Chapter One - Project Risk Management Notes

Project Risk Management Notes

1. Oromia State University MA in Project Management Project Risk Management 1

2. Project Risk Management 2 Muluneh H. (PhD) [email protected] Oromia State University

3. Learning Objectives Understand risk and the importance of good project risk management List common sources of risks on projects Describe the process of identifying risks and create a risk register Discuss qualitative risk analysis and explain how to calculate risk factors, create probability/impact matrixes, and apply the Risk Item Tracking technique to rank risks Discuss how to control risks 3

4. The Importance of Project Risk Management Project risk management is the art and science of identifying, analyzing, and responding to risk throughout the life of a project and in the best interests of meeting project objectives Risk management is often overlooked in projects, but it can help improve project success by helping select good projects, determining project scope, and developing realistic estimates 4

5. project Management Maturity by Industry Group and Knowledge Area* 5 KEY: 1 = LOWEST MATURITY RATING 5 = HIGHEST MATURITY RATING Knowledge Area Engineering/ Construction Telecommunications Information Systems Hi-Tech Manufacturing Scope 3.52 3.45 3.25 3.37 Time 3.55 3.41 3.03 3.50 Cost 3.74 3.22 3.20 3.97 Quality 2.91 3.22 2.88 3.26 Human Resources 3.18 3.20 2.93 3.18 Communications 3.53 3.53 3.21 3.48 Risk 2.93 2.87 2.75 2.76 Procurement 3.33 3.01 2.91 3.33  *Ibbs, C. William and Young Hoon Kwak. “Assessing Project Management Maturity,” Project Management Journal (March 2000).

6. Benefits from Software Risk Management Practices* 6 *Source: Kulik and Weber, KLCI Research Group

7. Global Issues Many people around the world suffered from financial losses as various financial markets dropped According to a global survey of 316 financial services executives, over 70 percent of respondents believed that the losses stemming from the credit crisis were largely due to failures to address risk management issues They identified several challenges in implementing risk management 7

8. CHAPTER I THE NATURE OF RISK AND RISK MANAGEMENT Definition of Risk The 2000 edition of the Guide to the Project Management Body of Knowledge (PMI, 2000) states that a project risk is: “an uncertain event or condition that, if it occurs, has a positive or negative effect on a project outcome 8

9. Risk A general definition of project risk is an uncertainty that can have a negative or positive effect on meeting project objectives. Negative risk involves understanding potential problems that might occur in the project and how they might delay project success Positive risks are risks that result in good things happening; sometimes called opportunities 9

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12. Project risks are characterized by the fact that: they are usually at least partially unknown they change with time they are manageable, in the sense that action may be taken to change their impact they exist only in the future tense – there are no past risks, only actual occurrences they exist in all project 12

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14. 1.2. Certainty, Risk, and Uncertainty 14 “Uncertainty is an uncomfortable position. But certainty is an absurd one.” — Voltaire Uncertainty is a lack of complete certainty. In uncertainty, the outcome of any event is entirely unknown, and it cannot be measured or guessed; you don’t have any background information on the event. Uncertainty is not an unknown risk. In uncertainty, you completely lack the background information of an event, even though it has been identified. In the case of unknown risk, although you have the background information, you missed it during the identify risks process

15. At first sight the terms ‘uncertainty’ and ‘risk’ seem similar. But how similar? Are they mere synonyms, able to be interchanged without confusion or loss of meaning? Or is there any real and useful distinction between the two? ‘uncertainty’ and ‘risk’ without resorting to a dictionary. Knight (1921) addressed this in the field of economics, separating insurable risk from true uncertainty. His approach drew on basic mathematical theory, that ‘risk’ arises from randomness with knowable probabilities, whereas ‘uncertainty’ reflects randomness with unknowable probabilities 15

16. Decision- theorists take a similar approach, separating ‘decisions under risk’ where the probabilities of different outcomes are known (or at least knowable) from ‘decisions under uncertainty’ where probabilities are unknown (and maybe unknowable). Some philosophers suggest that as a result ‘uncertainty’ belongs to the subjective realm of belief, while ‘risk’ has an objective component based in fact or truth. 16

17. Dictionary and thesaurus definitions of uncertainty and risk Table below it appears that ‘uncertainty’ is a generic term, while ‘risk’ seems to be more specific. TERM UNCERTAINTY RISK Dictionary (Collins, 1979) Lacking certainty; not able to be accurately known or predicted; not precisely determined, established or decided; liable to variation; changeable. Possibility of incurring misfortune or loss; hazard; involving danger, perilous. 9 Thesaurus (Roget, 2008) Ambiguity, ambivalence, anxiety, changeableness, concern, confusion, conjecture, contingency, dilemma, disquiet, distrust, doubtfulness, guesswork, hesitancy, hesitation, incertitude, inconclusiveness, indecision, irresolution, misgiving, mistrust, mystification, oscillation, perplexity, qualm, quandary, query, reserve, scruple, scepticism, suspicion, trouble uneasiness, unpredictability, vagueness. Accident, brinksmanship, contingency, danger, exposure, fortuity, fortune, gamble, hazard, jeopardy, liability, luck, openness, opportunity, peril, possibility, prospect, speculation, uncertainty, venture, wager.

18. 1.3 Peril and Hazard 18 The words "peril' and "hazard" may seem virtually synonymous but they mean very different things in the insurance industry. Peril is something that can cause a financial loss, while hazard is any condition or circumstance that increases the probability of a peril. or Hazards merely increase the likelihood of a loss, while perils are the specific event that causes a loss A peril is a potential event or factor that can cause a loss, such as the possibility of a fire that could engulf a house. A hazard is a factor or activity that may cause or exacerbate a loss, such as a can of gasoline left outside the house door or a failure to regularly have the brakes of a car checked.

19. Same types of Perils: Natural perils are those over which people have little control, such as hurricanes, volcanoes, and lightning. Human perils , then, would include causes of loss that lie within individuals’ control, including suicide, terrorism, war, theft, defective products, environmental contamination, terrorism, destruction of complex infrastructure, and electronic security breaches. Economic perils: Though some would include losses caused by the state of the economy as human perils, many professionals separate these into a third category labeled economic perils. Professionals also consider employee strikes, arson for profit, and similar situations to be economic perils. 19

20. Same type of hazards Physical Hazards: is tangible environmental conditions that affect the frequency and/or severity of loss. Examples include slippery roads, which often increase the number of auto accidents; poorly lit stairwells, which add to the likelihood of slips and falls; and old wiring, which may increase the likelihood of a fire. Physical hazard: actions, behaviors or physical conditions that increase the possibility of a peril. For example, smoking is considered to be a physical hazard that increases the likelihood of a fire or illness 20

21. Same type of hazards Moral hazard: hazards that occur due to immoral behavior such as dishonesty and fraud. For example, a business owner may burn down his warehouse to collect the insurance money or an accident victim may exaggerate his injuries. Morale Hazard: hazards that result from circumstances that make people or institutions adopt a careless or reckless attitude, which increases the possibility an injury or loss. For example, having insurance can make a person less careful about avoiding an injury or loss. 21

22. The areas to consider include: Car parks, delivery areas, pedestrian access Reception and waiting areas Storage of supplies and materials Movement of goods from stores to first process stage Office and administration areas Public display areas Work- in- progress stages Maintenance and repair Activities carried out off- site, including movement between sites Storage of waste/scrap materials Packaging and storage before d istribution 13

23. 1.4. Types and Primary Components of Risk 23 Primary components of risk are the probability of the incident and its impact . The probability represents the likelihood of accruing, while the impact is the loss that will result if the risk materialized The formula is: Risk = Probability x Impact

24. 1.4. Types and Primary Components of Risk 24 The formula is: Risk = Probability x Impact For example, if the likelihood of underestimating getting fire during manufacturing is 30%, and the cost will be 12,000 ETB (i.e. there is a 30% chance of incurring a 12,000 ETB lost), you could assign a risk value of 3600 ETB. But what exactly does this number represent? It means that if you entered a contingency of 3600 into the project, it will cover the risk of getting fire during manufacturing if you had many, identical projects.

25. Risk can be classified into two main categories: systematic and unsystematic. Systematic risk is the market uncertainty of an investment that affects all or many companies in an industry or group, U nsystematic risk represents asset- specific uncertainties that can affect the performance of an investment. 25

26. Risk can be classified into: Political/Regulatory Risk – The impact of political decisions and changes in regulation Financial Risk – The capital structure of a company (degree of financial leverage or debt burden) Interest Rate Risk – The impact of changing interest rates Country Risk – Uncertainties that are specific to a country 26

27. Social Risk – The impact of changes in social norms, movements, and unrest Environmental Risk – Uncertainty about environmental liabilities or the impact of changes in the environment Operational Risk – Uncertainty about a company’s operations, including its supply chain and the delivery of its products or services Management Risk – The impact that the decisions of a management team have on a company Legal Risk – Uncertainty related to lawsuits or the freedom to operate Competition – The degree of competition in an industry and the impact choices of competitors will have on a company 27

28. Types of Project Risks At the project level, risks can come from technical, external, organizational, and project management. Within those four types are several more specific examples of risk 28

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30. Project Risk Categories: PMBOK The Project Management Body of Knowledge (PMBOK) sorts project risk into three categories: operational risks, short-term strategic risks, and long-term strategic risks. We’ve summarized their explanations of these risk categories below: Operational Risks: Operational risks are those that relate to the results of the project. Operational risks are more present in the later stages of a project. Usually, they involve the products or deliverables produced, or the inability to produce them. Short-Term Strategic Risks: Short-term strategic risks are those that affect project owners during the project’s lifetime and in its immediate aftermath. They might also affect the people using the project’s results. Long-Term Strategic Risks: Long-term strategic risks are those that relate to the project’s goals and objectives, as well as the problems it is trying to solve. Long-term risks may affect users who are far removed from the project’s processes. 30

31. 1.5.Burden of Risk on Society 31 The presence of risk entails three major burdens on society: the size of an emergency fund must be increased, society may be deprived of certain goods and services, and worry and fear are present . For example, a graduating student whose father has taken a loan to pay his school fees may be gripped with a feeling of worry and fear if he is having difficulty in securing employment and set his father free of the shackles of creditors.

32. Larger Emergency Fund It is prudent to set aside funds for an emergency . However, in the absence of insurance, individuals and business firms would have to increase the size of their emergency fund to pay for unexpected losses. In any event, the higher the amount that must be saved, the more current consumption spending must be reduced, which results in a lower standard of living. Loss of Certain Goods and Services Another burden of risk is that society is deprived of certain goods and services. Because of the risk of a liability lawsuit, many corporations have discontinued manufacturing certain products. Other firms have discontinued the manufacture of certain products, including asbestos products, football helmets, silicone- gel breast implants, and certain birth- control devices because of fear of legal liability. 32

33. Worry and Fear A final burden of risk is that worry and fear are present. Numerous examples can illustrate the mental unrest and fear caused by risk F or example , s ome passengers in a commercial jet may become extremely nervous and fearful if the jet encounters severe turbulence during the flight. 33

34. 1.6. Definition of Risk Management 34 Risk has been differently defined by various types of disciplines. Dr. Brian A. Burt in his research shortly defines risk as the probability than an event will occur. (Burt, 2001). However, this definition ignores the probability that non-occurrence of an event may also contain risk, B ut a more comprehensive definition of risk would be that risk is a potential of losing or gaining something of value as a result of an action or inaction expectedly or unexpectedly (Wekipedia, 2013).

35. 1.6. Definition of … 35 This definition encompasses both the positive as well as the negative sides of risk. On the other hand, risk management is the process for identifying, analyzing, and communicating risk and accepting, avoiding, transferring, or controlling it to an acceptable level considering associated costs and benefits of any actions taken (Beers, 2011).

36. According to the Institute of Risk Management: 36 “Risk management involves understanding, analysing and addressing risk to make sure organizations achieve their objectives. So it must be proportionate to the complexity and type of organization involved. Enterprise risk management (ERM) is an integrated and joined up approach to managing risk across an organization and its extended networks.” “Because risk is inherent in everything we do, the type of roles undertaken by risk professionals are incredibly diverse. They include roles in insurance, business continuity, health and safety, corporate governance, engineering, planning and financial services.

37. 1.7. Principles of Risk Management 37 The ten elements of operation that represent the main risk areas to the success of a business are considered to be: 1 . Premises – where the firm is located, type of premises available for use, amenities, distribution routes, access for customers 2 . Product – industry sector, features of product or service offered, life cycle and fashion trends, materials used in production, green issues, quality 3 . Purchasing – access to supplies, storage and warehouse facilities, stock control, payment terms, cost 4 . People – the workers in the organization, skills, training needs, motivation and commitment, incentive packages available, employment contracts

38. 5 . Procedures – production procedures, record keeping and reporting systems, monitoring and review, use of standards, emergency procedures 6 . Protection – personal protection of workers and others, property and vehicle security, insurance cover, information systems, data security 7 . Processes – production processes, waste and scrap disposal, skills, technology and new materials 8 . Performance – targets set, monitoring, measurement tools, consistency, validity of data 9 . Planning – access to relevant data, management skills, external factors and levels of control, short- and long-term planning, investment options 10 . Policy – range of policies that support the strategic plans of the firm. 38

39. Figure below shows how the different elements impact on each other, and although these 10 principles cover the main elements comprehensively, it is hardly a nice easy number to remember! They have, therefore, been broken down into four distinct groups of: 1 . Physical properties – premises/product/purchasing supplies 2 . People elements – people/procedures they follow/protection 3 . Actions or processes – processes/performance against targets 4 . Management issues – policy and strategy/planning and organizing 39

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41. 1.8.Objectives of Risk Management 41

42. Pr ojects do not exist in isolation within an organization. Properly understood, a project is part of the delivery mechanism for the overall strategic vision of the organization. Defining the desired vision, required change and ultimate business benefits is the realm of strategy, whereas projects and their deliverables describe the tactics by which the strategy is achieved. Project (and programme) objectives sit between the strategic and tactical levels, since they are defined in relation to the strategic vision, and they in turn define the requirement for projects (top arrow in Figure below). 42

43. Objectives are also used to measure the value of project deliverables (bottom arrow in below). Many projects fail because of a disconnect between strategic vision and tactical deliverables, often as a result of poorly defined project objectives. This space between the two levels of strategy and tactics requires careful and proactive management if projects and programmes are to succeed in delivering the required benefits to the business. Yet it is precisely in this area that businesses are most at risk 43

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45. Project objectives provide the link between the overall vision and the projects which are established to implement that vision (Figure below, top arrow). They also define the acceptance criteria for project deliverables which provide the capability to realize business benefits (Figure below, bottom arrow). Project objectives are however affected by the uncertain environment within which projects and business are undertaken, resulting in a level of risk exposure. 45

46. Project risk management exists to address this risk exposure, and should lead to an acceptable and manageable level of risk in each project. This increases the chance of meeting project objectives, which in turn maximises the likelihood of achieving the required business benefits. As a result, there is a clear link between project risk management and business performance: effective risk management at project level should lead to realised business benefits, as illustrated in Figure below. More commonly a hierarchy of objectives exists within the organisation, progressively elaborating the vision into more and more detailed objectives, eventually reaching the project level. 46

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48. 1.9. Characteristics of Effective Risk Management 48 Some say that risk management is effective when all the principles in their favorite guidance are present and functioning. ISO talks about its “set of principles that organizations must follow to achieve effective risk management.” The principles are (from a consultant’s site that provides a high- level view of the standard):

49. -Creates and protects value; Is an integral part of all of the organisation’s processes; Forms part of decision making; Explicitly expresses uncertainty; Is systematic, structured and timely; Is based on the best available information; Is tailored to the organisation; Takes human and cultural factors into account; Is transparent and inclusive; Is dynamic, iterative and responsive to change; and Facilitates continual improvement of the organisation. 49

50. Some say that risk management is effective when activities are compliant with the organization’s related policies and standards. But are those policies an d standards adequate? Some will say that risk management is effective when the board, operating and executive management believe it adds value and are satisfied that it provides the information they require. I believe that has merit but they may be satisfied with less than mature risk management (that seems to be the case with many current organizations who are satisfied with enterprise list management, until they are caught short). 50

51. Some will say that risk management is effective when an independent assessment/audit/examination is performed and the report says so. The trouble is that the people who do such audits generally rely on one of the above criteria (components present, principles in operation, etc.) 51

52. 1.10. Drivers of risk management–why manage risk? 52 It is undoubtedly true that projects are risky as a result of their common characteristics, by deliberate design, and because of the external environment within which they are undertaken. It is impossible to imagine a project without risk. Of course some projects will be high-risk, while others have less risk, but all projects are by definition risky to some extent. The ‘zero-risk project’ is an oxymoron and a logical impossibility – it does not and cannot exist. But the link between risk and reward makes it clear that not only is a project without risk impossible, it is also undesirable.

53. W hy organizations should have risk management ? It’s NOT because laws and regulations mandate it in many cases. It’s NOT because people say you need it. It’s because effective risk management provides a level of assurance that an organization will not only achieve its objectives (or exceed them) but will set the best objectives. Quoting from ERM: “Enterprise risk management helps an entity get to where it wants to go and avoid pitfalls and surprises along the way.” E ffective risk management enables: “A greater likelihood of achieving business objectives” “More informed risk-taking and decision-making” 53

54. Irish guidance on the ISO 31000:2009 risk management standard says: “The purpose of managing risk is to increase the likelihood of an organization achieving its objectives by being in a position to manage threats and adverse situations and being ready to take advantage of opportunities that may arise.” 54

55. The Australian mining company, BHP Billiton, has a risk management policy signed by its CEO. It includes: “Risk is inherent in our business. The identification and management of risk is central to delivering on the Corporate Objective. By understanding and managing risk we provide greater certainty and confidence for our shareholders, employees, customers and suppliers, and for the communities in which we operate. Successful risk management can be a source of competitive advantage. Risk Management will be embedded into our critical business activities, functions and processes. Risk understanding and our tolerance for risk will be key considerations in our decision making. 55

56. As stated previously that risk is involved in all walks of life and imposes different types of threats to every aspect of human life. Therefore, we study risk management to be able to identify, assess, prioritize, analyze, measure, mitigate risks, as well as evaluating and revising our approaches to risk management. Dr. George L. Head in his book (Risk Management Why and How) describes that we have to study risk management for three main purposes; (1) safeguarding the resources, (2) preparing for opportunities (3) and limiting uncertainty (Head, 2009). 56

57. Risk management is applicable in every dimension of human existence. Thus, we have to study risk management because: Risk Management is critical for human survival: Throughout human history it can be observed that risk and survival accompanied each other. Therefore, the art of managing risks is not only vital to other areas, but also to human survival as well. Risk is an Integral Part of an Organization: It is obvious that organizations face various types of internal and external risks which affect the organization in many ways. Therefore, risk management is required to help the organization stay on track and avoid losses. 57

58. Business Establishment & Growth Depends on Risk Management: Business is a risk and without risk business is not possible. Therefore, we study risk manage to be able to do business or manage businesses of other people. Risk Management Plays a Pivotal Role in Project Management: Risk management is very important to a great deal of projects, because a number of essential information about project cost, performance, schedule and etc. are most of the time uncertain. Therefore, potential risks will be involved in the project implementation, but in order to implement projects effectively and efficiently then, risk management becomes a must. 58

59. 1.11. Techniques for Managing Risk 59 First obligation of corporate managers is maximization of owner’s wealth but at the same time insuring them from unwanted risks. There are five different techniques you can use to manage risk: Avoiding Risk, Retaining Risk, Spreading Risk, Preventing and Reducing Loss, and Transferring Risk.

60. Avoidance : Many times it is not possible to completely avoid risk but the possibility should not be overlooked. For example, s ome buildings on campus have had repeated water problems in some areas. By not allowing storage of records or supplies in those areas, some water damage claims may be avoided. Retention : At times, based on the likely frequency and severity of the risks presented, retaining the risk or a portion of the risk may be cost-effective even though other methods of handling the risk are available. For example, the University retains the risk of loss to fences, signs, gates and light poles because of the difficulty of enumerating and evaluating all of these types of structures When losses occur, the cost of repairs is absorbed by the campus maintenance budget, except for those situations involving the negligence of a third party. 60

61. Spreading : It is possible to spread the risk of loss to property and persons. Duplication of records and documents and then storing the duplicate copies in a different location is an example of spreading risk. Loss Prevention and Reduction : When risk cannot be avoided, the effect of loss can often be minimized in terms of frequency and severity. For example, Risk Management encourages the use of security devices on certain audio visual equipment to reduce the risk of theft. 61

62. Transfer : In some cases risk can be transferred to others, usually by contract. When outside organizations use University facilities for public events, they must provide evidence of insurance and name the University as an additional insured under their policy, thereby transferring the risk of the event from the University to the facility user. The purchase of insurance is also referred to as a risk transfer since the policy actually shifts the financial risk of loss, contractually, from the insured entity to the insurance company 62

63. WHAT ARE THE ESSENTIAL TOOLS OF RISK MANAGEMENT? Identify the tasks associated with the program or activity. Identify the hazards associated with each task. Evaluate and select risk management techniques. Assess the risks associated with the program or activity with the selected risk controls or transfers in place. Determine whether to modify or proceed with the program or activity based on the risk assessment. Implement the selected risk management techniques and monitor the results. "Frequency" and "severity "are used to measure the risk remaining after appropriate risk management techniques have been implemented 63

64. 1.12. Benefits of Risk Management 64 Risk management is a significant expense for any company. There are several skilled professionals that need to be recruited and maintain in order to ensure that the risks inherent in the business are being mitigated efficiently. The expense can be significant. This expense is often a deterrent for smaller firms to not implement risk management. However, the larger firms understand that the value created by risk management activities far outweighs the costs

65. 1.12. Benefits of Risk … 65 Forecasts Probable Issues: One of the benefits of risk management is that it changes the culture of a business organization. Companies that extensively use risk management have fewer business disruptions as such issues are foreseen and taken care of at an early stage. The proactive approach is very helpful since it helps companies to identify failed projects at an early stage.

66. Avoiding Catastrophic Events: Risk management prepares the companies for all kinds of shocks. Risk managers try to foresee the small shocks which affect the day- to- day business of any firm. However, they also try to focus on catastrophic events. Such events have a very low probability of occurring. However, if they do occur, then companies need to be prepared to deal with them without going bankrupt. 66

67. Enables Growth: Risk management sounds like a defensive business activity. It has a negative connotation and the assumption is that the activity is performed to avoid losses. When new products have to be launched or when new markets have to be entered, companies have a ready framework that can be deployed in order to avoid these risks. Hence, in a way, risk management ends up enabling companies to take calculated risks and expedite their growth . Extensive risk management processes mean that the company has a lot of data. This data can be mined in order to gain meaningful insights which ultimately leads to better decisions. 67

68. Helps to Stay Competitive: Risk management helps companies to minimize their losses at critical times. These are the times when poorly managed companies struggle to stay afloat. On the other hand, companies that have risk management processes in place tend to minimize their loss. Hence, the competitiveness of such companies stays constant. In fact, it may improve also. Business Process Improvement: The day- to- day processes of risk management force companies to collect more and more information about their processes and operations. As a result, companies are able to identify the parts of the process which are inefficient or where there is scope for improvement. Enables Better Budgeting: Companies that have risk management processes in place have better control of their finances as opposed to other companies. This is because they often have a close look at their financial numbers and try to trim any waste. The end result is that these companies have a better knowledge of their processes. As a result, these companies also have a better knowledge of their budgets. 68

69. 1.13. Personal Risk Management 69 The personal values understanding are essential because they include the beliefs that the individual has on a subject, a course of action or the desirability of a future situation. The personal values are responsible for most of the unconscious choices (NAUMES, et al., 1994) Personal risk management (PRM) is the process of applying risk management principles to the needs of individual consumers and families . It involves identifying, measuring, and treating personal risk, including insurance, followed by implementing the treatment plan and monitoring changes over time.

70. Personal risk management (PRM) helps individuals and families live their lives by proactively managing the risks associated with their lifestyle. It includes defining objectives, lifestyle risk analysis, identifying and selecting risk management techniques such as insurance policies, implementing the chosen risk management techniques, and monitoring the risk management program to ensure it continues to meet the identified goals and objectives. 70

71. A personal risk management plan helps individuals and families “live their lives” by proactively managing the risks associated with their lifestyle. Risk must be carefully identified and the solutions used to cover those risks will vary from the placement of insurance policies to the execution of risk mitigation techniques, such as catastrophe preparedness plans, low temperature monitoring and water shut-off valves Lifestyle Risk Analysis One of the most important steps is to systematically identify risks and analyze loss exposures by evaluating an individual’s lifestyle. This can be effectively conducted by assessing the following four categories: people, places, things and structure. 71

72. People: Who are the people in their lives that impact their loss exposure or have information to assist in the diagnosis? These people can include: spouses / partners, children, parents, employees, tenants, financial planners, attorneys Places: What places do they own and where do they like to go? What do they have at those residences? (cars, boats, horses, etc.) Where do they like to travel? (domestic and/or international) How do they get there? (commercial or private plane/boat; owned, rented ) Things What types of “things” do they like to do? What are their passions and hobbies? Are they collectors? (art, cars, antiques, etc.) Recreational activities – boating, skiing, hunting, etc. Do family members actively engage in social media? 72

73. Structure What is the ownership structure of the identified assets? Are assets individually owned jointly or in the name of a trust? Ownership structures can change over time. It is important to continually assess and understand the ownership entity to ensure that all parties are properly protected by risk management solutions. Red Flags When it comes to high net worth clients, pay close attention to the typical red flags that can help identify risk issues. 73

74. Personal qualities for project risk management Listening: A project manager needs to be able to listen effectively when it comes to managing risk. Team work: Work together to come up with a solution to mitigate your project risks . Composure: To be really good at project risk management you should be able to keep your cool. Communication: Once you have established the options and your recommendation for dealing with this risk you can go ahead and talk to people about it. Reliability: People need to be able to trust your plans so the more reliable they think you are, the easier it will be for them to work with you as they’ll believe that you have thought through the options and are presenting them with the best Detail- orientated: Risks are often complicated to understand and their solutions more so. Having the time and patience to focus on what is being presented and understanding the detail of the solution 74

75. 1.14. The Changing Scope of Risk Management 75 The Changing Scope of Risk Management is a study that examines the impact of the scope of risk management and ethical environment on internal audit activities and the quality of accounting control procedures . The scope of a risk management system is to protect workers from work- related hazards and eliminate work- related injuries, ill- health, diseases, accidents, and deaths. It is the duty of an employer to ensure the health and safety of all persons who may be affected by the work carried out

76. Very few projects are ever completed in line with original plans and budgets. Unforeseen changes are inevitable in project management. But putting proper change control processes in place can drastically minimize their impact. Poorly managed or uncontrolled changes can harm your project severely, leading to missed deadlines, budget overruns, and even project failure. Adding extra work and requiring extra budget and resources may impact your ability to deliver on target. 76

77. Defining Your Project: 77 Defining a project scope that is specific, clear, and attainable while ensuring any scope changes are carefully controlled is key to capital project management success Project scope management includes the processes required to ensure that the project includes all the work required – and only the work required – to complete the project successfully. Failure to define what's part of the project, as well as what's not, may result in unnecessary work being performed that can negatively impact your schedule and budget.

78. Change Control: When changes occur, for whatever reason, a tight change control process can help you keep the project on track. Once the changes are made, there is almost always an accompanying increase in the budget and/or extension of the schedule. Scope changes can come from internal or external sources, but if requests for change are frequent and numerous, it can be a clear indicator of a poorly- defined project scope and an inaccurate project baseline 78

79. Timing of Scope Changes: Everyone knows that the further into the project life cycle or phases, the costlier the scope changes get. The financial impact of even a small scope change late in the project can be large because it may involve reversing previous decisions, making completed work obsolete. For this reason, ensuring your project scope is accurate at the outset is always the best option. If scope changes do occur, try to ensure they come early in the project to avoid unnecessary budget overrun. 79

80. Haunted by Scope Creep? Scope creep happens when changes are included in the project scope of work without a proper change control process in place. Unfortunately, for many project managers, scope creep is still a real issue. To avoid scope creep and stay on schedule, follow these tips: Ensure the scope of work is well defined. Verify scope and project execution plan with all stakeholders. Set the project baseline at the planning stage and measure performance against it. Set up a proper change control process. Ensure that scope, resource requirements, and schedule impact is assessed and improved before including new activities into the schedule. Any change in work should be accompanied by funds in resources and budgets. 80

81. _The end_ 81