RISK MANAGEMENT PROGRAM AND PROJECT MANAGEMENT APPLICATION OCTOBER 6, 2006 Presented by Don...
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Transcript of RISK MANAGEMENT PROGRAM AND PROJECT MANAGEMENT APPLICATION OCTOBER 6, 2006 Presented by Don...
RISK MANAGEMENT PROGRAM RISK MANAGEMENT PROGRAM
AND AND
PROJECT MANAGEMENT APPLICATIONPROJECT MANAGEMENT APPLICATION
OCTOBER 6, 2006OCTOBER 6, 2006
Presented byPresented byDon Devieane, CGA, ManagerDon Devieane, CGA, ManagerRisk Management ProgramRisk Management Program
OVERVIEWOVERVIEW(RISK MANAGEMENT PROGRAM)(RISK MANAGEMENT PROGRAM)
OVERVIEWOVERVIEW(RISK MANAGEMENT PROGRAM)(RISK MANAGEMENT PROGRAM)
Program HistoryProgram History Framework ComponentsFramework Components Risk CategoriesRisk Categories Risk AssessmentRisk Assessment Measurement CriteriaMeasurement Criteria Corporate Risk MapCorporate Risk Map
OVERVIEWOVERVIEW(PROJECT MANAGEMENT APPLICATION)(PROJECT MANAGEMENT APPLICATION)
Project JustificationProject Justification Project Risk IdentificationProject Risk Identification Risk Assessment (Measurement)Risk Assessment (Measurement) Risk TreatmentRisk Treatment Residual RiskResidual Risk Reporting and MonitoringReporting and Monitoring
COMPANY PROFILECOMPANY PROFILE(MANITOBA HYDRO)(MANITOBA HYDRO)
Provincial Crown CorporationProvincial Crown Corporation 510,000 electric 258,000 gas customers510,000 electric 258,000 gas customers 98% of electricity hydroelectric98% of electricity hydroelectric 14 hydroelectric G.S.14 hydroelectric G.S. Provide 100 communities with N.G.Provide 100 communities with N.G. 8,700 kilometers of pipeline8,700 kilometers of pipeline Capital assets exceed $11 billionCapital assets exceed $11 billion Approximately $2.4 billion in revenueApproximately $2.4 billion in revenue Approximately 6,000 employeesApproximately 6,000 employees
COMPANY PROFILECOMPANY PROFILE(MANITOBA HYDRO)(MANITOBA HYDRO)
Major EventsMajor Events
Grand Rapids G.S.Grand Rapids G.S.
Bi Pole Bi Pole
DroughtDrought
StonewallStonewall
COMPANY PROFILECOMPANY PROFILE(MANITOBA HYDRO)(MANITOBA HYDRO)
RISK MANAGEMENT PROGRAMRISK MANAGEMENT PROGRAM(PROGRAM HISTORY)(PROGRAM HISTORY)
Started in 1999 Started in 1999 - CRMSC established in 2002- CRMSC established in 2002- First CRM report in 2003- First CRM report in 2003- Policy and guidelines issued 2004- Policy and guidelines issued 2004- Internal web site 2006- Internal web site 2006
ReasonsReasons- Business Failures - Business Failures - Market Changes- Market Changes- Pressure from outside (best practice)- Pressure from outside (best practice)
RISK MANAGEMENT PROGRAMRISK MANAGEMENT PROGRAM(PROGRAM HISTORY)(PROGRAM HISTORY)
Purpose Purpose - Identify risks - Identify risks - Mitigate negative occurrences- Mitigate negative occurrences- Take advantage of opportunities- Take advantage of opportunities
Benefits Benefits - Simple- Simple- Systematic- Systematic
- Proactive- Proactive- Integrated- Integrated
RISK MANAGEMENT PROGRAMRISK MANAGEMENT PROGRAM(FRAMEWORK COMPONENTS)(FRAMEWORK COMPONENTS)
Mission / Mandate / ProjectMission / Mandate / Project Risk IdentificationRisk Identification Potential ImpactPotential Impact Risk TreatmentRisk Treatment Residual RiskResidual Risk Reporting and Monitoring Reporting and Monitoring
RISK MANAGEMENT PROGRAMRISK MANAGEMENT PROGRAM(FRAMEWORK COMPONENTS)(FRAMEWORK COMPONENTS)
CROSS FUNCTIONAL FORUMGUIDE AND MONITORLINK TO AREAS OF RESP.PARTICIPATION / LEADERSHIP
RESIDUAL RISK ASSESSMENTRISK TOLERANCE
DETERMINE LIKELIHOOD
CHAMPIONRISK PHILOSOPHYRISK COMMITTEEAPPROVALS
MISSION / MANDATE
EXECUTIVEEXECUTIVE
CORPORATE RISK MANAGEMENTCORPORATE RISK MANAGEMENTSTEERING COMMITTEESTEERING COMMITTEE
RISK MANAGEMENT PROCESS (LINE MANAGEMENT)RISK MANAGEMENT PROCESS (LINE MANAGEMENT)
RISK TREATMENT
MONITOR
AND
REPORT
RISK IDENTIFICATION(THREATS TO ACHIEVE)
POTENTIAL IMPACT(PRE RISK TREATMENT)
DETERMINE CONSEQUENCE
ADDITIONAL ACTIONREQUIRED
RESOURCEFACILITATETRAIN COORDINATE
CRM DEPARTMENTCRM DEPARTMENT
RISK MANAGEMENT PROGRAMRISK MANAGEMENT PROGRAM(RISK CATEGORIES)(RISK CATEGORIES)
Market Market FinancialFinancial EnvironmentalEnvironmental InfrastructureInfrastructure HumanHuman Business / Business / OperationalOperational
ReputationReputation Governance / Governance /
Regulatory / LegalRegulatory / Legal Aboriginal Aboriginal Alternative Alternative
TechnologyTechnology StrategicStrategic
MAIN CATEGORIES MAIN CATEGORIES
RISK MANAGEMENT PROGRAMRISK MANAGEMENT PROGRAM(RISK CATEGORIES)(RISK CATEGORIES)
Exchange Exchange Interest RatesInterest Rates CreditCredit InflationInflation Gas Price Gas Price
VolatilityVolatility Gas Derivative Gas Derivative
InstrumentsInstruments
SUB CATEGORIES (FINANCIAL)SUB CATEGORIES (FINANCIAL)
Capital Structure Capital Structure
Shortage Shortage Pricing / Fuel Pricing / Fuel PricePrice
Power Hedging Power Hedging Instruments Instruments
RISK MANAGEMENT PROGRAMRISK MANAGEMENT PROGRAM(RISK ASSESSMENT)(RISK ASSESSMENT)
““You don’t want the decimal point you You don’t want the decimal point you want the order of magnitude”want the order of magnitude”
Each risk impact is assessed in terms Each risk impact is assessed in terms of:of:
ConsequenceConsequence
LikelihoodLikelihood Consistent across the entire corporationConsistent across the entire corporation Worst case scenario Worst case scenario
RISK MANAGEMENT PROGRAMRISK MANAGEMENT PROGRAM(RISK ASSESSMENT)(RISK ASSESSMENT)
Consequence rated: Consequence rated:
- As high, medium or low - As high, medium or low
- Either financial, safety, reliability, - Either financial, safety, reliability,
environment or customer valueenvironment or customer value
- Financial - Financial
LowLow $0 - $50 million$0 - $50 million
MediumMedium $50 - $150 million$50 - $150 million
HighHigh > $150 million> $150 million
RISK MANAGEMENT PROGRAMRISK MANAGEMENT PROGRAM(RISK ASSESSMENT)(RISK ASSESSMENT)
Likelihood rated: Likelihood rated:
- As high, medium or low - As high, medium or low
- Low, not likely to occur within 10 years- Low, not likely to occur within 10 years
Medium,Medium, likely to occur within 5 - 10 yearslikely to occur within 5 - 10 years
High, likely to occur within 1 -10 yearsHigh, likely to occur within 1 -10 years
RISK MANAGEMENT RISK MANAGEMENT PROGRAMPROGRAM
(CORPORATE RISK MAP)(CORPORATE RISK MAP) A.1.1
A.1.1A.1.1A.1.1 A.2.5 A.2.7 B.7
C.2
D.5
G.1 H.4
Low Medium High
LIKELIHOOD
CONSEQUENCE
Low
Medium
High C.3
D.1D.3
E.1 E.3 F.2
H.1
H.2 H.3
H.5 J.1 K.1
A.2.1 B.8
D.2
E.2
I.1I.2
C.1
A.2.3 B.1 B.3
B.6 D.4 D.6
A.2.4
A.2.6
A.2.2 B.4 B.5
F.1
B.2
A.1.2
B.9
C.4D.1.1
D.7
Water Supply DroughtWater Supply Drought
UneconomicUneconomic LoadsLoads
Power Hedging Power Hedging InstrumentsInstruments
PROJECT APPLICATIONPROJECT APPLICATION
PROJECT APPLICATIONPROJECT APPLICATION(PROJECT JUSTIFICATION)(PROJECT JUSTIFICATION)
Support for the project has already been justified Support for the project has already been justified - Reliability- Reliability- Safety- Safety- Opportunity - Opportunity
The best solution has been identified through business The best solution has been identified through business case analysiscase analysis
Environmental concerns are resolvedEnvironmental concerns are resolved Prioritize initiatives and opportunities Prioritize initiatives and opportunities
PROJECT APPLICATIONPROJECT APPLICATION(PROJECT JUSTIFICATION)(PROJECT JUSTIFICATION)
Well documented cost estimateWell documented cost estimate
- Costs should be representative of most - Costs should be representative of most likely scenariolikely scenario
- Costs must not contain hidden - Costs must not contain hidden contingencies and allowancescontingencies and allowances
PROJECT APPLICATIONPROJECT APPLICATION(PROJECT JUSTIFICATION)(PROJECT JUSTIFICATION)
-30
-20
-10
0
10
20
30
-2 -1 0 1 2
PROJECT APPLICATIONPROJECT APPLICATION(RISK IDENTIFICATION)(RISK IDENTIFICATION)
Risk can be defined as what can cause variability in possible Risk can be defined as what can cause variability in possible outcomes. outcomes.
Cost / delay / deliverable (performance)Cost / delay / deliverable (performance) Brainstorming Brainstorming HistoryHistory Corporate risk categories/subcategoriesCorporate risk categories/subcategories
PROJECT APPLICATIONPROJECT APPLICATION(RISK IDENTIFICATION)(RISK IDENTIFICATION)
Listing of possible risksListing of possible risks Proper and detailed analysis can stream line the effort requiredProper and detailed analysis can stream line the effort required Properly developed forms and support information will ensure Properly developed forms and support information will ensure
consistencyconsistency
PROJECT APPLICATIONPROJECT APPLICATION(RISK IDENTIFICATION)(RISK IDENTIFICATION)
Risk identificationRisk identification
- Business Operational (Supply Chain)- Business Operational (Supply Chain)
- Legal (Licensing, Property) - Legal (Licensing, Property)
- Environmental (Weather, Land)- Environmental (Weather, Land)
- Human (Availability, Skilled)- Human (Availability, Skilled)
- Financial (Exchange, Inflation,)- Financial (Exchange, Inflation,)
PROJECT APPLICATIONPROJECT APPLICATION(RISK ASSESSMENT)(RISK ASSESSMENT)
Business operational (supply chain)Business operational (supply chain) - Having the - Having the rightright material available when its material available when its
requiredrequired (Level of engineering design, - proven / unproven (Level of engineering design, - proven / unproven
technology)technology) - What are the costs associated with:- What are the costs associated with:
- 1 month- 1 month- 2 month- 2 month- 6 month - 6 month
- What is the likelihood of this occurring (probability)- What is the likelihood of this occurring (probability)
A.1.1A.1.1
A.1.1
Low Medium High
LIKELIHOOD
CONSEQUENC
E
Low
Mediu
mHigh
A.1
A.1
A.1
PROJECT APPLICATIONPROJECT APPLICATION(RISK ASSESSMENT)(RISK ASSESSMENT)
6 Month
2 Month
1 Month
Supply Chain
Note : Can be done for each material item
A.1.1A.1.1
A.1.1
A.3 A.2
Low Medium High
LIKELIHOOD
CONSEQUENC
E
Low
Mediu
mHigh
C.3
D.3
E.1F.2
D.2
E.2C.1
A.1 B.1 B.3
A.3
F.1 B.2
PROJECT APPLICATIONPROJECT APPLICATION(RISK ASSESSMENT)(RISK ASSESSMENT)
PROJECT APPLICATIONPROJECT APPLICATION(RISK TREATMENT)(RISK TREATMENT)
RISK MITIGATIONRISK MITIGATION
- Elimination of risk by exclusion, sharing, insuring or- Elimination of risk by exclusion, sharing, insuring or
by the use of appropriate legal documentation and by the use of appropriate legal documentation and
financial documents. Risk allowance and financial documents. Risk allowance and
acceptance.acceptance.
- Identify what can be done to manage and mitigate - Identify what can be done to manage and mitigate
the potential for cost overruns or delays. the potential for cost overruns or delays.
- Adjust risk impact assessment for reduction due to- Adjust risk impact assessment for reduction due to
risk treatment efforts (revise risk map)risk treatment efforts (revise risk map)
PROJECT APPLICATIONPROJECT APPLICATION(RISK TREATMENT)(RISK TREATMENT)
Business operational (Supply Chain)Business operational (Supply Chain)
- Scheduling - Scheduling
- Supplier ( Foreign / Local )- Supplier ( Foreign / Local )
- Transportation- Transportation
- Penalties (Legal Clauses / Performance - Penalties (Legal Clauses / Performance
Bond) Bond)
- Surplus - Surplus
A.1.1A.1.1
A.1.1
A.3 A.2
Low Medium High
LIKELIHOOD
CONSEQUENC
E
Low
Mediu
mHigh
C.3
D.3
E.1F.2
D.2
E.2C.1
A.1
B.1 B.3
A.3
F.1 B.2
PROJECT APPLICATIONPROJECT APPLICATION(RISK TREATMENT)(RISK TREATMENT)
A.1.1A.1.1
A.1.1
A.2
Low Medium High
LIKELIHOOD
CONSEQUENC
E
Low
Mediu
mHigh
C.3
D.3
E.1F.2
D.2
E.2
C.1
A.3 B.1 B.3
A.1 F.1 B.2
PROJECT APPLICATIONPROJECT APPLICATION(RESIDUAL RISK)(RESIDUAL RISK)
A.3
A.1.1A.1.1
A.1.1
A.3 A.2
Low Medium High
LIKELIHOOD
CONSEQUENC
E
Low
Mediu
mHigh
C.3
D.3
E.1F.2
D.2
E.2
C.1
A.3 B.1 B.3
A.1 F.1 B.2
PROJECT APPLICATIONPROJECT APPLICATION(RESIDUAL RISK)(RESIDUAL RISK)
C.3 E.2
C.1
F.2 E.1
A.3 B.1 B.3
A.1F.1 B.2
C.3 E.2
C.1
F.2 E.1
A.3 B.1 B.3
A.1 F.1 B.2
PROJECT APPLICATIONPROJECT APPLICATION(REPORTING AND MONITORING)(REPORTING AND MONITORING)
RISK CONTROLRISK CONTROL
Takes place during project execution and Takes place during project execution and consists of a rigorous control of scope, quality, consists of a rigorous control of scope, quality, cost and schedule and being constantly alert cost and schedule and being constantly alert of potential concerns. of potential concerns.
PROJECT APPLICATIONPROJECT APPLICATION(REPORTING AND MONITORING)(REPORTING AND MONITORING)
Establishment of tolerancesEstablishment of tolerances Defined as the allowable or permissible variation from a standardDefined as the allowable or permissible variation from a standard Actions are taken when the risk exceeds its allowable tolerance Actions are taken when the risk exceeds its allowable tolerance Low, zero or limited variabilityLow, zero or limited variability Medium, some variability is acceptedMedium, some variability is accepted High, significant variability is accepted High, significant variability is accepted
PROJECT APPLICATIONPROJECT APPLICATION(REPORTING AND MONITORING)(REPORTING AND MONITORING)
Monitor PointsMonitor Points Trigger PointsTrigger Points On Site InspectionOn Site Inspection Dispute Resolution Mechanism Dispute Resolution Mechanism Who Needs to Know and When (Predetermined) Who Needs to Know and When (Predetermined)
PROJECT APPLICATIONPROJECT APPLICATION(REPORTING AND MONITORING)(REPORTING AND MONITORING)
QUESTI0NSQUESTI0NS