PERFORM COMPREHENSIVE RISK ANALYSIS

Implementation of risk analysis and mitigation plans, whether formal or informal, at early stages of the project is critical to project success. Risk analysis must include clear and concise assignment of responsibilities and designated resources. Risk analysis must also include not only traditional cost and schedule issues but also context and financing issues, such as those related to railroads, utilities, U.S. DOT Section 4(f), the National Environmental Policy Act (NEPA), appropriations, capital bill allocation (use it or lose it funding), and the effect of delays on private equity viability.

You can use risk analysis outcomes to develop aggressive mitigation plans that include the possibility of reallocating contingency within project segments or phases to prevent delays or cost increases. Early involvement from contractor groups or construction specialty review boards can be effective for input on means, methods, and material supply issues.

Use evaluation of risk probabilities (qualitative or quantitative) for potential loss events from expert panels and historical records in your prioritization and mitigation strategies. After these strategies are established, integrate your risk analysis and mitigation plan with the critical success factors for the project. Several analysis tools, software products, and spreadsheet applications are available that are a good option in helping to establish project contingencies.

Performing comprehensive risk analysis can apply to complexity management for any of the five dimensions or for interactions among any of the dimensions.

Use comprehensive risk analysis to help manage direct risks from complexity in cost, schedule, scope, and quality control and indirect risks in cost, schedule, and scope arising from the potential impact of context and stakeholder issues and risks associated with project financing. Comprehensive risk analysis is highly recommended for complex projects.

Steps in Performing Comprehensive Risk Analysis

Follow these steps in performing comprehensive risk analysis:

1. Assemble a project team with broad representation and expertise. Incorporate individuals with local knowledge, as well as those with organizational knowledge. Consider dedicated time for developing risk management plans. Consider using an outside facilitator.

2. Have the team brainstorm potential risk factors.

3. Have the team rank each potential risk factor by considering both likelihood and

severity of the risk and the impact it will have on achieving project outcomes.

Include discussions of both potentially negative and positive risks.

4. Develop mitigation strategies for each critical risk factor. Assign responsibility for tracking risk to a specific team member.

5. Identify project partners and other stakeholders that will have any impact on the issue or that can be influenced by the issue. The objective is to make sure the team is not trading one risk for another.

6. Allocate resources needed to support mitigation strategies. Also, consider contract language, incentives, and partnership agreements that reduce resistance to the mitigation strategy.

7. Have the project team meet frequently to update the risk management plan.

8. Integrate risk management decisions into cost estimates, project schedules, design scopes, the communication plan, and so forth.

Download: Project Management Plan Templates