1. 1 Department of Production and Quality Engineering Rethinking Project Risk Management PUS Seminar, November 30, 2010 Professor Asbjorn Rolstadas Norwegian University of Science and Technology

2. 2 Department of Production and Quality Engineering Project Management - State of Art  PMI driven  Main focus on delivery projects  Structured approach  Make a plan and stick to it  Manage deviations and changes  Avoid or manage risk

3. 3 Department of Production and Quality Engineering All Projects Carry Risk  Scope creep  Hope creep  Effort creep  Feature creep From Wysocki

4. 4 Department of Production and Quality Engineering Uncertainty, Risk and Opportunity  Uncertainty  More than one outcome  Connected to probability  Representing a state of insufficient information  Opposite of certainty  Risk  Event that has negative consequences if it happens  Probability of event multiplied by consequences  Opportunity  Event that has positive consequences if it happens  Probability of event multiplied by consequences

5. 5 Department of Production and Quality Engineering Stakeholders Create Risk

6. 6 Department of Production and Quality Engineering Traditional Risk Management Risk identification Quantitative analysis Qualitative analysis Risk control

7. 7 Department of Production and Quality Engineering PMI Risk Management Processes Describes the processes concerned with conducting risk management on a project Project Risk Management Risk Management Planning Risk Identification Qualitative Risk Analysis Quantitative Risk Analysis Risk Response Planning Risk Monitoring and Control

8. 8 Department of Production and Quality Engineering Out of the Box Thinking  Blue Ocean Strategy  Black Swan  The Tipping Point  Reinventing Project Management  Managing the Unknown  Agile Project Management  Risk Navigation Strategies – Beyond the Myth of Predictability

9. 9 Department of Production and Quality Engineering Red Ocean  Competitive battlefield  All competitors present  Fighting to be the best and beat each other  Focusing on economic growth

10. 10 Department of Production and Quality Engineering Blue Ocean  Sectors or companies that do not exist today  Unknown market place  Beyond competition  Strategy to survive by creating new markets and making competition irrelevant  Created in Red Oceans by extending limits

11. 11 Department of Production and Quality Engineering Black Swans  It is an outlier  It carries extreme impact  Human nature makes us concoct explanations for its occurrence after the fact, making it seem explainable and predictable

12. 12 Department of Production and Quality Engineering The Protective Approach  Focus on front-end loading  Predict everything as accurately as possible  Minimize financial risk  Avoid surprises during project execution  Keep fighting in the red ocean  Accept black swans

13. 13 Department of Production and Quality Engineering The Offensive Approach  Live with risk throughout the project  Postpone decision as long as possible  Capitalize on emerging opportunities (risks)  Stimulate agility – empower the PM  Move into the blue ocean

14. 14 Department of Production and Quality Engineering Risk and Complexity From Hartman

15. 15 Department of Production and Quality Engineering Current Risk Management Thinking  Focus on predictability  Fight uncertainty and risk  Create risk buffers  Exercise strong control

16. 16 Department of Production and Quality Engineering The Tunnelling Concept (Taleb)  Neglect of sources of uncertainty outside the plan itself  Data that supports our proposition is embraced and utilized to further increase that support, while data that challenges it is ignored, dismissed  Reducing our ability to see outside the boundaries of our assumptions

17. 17 Department of Production and Quality Engineering Tunnel Vision and Black Swans

18. 18 Department of Production and Quality Engineering Barriers Against Influence

19. 19 Department of Production and Quality Engineering Extending the Risk Picture

20. 20 Department of Production and Quality Engineering Types of Risk  Operational  Within control of the PM  Strategic  Within control of the owner  Contextual  External or interlinked with other projects

21. 21 Department of Production and Quality Engineering Decision Model

22. 22 Department of Production and Quality Engineering Uncertainty and Risk

23. 23 Department of Production and Quality Engineering Decision Process

24. 24 Department of Production and Quality Engineering Decision Factors

25. 25 Department of Production and Quality Engineering The Bermuda Project Risk Triangle

26. 26 Department of Production and Quality Engineering The Change Process

27. 27 Department of Production and Quality Engineering The Journey to change in behavior

28. 28 Department of Production and Quality Engineering Extended Project Risk Navigator Components

29. 29 Department of Production and Quality Engineering A New Approach  The notion of the Bermuda Project Risk Triangle including operational, strategic and contextual risks  A change process leading from exploring via adapting to delivering (illustrated as a journey)  A framework for the Extended Project Risk Navigator containing the three main components: Governance system, Decision process, and Strategic planning.

30. 30 Department of Production and Quality Engineering Shifts in Mindset Required  From projects as deliveries - to means to enhance project business value  From viewing uncertainties as “evil” - to acknowledge the project nature being unique and uncertain, hence requiring dynamic strategies  From projects as known tasks to be accomplished – to embrace a continuum of known-unknown tasks to be executed  From viewing deviations from project baselines as inaccurate planning or inappropriate control – to acknowledgement of deviations being the rule and not the exception