Integrating Risk and Benefits Management

Bruce Phillips and William Foulds

Life Cycle Engineering

content

Life Cycle Engineering

Case Studies

Who are we?

Why ‘risk and benefits’?

Understanding the risk/benefit relationship

Context, integration and themes

…and what do we do?

Success Factors The important enablers

Consultancy Services Solutions Collaborative Solutions –

ensuring the information and processes our customers need are securely shared, better organised and available at the point of need

Management Services – supporting and delivering critical projects and programmes, managing risk and providing assurance and governance

our business

Lifecycle Engineering – managing and supporting assets, ensuring they are available and affordable through life

Information & Knowledge Management – delivering confidence in the quality and assurance of our customers’ information

Visualisation Solutions – advanced solutions that work with the growing big data challenge, and more information systems to support more informed decision making

Data Analytic Solutions - helping our customers to work smarter and make better decisions

Will Foulds Bruce Phillips

The business – Management Services, Project Management Group Leader

The business – Management Services, Risk Management Group Leader

our people

The profession - Institute of Risk Management (IRM) Member and MSc Risk Management, PRINCE2 and APMP

The ‘sharp-end’ - Delivering enterprise, portfolio, programme and project risk management architectures and solutions worldwide

The ‘sharp-end’ - Delivery and leadership of many projects, programmes and transformation changes in Defence, Security and ICT

The profession – APMP, MSP, APM Benefits SIG and APM SWWE Committee

making it up as you go along…

why ‘risk’?

• “Effect of uncertainty on objectives” (ISO 31000).

• Golden Rule: “Risk is in the eye of the beholder”.

• Determined by:

• Perception: What is the risk, and how big is it?

• Appetite: What risk am I willing to accept?

• Value: What’s it worth to me?

• Coin-toss game

• Flying in an aeroplane

• We use risk management as a mechanistic process

to achieve objectives.

• But, our actions are a balance of Risk and Benefit

• Individuals, project teams, stakeholders

• The intended project benefits

It’s all about Risk…isn’t it?

Strategic Objectives

Identify

Assess

Plan

Manage

• Identify elements of uncertainty

• Balance appetite, perception and value

• Focus management attention

• Communicate - Monitor, report and update

• Fundamentally linked to Strategic

Objectives

why risk management?

• Recent Trends: Objectives biased, not benefits

• Compliance: Birth of the ‘compliance’ approach restricts benefits identification

• Integration: Little alignment of Benefits and Risk Management functions

why ‘benefits’?

• Outcome considered to be an advantage by one or

more stakeholders.

• Delivery of benefits is the rationale behind the

investment in business change.

• In project management, success can only be

achieved through delivery of benefits.

• Like risk management, it contributes towards the

achievement of strategic objectives.

• Therefore, integrated risk and benefits management

enables success.

• Experience tells us that there is a poor record of

transformational change initiatives realising the

benefits they were intended to deliver.

• Lack of benefits identification or management?

• Not managing the uncertainty?

It’s all about Benefits…isn’t it?

why benefits management?

Strategic

Objectives

Identify

Plan

Deliver

Review

• Supports:

• The decision to invest

• Delivering the vision

• Defining project outputs

• Ownership and contribution

• Helps harness (the inevitable) changes and

opportunities as they come along.

• It’s also about non-benefits i.e. risk!

• Fundamentally linked to Strategic Objectives

• Business Case: Investment decisions not based upon the balance of risk v benefits!

• Understanding: Benefits and risk management seen as a ‘black arts’.

• Measuring Success: We don’t - we just move on to the next project.

key risk/benefits themes

Strategic

Objectives

Plan

Execute

Harvest

Learn

• Integration: Positive cumulative effect through managing risk and benefits together

• Engagement: Improved collaboration, communication, ownership and visibility

• Learning: Helps to ensure experiential learning is encouraged and exploited

• Plan: Simple strategies to integrate… integrated risk

and benefits management strategy

• Execute: Bring risk and benefits into alignment through

monitor and control… benefits/non-benefits

focused risk register

• Harvest: Review of what benefits were delivered and

when… updated risk/benefits realisation plan

• Learn: Understanding the risk/benefit relationship and

what we learnt (good and bad)… continuous

improvement plan

typical lifecycle

Potential Risk

Impacts not

Integrated in to

Benefits Realisation

Plan

Risk

Management

Strategy

Outputs Transitioned

to Users

Embedding the New

Capability

New Capability Seen

as BAU and Used

Effectively

Benefits Realisation Value Curve

Risk Impact Curve

Pre-Project Project Transition Early Operations Sustained

Operations

Risk Register

No Real Validation of

Risks Against

Benefits and their

Profiles

Delivery

Understand the

context

Monitoring

Risk with No Direct

Consideration of

Impact on Benefits

Little or No Risk v

Benefits

Performance Review

Focus on Benefits.

Insufficient Focus on

Non-Benefits

No Benefits

Realisation

Measurement or ROI

Assessment

No Appetite for

Opportunity Benefits

or Trade-offs

Benefits

Management

Strategy

target lifecycle

Integrated Risk and

Benefits Realisation

Planning

Integrated Risk and

Benefits

Management

Strategy

Embedding the New

Capability

Benefits Realisation Value Curves

Risk Impact Curves

Pre-Project Project Transition Early Operations Sustained

Operations

Benefits Focused

Risk Register

Validating Candidate

Risks Against

Agreed Benefits and

their Profiles

Delivery

Schedule and Cost

Risk/Benefit Analysis

Understand the

context

Monitoring Risk and

Controlling Benefits

Review of Risk v

Benefits

Performance against

Baseline

Risk Impact of Non-

Benefits

ROI and Assess

Contribution towards

Strategic Objectives

Opportunity and

Trade-off Decisions

‘before’

‘after’

‘before’

‘after’

Minimise

Maximise

New Capability Seen

as BAU and Used

Effectively

Outputs

Transitioned

to Users

arms factory build

Scenario

• Design/build; Risk Management to ensure

programme planning and decision support.

• Objectives: a) factory build, b) markets and

exports serviced and c) deliver long-term

economic return.

• Traditional methods of risk management to be

deployed under contract: T, C and P.

Solution

• Working with local stakeholders and project

team to identify benefits: a) local recruitment,

b) sustainability for dual-purposes and c) 25%

increase in production ahead of rivals

• Benefits-based risk register.

• Graphic of risk ‘burn-down’ and realisation of

benefits to the local people and economy.

Benefits

• Novel risks/opportunities that traditional

methods would have missed.

• Increased support from local stakeholders

(linked to motivation).

• Benefits approach enhanced risk register.

• Delivering value, not just a product.

security services

Scenario

• Significantly under-performing service provision

• Original objectives around demand/capacity

management, product quality, value

• Concept of risk and benefits completely alien

• Threat of losing the contract

Solution

• Understand risk impact on current baseline

• Define new service levels based on delivery of

achievable benefits

• Risk aligned benefits realisation planning

• Joint team continuously reviewing risk and

affects on benefits, via skilled PMO

• Benefits measured using same baseline

approach and metrics

Benefits

• Culture shift in attitude to risk and benefits

• Increased project and programme success

• Customer satisfaction

• Value driven by increased productivity x6

army communications programme

Scenario

• Objectives around managing equipment

obsolescence and reducing training burden

• No defined benefits

• Benefits not really understood - at all levels

• Decisions being taken without understanding

risk and impact on benefits

Solution

• Benefits workshops, seniors/decision-makers

• Identify, prioritise benefits and understand risk

• Goal based benefits realisation plan focused

on the management of risk

• Integrated risk mitigation of non-benefits and

end benefits

• Decision-making based on impact on benefits

Benefits

• Realisation that ‘it’s all about delivering benefits’

• Risk to benefit relationship understood

• Benefits selected on value, prioritisation and risk

• Benefit options, based on risk impact

defence systems engineering

Scenario

• Environmental protection system for armoured

vehicle procurement programme

• Two options: ‘active’ (self-regenerating filters)

and ‘passive’ (disposable filters)

• Risks and benefits of each option not

considered or understood

• Decision required for business case

Solution

• Through-life assessment of both options

based on risk and benefits relationship

• Considering risk/benefit curves for both

options determined ‘passive’ as optimum

• Recommendation based on balance of risk

and delivery of benefits, approved by ChEng

Benefits

• Clear risk/benefit assessment based on

capability, financial, organisational and

regulation categories

• Decision-makers know the impact of their

decision

• Approach adopted for other areas of the vehicle

enabling fleet based benefits/risk trade-offs

navy communications programme

Scenario

• Complex ICT transformation programme

• Process, organisation, technology and

information but no coherence

• Poor governance - and new SRO!

• Integrated risk and benefits management

immature

Solution

• Creation of a blueprint with under-pinning

benefits and risks

• Creation of a programme plan that defines

how outputs and outcomes will be delivered

• Creation of a scheduling approach that

integrates risk and benefits

• Exploring the relative schedule and cost

risk/benefits of different delivery options

Benefits

• Risks and benefits traceable from vision to

implementation

• Coherence in future state of the programme

• Accountability: known cost of risk and cost

of benefits

• Culture change

critical success factors

Simplicity: Empowerment, Process, Transparency

Culture: Leadership, Attitude, Collaboration

Habit: Methodology, Motivation, Sustainability

Any Questions?