MANAGING PROJECT RISK Business risk management for project leaders YEN YEE CHONG @ EVELYN MAY BROWN FINANCIAL TIMES London New York San Francisco Toronto Sydney Tokyo - Singapore Hong Kong Cape Town Madrid Paris - Milan Munich Amsterdam PEARSON EDUCATION LIMITED Head Office: Edinburgh Gate Harlow Cb2O 21E Tel: +44 (0)1279 623623 Fax: +44(OW279 431059 London Office: 128 Long Acre, London WC2E 9AN Tel: +44 (0)207 447 2000 Fax: +44 (0)207 240 5771 Website: www.buriness-mindr.com First published in Great Britain in 2000 @ Pearson I Education Limited ZOO0 The right of Yen Yee Chong and Evelyn Brown to be identified as authors of this work has been asserted by them in accordance with the Copyright Designs, and Patents Act 1988 ISBN 273 63929 British Library Cataloguing in Pub/ication Data A CIP catalogue record for this book can be obtained from the British Library All rights reserved; no part o f this publication may be reproduced, stored in a retrieval sntern , or transmitted in anv form or bv anv means electronic mechanical, photocopying, recording, or otherwise without either the prior written permission of the Publishers or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd 90Tottenham Court Road London WIP OLP This book may not b@lent, resold, hired out or otherwise disposed of by way of trade in any form of binding or cover other than that in which it is published, without the prior consent of the Publishers Typeset by Northern Phototypesetting Co Ltd, Bolton Transferred to digital print on demand 2003 Printed and bound by Antony Rowe Ltd Eastbourne About the authors Yen Yee Chong is actively involved with the aspects of project management for DSL Consultants Ltd, covering projects in the UK, Russia and Greece He has lived and worked in the Baltic and Russian region for over three years, and worked for George Soros's Civic Education Project at universities in the Baltics, especially Estonia His previous book for Financial Times Publications was Risk Management in Russia and the Baltic States, October 1997 He specializes in the markets of Greece, Russia and the Baltic States for DSL Consultants Ltd Evelyn May Brown is at executive level with DSL Consultants Ltd and is involved with various levels of project assessment activities within the UK, Greece and Egypt She previously worked for the Australian government situated in the UK, also for British government departments including the Department of Trade and Industry and Value Added Tax headquarters Part of her duties entailed enforcement of liquidation, insolvency and bankruptcy for various companies, partnerships and sole-proprietors Since its creation in 1981 DSL expertise has been in designing office information systems, and office environments Our independent service is to evaluate and install the most suitable systems for the client - DSL does not stock or sell equipment This process brings DSL into all stages of project management, from systems analysis and design to implementation (production) of office systems Analysis covers the user's needs, system requirements, feasibility, access, council planning, company authorization and operating licences, etc., as well as estimation of budget, schedule and manpower with ergonomic considerations Design involves creating user specifications and blueprints for system construction to satisfy user needs, capacity and safety features (mechanical aspects, heating, ventilation, air conditioning, electricity circuits, cabling, etc.) We then combine the user's system requirements with IT and telecommunications technology to design the 'best fit' and ensure compatibility of specialized applications in banking and trading software platforms, especially with existing systems But our involvement does not stop there - we continue to About the autho expand or upgrade the client's system for additional and future needs DSL has to assess all the above factors in a project, such as constructing a bank's dealing room There are also the various issues of personnel management, and linking with all the parties involved in the project These include the customer, end-users, regulatory authorities, contractor, sub-contractors et al One of the main tasks is obtaining supplies and systems from sub-contractors, and getting the best deal for the customer during the invitation to tender (ITT) This is complicated partly because of the client's lack of knowledge about the systems and technology on the market, and partly because of contractors' performance Hiring a contractor who under-performs can have such an impact that we help in framing the ITT process This process exists to sift out those contractors who are unlikely to deliver the suitable service or product for the customer There is also the possibility that a bidding contractor may be bribing one of the client's employees to make the hiring process unreliable DSL comes in as an independent arbitrator to determine who and what will provide the best deal for the customer, thereby cutting down the selection risk The downside risk of hiring the wrong firm or taking on unsuitable equipment for the job is too great The customer may be king, but he still can make the wrong choice in picking the wrong product or contractor Contents Acknowledgements viii Foreword x introduction xi F la Objectives i Risk in context Threat management Risk attitude and perspective Acceptable risk Business projects and risk 15 What is a business project and what is project management? 16 Prototyping 22 Fund-raising 25 Implementation of a project 26 The essence of project management 30 Risk analysis 35 Defining risk 36 Measur~ngrisk 39 The Delphi group 40 Sources of risk 41 Position-keeping or stock-keeping 62 Project failure 62 qg Risk management 67 Project risk management in a nutshell 69 The risk planning cycle 78 Project budget 79 Project termination 85 Critical success factors for an IT project 85 $r;& The legal process and risk 87 The value of a contract or law suit Change management 96 PRINCE 98 Contingency management 99 Insurance 103 Market exposure 107 %> 88 Business roles in the project i 1 Project team members 112 Project risk management services on the market Project co-ordination committee 123 % 120 Operational risk management 125 Insiders and corruption 127 Leadership, team, task and the individual 132 Risk management as a cultural issue 136 Project auditinglreview 146 Ta Quality assurance 149 Introduction 150 QA checking 152 The invitation t o tender process 153 Benchmarking 155 qB Finance in project risk management Cash flow 158 Derivatives 164 Responsibility, risk and monitoring risk Lessons of derivatives trading 167 Project accountability 169 The UK Private Finance Initiative 171 Project ownership 175 Mergers and acquisitions 176 The euro in business 178 71 157 166 Technology platforms in risk management 183 Protection of intellectual property rights 184 Standards and risk management toolkits 186 Project management toolkits 188 Practical projects and IT developments for SMEs 189 Risk management - a hard choice for a soft science 195 Risk modelling and simulation 197 Scenario analysis 205 Stress testing or sensitivity analysis 205 Risk modelling for the 2lst century 208 Proper methodology and tools 210 Summary of scheduling and budgeting 214 T? Summary 219 Project leadership 221 Project risk methodology 222 Project management technology Conclusions 223 Appendix 227 Appendix 233 Index 235 223 Acknowledaements Writing a book is a considerable project that encompasses a variety of tasks that are never thanked in full We would first wish t o express our gratitude to those kind enough to write a book foreword or t o review the earlier versions In alphabetical order: Dr Mamdouh Barakat, ME Risk Management, London John Barclay, Credit Suisse First Boston, London Dr Lev Borodovsky, Credit Suisse First Boston, New York and Global Association of Risk Professionals (GARP) Simon Card, BT Global Finance, London Tony Carter, Halliburton, Brown & Root, UK Air Marshall Sir John Curtiss, Pathfinders, London Jim Godwin, Moscow-Narodny Bank, London and Moscow Simon LaMoon, AON Group Insurance, London Giles Pallister, Royal Academy of Arts, London Prof Charles E Scott, Loyola College, USA Prof Dr M Peter van der Hoek, Erasmus University, Netherlands Klaus Winkler, Telepassport GmBH, Frankfurt In addition, we thank: Mahmoud Awaad (DSL Consultants) for his sterling efforts in project management George Littlejohn, Emerging Markets Forum, London Hana Bishop and Paul Casterton, London Det Supt Ken Farrow, City of London Police Mike Kolker, USA Andrew Blythe, Hanscomb, Moscow Alex K., Athens (shipping) Thomas Tow and Melanie Francis (architects), Tow-Francis, Singapore Chu Mei-Peng, Malaysia Tomas Gilsi, Stockholm Also, our thanks to the banking consultants In particular: Steve Peachey, London Wolfgang Berg, Munich Marinus Piek, Netherlands Our thanks also to the team at FT Prentice Hall who devoted their efforts to this book: Richard Stagg, Amelia Lakin, Valerie Roberts, Linda Dhondy, Iain Campbell and others who were kind and patient enough to help us Our FT Prentice Hall editors Vivienne Church and Elizabeth Truran helped considerably in reading earlier proofs and being diligent wading through reams of paper - seemingly a thankless task at times and one for which we are very grateful to them Finally, we would like to express our thanks to those we have omitted or who wished to collaborate but had to keep their names confidential Yen Y Chong Evelyn Brown DSL Consultants Ltd London Wall Buildings London EC2M SUU Tel: 0171 448 SO00 Fax: 0171 448 5222 Email: DSL@BTinternet.com Foreword Risk management encompasses a wide variety of different types of risk in any financial institution - market, credit, liquidity, event and operational Until fairly recently, operational risk was something of a Cinderella - never quite invited to the ball attended by the big players in market risk and their brethren in the other fields It lacked the perceived thrill of the eternal 'poachers and gamekeepers' struggle between risk managers and financial engineers Identifying and managing operational risk seemed little more than sound common sense, a vital but rather pedestrian back-office function Two developments have changed that - an awareness amongst senior management that operational risk deserves to be taken seriously in an increasingly risky world; and the attempt to incorporate all forms of risk in the next generation of enterprise risk management systems Five key forces are changing the way that senior managers in major institutions round the world view their future - new technologies, globalization, nonbank competition, deregulation and the opening up of previously protected markets Cross-border activity always heightens risk, and the trend towards globalization amongst the big banks' customers nleans that they must follow the trend, go global and thus have to cope with a rapidly-growing set of risks Increased competition, partly in the wake of liberalization, always puts pressure on profits, at least in the short term So corners may be cut and everbigger risks may be taken to maintain bottom lines At BT Global Finance, we work closely with our customers in the biggest financial institutions worldwide to help them cope with all forms of risk Cooperating with them in building enterprise-wide risk management systems is as much part of the job as installing a phone line So my colleagues and I welcome Yen Yee Chong and Evelyn Brown's distinguished contribution to the field of operational risk They, and others in the industry, have finally managed to get it its long-overdue invitation t o the ball Simon Card OBE Senior Marketing Manager BT Global Finance Sector APPENDIX Assiqnments Here are some issues and questions which might arise during a project Assignment Introducing a hospital's IT-based diagnostic system A new computer system is being installed in a hospital ar WardbrookesHealthcare This system is reputed to use the latest technology to assist the doctors in diagnosing symptoms and prescribing the necessary drugs It has been tested in a South-East Asian hospital, where we are told it was successful,and is making its debut in a western European healthcare environment There is a lot o f pressure to ensure that this pilot project is a success You are told to assess its performance for use in your hospital You have also been called in to address some key issues, including medical ethics, responsibility for installation, responsibility when litigation arises, user support and training Questions: How effective is it in helping to treat patients? What you think of the use of computer diagnoses in treating patients? Will the computer diagnoses be put to practical use? Can we mix and match from the doctor's diagnoses and the computer's diagnoses? What are the possible outcomes if some diagnoses prove to be incorrect? What if some diagnoses prove fatal? What are the likely legal damages both in money and in staff terms? Is the doctor covered by insurance for diagnosis and prescription errors? Is the hospital covered by insurance for diagnosis and prescription errors? Can the computer system supplier be sued for diagnosis and prescription errors? Are there any instances of similar law suits? Are there any other cases of diagnostic error involving the computer system supplier? What other cases of diagnostic error have been handled by the insurance company ? Appendix What you know of the legal framework for computer system diagnoses in treating patients in South-East Asia? Who will operate the system in the hospital? How will your hospital staff be trained t o operate this system? What training and back-up will the computer supplier give? What back-up facilities are there for the staff? What back-up facilities will there be for the computer? Assignment Constructing a new school in an emerging market An unnamed Muslim country asks you and your company to build a large schooling complex for them It is hoping that the project can be completed very quickly, so there is unlikely to be an international call for tenders Is this a good market? You have a short time to complete a detailed reply to their request Questions What are the prospects over the next five (or so) years? Can I get an acceptable return within this time? Who are the main project players? Is the political climate going to be favourable? Assignment Building an airport in Africa General Siswe-Banze of the Equatorial African Republic (EAR) has invited your company to bid for this contract in the capital, Benzoso You will have to put down $1 million as a deposit to bid Decisions are due at the end of 12 months Questions Is there political stability? What is the likelihood of war or of the general's regime toppling? What is the likelihood of securing the contract? How much work (man-weeks and dollars) is needed to prepare the bid? How great is the risk of losing your deposit? How many sweeteners are likely to be needed for this bid? What is the likelihood of them annulling the contract? Assignment Opening a traffic management system You have won a contract to open a new trafficmanagement system but your former contractor in technological signalling systems is going out of business Plus, you have to find contractors to install the systems on site Questions What are the technologies available for this system? What are their relative mwits and disadvantages? Who are the contractors for these systems? How the contractors' performance records look? What is your probable back-up system? Who will accept liability for accidents caused by faulty trafficsignals? Assignment Installing a bank's IT-based dealing system The world-famous Dudley's Bank Corp has invited your company to design and install a large and complex dealing system They want the project completed before 31 December 1999 There will be a wide invitation to tender You have a short time to prepare your tender Questions What are the prospects of us winning this tender? What is our probable winning price? How much surety we have to put up in order to bid? What is our probable performance bond for this contract? What will be our performance limits? Can we get an acceptable prafit at this price? Who are the main competing project bidders? Will the bank be in a position to honour its commitments to us? What measures are already in place to handle Year 2000 problems? Who will guarantee/insureagainst Year 2000 compliance for the client? Assignment Opening a restaurant You have decided to open a restaurant You have to prepare a business plan for backers at short notice Appendix Questions W h o are your backers? Do yoid have an adequate history for each o f them? How will you finance the project? Is this secure? What you need to consider, for instance interest rates offered? Do you have 100 per cent planning pemzission? Are there any planning restrictions? What is the health and safety policy here? What are the sanitary standards necessary? Are there sufficient restaurants in the area? What is the local council's policy for new restaurants? Assignment Opening a department store You and your partners are opening a new department store You estimate that your reserves will stand at $12 million at the start o f the project Questions How you forecast your cash flow over 12, 24, 36 months? What are the terms o f your borrowings? What kind of cash modelling have you used: NPV, DCF, IRR, MERA or other? How resilient and applicable is your cash modelling? Do you have a contingency if sales drop 10 per cent next year? What have you done to minimize theft from a) outside parties, b) staff? Have you installed closed-circuit cameras? Are there enoldgh guards on the door? Do you have plain-clothes surveillance staff? Assignment Opening a network of stores You have decided to open a network of video and media stores Questions W h o have you chosen as your project manager? How did you select himlher? W h o are their construction sub-contractors? What is their record on previous construction jobs? How you ensure your franchise holders maintain good operational quality? What contingencies you have if they fail to pay you? What have you done to protect against leakage on deliveries? What have you done t o ensure that tapes and discs are not damaged in use? What have you done to protect against shoplifting? Assignment Introducing a new line of pharmaceutical products Questions Has this drug been thoroughly tested? What results and assumptions underlined the test plan? What is the current FDA regulatory status on your testing? Have you determined the significance of the long probability tails on testing? What if there are side-effects? What other similar products are there o n the market? Is any one product of the same formula? Can you be successfully sued for copying any formula? Assignment 10 Designing and installing a jewellery store abroad You are called in as the sub-contractor t o the project manager He has asked you t o implement the security measures Questions What are the physical design characteristics of the premises? What are the constraints on placing and positioning equipment and staff? Is there closed-circuit CCTV? Are tbere zoned areas of security? Is there a security room and vaults in most central and secure locations? Are there infra-red or photoelectric eyes for motion detectors? Are there metal scanners in special sections? Have you placed armed guards on the front door? Is there fire and smoke detector equipment? Is there a back-up electricity supply? Do you keep a log of your staff to sign in? Are there coded doors or door keyslcards? Are wires concealed or buried in concrete? Is there a back-up telephone system? Have you carried out a vetting procedure of staff on their career and social background? Central Computer & Telecoms Agency, info@ccta.gov.uk APPENDIX Further information Bibliography Chicken, J C (1994) Managing Project Risks in Major Projects, Chapman & Hall Construction Industry Council (1998) Constructor's Key Guide to PFI, Telford CCTA, the Central Computer & TelecommunicationsAgency, UK (1997) Instnrction to SSADM + Karnow, S (1994) Vietnam: A History, Random House Institute of Civil Engineers and Institute of Actuaries, RAMP: Risk Analysis Institute of Civil Engineers (1991) Guidance on Tenders for Civil Engineering Contracts Institute of Civil Engineers (1997) Adjudication Procedure Institute of Civil Engineers (1997)Arbitration Practice Institute of Civil Engineers (1994) Conciliation Pmcedure The International Project Management Association, International Journal of Project Management, Elsevier, UK, February 1999 (1998) Management for Projects, Thomas Telford Meredith, J & Mantel, S (1997) Project Management, John Wiley Morris, I?, The Management of Projects (1997) Thomas Telford Project Management Institute, Project Management Book of Knowledge, USA Raftery, J (1996) Risk Analysis in Project Management, E&F.N Spon (Chapman & Hall) Soros, G (1998) The Crisis of Global Capitalism, Little, Brown & Co Wallace, J (1997) Overdrive, John Wile): Further contacts American National Standards Institute, www.ansi.org Association of Pathfinders, pathfinder-association@email.msn.com British Standards Institute, London, www.bsi.org.uk Central Computer & Telecoms Agency, info@ccta.gov.uk DSL Consultants Ltd, www.dslconsultants.com Euro Business Management (M&A), www.ebml.co.uk Federation Internationale des Ingenieurs-Conseils (International Federation of Consulting Engineers), wr.fidic.org GARP (Global Association of Risk Management Professionals), www.garp.org IBM Project Manager, www.europe.ibm.com/prndirect Institute of Actuaries, www.actuades.org.uk Institute of Civil Engineers, www.ice.0rg.uk International Standards Organisation, Switzerland, www.iso.ch Mamdouh Barakat Risk Management, www.mhrm.com JP Morgan, www.jpmorgan.com Newsbase, UK, www.newsbase.co.uk Project Management Institute, USA, www.pmi.org Index Agents, use of, 119-120 Airline reservation systems planning behind, 101 Bad debts, reducing, 95-96 Banking operations, security of, 128-129 Barings Bank, case study, 60-61 Benchmarlung, 155-156 Bespoke products off-the-shelf versus, 24 BSE cattle infection case study, 10, 11 Business meaning, project cycle, 17 projects, conception of, 16 risk, conditions, 30-32 defining, Canary Wharf financing, 159-160 Channel Tunnel, case study, 83-84 Cigarette-smoking, Community enterprise unfavourable concept of, Consultants, recruiting, 320-123 Contingency management, 99-103 planning behind, 101 succession, 102 Contract, assessing value of, 88 examining a, 89-90 Counter-party risk assessing, 54-57 due diligence, case study, 55-57 Country risk, 46-48 Credit risk, 57-59 Culture issues building consensus, 141-142 case study, 137 job descriptions, 137-138 languages, importance of, 140 local recruitment, 140-141 sales effort, 136-137 sensitivity of, introducing, 139-140 team risk awareness, introducing, 138-141 teambuilding, 138-139 Currency risk, Default risk, 57-59 Delays and underperformance, 94-96 Delphi group, 40 Documentation, importance of, 97 Drugs side-effects of, 11 DSL office design planning behind, 101 European Space Agency Ariane project, 98-99 European Union fraud team, 144-145 Executives, security of, 126 Extortion, avoiding, 129 Failure, examining, 62-66 budgetary factors, 64 business, 63 case study, 63-64 legal/regulatory, 65-66 scheduling, 64 technical, 65 Financing cash flow, 158-160 Chinese walls, 169 collateral, future revenue as, 162-163 derivatives, 164-165 lessons of, 167-168 Euro, 178-180 financial risk management, 163 long-term capital management, 165 mergers and acquisitions, 176-178 monitoring risk, 166-167 operating regulations, 163 options contracts, 169-170 private finance initiatives, 171-175 privatization, 173 project accountability, 169 project ownership, 175-176 regulatory authorities, influence of, 119 revenue protection, 160-161 take-over procedures, 177-178 Football managers, impact of changing, 142-143 Forensic accounting, 154 Formula Grand Prix Racing financing of, 119 Fraud, discovering, 144-145 Fund-raising, 25 GM foods, assessing risk of, 1112 Government and regulatory agencies, 118 Granger Telecommunications, 127 Health & Safety fire risk, 118 management of, 116-1 18 Heathrow terminal 5, delays in, 29 tunnel collapse at, 117 Home income plans, 72 Housing, selling of, 23 Indonesia, case study, 44-45 Information Technology alignment, requirement for, 113 Internet, information available from, 191 security breaches, 191-192 millennium bug, 100 project, success factors in, 85 technology platforms, data warehousing, 192 enterprise resource planning, 192-194 intellectual property rights, protection of, 184-186 Microsoft Project Manager, 188-189 project management toolkits, 188-189 small and medium enterprises, in, 189-194 unifying, 187 Insiders and corruption, 127-132 Baltic banking crisis, 128 investment, purchasing, 131-132 Mars bar thief, 128 Russian banking crisis, 129 Russian department store, 129 security guards, 128 staff, screening of, 129-131 Lnsurance, 103 Interest rate risk, 54 Intermediaries, 119-120 Internet information available from, 191 security breaches, 191-192 Internet-based stocks, 50 Investments, Invitation to Tender controlling, 153-155 Leeds versus Sheffield location, factors in choice of, 48 Legal process bad payers, chasing, 95-96 contingency management See Contingency management contract, assessing value of, 88 examining a, 89-90 delays and underperformance, 94-96 documentation, importance of, 97 industrial action, 91 law suit, value of, 88 lines of responsibility, establishing, 88 medical negligence, 104 project penalties, 93-96 project responsibilities, 89 strikes, 91-92 unreasonable conduct, 95 Lenders risk averse nature of, Location factors in choice of, 48 Market exposure, 107-108 Market risk, assessing, 49-51 Medical negligence, 104 Microsoft, birth of, 25 MIG, 127 Movie, big-budget, producing a, 23 NASA case studies cost-plus pricing, 82 satellite research, 144 space shuttle disaster, 38 Off-the-shelf, bespoke products versus, 24 Operational risk, 59-61 Barings Bank, case study, 6 Olympic Games, case study, 60 Operational risk management, 126 banking operations, safety of, 128-129 check-list for, 130 cultural issues, 136-146 executives, security of, 126 extortion, avoiding, 129 Granger Telecommunications, 127 insiders and corruption, 127 investments, making, 131-132 leadership, 132-133 Mars thief, 128 MIG, 127 questioning performance, 131 security guards, 128 staff, screening, 130, 133 selection, 134-136 Outsourcing, dulled staff, hiring of, 120-123 Pensions case study in UK, 71 Piper Alpha oil drilling platform, 106 Planning defects, 20-22 Political risk, 43-45 Indonesia, case study, 44-45 Position-keeping, 62 PRINCE method, 17-19 PRINCE 2,97,98-99,188 Probability, understanding, Programme, meaning, Project auditing and review, 146 benefits matrix, 32-34 budget, 79-84 bottom-up, 80 case studies, 82-84 cost control, 80-81 resourcing, 84 top-down, 79-80 cycle, 17 failure, examining, 62-66 budgetary factors, 64 business, 63 case study, 63-64 legallregulatory, 65-66 scheduling, 64 technical, 65 implementation of, 26 big-bang, 26 phased, 26-27 inertia, 30 IT See IT project management, essence of, 30-34 methodologies of, 17-19 process of, 73 technology, 223-224 meaning, monitoring, 43 penalties, 93-96 planning, 16-17 responsibilities, 89 risk, defining, methodology, 222-223 selection, steering, 77-78 team See Project team termination, 85 Project leadership, 221-222 Project team, 28-29 accountant, 115 banker or financier, 115-1 16 case studies, 113, 117 co-ordination committee, 123 designer, 16 engineer, 116 health & safety manager, 116-1 17 lawyer, 116 members of, 112-120 project manager, 113-114 project sponsor/client, 112-1 13 sales and marketing executive, 114-115 Prototyping, 22-23 Quality assurance benchmarking, 155-156 checking, 152-153 forensic accounting, 154 invitation to tender process, 153-155 matrix evaluation, 155 total quality management, 150-151 R A M P method, 18-19 Recruitment bids, assessing, 121 consultants, 121-123 outsourcing, 120-121 Risk acceptable, 7-9 analysis, methods of, 42 attitude and perspective, 5-7 risk-averse, risk-aware project-players, risk-ignorant, 6-7 risk-seekers, 5-6 defining, 36-38 large business effect, 37 small business effect, 37 external context of, identification, 37 management See Risk Management managers, aversion t o appointing, 38 market See Market risk measuring, political See Political risk probabilities, estimation of, 40 quantification, 37 sources of, 41 Risk Management defining, 68-69,73 elements of, 73 future risks, 69-70 options for, 31-32 past risk, 71 present risks, 70-71 risk log, 74-75 risk planning cycle, 78-79 budgeting, 78 cost-estimation, 78-79 skills, consistent exercise of, 41 total risk, 71-72 Risk modelling and simulation, 197-199 analytical hierarchy process, 199-200 beta distribution costs, 217-218 deterministic models, 201-202 estimated monetary values, 202 Gantt chart, use of, 212-213 multiple estimating risk analysis, 203-204 proper methodology and tools, 210-213 RAMP methodology, 212 risk-adjusted discount rate, 202 scenario analysis, 205 scheduling and budgeting, summary of, 214-218 sensitivity analysis, 205 simulation, 207 Stochastic models, 201-202 stress testing, 205, 206 triangular distribution costs, 216 twenty-first century, for, 208-210 value at risk, 202-203 Risk-return ratio, desired, Royal Infirmary, Edinburgh IT alignment at, 113 Royal Opera House, London mismanagement at, 76-77 Russia bank training course, 73 bond market, 107 economic crisis in, 52-54 Volvo in, 120 Sheffield versus Leeds location, factors in choice of, 48 Shipping insurance, 104-106 Singapore architecture and feng shui, 94-95 fall of in 1942, 75 Spocette method, 19 SSADM, 18 Staff monitoring, 13 screening, 12-13, 130, 133 selection, 134-136 Steering committee risk of using, 77 Stock-keeping, 62 Strikes, 1-92 Technology platforms See IT Thalidomide, 11 Threat management, 4-5 ring-fencing problematic outcomes, UK Ambulance Sewices case study, 69-70 Volvo Russia and Baltic States, in, 120 security measures, 126 Voyager, launch of, 26 Waterfall model, 17 limitations of, 19-20, 21 ... xi F la Objectives i Risk in context Threat management Risk attitude and perspective Acceptable risk Business projects and risk 15 What is a business project and what is project management? 16... Implementation of a project 26 The essence of project management 30 Risk analysis 35 Defining risk 36 Measur~ngrisk 39 The Delphi group 40 Sources of risk 41 Position-keeping or stock-keeping 62 Project. .. failure 62 qg Risk management 67 Project risk management in a nutshell 69 The risk planning cycle 78 Project budget 79 Project termination 85 Critical success factors for an IT project 85 $r;&