practical project risk assessment, simon white

Trigo White Ltd Risk Management www.trigowhite.com

Practical project risk assessment

APM Aberdeen

Robert Gordon University, Aberdeen

10th March 2015

Simon White

Consultant, Trigo White Ltd

+44 (0)7831 791 032

[email protected]


Risk management services

• Risk Management Plan development

• Risk workshop facilitation

• Qualitative risk assessment and analysis

• Risk register review

• Risk process design / review / implementation / audit

• Quantitative risk assessment and analysis

• Industry best practice

• Over 20 years’ consulting to a wide variety of industries

• Add value with risk management


The risk workshop

• Valuable discussion: assumptions, inter-discipline issues, allows honesty

• Structured approach, best practice

• Engage project team, management and stakeholders

• Skilled facilitation, ensuring contribution from all team members, keeping focus

• Identify, discuss and qualify risks

– Cause, risk, effect

– Probability (H / M / L …)

– Impact on schedule, cost and safety, production, operations (H / M / L …)

• Capture mitigation options and fallback options • Effect of mitigation

• Agree action owners and deadlines

• Make decisions – is it worth mitigating?

Probability Impact Score

Major scope change M VH 25

SIMOPS issues H L 17

DECC requires recycle L H 15

Delay to lift vessel arrival L M 9

… …


The risk workshop

• Risks can be ranked and summarised

• Give focus on mitigation

• Establish agreement

• Demonstrate robustness

• What are our top risks?

VH

Major

scope

change

H

DECC

requires

recycle

M

Delay to

lift vessel

arrival

LSIMOPS

issues

L M H VH

Probability

Imp

act


The risk register

• A useful live project document

• Prioritise, categorise risks

• Ranking, reporting of key risks

• Focus risk mitigation

• Track mitigation actions – progress and effectiveness

• Keep risk visible throughout planning and execution

• Risk analysis adds more value …


Inputs for a risk analysis

• Base schedule (WBS)

– Around 50-300 activities

– “Forward-driven” logic

– Can use existing schedule, or create in a workshop

• Base cost estimate (CBS)

– Around 20-50 high-level cost elements

– Allowances / contingency identified

• Any risks already identified


Quantitative risk assessment

• Quantify significant risks

– Probability (%)

– Schedule impact in days: P10, P50 and P90 (if it occurs)

– Cost impact in £: P10, P50 and P90 (if it occurs)

• Associate the risks with the schedule activities (WBS)

– E.g. “Delay to lift vessel arrival” will impact installation activities

• Associate the risks with the cost elements (CBS)

– E.g. “Delay to lift vessel arrival” will impact topsides cost

(optional)


3 4 5 6 7 8 9 10 11 12

Pro

bab

ility

den

sity

Activity cost (MM USD)

P10 P50 P90

Quantitative risk assessment

• Further quantitative assessments

– Schedule variance (-10% / +30% for engineering activities)

– Cost variance (-5% / +10% for jacket fabrication cost)

– Variance accounts for:

• Estimating uncertainty

• Risks not specifically modelled

– Correlation (topsides fabrication costs are uncertain because of common

causes)

– Series / parallel impacts (poor weather and lift vessel delay are in parallel)


Pro

bab

ility

den

sity

Total project cost (MM USD)

P10 P50 P90

23

Base = 16.4

Quantitative risk analysis

• The risk model shows the effect of the assumptions on the overall project

Base

estimate

(MM USD)

Bulks 2.3

Fabrication 5.7

Transportation 1.9

Heavy lift vessel 1.6

Hook-up and

commissioning

4.3

Project services 0.6

Total 16.4

The P90 is a "reasonably likely" worst case.

Contingency at P90 = 6.6



• The total contingency can be shown (on average) against the individual

costs

0

10

20

Bu

lks

Fab

rica

tio

n

Tran

spo

rtat

ion

Hea

vy li

ft v

esse

l

Ho

ok-

up

an

dco

mm

issi

on

ing

Pro

ject

ser

vice

s

Tota

l

P90 contingency:

Total base cost:

6.6

16.4

23.0Total P90 cost:MM

USD



• The total contingency can also be shown against different types of risk

0

10

20B

ase

cost

Tech

nic

al r

isk

No

n-t

ech

nic

al r

isk

Tota

l

P90 contingency:

Total base cost:

6.6

16.4

23.0Total P90 cost:MM

USD



• The model shows the effect of the risk on schedule as well as cost



• The contribution of risks to the overall project cost or schedule can be

calculated

-1 -0.5 0 0.5 1 1.5

Variance of labour costs

Impact of SIMOPS issues

Impact of delay to lift vessel arrival

Variance of offshore labour rate

Variance of transportation rate

Impact of flotel unavailability

Impact of poor weather

MM USD

Contribution to P10 / P90cost contingency

Contribution to P50cost contingency



• The total contingency can be shown (on average) phased over time

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Jan-1

1

Jul-11

Jan-1

2

Jul-12

Jan-1

3

Jul-13

Jan-1

4

Jul-14

Jan-1

5

Jul-15

Jan-1

6

Jul-16

Jan-1

7

Jul-17

Jan-1

8

Jul-1

8

Jan-1

9

Mo

nth

ly c

ost

(M

M U

SD)

Base phasing

P10 phasing

P50 phasing

P90 phasing


All this can be …

• Practical

• Defendable

• Valuable


An example

• Offshore natural gas development

• Schedule: many assumptions, critical path, burn rates, weather

• Cost: management and partners require confidence, justification of

contingency, basis for decisions

• Production: delays hurt NPV

• Operability: shutdowns hurt NPV

• Busy multi-discipline team

• Busy project manager

• Need a meaningful risk report


Full risk report


Full risk report

• Documents risk identification and assessment process

• Shows who contributed to the process

• Includes risk register and all other assumptions

• Shows the model logic

• Gives full results

– Overall contingency on cost and schedule, with justification

– Breakdown of contingency by WBS, CBS and by risk

– Effect of mitigation

• Forms a permanent record of the team’s view of the risk to the project, at a

given point in time

• Refresh / update at each stage gate


Benefits of risk analysis

• A valuable process

– Challenge project teams and base estimates

– Express uncertainty in the team’s base assumptions

– Capture risks, assumptions, issues, and their consequences

– Encourage open discussion amongst integrated team

• Demonstrate awareness of risk – Agree and communicate the team’s view of the risk

– Justify contingency and mitigation efforts

– Allow challenges, discussion and negotiation

– Set realistic stakeholder expectations

• The risk model represents the perceived risk, and its logical

consequences


About Simon White

• Over 20 years’ experience in risk management and risk analysis

– Wide variety of industries and major projects

– Three years as UK Risk Analyst for ConocoPhillips

– Previously Senior Risk Management Consultant and trainer for Pertmaster, Primavera and

Oracle

– Risk analyst for current major oil / gas projects such as Cygnus, Clair Ridge and Jasmine,

and a major government infrastructure programme

• Recognised as one of the leading practitioners of integrated project schedule and cost

risk management and analysis

– Methods allow project risk models to be interrogated and understood by project teams and

senior management

– Designed and built commercial risk software: Predict!, Arrisca, and a contributing architect to

Primavera Risk Analysis (Pertmaster)

– Develops tools for more practical and valuable project and business risk management.


Questions?

Simon White

Consultant

Trigo White Ltd – Risk Management

+44 (0)7831 791 032

[email protected]

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