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s Project Risk Management Handbook

Description

P ROJECT R ISK M ANAGEMENT H ANDBOOK Threats and Opportunities

Second Edition Revision 0 May 2,

Office of Statewide Project Management Improvement (OSPMI)

Office of Statewide Project Management Improvement (OSPMI) 1120 N Street,

Mail Station 28 Sacramento,

CA 95814 www

gov/hq/projmgmt Project Risk Management Handbook May 2,

Preface This handbook provides an overview of risk management (both threats and opportunities) at the California Department of Transportation (Department)

This version is effective as of May 2,

The project team thanks all individuals within and outside the Department for their support and contributions to the production of the Project Risk Management Handbook

Purpose

This document describes the basic concepts and processes that guide risk management planning and implementation during project development

Audience

Department project managers,

and other staff engaged in the delivery of capital projects

Background

The purpose of this handbook is to provide the districts with a complete and uniform approach to project risk management and to make the present policy/subject matter more useful and easier to understand

Revisions

The 2nd edition represents the first major update to the 1st edition

Conventions

Titles of books and other documents appear in italics

Website URLs appear in bold italics

Like this example

Additional information,

and tips appear in the left margin

Project Risk Management Handbook

C CONTENTS

Preface

vii Implementation of Risk Management in Project Delivery Chief Engineer's Memorandum

Overview

Process Overview

Project Risk Management Handbook

Contents

Process Steps

Appendices

Glossary

51 Index

Project Risk Management Handbook

Contents

Figures Figure 1

Project Risk Management Process Flow Diagram

5 Figure 2

Sample Risk Register

Sample Probability x Impact (PxI) matrix for Threat

Sample Probability x Impact (PxI) matrix for Opportunity

Project Risk Management Handbook

Project Risk Management Handbook

Project Risk Management Handbook

1 OVERVIEW

This chapter defines:  Project risk and risk management  The objective of risk management within the Department

Project Risk Management Handbook

Why Risk Management

Why Risk Management

? The Capital Project Risk Management Process,

is intended to aid in the effective management of project risks,

both threats and opportunities

The project manager (PM),

and project team members (Project Development Team,

PDT) jointly develop a written plan that enables them to identify,

and control capital project risks

Risk management goes further than planning,

and the risk response actions planned and incorporated in a risk management plan need to be executed effectively and monitored for their effectiveness

The project manager should conduct frequent reviews of project risks and the progress made in addressing them,

indicating where risks are being effectively handled and where additional actions and resources may be needed

Definition

Project risk is an uncertain event or condition that,

has a positive or a negative effect on at least one project objective

A risk may have one or more causes and,

It involves processes,

and techniques that will help the project manager maximize the probability and results of positive events and minimize the probability and consequences of adverse events as indicated and appropriate within the context of risk to the overall project objectives of cost,

Project risk management is most effective when first performed early in the life of the project and is a continuing responsibility throughout the project’s life cycle

Objective

The project risk management process helps project sponsors and project teams make informed decisions regarding alternative approaches to achieving their objectives and the relative risk involved in each,

in order to increase the likelihood of success in meeting or exceeding the most important objectives (e

time) sometimes at the expense of other objectives (e

Risk management encourages the project team to take appropriate measures to:  Minimize adverse impacts to project scope,

 Maximize opportunities to improve the project’s objectives with lower cost,

enhanced scope and higher quality

 Minimize management by crisis

A Guide to the Project Management Body of Knowledge (PMBOK® Guide),

Third Edition,

Chapter 11

Project Risk Management Handbook

2 PROCESS

OVERVIEW

This chapter describes key success factors,

important documents of the process,

and key responsibilities of project participants

Project Risk Management Handbook

Key Success Factors for Project Risk Management

Key Success Factors for Project Risk Management A key success factor is a corporate culture that: •

Supports the honest,

realistic and open recognition of project risks even if they indicate problems with the project

Encourages talking about risks realistically with no penalty for people who do so openly within the risk management process

Promotes discussion in an atmosphere where there are no risks that are out-of-bounds for discussion and no enforcement of bureaucratic hierarchy in meetings where risk identification and assessment is discussed

Another key success factor is the commitment to collecting realistic and high-quality data about risks

Risk data are often based on the judgment and expertise of informed individuals

It takes effort and organizational support to spend the time and resources needed to collect accurate data about project risk

A final key success factor is the participation of Caltrans management in policy-making activities such as in developing the threshold definitions of risk impact on main objectives,

in identifying the combinations of probability and impact that lead to ranking risks as low,

and in determining the relative importance of different objectives for the project

Project Risk Management Handbook

Project Risk Management Process Flow Diagram

Project Risk Management Process Flow Diagram The project team completes the risk management plan and the risk register (defined later in this Handbook) before the project initiation document (PID) component ends

The team updates the register regularly in each subsequent lifecycle component and continues to monitor and control risks throughout the life of the project

C o n c'e p tu a liz e P ro je c't S co p e (R e s'p o n s'ib ility o f P ro je c't M a n a g e r a n d'S p o n s'o r)

D ra ft P ro je c't In itia tio n D'o c'u m e n t (R e s'p o n s'ib ility o f P ro je c't M a n a g e r a n d'P ro je c't T e a m )

D ra ft P ro je ct W o rk p la n w ith C ritica l'P a th (R e s'p o n s'ib ility o f P ro je c't M a n a g e r a n d'S u p p o rt U n it)

R isk A ss e s'sm e n t (R e sp o n s'ib ility o f P ro je ct M a n a g e r a n d'P ro je c't T e a m ) A s'se s'sm e n t In c'lu d'e s': (1 ) Id e n tific a tio n o f fu n ctio n a l'e x p e rts (2 ) S c'h e d'u lin g th e te a m m e e tin g (3 ) Id e n tific a tio n o f s'ta ke h o ld e rs (4 ) U s'e o f fa cilita to r a s'n e e d'e d

C irc u la tio n C o m m e n ts M a y In d'ica te A d'd itio n a l'R is k s

D ra ft W o rkp la n a n d'D ra ft P ro je c't In itia tio n D'o c'u m e n t (R e sp o n s'ib ility o f P ro je ct M a n a g e r a n d'P ro je c't T e a m

C irc u la te a n d'R e s'p o n d'to c'o m m e n ts (R e s'p o n s'ib ility o f P ro je c't M a n a g e r a n d'P ro je c't T e a m )

F in a liz e P ro je c't In itia tio n D'o c'u m e n t a n d'W o rk p la n (R e s'p o n s'ib ility o f p ro je c't M a n a g e r)

P ro g ra m P ro je c't (R e s'p o n sib ility o f P ro je c't S p o n s'o r)

U p d'a te ,

M o n ito r a n d'C o n tro l'R is ks T h ro u g h T h e P ro je c't D'e liv e ry C y c'le (R e s'p o n s'ib ility o f P ro je c't M a n a g e r a n d'P ro je c't T e a m )

Figure 1

Risk management process flow diagram

Project Risk Management Handbook

Processes and Outputs

Processes and Outputs This matrix shows the six main processes and all of the deliverables associated with project risk management

Process

Output(s) (deliverables)

Risk management planning

Risk Management Plan (RMP)

Risk identification

Risk Register (Register)

Qualitative risk analysis

Risk Register (updates) Prioritized list of risks classified as high,

Quantitative risk analysis

Quantitative Risk Analysis Reports Numerical analysis of the project’s likelihood of achieving its overall objectives (Risk Register updates)

Risk response planning

contingency reserve (amounts of time or budget needed)

Risk monitoring and control

Risk Register (updates) The outcome may result in workaround plans,

programming change request (PCR),

and updates to risk identification checklists for future projects

Project Risk Management Handbook

Key Responsibilities

Key Responsibilities This matrix shows the six processes and the responsibilities of the project manager and stakeholders

Process Tasks Sponsor

Deputy District Director,

Program and Project Management

Project Manager

Project Manager Support/ Risk Officer

Risk management planning

Risk identification

Qualitative risk analysis

Quantitative risk analysis (As applicable)

Risk response planning

Risk monitoring and control

Project Team

Risk Owner

Legend:  R = responsible  S = support  A = approve  C = concur

Project Risk Management Handbook

This chapter identifies and explains the six risk management processes: 1

Risk Management Planning 2

Risk Identification 3

Qualitative Risk Analysis 4

Quantitative Risk Analysis 5

Risk Response Planning 6

Risk Monitoring and Control

Project Risk Management Handbook

Risk Management Planning

Risk Management Planning Before starting project studies,

the project manager establishes a PDT in accordance with Department policy

For details,

see the “PDT Formation” sub-section of the Project Development Procedures Manual

Careful and explicit planning enhances the possibility of success of the five other risk management processes

Risk Management Planning is the process of deciding how to approach and conduct the risk management activities for a project

Planning of risk management processes is important to ensure that the level,

and visibility of risk management are commensurate with both the risk and importance of the project to the organization,

to provide sufficient resources and time for risk management activities,

and to establish an agreed-upon basis for evaluating risks

The Risk Management Planning process should be completed early during project planning,

since it is crucial to successfully performing the other processes described in this handbook

The risk management plan identifies and establishes the activities of risk management for the project in the project plan (RMP)

For a copy of Standard RMP template,

An electronic version of the template is also available on the Project Risk Management webpage

Please see project management guidance website at http://www

Project Risk Management Handbook

Risk Identification

Risk Identification Risk identification involves identifying potential project risks

Risk Identification produces a deliverable — the project Risk Register – where risks are identified that may affect the project’s ability to achieve its objectives

Risk Identification documents which risks might affect the project and documents their characteristics

The Risk Register is subsequently amended with the results from qualitative risk analysis and risk response planning,

and is reviewed and updated throughout the project

Participants in risk identification activities can include the following,

where appropriate: project manager,

risk management team (if assigned),

subject matter experts both from the project and from outside the project team,

While these personnel are often key participants for risk identification,

all project personnel should be encouraged to identify risks

Risk identification is an iterative process because new risks may become known as the project progresses through its life cycle and previouslyidentified risks may drop out

The frequency of iteration and who participates in each cycle will vary from case to case

The project team should be involved in the process so that they can develop and maintain a sense of ownership of,

the risks and associated risk response actions

Stakeholders outside the project team may provide additional objective information

The Risk Identification process is a requirement for the Qualitative Risk Analysis process

using:  The risk breakdown structure,

suitably tailored to the project

An example of a risk breakdown structure is in Appendix B

 The sample risk list provided in Appendix C

 Their own knowledge of the project or similar projects

 Consultation with others who have significant knowledge of the project or its environment

 Consultation with others who have significant knowledge of similar projects

 Other tools and techniques such as those provided in Chapter 11,

It is important to specify the risk correctly

For instance,

an impact on a project objective

The risk statement structure that should be followed in specifying identified risks is: Because of the (cause,

leading to an impact (at this stage unanalyzed) on XX objective where XX is cost,

Project Risk Management Handbook

Risk Identification

This structure helps specify the risk correctly

As an example of the use of the risk statement structure,

the fact that the bridge is built over water is not a risk,

The risk may be unknown sub-surface conditions,

which if they occur may lead to re-design of the supports

Mitigation could involve coring at the support location and engineering analysis based on the findings,

to reduce the probability of unknown conditions

In risk identification,

sometimes there is a temptation to dismiss a risk because “we cannot do anything about it anyway”

This argument does not change the risk into a non-risk,

simply because there is no viable mitigation strategy

The risk that cannot be mitigated may have an effect on the project and can be calibrated in qualitative and quantitative analysis

It is just not possible to handle this risk,

some of these risks may be affected by risk handling if people think carefully about it,

political risk may be influenced by public outreach and information campaigns

Techniques for identifying risks and opportunities are also taught in the Department’s Value Analysis courses

The team considers:  Threats — a risk that will have a negative impact on a project objective if it occurs (what might happen to jeopardize the project’s ability to achieve its objectives)  Opportunities — a risk that will have a positive impact on a project objective if it occurs (what might happen to improve the project’s ability to achieve its objectives)  Triggers — symptoms and warning signs that indicate whether a risk is becoming a near-certain event and a contingency plan/response plan should be implemented

The team should also consider:

The updated Risk Advertisement/Risk Vote guidance memo is posted on the project delivery intranet site

The new guidance requires use of the risk management register as part of the submittal

Example: You identify delays caused by hazardous waste issues as one of your primary risks

If you are able to develop a response that mitigates only problems caused by underground fuel tanks,

you may still have other hazardous waste risks

Your goal is to reduce residual risks to an acceptable level

Secondary risks – Secondary risks are caused by responses to the project's original risks

For example,

if you decide to hire outside help as a way of mitigating a project risk,

you now have additional concerns that arise as a result of using the external vendor

The timeliness of their work and potential contractual disputes are risks you did not have before you decided to use their services

For instance,

Federal budget cuts may increase delays in Federal Highway Administration permits at the same time federal programming dollars become scarcer

Project Risk Management Handbook

Qualitative Risk Analysis

Qualitative Risk Analysis Qualitative Risk Analysis includes methods for prioritizing the identified risks for further action,

such as Quantitative Risk Analysis or Risk Response Planning

Organizations can improve the project’s performance effectively by focusing on high-priority risks

Qualitative Risk Analysis assesses the priority of identified risks using their probability of occurring,

the corresponding impact on project objectives if the risks do occur,

as well as other factors such as the time frame and risk tolerance of the project constraints of cost,

Across the same project the definitions that will be used for levels of probability and impact should be the same

The organization’s management,

project customer or sponsor has an important role in the Qualitative Risk Analysis process

 The project sponsor defines for the risk analysis lead and team the levels of impact on time,

scope and quality that would qualify a risk as having a very low,

high or very high impact on each objective

 The project sponsor determines the combinations of probability and impact that make a risk low,

moderate and high priority for each objective in light of the definitions just mentioned

Once the definitions are in place,

team members assess the identified risks’ probability and impact and then put them into high,

and low risk categories for each project objective (time,

They rank risks by degrees of probability and impact,

using the definitions in place,

and include their assessment rationale

For more information and a sample,

Team members revisit qualitative risk analysis during the project’s lifecycle

When the team repeats qualitative analysis for individual risks,

trends may emerge in the results

These trends can indicate the need for more or less risk management action on particular risks,

or whether a risk mitigation plan is working

Project Risk Management Handbook

Quantitative Risk Analysis

Quantitative Risk Analysis Quantitative risk analysis is a way of numerically estimating the probability that a project will meet its cost and time objectives

Quantitative analysis is based on a simultaneous evaluation of the impact of all identified and quantified risks

The result is a probability distribution of the project’s cost and completion date based on the identified risks in the project

Quantitative risk analysis involves statistical techniques,

primarily Monte Carlo simulation,

that are most widely and easily used with specialized software

Quantitative risk analysis starts with the model of the project,

either its project schedule or its cost estimate depending on the objective

The degree of uncertainty in each schedule activity and each line-item cost element is represented by a probability distribution

The probability distribution is usually specified by determining the optimistic,

the most likely and the pessimistic values for the activity or cost element – this is typically called the “3-point estimate

” The three points are estimated during an interview with subject matter experts who usually focus on the schedule or cost elements one at a time

The risks that lead to the three points are recorded for the quantitative risk analysis report and for risk response planning

For each activity or cost element a probability distribution type is chosen that best represents the risks discussed in the interview

Typical distributions usually include the triangular,

A specialized Monte Carlo simulation software program runs (iterates) the project schedule or cost estimate many times,

drawing duration or cost values for each iteration at random from the probability distribution derived from the 3-point estimates and probability distribution types selected for each element

The Monte Carlo software develops from the results of the simulation a probability distribution of possible completion dates and project costs

From this distribution it is possible to answer such questions as: •

How likely is the current plan to come in on schedule or on budget

How much contingency reserve of time or money is needed to provide the agency with a sufficient degree of certainty

Using sensitivity analysis,

which activities or line-item cost elements contribute the most to the possibility of overrunning schedule or cost targets

Additional information on quantitative schedule and cost risk analysis are also available on the project management guidance website at http://www

Project Risk Management Handbook

Quantitative Risk Analysis

When to Use Quantitative Analysis

The Department does not require quantitative analysis for projects

the PDT or the District may determine that a project will need to undergo an in-depth quantitative risk analysis based on the cost,

complexity or high profile of the project

Project Risk Management Handbook

Risk Response Planning

Risk Response Planning Risk Response Planning is the process of developing options,

and determining actions to enhance opportunities and reduce threats to the project’s objectives

It focuses on the high-risk items evaluated in the qualitative and/or quantitative risk analysis

In Risk Response Planning parties are identified and assigned to take responsibility for each risk response

This process ensures that each risk requiring a response has an owner monitoring the responses,

although a different party may be responsible for implementing the risk handling action itself

The project manager and the PDT identify which strategy is best for each risk,

and then design specific action(s) to implement that strategy

Strategies for Negative Risks or Threats include:  Avoid

Risk avoidance involves changing the project plan to eliminate the risk or to protect the project objectives (time,

The team might achieve this by changing scope,

or adding resources (thus relaxing the so-called “triple constraint”)

These changes may require a Programming Change Request (PCR)

Some negative risks (threats) that arise early in the project can be avoided by clarifying requirements,

Risk transference requires shifting the negative impact of a threat,

along with ownership of the response,

An example would be the team transfers the financial impact of risk by contracting out some aspect of the work

Transference reduces the risk only if the contractor is more capable of taking steps to reduce the risk and does so

Risk transference nearly always involves payment of a risk premium to the party taking on the risk

Transference tools can be quite diverse and include,

but are not limited to the use of: insurance,

incentive/disincentive clauses,

A+B Contracts,

Risk mitigation implies a reduction in the probability and/or impact of an adverse risk event to an acceptable threshold

Taking early action to reduce the probability and/or impact of a risk is often more effective than trying to repair the damage after the risk has occurred

Risk mitigation may take resources or time and hence may represent a tradeoff of one objective for another

However,

it may still be preferable to going forward with an unmitigated risk

Project Risk Management Handbook

Risk Response Planning

Monitoring the deliverables closely,

increasing the number of parallel activities in the schedule,

early involvement of regulatory agencies in the project,

early and continuous outreach to communities/advocacy groups,

implementing value engineering,

adopting less complex processes,

or choosing a more stable supplier are examples of mitigation actions

Strategies for Positive Risks or Opportunities include:  Exploit

The organization wishes to ensure that the opportunity is realized

This strategy seeks to eliminate the uncertainty associated with a particular upside risk by making the opportunity definitely happen

Examples include securing talented resources that may become available for the project

Allocating ownership to a third party who is best able to capture the opportunity for the benefit of the project

Examples include: forming risk-sharing partnerships,

working with elected officials,

This strategy modifies the size of an opportunity by increasing probability and/or positive impacts,

and by identifying and maximizing key drivers of these positive-impact risks

Seeking to facilitate or strengthen the cause of the opportunity,

and proactively targeting and reinforcing its trigger conditions,

Impact drivers can also be targeted,

seeking to increase the project’s susceptibility to the opportunity

Strategy for both Threats and Opportunities:  Acceptance

A strategy that is adopted because it is either not possible to eliminate that risk from a project or the cost in time or money of the response is not warranted by the importance of the risk

When the project manager and the project team decide to accept a certain risk(s),

they do not need to change the project plan to deal with that certain risk,

or identify any response strategy other than agreeing to address the risk if and when it occurs

A workaround plan may be developed for that eventuality

There are two types of acceptance strategy: 1-

Active acceptance

The most common active acceptance strategy is to establish a contingency reserve,

or resources to handle the threat or opportunity

Contingency Plan: Some responses are designed for use only if certain events occur

In this case,

also known as “Contingency Plan”,

is developed by the project team that will only be executed under certain predefined conditions commonly called “triggers

Project Risk Management Handbook

Risk Response Planning

Passive acceptance

Requires no action leaving the project team to deal with the threats or opportunities as they occur

Workaround: Workaround is distinguished from contingency plan in that a workaround is a recovery plan that is implemented if the event occurs,

whereas a contingency plan is to be implemented if a trigger event indicates that the risk is very likely to occur

As with risk identification process,

the team should also consider residual risks,

and risk interaction in the risk response planning process

See page 10 for details

Project Risk Management Handbook

Risk Monitoring and Control

Risk Monitoring and Control Risk monitoring and control keeps track of the identified risks,

It also monitors the execution of planned strategies on the identified risks and evaluates their effectiveness

Risk monitoring and control continues for the life of the project

The list of project risks changes as the project matures,

or anticipated risks disappear

Typically during project execution there should be regularly held risk meetings during which all or a part of the Risk Register is reviewed for the effectiveness of their handling and new risks are discussed and assigned owners

Periodic project risk reviews repeat the process of identification,

The project manager ensures that project risk is an agenda item at all PDT meetings

Risk ratings and prioritization commonly change during the project lifecycle

If an unanticipated risk emerges,

or a risk’s impact is greater than expected,

the planned response may not be adequate

The project manager and the PDT must perform additional response planning to control the risk

Risk control involves:  Choosing alternative response strategies  Implementing a contingency plan  Taking corrective actions  Re-planning the project,

as applicable The individual or a group assigned to each risk (risk owner) reports periodically to the project manager and the risk team leader on the status of the risk and the effectiveness of the response plan

The risk owner also reports on any unanticipated effects,

and any mid-course correction that the PDT must consider in order to mitigate the risk

Project Risk Management Handbook

A APPENDICES

This chapter provides the documents referenced in the text

Project Risk Management Handbook

Appendix A: Sample Risk Management Plan Template

Appendix A: Sample Risk Management Plan Template

Project Risk Management Handbook

Appendix A: Sample Risk Management Plan Template

Risk Management Plan District____EA_______________ County________Route:_________PM________

Purpose This document describes how Risk Management will be structured and performed on this project

The risk management plan includes methodology,

definitions of risk probability and impact,

probability and impact matrix,

The Caltrans Project Risk Management Handbook will be utilized as primary reference and guideline

APPROVED BY:

____________________________ Project Manager

Project Risk Management Handbook

Appendix A: Sample Risk Management Plan Template

Roles and Responsibilities Project Manager responsibilities include: ♦

Incorporate the resources and time required to execute the Risk Management Plan in the project budget and schedule

Develop,

distribute and implement this Risk Management Plan

Develop and update the Risk Register with the support of the Project Team and incorporate it into the workplan

Coordinate with the risk owners to monitor risks and implement risk response strategies

Project Manager Support or Risk Officer responsibilities include: ♦

Support the Project Manager in developing and updating the Risk Management Plan and the Risk Register

Maintain updates to the Risk Management Plan and the Risk Register

Maintain a list of risk and response strategies of all the projects in the district

Update the Sample Risk List and the lessons learned database (http://pd

gov/pm/PMPI/LessonsLearned/index

Project Team responsibilities include: ♦

Identify the risk and describe it

Assess the probability that a risk will occur and specify the criteria used to assess the probability

Assess the impact of risks on project cost,

and specify the criteria used to assess the impact

Help identify the risk owners and assist in developing the risk response strategies (Project Team members may be assigned as “Risk Owner”)

Perform the risk response steps assigned

Assist the PM in activities associated with Risk Monitoring and Control

Risk Owner responsibilities include: ♦

Develop and/or update the assigned risk response strategy

Monitor the risk assigned and inform PM of any threats or opportunities to the project

This includes monitoring the risk trigger and informing the PM,

if the risk becomes a real event

Project Risk Management Handbook

Appendix A: Sample Risk Management Plan Template

Risk Register The Risk Register documents the identified risks,

the assessment of their root causes,

areas of the project affected (WBS elements),

the analysis of their likelihood of occurring and impact if they occur and the criteria used to make those assessments and the overall risk rating of each identified risk by objective (e

Project Risk Management Handbook)

Importantly,

it includes the risk triggers,

response strategies for high priority risks,

and the assigned risk owner who will monitor the risk

Risk Identification Methods Used The risk breakdown structure (Appendix B,

Project Risk Management Handbook) and Sample Risk List

Project Risk Management Handbook) will be used as reference tools to help identify and categorize risks

Risk Analysis Methods Used Qualitative Risk Analysis attempts to rank the risks into high,

medium and low risk categories based on their probability of occurring and impact on an objective

(The objective with the most impact,

This project will

This project will

Quantitative Risk Analysis attempts to estimate the risk that the project and its phases will finish within objectives taking into account all identified and quantified risks,

estimates the contingency needed for cost and schedule and identifies the best decisions using decision tree analysis

(See Project Risk Management Handbook for additional information and when to use Quantitative Risk Analysis)

This project will

use quantitative cost risk analysis

This project will

use quantitative schedule risk analysis

This project will

This project will

use other quantitative methods

____________________________________________________________

Project Risk Management Handbook

Appendix A: Sample Risk Management Plan Template

Period of Risk Management Meetings and Full Review of Project Risk Meetings for the purpose of discussing and making decisions on Project risk will be held: Weekly ________ Bi-Weekly _________ Monthly __________Other____________ The risk management identification,

analysis and response planning process shall occur during project initiation document (PID)

A full review and update of risk register will occur at the beginning of each subsequent phase of the project

Budget Allocated for Risk Management Staff allocated and assigned for risk management activities include: PMSU Chief

Risk Officer

Environmental

DES/Structure

Traffic Operations

Maintenance

× $ __ /Hr = A total of $

is allocated for Risk Management on this project

Project Risk Management Handbook

Appendix B: Risk breakdown structure

Appendix B: Risk breakdown structure

Project Risk Management Handbook

Appendix B: Risk breakdown structure

Project Risk Management Handbook

Appendix C: Sample Risk List

Appendix C: Sample Risk List The process of risk identification produces a project risk list

The project team then puts the risks into categories and assigns each risk to a team member

The project team members may use this sample risk checklist to help in developing a project specific risk list

This list is not meant to be all-inclusive

Care should be taken to explore items that do not appear on this checklist

Team members add other risk areas from previous project results and as they arise during the project

Such sources might include:  Final project reports  Risk response plans  Organized lessons learned  The experience of project stakeholders or others in the organization  Published information such as commercial databases or academic studies

Project Risk Management Handbook

Appendix C: Sample Risk List

Design Risks  Design incomplete  Unexpected geotechnical or groundwater issues  Inaccurate assumptions on technical issues in planning stage  Surveys incomplete  Changes to materials/geotechnical/foundation  Bridge site data incomplete to DES  Hazardous waste site analysis incomplete  Unforeseen design exceptions required  Consultant design not up to Department standards  Unresolved constructability items  Complex hydraulic features  Unable to meet Americans with Disabilities Act requirements  Project in a critical water shortage area and a water source agreement required  Incomplete quantity estimates  Unforeseen construction window and/or rainy season requirements  New or revised design standard  Construction staging more complex than anticipated

External Risks  Landowners unwilling to sell  Local communities pose objections  Unreasonably high expectations from stakeholders  Political factors or support for project changes  Stakeholders request late changes  New stakeholders emerge and request changes  Threat of lawsuits  Increase in material cost due to market forces  Water quality regulations change  New permits or additional information required

Project Risk Management Handbook

Appendix C: Sample Risk List

 Reviewing agency requires longer than expected review time  Changes to storm-water requirements  Permits or agency actions delayed or take longer than expected  New information required for permits  Environmental regulations change  Controversy on environmental grounds expected  Pressure to deliver project on an accelerated schedule  Labor shortage or strike  Construction or pile driving noise and vibration impacting adjacent businesses or residents

Environmental Risks  Environmental analysis incomplete  Availability of project data and mapping at the beginning of the environmental study is insufficient  New information after Environmental Document is completed may require re-evaluation or a new document (i

utility relocation beyond document coverage)  New alternatives required to avoid,

mitigate or minimize impact  Acquisition,

creation or restoration of on or off-site mitigation  Environmental clearance for staging or borrow sites required  Historic site,

wetlands and/or public park present  Design changes require additional Environmental analysis  Unforeseen formal NEPA/404 consultation is required  Unforeseen formal Section 7 consultation is required  Unexpected Section 106 issues expected  Unexpected Native American concerns  Unforeseen Section 4(f) resources affected  Project may encroach into the Coastal Zone  Project may encroach onto a Scenic Highway  Project may encroach to a Wild and Scenic River  Unanticipated noise impacts  Project causes an unanticipated barrier to wildlife  Project may encroach into a floodplain or a regulatory floodway  Project does not conform to the state implementation plan for air quality at the program and plan level Project Risk Management Handbook

Appendix C: Sample Risk List

 Unanticipated cumulative impact issues

Organizational Risks  Inexperienced staff assigned  Losing critical staff at crucial point of the project  Insufficient time to plan  Unanticipated project manager workload  Internal “red tape” causes delay getting approvals,

decisions  Functional units not available,

overloaded  Lack of understanding of complex internal funding procedures  Priorities change on existing program  Inconsistent cost,

scope and quality objectives  Overlapping of one or more project limits,

scope of work or schedule  Funding changes for fiscal year  Lack of specialized staff (biology,

)  Capital funding unavailable for right of way or construction

Project Management Risks  Project purpose and need is not well-defined  Project scope definition is incomplete  Project scope,

and deliverables are not clearly defined or understood  No control over staff priorities  Consultant or contractor delays  Estimating and/or scheduling errors  Unplanned work that must be accommodated  Lack of coordination/communication  Underestimated support resources or overly optimistic delivery schedule  Scope creep  Unresolved project conflicts not escalated in a timely manner  Unanticipated escalation in right of way values or construction cost  Delay in earlier project phases jeopardizes ability to meet programmed delivery commitment  Added workload or time requirements because of new direction,

Project Risk Management Handbook

Appendix C: Sample Risk List

 Local agency support not attained  Public awareness/campaign not planned  Unforeseen agreements required  Priorities change on existing program  Inconsistent cost,

Right of Way Risks  Utility relocation requires more time than planned  Unforeseen railroad involvement  Resolving objections to Right of Way appraisal takes more time and/or money  Right of Way datasheet incomplete or underestimated  Need for “Permits to Enter” not considered in project schedule development  Condemnation process takes longer than anticipated  Acquisition of parcels controlled by a State or Federal Agency may take longer than anticipated  Discovery of hazardous waste in the right of way phase  Seasonal requirements during utility relocation  Utility company workload,

financial condition or timeline  Expired temporary construction easements  Inadequate pool of expert witnesses or qualified appraisers

Construction Risks  Inaccurate contract time estimates  Permit work window time is insufficient  Change requests due to differing site conditions  Temporary excavation and shoring system design is not adequate  Falsework design is not adequate  Unidentified utilities  Buried man-made objects/unidentified hazardous waste  Dewatering is required due to change in water table  Temporary construction easements expire  Electrical power lines not seen and in conflict with construction  Street or ramp closures not coordinated with local community Project Risk Management Handbook

Appendix C: Sample Risk List

 Insufficient or limited construction or staging areas  Changes during construction require additional coordination with resource agencies  Late discovery of aerially deposited lead  Experimental or research features incorporated  Unexpected paleontology findings  Delay in demolition due to sensitive habitat requirements or other reasons  Long lead time for utilities caused by design and manufacture of special components (steel towers or special pipe)

Engineering Services Risks  Foundations utilizing Cast-In-Drilled-Hole or Cast-In-Steel-Shell pile 30” in diameter or greater may require tunneling and mining provisions within the contract documents and early notification of CalOSHA  Bridges constructed at grade and then excavated underneath may require tunneling and mining provisions within the contract documents and early notification of Cal-OSHA  Hazardous materials in existing structure or surrounding soil

asbestos bearings and shims  Piles driven into fish habitat may require special noise attenuation to protect marine species  Special railroad requirements are necessary including an extensive geotechnical report for temporary shoring system adjacent to tracks  Access to adjacent properties is necessary to resolve constructability requirements  Existing structures planned for modification not evaluated for seismic retrofit,

scour potential and structural capacity  Foundation and geotechnical tasks (foundation drilling and material testing) not identified and included in project workplan  Bridge is a habitat to bats or other species requiring mitigation or seasonal construction  Condition of the bridge deck unknown  For projects involving bridge removal,

bridge carries traffic during staging  Verify that all seasonal constraints and permitting requirements are identified and incorporated in the project schedule  Complex structures hydraulic design requiring investigation and planning  Assumptions upon which the Advance Planning Study is based on are realistic and verification of these assumptions prior to completion of the Project Report  Design changes to alignment,

stage construction between Advance Planning Study and the Bridge Site Submittal  Unexpected environmental constraints that impact bridge construction

Project Risk Management Handbook

Appendix C: Sample Risk List

 Unforeseen aesthetic requirements  Delay due to permits or agreements,

or local agencies for geotechnical subsurface exploration  Delay due to Right-of-Entry agreements for geotechnical subsurface exploration  Delay due to traffic management and lane closure for geotechnical subsurface exploration

Project Risk Management Handbook

Appendix D: Sample Risk Register Using the sample risk list (Appendix C),

the assigned project team members add their specific information to the risk register

The following illustration shows a sample Excel spreadsheet that represents one possibility for what a risk register might include

For a copy of the most recent electronic version of the risk register please visit the project management guidance Website at: http://www

Project Risk Management Handbook

Appendix D: Sample Risk Register

Figure 2

Risk management plan spreadsheet sample

Project Risk Management Handbook

Appendix E: Risk Ranking

Appendix E: Risk Ranking Using established methods and tools,

qualitative risk analysis assesses the probability and the consequences (impact) of each identified risk to determine its overall importance

Using these tools helps to correct biases that are often presented in a project plan

In particular,

careful and objective definitions of different levels of probability and impact are the keys to the credibility of the results

 To rank risks by probability and impact: For more information about risk ranking,

Step 1: Set up a matrix to match a percentage (probability of risk) to a ranking number

Department project managers often use the matrix shown below,

but they can set up a different matrix if it would better suit the project

Risk Probability Ranking Ranking

Probability of Risk Event

60–99%

40–59%

20–39%

10–19%

Step 2: Set up a matrix to match the objective (time,

Department project managers may use the impact ratings shown in the following matrices for risks,

but they can choose values other than those shown below if the Sponsor and the PM think it would better suit the project

Impact matrices for threats and for opportunities follow:

Project Risk Management Handbook

Evaluating Impact of a Threat on Major Project Objectives Impact

Very Low

Moderate

Very High

Delivery Plan Delivery Plan Delivery Plan Delivery Plan milestone delay milestone delay of milestone delay of milestone delay Time outside fiscal more than 1 within quarter one quarter year quarter Insignificant 20% Cost Cost Cost Increase Increase Increase Increase Increase Scope decrease Changes in Changes in project Sponsor does not Scope does not is barely project limits or limits or features agree that Scope meet purpose features with with 5-10% Cost meets the purpose and need Scope noticeable