SS: Panel- Session on Risk Management in the Offshore Energy Industry, International Risk Management

Abstract

Abstract Executing any design or construction project involves risk, and complex projects have a potential for even greater risk. The function of project management is to establish processes which control the performance of work by the project participants. Project managers plan project execution around the expectation that events will occur within a ‘normal’ range, both temporal and financial. The intent of managing risk is to establish a program to prepare for both negative and positive risks which manifest outside of this normal range. While certain risks, such as property damage, are frequently insured, many risks are not. In this paper, the term Project Risk will refer to these abnormal risks and Project Risk Management will refer to the efforts required to exert control over the impact of Project Risks. In 1992, The Project Management Institute (PMI) defined Project Risk and Project Risk Management (Reference 1) as follows:Project Risk is the cumulative effect of the chances of uncertain occurrences adversely affecting project objectives.Project Risk Management is the art and science of identifying, assessing, and responding to project risk throughout the life of a project and in the best interests of its objectives. In 2001, another definition of Project Risk Management was stated as follows (Reference 2): Risk management is the act or practice of dealing with risk. It includes planning for risk, assessing (identifying and analyzing) risk issues, developing risk handling options, and monitoring risks to determine how risk has changed. By 2004, PMI had modified its definition in the Guide to the Project Management Body of Knowledge (Reference 3) as follows:Project Risk is an uncertain event or condition that, if it occurs, has a positive or negative effect on at least one project objective…the cumulative effect of the chances of uncertain occurrences adversely affecting project objectives.Project Risk Management includes the processes concerned with conducting risk management planning, identification, analysis, responses, and monitoring and control on a project; most of these processes are updated throughout the project. In this same Guide, PMI goes on to establish the purpose of Project Risk Management as follows:Specifically identify factors that are likely to impact the project objectives of Scope, Quality, Time and Cost;Quantify the likely impact of each factor;Give a baseline for Project Non-Controllables; andMitigate impacts by exercising influence of Project Controllables. This paper does not provide a comprehensive specification for a Risk Management program; rather, it is intended to provide the reader with an overview of the general concepts as well as provide sources of additional information for further study. It is also provides real-world examples of what happens when projects experience a breakdown of Project Management and fail to recognize the time and cost impact of relatively small issues, avoidable with a Project Risk Management Program.