.

2. Knowledge of project risk threats & opportunities impact to cost and schedule.

3. Knowledge of entering data to identify & quantify project risk threats and opportunities.

4. Knowledge of generating cost & schedule graphs, risk register and other reports.

5. Ability to determine risk-based cost & schedule and the project contingency amount from risk analysis results.

UPDATE THIS

What is Risk?

Project Management Institute (PMI) Says:

“An uncertain event or condition that, if it occurs, has a positive or negative effect on the project’s objectives.”

$

S

S

Scope

Schedule

Cost

Risk Assessment

Risk Assessment’s aim is to assess potential impact of various scope, event, and budget risks on the project’s cost and schedule.

Probability of Occurrence

Impact

Initial Risk

Risk Management

Probability of Occurrence

Impact

Initial Risk

Managed Risk

Risk Management’s aim is to identify opportunities and mitigation strategies to reduce both the likelihood of an event occurrence and the potential effect if it occurs.

Qualitative vs Quantitative Risk Analysis

Project Management Handbook, Risk Based Graded Approach Worksheet (Assess riskiness of all project to aide in consultant selection)

Risk Analysis Self Modeling Tool by HDR & SHRP2-R09 Risk Template(total project cost generally under $50 million)

Risk Analysis Workshop and Commercial Risk Modeling Software(total project cost greater than $50 million)

Independent Consultant-led Workshop (complex or major projects with total cost greater than $500 million)

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What’s in your Tool Box?

What’s the Risk Based Graded Approach Worksheet?

• PM Handbook – Chapter 19• Initial risk assessment (15 minutes)• Supports consultant selection decision

What is the Self-Modeling Risk Tool?

• Worksheet with Macros

• Generally under $50 million

• Less than 24 Risk Events

• Needed to Determine “Project Unknowns” Factor in the LRE (i.e. Contingency)

• 3-Day Workshop Not Necessary

• FDOT & Consultants working on FDOT projects!

What’s the Purpose of the Self-Modeling Tool?

Traditional• Contingency is intended to

include all risk (known & unknown)

• Little control of cost and schedule

• Reactive

Risk-Based Risk are clearly identified and

quantified

Reasonable control of cost and schedule

Proactive

Threat 1, 2, 3, etc.

Opportunity 1, 2, 3, etc.

Contingency

Range of Cost at Completion

Cost

Time

How Can Cost Risk Analysis Help?

Construction

Open to Traffic

PD&E Design

Letting

Estimate PDC

Estimate Inflated $

As Planned Curve

Better than Planned Curve

Worse than Planned Curve

Range for Completion Date

Source: FHWA

What are the Outcomesof Risk Management?

• Validation of Project Cost and Schedule

• Managed Risk Response Plan• Identification of high cost and schedule risk

drivers

• Managed District Contingency Box• Reduced Contingency as project evolves

• Understand and Communicate Cash Flow Requirements and Financial Plans

Risk-based Estimating Process

• Identify Projects

• Project Manager – Estimators Coordination

• Identify Project Risk

• Quantify Project Risk

• Risk Self-Modeling Tool• Enter project parameters

• Enter quantified risk

• Generate cost & schedule graphs

• Generate risk register

• Determine project contingency

What is needed to Get Started?

• Materials Needed:• Project Information• Long Range Estimate

• Summary by Component • Personnel Needed:

• Project Manager• Estimator• Consultant/Designer• Subject Matter Experts:

• Design• Construction• Other Stakeholders

How Does It Work?Identify

Assess

Analyze

Response Strategies

Monitor& Control

Plan &Organize

RISK

Plan & Organize

SHRP2-R09 - Structuring

2-9

How Does It Work?

Identify

Assess

Analyze

Response Strategies

Monitor& Control

Plan &Organize

RISK

Risk Management Process

•Where to Start?•Start-up Risk List•Lessons Learned •Project Knowledge•Project History•Team Brainstorming

Identify

Risk Starter List

SHRP2-R09 - Risk Identification

Generated by template once risks are categorized 2-18

How Does It Work?

Identify

Analyze

Response Strategies

Monitor& Control

Plan &Organize

RISKAssess

Assess

Probability

40%

Impact to Schedule

60 Daysx

Impact to Cost

$100,000x

10% 90%

40%

10% 90%

60 D

10% 90%

0.1M

Risk Assessment

Risk Assessment

Risk Assessment

Risk Assessment

Risk Assessment

Risk Assessment

SHRP2-R09 - Unmitigated Risk Assessment

2-25

How Does It Work?

Identify

Assess

Response Strategies

Monitor& Control

Plan &Organize

RISKAnalyze

Risk Analysis

Risk Analysis

SHRP2-R09 - Unmitigated Project Performance

Project Schedule Performance (Base vs. Unmitigated)

Note: Base performance results from Step 12-34

SHRP2 Risk Management Template

HELP Step 07 - Unmitigated Risk Ranking Plots

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0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50

CR-1

PD-8

Mean Severity ($M)

Ris

k

Opportunities - Unmitigated

0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70

SC-6PR-1RR-1RR-3RR-8RR-2CR-2CR-4

PD-13PR-2

PD-11CR-3

PD-12PD-14

PD-4SC-3SC-5

PD-16RR-7PD-5PD-6CR-5EP-2RR-6PD-1

PD-15CR-9PR-8PL-2CR-7

Mean Severity ($M)

Ris

k

Threats - Unmitigated

SHRP2-R09 - Unmitigated Risk Ranking Plots

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How Does It Work?

Identify

Assess

AnalyzeMonitor& Control

Plan &Organize

RISK

Response Strategies

Mitigation StrategiesRisk Management Process

Risk Response StrategiesThreats

Risk Factors that Increase Cost or Schedule

Opportunities

Risk Factors that Reduce Cost or Schedule

Avoid: Change the project scope to eliminate the impact of a risk.

Exploit: To make a proactive decision to take action to show that an opportunity is realized.

Transfer: Move a risk to another party who is more capable at handling the risk (such as the developer or insurance company).

Share: Assigning ownership of the opportunity to a third-party who is best able to capture the benefit for the project.

Mitigate: The project team may seek to lessen the impact of a specific risk item, which may involve the consumption of additional time and/or money. Mitigation usually requires positive action and has a cost.

Enhance: Take action to increase the probability and/or impact of the opportunity for the benefit of the project; seeking to facilitate or strengthen the cause of the opportunity, and proactively targeting and reinforcing its trigger conditions.

Accept: To take no action when a response may be too costly to be effective or when the risks are uncontrollable and no practical action may be taken to specifically address it. In active acceptance, the project team sets up a contingency reserve fund to account for the residual expected value of the remaining risks.

Risk Response Strategies

Risk Response Strategies

SHRP2-R09 - Mitigated Project Performance

Project Schedule Performance (Unmitigated vs. Mitigated)

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How Does It Work?

Identify

Assess

Analyze

Response Strategies

Plan &Organize

RISKMonitor & Control

Monitor & Control

The Risk Register is the single most powerful Control Tool

Incorporate it in your Progress Reports!

SHRP2 Risk Management Template

HELP Step 10 - Mitigated Risk RegisterNOTE: Risks and opportunities are sorted by total severity, though the

order should be identical whether using raw severity or percent of total

severity

Risk

Label

Risk Description Risk

Type

Mean

Cost

Impact

(CY $M)

Mean

Duration

Impact

(months)

Mean

Disruption

Impact

(M-Hr)

Mean

Change to

Critical

Path

Schedule

Mean

Severity

(YOE $M)

Percent

of Total

Mean

Severity

Risk

Ranking

based on

Mean

Severity

Retire

Risk ?

RR-8 QDOT helps City pay for water and sewer-line relocation Threat 0.91 0.00 0.00 0.00 0.95 0.16 1 No

PR-1 Uncertainty in construction-cost inflation rate Threat 0.58 0.00 0.00 0.00 0.62 0.10 2 No

RR-1 Uncertainty in ROW inflation rate Threat 0.58 0.00 0.00 0.00 0.60 0.10 3 No

PD-13 Change in environmental documentation. Threat 0.13 1.00 0.00 1.00 0.38 0.06 4 No

PR-2 Uncertain Design/Build contracting market conditions at time of bid Threat 0.30 0.25 0.00 0.25 0.38 0.06 5 No

SC-6 Provide new lighting throughout project. Threat 0.29 0.00 0.00 0.00 0.31 0.05 6 No

RR-3 Unwilling sellers Threat 0.29 0.00 0.00 0.00 0.30 0.05 7 No

RR-2 Accelerating pace of development in interchange area Threat 0.16 0.38 0.00 0.37 0.26 0.04 8 No

PD-12 Structures impacted by Main Street realignment are eligible for Historic Register. Threat 0.13 0.31 0.00 0.31 0.21 0.03 9 No

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SHRP2-R09 - Mitigated Risk Register

SHRP2 Risk Management Template

HELP Step 12 - Mitigated Risk Ranking Plots

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0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00

RR-8PR-1RR-1

PD-13PR-2SC-6RR-3RR-2

PD-12CR-4

PD-11PD-14

PD-4CR-3CR-2SC-3SC-5

PD-16RR-7PD-5PD-6CR-5EP-2RR-6PD-1

PD-15CR-9PR-8PL-2CR-7

Mean Severity ($M)

Ris

k

Threats - Residual

0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50

CR-1

PD-8

Mean Severity ($M)

Ris

k

Opportunities - Residual

SHRP2-R09 - Mitigated Risk Ranking Plots

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• Production Support Office Web Site• Project Management Handbook Chapter 19

• Program Management Office SharePoint Site• Cost Risk Analysis Tools CRA Tools

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Where can I find the tools?

Questions?

State Risk Management Team

Greg DavisTim Brock

Rob QuigleyFrank ChupkaKurt Lieblong