Practical project risk assessment, Simon White
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This document discusses risk management services provided by Trigo White Ltd, including risk workshop facilitation, qualitative and quantitative risk assessment, and development of risk management plans and risk registers. It provides details on Trigo White's approach to facilitating risk workshops, including identifying, qualifying, and capturing risks and mitigation options. It also summarizes how Trigo White can perform quantitative risk assessment, including modeling the impact of risks on project schedules and costs, and determining an overall contingency level based on risk.
Practical project risk assessment, Simon White
- 1. Trigo White LtdRisk 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 simon@trigowhite.com
- 2. Trigo White LtdRisk Management www.trigowhite.com 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
- 3. Trigo White LtdRisk Management www.trigowhite.com 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 … …
- 4. Trigo White LtdRisk Management www.trigowhite.com 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 L SIMOPS issues L M H VH Probability Impact
- 5. Trigo White LtdRisk Management www.trigowhite.com 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 …
- 6. Trigo White LtdRisk Management www.trigowhite.com 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
- 7. Trigo White LtdRisk Management www.trigowhite.com 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)
- 8. Trigo White LtdRisk Management www.trigowhite.com 3 4 5 6 7 8 9 10 11 12 Probabilitydensity 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)
- 9. Trigo White LtdRisk Management www.trigowhite.com Probabilitydensity 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 (MMUSD) 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
- 10. Trigo White LtdRisk Management www.trigowhite.com Quantitative risk analysis • The total contingency can be shown (on average) against the individual costs 0 10 20 Bulks Fabrication Transportation Heavyliftvessel Hook-upand commissioning Projectservices Total P90 contingency: Total base cost: 6.6 16.4 23.0Total P90 cost: MMUSD
- 11. Trigo White LtdRisk Management www.trigowhite.com Quantitative risk analysis • The total contingency can also be shown against different types of risk 0 10 20 Basecost Technicalrisk Non-technicalrisk Total P90 contingency: Total base cost: 6.6 16.4 23.0Total P90 cost: MMUSD
- 12. Trigo White LtdRisk Management www.trigowhite.com Quantitative risk analysis • The model shows the effect of the risk on schedule as well as cost
- 13. Trigo White LtdRisk Management www.trigowhite.com Quantitative risk analysis • 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 / P90 cost contingency Contribution to P50 cost contingency
- 14. Trigo White LtdRisk Management www.trigowhite.com Quantitative risk analysis • 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-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Monthlycost(MMUSD) Base phasing P10 phasing P50 phasing P90 phasing
- 15. Trigo White LtdRisk Management www.trigowhite.com All this can be … • Practical • Defendable • Valuable
- 16. Trigo White LtdRisk Management www.trigowhite.com 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
- 17. Trigo White LtdRisk Management www.trigowhite.com Full risk report
- 18. Trigo White LtdRisk Management www.trigowhite.com 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
- 19. Trigo White LtdRisk Management www.trigowhite.com 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
- 20. Trigo White LtdRisk Management www.trigowhite.com 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.
- 21. Trigo White LtdRisk Management www.trigowhite.com Questions? Simon White Consultant Trigo White Ltd – Risk Management +44 (0)7831 791 032 simon@trigowhite.com