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Outline Panama Canal Project Risks


Introduction - (Erin) Background - (Erin) Project Risk Management Methods (Sunita) (Refer to: CH-7 & 9 (Kendrick, 2009), CH-6 (Heldman, 2009, )CH-11 (PMBOK, 2008)) Team A has been tasked with developing a risk based contingency plan for a baseline project budget estimate for Panama Canal project; conform the risk model to allow connectivity of the project budget estimate and the risk model; refine the risk model to allow for the analysis and management of risk mitigation strategies, and establish a process that supports the ongoing management of risks through the life cycle of Panama Canal project. Team A provided support and guidance in the areas of risk analysis using the quantitative and qualitative risk analysis. To document the risk management plan we used the project scope, cost management plan, schedule management plan, communication management plan, environmental factors, and organizational assets as inputs to risk identification. Team conducted risk analysis using series of steps. First the risks were identified from human, operational, political, cost, technical, natural, reputational, project and procedural perspective. We used the PERT database, expert opinions, brain storming and interviewing techniques to identify the risks. The risks were categorized systematically to help with identification of risks and provide a basis for understanding for the entire project team ( Heldman, 2009, pp. 237). Our Risk break down structure was defined as shown by figure (?)

Figure (?) Once the risks were identified, the next step was to analyze the risks using qualitative and quantitative techniques. Risks are typically first analyzed in a qualitative procedure to produce a filtered set of risks to be analyzed quantitatively (Kendrick, 2009, pp. 150). Once you have identified the risks you face, the next step is to work out the likelihood of the risk being realized and to assess its impact. One approach to this is to make your best estimate of the probability of the event occurring, and to multiply this by the amount it will cost you to set things right if it happens. This gives you a value for the risk.

Risk Assessment and Input Once we had identified the risks we analyzed a range of possible outcomes for the risks. Risk management is the art and science of anticipating and planning for future uncertain events. It is concerned with identifying and analyzing a range of possible outcomes, then control and mitigate their negative impacts. The objective is to understand, and mitigate or control risks. Understanding the risks inherent with each potential project alternative is important to controlling cost and developing estimates that reflect the cost of accepted risks. Analysis of risks and uncertainty involves the quantification of identified risks. . In a comprehensive risk management process, risk analysis is used to prioritize the identified risks for mitigation, monitoring, and control purposes. Risk mitigation involves the process of avoiding, transferring, mitigating or accepting the risk. Risk monitoring and control involves the tracking of the identified risks and the analysis of new risks. It also ensures the execution of risk response plans and evaluates their effectiveness. In the context of cost estimating, risk analysis can be extremely helpful for understanding project uncertainty and setting

appropriate contingencies. Team A Risk analysis consisted of continuous risk management process that included Risk Identification, risk analysis (quantitative and or qualitative); Risk mitigation planning, risk monitoring and risk control

Even with the best design and engineering, capital construction is a complex task that is fraught with risk and uncertainty. Traditional methods of cost estimating and project management often overlook risk and uncertainty or deal with it in an ad hoc manner. Using a formal risk management process that is integrated into the cost estimating and project management process will have many advantages. Risk management should be a dynamic and continuous process throughout project development. At the earliest stages of project development, it will be helpful in developing an understanding of project uncertainty and in developing an appropriate project contingency. As the project progresses, the monitoring and control processes assist in managing cost escalation resulting from scope growth or the realization of uncertain events.

The cost-risk model was developed by the project team that reflected the cost and schedule uncertainty and risk involved in the project. The revised approach builds the risk model from the cost estimate to allow for appropriate modeling of labor, equipment and material variations. It also integrates a critical path schedule to model more global project delays stemming from items such as organizational risks, labor strikes, and inefficient contracting. The new model structure incorporated the 14 risks,

and modeled them in three distinctly different structures in the model through an analysis of 1) the impact of reduced revenues, 2) the impact of delays and 3) the impact of cost overruns to the expansion project. This structure provided a more accurate model of cost and schedule risk while still providing the output required for the overall financial model. Figure (?) depicts how the 14 major risks relate to the model structure

Model structure and areas of Critical Risk We developed a risk assessment table base on identified risks:

Health hazards including disease: Malaria & Yellow Fever Harsh environmental conditions and exposure to disease carrying insects, rain, mud and unsanitary conditions for project personnel Project scope deliverables: Working canal that will support major shipping

Probability ((H/M/L) H


Overall Risk

Delivery of Resources / supplies on site with minimum delays Supply of Resource availability to support schedule Operational availability and reliability of equipment and machinery in wet tropical environment Availability of technical experts in required project areas and qualified line managers Sufficient general labor to support all elements of the project Weather and seasonal implications External (Project site & U.S.)& Internal (Within Project site) Communications Project Team understands Project Scope Deliverables & Objectives Project Cost











After the qualitative risk assessment the major risks were prioritized and ranked based on most significant to the least. The major risks were then further analyzed using quantitative methods. Quantitative risk analysis helps evaluate the impact of risks prioritized in quantitative analysis by assigning numeric probability to each risk and using it to quantify projects risk exposure (Heldman, 2009, pp. 257). Quantitative risk analysis was conducted using interviewing techniques, as there was no historical data on project of this size and nature. ---RC, should I add your table for quantitative analysis

The phases of risk management process is represented by Figure (?)

PHASES OF RISK MANAGEMENT PROCESS This process is continuous throughout the life cycle of the project. IV. Results / Analysis (Ron) (Refer to: CH-8 & 11 (Kendrick, 2009), CH-6 (Heldman, 2009), CH-11 (PMBOK, 2008)) A. Plan Risk Reponses 1. 2. 3. Inputs Tools and Techniques Outputs

B. Monitor and Control 1. 2. 3. V. Inputs Tools Techniques Outputs

Conclusions / Recommendations (Ron)

Typically, a project's qualitative risk assessment will recognize some risks whose occurrence is so likely or whose consequences are so serious that further quantitative analysis is warranted. A key purpose of quantitative risk analysis is to combine the effects of the various identified and assessed risk events into an overall project risk estimate. This overall assessment of risks can be used by the transportation agency to make go/no-go decisions about a project. It can help agencies view projects from the contractor's perspective through a better understanding of the contractor's risks. More commonly, the overall risk assessment is used to determine cost and schedule contingency values and to quantify individual impacts of high-risk events. The ultimate purpose of quantitative analysis, however, is not only to compute numerical risk values but also to provide a basis for evaluating the effectiveness of risk management or risk allocation strategies. Many methods and tools are available for quantitatively combining and assessing risks. The selected method will involve a tradeoff between sophistication of the analysis and its ease of use. There are at least five criteria to help select a suitable quantitative risk technique: 1. The methodology should be able to include the explicit knowledge of the project team members about the site, design, political conditions, and project approach. 2. The methodology should allow quick response to changing market factors, price levels, and contractual risk allocation. 3. The methodology should help determine project cost and schedule contingency. 4. The methodology should help foster clear communication among the project team members and between the team and higher management about project uncertainties and their impacts. 5. The methodology should be easy to use and understand. http://international.fhwa.dot.gov/riskassess/risk_hcm06_04.cfm