Project Risks

After completing the time schedule, the potential risk will be more obvious. Knowledge of the risks that may be faced during the proj­ect is extremely important for the project manager, as he is responsi­ble for identifying the activities of higher risk impact on the overall project implementation, which will either increase the duration or increase the cost.

Therefore, the project manager should review the planning schedule and identify areas of planning that contain high risks, as known from the following: ‘

1. Tasks on the critical path

2. Tasks that need a long time period in which to be executed

3. Tasks that have a little overtime

4. Activities that start with the beginning of other activities

5. Tasks that need many individuals for their execution

6. Complex tasks

7. Activities and tasks that need condensed training

8. Tasks that need new advanced technology

After selecting the tasks that would cause risk to the project and thus determine their position relative to other risks and tasks, the necessary steps to implement those tasks and how to follow up on implementation daily and assign reasonable persons who will be responsible for follow-up in that stage of the project must be identified and planned.

To better illuminate what sorts of things can be considered high – risk activities during project execution, the example of pouring concrete in Chapter 4 is instructive.

One of the riskiest activity of that project is excavation work. It needs a long time period in execution and it lies on the project’s critical path. Therefore it has a high probability of delay which has a high potential impact on the complete project.

In any project the longest activity located on the critical path is the riskiest. On the other hand, delivery of machinery and other mechan­ical equipment ordered abroad has a known and hence more man­ageable risk of suffering delays. The consequences of such delay may be somewhat mitigated by rearranging tasks that can be performed without that equipment, to be started or finished before delivery of the equipment. The complexity of such task rescheduling will be a function of how many other activities depend on the delivery of the awaited equipment. Both these examples — excavation and await­ing delivery of needed equipment — have a high-risk assessment, as they lie beyond the full control of project management.

The success of the project means that the project’s objectives were achieved according to a specific time schedule and budget. During the project’s execution, however, specific costs, the time period, and the objectives of the project can increase or decrease. These three elements affect one another, so the project success is really a mea­sure of how cohesively these elements work together, as presented in Figure (9.2).

From the probability theory discussed earlier in Chapter 3, it emerges that the probability of success is small. The goal is to locate the project in the zone of mutual intersection.

There are many areas in the project that are not specific, and these are sources of risks. These can be any of the following:

• Activities of a long period of time and on the critical path

• A lack of identification of the project objectives

• A non-competent project manager

• An inaccurate cost estimate

• A bad atmosphere, in general, in the project

• Achieving customer satisfaction

• A rapid change in resources during time periods, as shown in Figure (9.3)

Figure (9.3) presents staff and other resources distribution onsite within a construction period. At the start of the project, the activities and resources are low. There is a transition zone, in which resources increase consequent upon an increase in activities. This transition

Figure 9.3 Change in staff volume during a project.

zone will be one of high risk, as it will rapidly increase the working resources in the project in a short time period. Therefore, the likeli­hood of bad quality, misunderstanding the objective, and mistakes in safety procedure will be very high.

In the middle of the project, there will be stability in the number of resources, so the risk will be less. After that, start the other tran­sition zone by decreasing the resources which this stage will be a high risk also as in this case there will be a likelihood of manpower shortage fast and missing the handover or transfer equipment by mistake that you may need it later, in the same time the staff decreasing, so everyone in the project will be busy for searching to the other opportunity in another projects.

The list below can be your guide as a checklist for defining uncertainty risks in your project. In general, the common sources of uncertainty in a project are as follows:

• Scope of work

• Quality of estimates

• False assumptions

• Technological novelty

• Changes in technical specs

• User interface

• Staffing

• Staff productivity

• Skill levels

• Contractor performance

• Subcontractor performance

• Approvals and funding

• Market share

• Competition

• Economic climate

• Inflation and exchange rate

• Site conditions, such as soil characteristics

• Weather, as it has a high impact in the case of offshore projects

• Transportation logistics

• Change in law

• Political environment

• Public relations

• Customers

• Extensive software development