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Constructing ExcellenceBerkshire Club Meeting
Uncertainty Management:
Dealing with Risk and Value
Emma Major
Major Value Consultancy Ltd
Introduction
Uncertainty Management: Dealing with Risk and Value
Project Managers are well versed in the process of schedule risk management;
but how many project managers also identify, analyse and manage the positive opportunities on
schedules?Perhaps it is time for project managers to see Value and Risk Management of project schedules as the
two sides of the same uncertainty coin.
Risk Management
The process through which uncertainty is controlled is over the life of a project
Risk Management Process
– Identify the Risks
– Analyse the risks - probability and impact
– Quantify the risks - effect to the project
– Develop Risk Response Plans
– Construct a Risk Register
– Manage the process throughout the project
Value Management Process
Background & Preparation
for the Workshop
Background & Preparation
for the WorkshopInformation Stage
Information StageFunction Analysis
Function AnalysisIdea Generation
Idea Generation
Idea DevelopmentIdea Development
Decision BuildingDecision Building
Action PlanAction Plan
Idea EvaluationIdea Evaluation
How? Why?
Function Analysis
Records Storage
Library
Car Park
Training Room
Quality Facility
Self Catering
SafeSecure
Easy to Clean
Showers
Appearance
Provide Capacit
y
Use of Redundant
Facility Durability
Co-locate
Facilities
User friendly
RestLeisure
Smoking
Improve
Morale
Counselling
Facility
Quick and Easy Access
Open view
(Booking On)
Comms
Satisfy Locals/
Authority
Maintenance
Buildability
Abuse Resistant
Meet Statutory
Requirements
Minimise Disruption
during construction
Speed of Constru
ction
Flexibility
33 Trains per hour
ToiletsMale/
Female
Mobility Impaired
Uncertainty Management
How does Risk Management deal with the negative risks?
How does Value Management manage the risks?
Why Uncertainty Management?
Why identify uncertainties?– Optimise project delivery– Reduce abortive work – Increase value– Develop the relationship between positive
uncertainties (value) and negative uncertainties (risks)
When to Commit?
80%
COST
TIME
Concept Feasibility Design Construction Use
When is the best Opportunity?
COST
TIME
Concept Feasibility Design Construction Use
Potential for change
Resistance to change
Cost of change
Implementing Uncertainty Management
Project Stage/Phase Value Activity Risk Activity Benefits for the Project
Definition/Feasibility VM Strategy RM Strategy Consensus of project strategy
Concept Outline VM Outline RI and RA Identification of the option that most closely meets objectives
Preliminary Design VM RI, RA and RM Guaranteeing maximum value and minimum risk for the project
Detailed Design VE RI, RA and RM Guaranteeing maximum value and minimum risk for the option
Procurement VE RA and RM Assists contracted selection
Delivery VM RM Incentivises contractor
Project Completion VM Review RM Performance Review and Evaluation
Key: VM – Value Management VE – Value Engineering RM – Risk Management RI – Risk Identification RA – Risk Analysis
Linking Risk and Value Analysis
– Agree the project function– Identify uncertainties that impact outcome– Evaluate the uncertainties into a prioritized listing– Develop the uncertainties to understand probability
and impacts on the project and its function– Decide which of the uncertainties to manage in the
short, medium and long term and assess the impact– Develop an action plan with managers– Review uncertainties and repeat
Benefits for Management
– Optimised projects and businesses– Achievement of Best Value– Clarity and transparency of decision making– Greater understanding of the risks involved– Reduced resource requirements due to the
resultant economies of scale – Raised awareness of the relationship of value
opportunities and their associated risks
Heads or Tails
Uncertainty Management
Questions?
Interactive Worked Example
Building a House Extension
Brief:Extend a house to double the size of the kitchen and provide a
conservatory style dining room
Process
1 - Agree the Function of the Project
2 - Identify uncertainties
3 - Rank uncertainties
4 - Develop management responses and actions for the key uncertainties
5 - Uncertainty Analysis
6 - Review the outcome from the process
Function Analysis
• What is the project function?– Increase Space
• Extend Kitchen– Provide storage– Additional sink– Informal dining
• Provide Dining Room– Entertaining Space– Conservatory– Garden doors
Identification
• Identify Uncertainties
• Negative– Disruption to the household– Delivery is later than expected
• Positive– larger extension possible than envisaged– remodelled garden provided if work
undertaken in summer
Ranking
-9 -6 -3 H (3) 3 6 9
-6 -4 -2 M (2) 2 4 6
-3 -2 -1 L (1) 1 2 3
H(-3) M(-2) L(-1)
Prob
Impact L (1) M (2) H (3)
(50-100K) (10-50K) <(10K) Cost <10K 10K-50K 50K-100K
(1 - 2wks) (3d - 1wk) < (3days) Time < 3 days 3d - 1wk 1 - 2wks
Management
• How do you minimise the risks and ensure the opportunities occur?
– Review the project in line with the uncertainties
– Action Planning– Uncertainty Manager to ensure benefits
are achieved
Uncertainty Analysis
• Evaluate the actual time and cost changes that could be achieved
• Model these using Monte Carlo Risk Analysis Software
• Include an uncertainty range within the project to ensure accurate reporting
Heads or Tails
Uncertainty Management
Questions?
For further information Emma Major
Major Value Consultancy14 Allonby Close, Lower Earley
Reading RG6 3BY. UK
[email protected]+44(0)118 926 0673