What is Risk Management ?

By Steven Macdessi

Do you run your own business whether small or large? If yes then I am sure that you will be well aware of different risks associated with business. Running a business or even a project is not an easy job as you have to fight against thousands of risks related with your internal or external environment. Almost every single organizations works hard for ensuring its long term existence but at the end only those organizations actually survive who adopts risk management techniques. Do you know what risk management is and how you can apply it on your organization in order to get maximum benefits? If no then I am here to help you in this regard.

What is Risk Management?

Risk management is any technique, strategy or action plan followed to avoid or overcome the risk. On the other hand, risk itself is any unwanted situation that can result in huge loss. It can be anything such as a mishap or accident at your workplace, fires, tornadoes, earthquakes or any other natural disaster. Apart from this, there are various legal risks, the most common examples of which include fraudulent acts, theft, or sexual harassment lawsuits. Financial risks are also of great concern for the business owners. The risk management depends on specific type of risk present in your company.

Risk management is done by the risk managers who have a basic or master degree in this subject. They know about all types of risks and their possible solutions. These managers not only make the list of all possible risks associated with your particular organization but also make an action plan for avoiding and removing these risks. They adopt the latest strategies for risk mitigation. Almost every single organization hires a personal for risk management.

How to Apply Risk Management Effectively?

It is generally said that an efficient risk avoidance and mitigation plan can reduce the chances of loss that may occur up to 80% or even more. A large number of institutes including Project Management Institute, the International Organization for Standardization (ISO), the National Institute of Science and Technology, and actuarial societies have developed various strategies and risk management standards that may help you to avoid risk fully or partially. Generally five different steps are followed in order to apply the risk management effectively. Following is an overview of all these five steps.

Risk Identification

It is the first and the most important step. In this step, the risk managers identify the specific risks associated with your business.

Risk Analysis and Prioritization

After identifying the risks, they are then analyzed carefully in order to know the extent of damage that may occur due to them. In this step, the risk managers also prioritize the risk. For instance, your organization is exposed to 5 different risks then they will be given numbering according to the extent of danger associated with all of them.

Risk Control and Loss Prevention

In this step, various strategies are developed for risk control and loss prevention. Different strategies are made to target different types of risks as a single strategy cannot be applied for controlling all the risks.

Risk financing, and Risk Implementation/Administration

In the last step, all the risk control strategies are practically implemented and results are then noted afterwards.

Some organizations follow all the above mentioned steps while other follows any 2 or 3 of them for ensuring applying the risk management effectively. The success of your risk management techniques basically depends on your skills and experience as well as your planning, organizing and controlling abilities.

23
Apr 2012
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Australian Institute of Project Management and RedR Australia, a Great Combination

In this current scenario due to an increase in competition, most of the organizations are joining hands with other organizations for getting mutual benefits. This not only helps the organizations to increase their revenues but also give them a competitive advantage over the other organizations. Australian institute of project management and RedR Australia is a big example of this practice. Both these organizations have developed a strategic alliance with each other.

Australian Institute of Project Management and RedR Australia, an Overview

Before discussing the strategic alliance of Australian institute of project management and RedR Australia, let me introduce both these organizations with you. Australian institute of project management is a well known name known for its extraordinary project management. It is one of the leading organizations that have been promoting the profession of project management in Australia. It is the dream of every project manager to work under the AIPM. It has a wide team of highly skilled project managers. Moreover, it has also introduced various achievement awards in order to appreciate the excellence in project management.

RedR Australia on the other hand is also a very popular name in the industry. It is known for its extraordinary training services provided to the community. It provides training to professional project managers so that they may do multi tasking. The training provided by RedR enables the workers to survive in the toughest environment. RedR also serves the devastated areas which are under any conflict or natural disaster. RedR provides its service voluntarily.

AIPM AND RedR, Joining Hands with Each other

Australian institute of project management and RedR Australia became strategic alliances of each other on February 2010. In a formal ceremony Bill Young, who is the president of the Australian institute of project management signed a contract with Alan McLean, the CEO of RedR Australia. Both these organizations agreed to share their skills and abilities with each other in order to enhance their working capabilities.

Purpose of Strategic Alliance between AIPM and RedR Australia

The main purpose for strategic alliance is to get benefits from each other by working in a friendly environment. By doing the strategic alliance, large numbers of project managers from Australian institute of project management will be able to get proper training from RedR so that they may become eligible to provide their project management services not only inside but also outside the country. This will help both these organizations to make extraordinary project managers that can work in any type of environment. RedR Australia will enhance the skills and abilities of professional project managers by enrolling them in various courses.

Benefits of Strategic Alliance between AIPM and RedR Australia

After becoming a strategic alliance, the project managers of Australian institute of project management will be informed of various opportunities by availing which they can share their skills and experience with the team of RedR Australia. By doing so, the project managers of AIPM will be able to enhance their skills by working in multidimensional environment whereas RedR Australia will get more members to support their voluntary activities.

21
Mar 2012
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What does Efficient project management mean ?

It means efficiently executed projects, which means everybody’s happy

The present situation of our world in terms of business becomes more and more challenging. That is why you have to make sure that you will make use of the best way to achieve success for your business. The availability of different project management methods greatly helps project managers to efficiently obtain success in each of their projects.
The simplest description of project management is about getting things done. For project managers to have control in running the project, they should use the most efficient project management method. There are various types of project management and each of them can be used perfectly for a certain type of project. Some might believed that there are project management methods that can be efficient for all kinds of projects and there are those who do not.

What Makes an Efficient Project Management?

Every project manager has their own preferences on the type of project management to be used for their projects. The best way to determine the perfect kind of project management tool that will work for your project is through knowing the qualities that makes it efficient.
The efficiency of one project management depends mainly on the purpose it has to serve. If you believed that one project management method can be used for variety of projects then the decision is still yours. But if you think that each project deserves different project management method then you have to make the right choice.
The right choice of project management is the one that can meet the quality of the end product demanded by your client. Along with the quality, your project management tool should be able to meet the timeline and the budget. It should not give you any drawbacks, troubles and hassles but instead convenience and satisfaction.

Benefits of Efficient Project Management

Having efficient project management can give you, your employees and your business several benefits. With the best choice of project management you are able to execute projects according to the specific needs of your clients. Meeting the needs of your users indeed satisfy them which in return can develop trust and loyalty.
Keeping your clients with you allow you to do more projects with them which can bring profits to your business. Increasing your income let you expand your business by which is one of the descriptions of a successful company.
Efficient project management help your clients to achieve their requirements with no delays and lesser effort. While your employees are guaranteed to have continuous working hours and in fact might require you to hire for more workers because of the continuous growth of your business.

15
Dec 2011
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Scope Management

SCOPE MANAGEMENT

by Steven Macdessi

WHAT IS MEANT BY THE TERM “SCOPE”?

“ALL THAT NEEDS TO BE INCLUDED IN THE WORKS TO SUCCESSFULLY COMPLETE THE BUILDING OR STRUCTURE”.

All the relevant information necessary to produce a satisfactory outcome (building/structure)

“SCOPE” is also often referred to as “THE EXTENT OF WORKS.”
If the works can’t be identified how can they be managed and therefore completed?

HOW IS THE SCOPE OF WORKS ASSCERTAINED?

The Scope or extent of works can be either “expressed” or “implied”.

Expressed:    Specifically written (or drawn) details.

For example:
Specification
Drawings
Invitations to tender (tender documents),
Tender /quotation submission,
Acceptance / agreement / contract,
Requests for information (RFI)
Variations
Provisional Sum/Prime Cost Advice Notes
Manufacturer’s Instructions/Manuals etc.
Client formal instructions

Implied:
Acts of Parliament (State & Federal),
Law (Adjoining owners, Public Liability)
B.C.A. (Fire Safety, Health and Amenity).
Council Requirements;
Development Approval.
Building Consent (Construction Certificate)
Australian Standards
OH&R Regulations

It is difficult at times to identify accurately all of the work necessary. Therefore managing scope can be often complicated. “Scope Management” involves the effective managing of the initial project information as well as any changes to the design &/or contract which occur during the progress of the works. It necessitates an understanding of planning how scope is to be identified then managed.

Scope management incorporates highlighting the extent of the works and relating that detail effectively to all those likely to effect the desired outcome. It requires the establishment of systems, processes and procedures that can identify changes to the scope and then be able to effectively relay those changes onto all of the parties who need to know and/or are affected by such changes. It involves ensuring everyone involved is acutely aware of the initial scope and any subsequent changes. Scope Management is essential to the attainment “quality”.

SCOPE MANAGEMENT 
This is concerned with defining the project, its purpose and objectives, and identifying all the relevant work to be accomplished so that the project can be successful.

The major processes of scope management are:-
1.    Collect Requirements
2.    Define Scope
3.    Create WBS
4.    Scope Verification,
5.    Scope Change Control.

1. COLLECT REQUIREMENTS
Collect requirements is the process of defining and documenting stakeholders’ (eg clients) needs to meet the project objectives.

The project’s success is directly influenced by the care taken in capturing and managing project and product requirements.

Depending on the stage of the project, project objectives can be included in concept drawings, DA drawings, benchmarks, etc.

2. DEFINE SCOPE
This is the process of developing a written scope statement as the basis of future project decisions including, in particular, the criteria used to determine if the project or phase (stage) has been completed satisfactorily.
The importance of defining the scope is to:-
a)    Define the boundary of the works and confirm common understanding among stakeholders,
b)    Form the basis of agreement between the client and the contractor by identifying both the project objectives and the major deliverables,
c)    Be a guide and constraint for the configuration management process influencing change control.

A written “Scope Statement” is used to briefly identify the wprks to be carried out. It is a concise, yet complete, description of the works.

The “Scope Statement” should include reference to:
type of construction (form of structure),
size (area, levels, length, rooms)
location (if applicable),
particular materials,
specialized building systems,
standard of finishes,
unique characteristics.

An experienced construction professional should be almost able to draw the project in his head from the statement provided. A commonly used scope statement between the Client and the Builder is the “Principal’s Project Requirements” (PPR) which forms part of the building contract.

3. CREATE WORK BREAKDOWN STRUCTURE
Create WBS is the process of outlining how the project will be built, by subdividing the major project deliverables and project work into smaller, more manageable components.

WBS will identify each trade that is required for the project and the works they are required to carry out.

4. SCOPE VERIFICATION
The process of formalizing acceptance of the project scope by the client and stakeholders.

The scope of work should be formally verified at the end of each phase of a project.
From a builder’s point of view it should definitely be verified at the time of tendering, at the time of endorsing the contract, when works commence and of course during the construction stage where variations may have occurred.

Scope can be verified by way of inspections such as measuring, examining and certification to determine whether the work meets the requirements defined in the scope.

5. SCOPE CHANGE CONTROL
All projects are subjected to changes during their life cycle. “Scope Change Control” is the process of identifying and managing change to the building works during the project’s duration.

Scope Change Control involves:-
a)    Influencing the factors, which create scope changes, to ensure that changes are ultimately beneficial to the project,
b)    Determining that a scope change has occurred,
c)    Managing the actual changes when and if they occur

Variations (changes to the scope)
Changes or “Variations” are a generally accepted occurrence in the construction industry and most standard forms of building agreement cater for changes to the scope. Such changes however need to be managed in accordance with that contract.

One essential feature of a Scope Management System is the early recognition that the scope of the works will invariably change during the duration of any contract and it is the function of the Scope Management System to identify, record, initiate and monitor the variations to the initial scope.

References

PMI (2008), A Guide to the Project Management Body of Knowledge (PMBOK Guide), 4th Ed, Project Management Institute, Newtown Square, PA.

23
Jun 2011
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The Variety of Project Management Methodologies

By Steven Macdessi

The entire process of project management includes different steps, principles and strategies by which must be taken into consideration even the smallest detail that is integrated. Projects may vary from scope, objectives, goals and procedures to another project. The use of project management methodologies then may also be different from one project to another.

You can make use of the different project management methodologies which best suits your project. For your project management methodologies to be effective, you should know first what they are exactly. The following are the different project management methodologies that you can use with some of their details.

1. Traditional Project Management Methodologies.

This type of project management approach includes sequence of steps that need to be completed. These steps are the initiation stage, planning or design stage, execution or production stage, monitoring or controlling system and project completion stage. These procedures may differ or the steps may not be the way as it follows because of certain reasons. Some may repeat one step for several times depending on how the project will be able to make use of this project management methodology.

2. Critical Chain Project Management.

The resources are what this project management methodology put emphasis to. This method plans and manages the project with the goal to increase the rate of throughput of projects. This project management methodology uses the Theory of Constraints wherein the system constraints are the resources. Before the critical chain will start the resources must be ready so as to achieve the best possible outcome.

3. Extreme Project Management Methodology.

If your project seems to be very complex and uncertain then this project management methodology is the best that you can use. The human side of the project is the main focus of extreme project management methodology or others may call the XPM (Extreme Project Management). Utilising this will allow you to find ways on how to deal with the complexities of human collaboration so as to bring success to your project.

4. Event Chain Methodology.

Dealing with uncertainties of the project can greatly affect the outcome so when you doubt your abilities to overcome such then this project management methodology can be the best. Event chain methodology focuses on identifying and managing events which can affect the project schedules.

5. Process-based Management.

The process-bases project management methodology is oriented towards attaining a vision to guide the organisation rather than any activity or task. The vision may deal with the strategy and the structure, budgets, incentives or costs of the project. As the name implies the process will be the basis of the decisions to be made as the project is existing.

These are some of the project management methodologies that you can used to achieve better outcome of your project. Your choice may depend on what the situation or project may call. The type of project management methodologies may vary from one project to person and to business. Make sure that you choose the best project management methodology for you to be able to gain success.

02
Aug 2010
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What is in a Quality Assurance Plan?

If you’ve been in business long enough, you’ve most likely already heard about setting up a quality assurance plan. A lot of businesses, big and small, already have theirs in place. If you don’t have one yet, you might want to get started creating one.

The term is already an obvious giveaway to its definition. It implies the company’s thrust towards planning to produce and deliver products that are so good and effective that customers will almost always be satisfied. The individuals therefore who are assured are the ones who pay for what you sell.

Assuring customer satisfaction is therefore a relevant concept here. This is why you should also want to know why it is important. When you have a good quality assurance system that promotes satisfaction, you ensure the continued existence of your business. The more satisfied customers are, the more they’ll keep coming back to you. That means more income for years to come.

To make sure that you will always be able to churn out good products, you need to make sure that your plans are organized. The first step that you would always have to tackle in system creation is the identification of objectives. These should always be in line with customer needs and wants. You can get ideas of these through actual feedback.

Once you know what you need to concretely accomplish in a quality assurance program, the next step is to define roles and responsibilities. This simply means putting on the table who is in charge of what. All members of your team should be encouraged to ask questions to promote a thorough understanding of what is expected of them and what needs to be done.

The next step in planning is to create a structure or outline for coordination. Companies typically have several teams in charge of various standards and general responsibilities. It is a must for the team in charge of assuring product value to make sure that its system components and actions are in harmony with those of others. Otherwise, some points might contradict and make the accomplishment of objectives difficult.

Quality assurance plan task and schedule definition is the final planning step. This involves outlining what specific tasks need to be done and accomplished within a set time frame. This wraps up the brainstorming component in a comprehensive program and is followed by the phases that cover implementation, checking and action.

A good solid system actually does more than make customers happy. Companies can use their programs to their greater advantage to achieve ISO certification. Getting certified is an optional move for companies but you might want to apply for this to enjoy more benefits. It is generally known that certified companies are regarded even more highly by customers, business partners and other companies because of their having met international standards.

There is no doubt that you only stand to benefit from planning for a quality assurance system. Consistently providing good products or services is the only way you can convince customers that you are worth sticking it out with…

07
Jul 2010
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Cost Overrun

Cost overrun is defined as excess of actual cost over budget. Cost overrun is caused by cost underestimation and is sometimes called “cost escalation,” “cost increase,” or “budget overrun”. However, cost escalation and increases do not necessarily result in cost overruns if cost escalation is included in the budget.

Cost overrun is common in infrastructure, building, and technology projects. One of the most comprehensive studies  of cost overrun that exists found that 9 out of 10 projects had overrun, overruns of 50 to 100 percent were common, overrun was found in each of 20 nations and five continents covered by the study, and overrun had been constant for the 70 years for which data were available. For IT projects, an industry study by the Standish Group (2004) found that average cost overrun was 43 percent, 71 percent of projects were over budget, over time, and under scope, and total waste was estimated at US$55 billion per year in the US alone.

Spectacular examples of cost overrun are the Sydney Opera House with 1,400 percent, and the Concorde supersonic aeroplane with 1,100 percent. The cost overrun of Boston’s Big Dig was 275 percent, or US$11 billion. The cost overrun for the Channel tunnel between the UK and France was 80 percent for construction costs and 140 percent for financing costs.

Three types of explanation of cost overrun exist: technical, psychological, and political-economic. Technical explanations account for cost overrun in terms of imperfect forecasting techniques, inadequate data, etc. Psychological explanations account for overrun in terms of optimism bias with forecasters. Finally, political-economic explanations see overrun as the result of strategic misrepresentation of scope and/or budgets.

All of the explanations above can be considered a form of risk. A project’s budgeted costs should always include cost contingency funds to cover risks (other than scope changes imposed on the project). As has been shown in cost engineering research, poor risk analysis and contingency estimating practices account for many project cost overruns. Numerous studies have found that the greatest cause of cost growth was poorly defined scope at the time that the budget was established. The cost growth (overrun of budget before cost contingency is added) can be predicted by rating the extent of scope definition, even on complex projects with new technology.

Cost overrun is typically calculated in one of two ways. Either as a percentage, namely actual cost minus budgeted cost, in percent of budgeted cost. Or as a ratio, viz. actual cost divided by budgeted cost. For example, if the budget for building a new bridge was $100 million and the actual cost was $150 million then the cost overrun may be expressed as 50 percent or by the ratio 1.5.

05
Jul 2010
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Steps To Determine Project Success and Failure

Success is something that is desired by any business and company since they started. You’ve heard a lot of different stories on how they achieve success. One of the ways is to start with the specific by achieving project success. The project success and failure can be influenced by different factors. There are specific processes by which you can achieve project success and they can be availed from the experts. The common connotation that the bigger the project the chance of failing it is also bigger can be partly true since there are lots of responsibilities that you need to accomplish. But you can make use of this as a motivation in proving them wrong through the use of the important determinants of project success and failure.

The success and failure of your project can be determined by different criteria. The following are some of the steps that can determine the project success and failure.

1. Find out the scope of the project.

Scope is simply the works needed to complete the project. To ascertain the scope, you need to either express it by writing it or imply it. Managing the scope is a critical task since in determining project success and failure because you cannot identify all of the necessary tasks.

2. Collection of requirements.

 

This particular step is actually falls under the scope management and including the others that will follow. They are enumerated individually since they contribute specifically to the project success and failure. This step includes the act of ascertaining the needs of the stakeholder or the client. Collecting the requirements in well manner can directly influence the success and failure of the project.

3. Come up with Work Breakdown Structure.

Work breakdown structure is bringing the whole project into specifics. It includes the outline of the plan on how the project will be put up and determining the smaller parts of it. Like for an instance, dividing the deliverables and other small components comprises the work breakdown structure. Doing this right or not can also affect the project success and failure.

4. Verifying the scope.

Since you know the definition of scope and its importance, it is just to consider if it is accepted by the client. There are many ways to verify the scope of the project including at the time of presenting the contract, during the construction and after it has been built. Scope verification is an essential factor that can contribute greatly to the project success and failure.

These are some of the many determinants of project success and failure. And these are proven by experts as reliable steps in carrying out a project. You can have these and many of them can be found from the vast of online sites. Project success and failure is certainly influenced by many factors, steps, processes, etc. But the most important thing is that you are aware of them and you can make use of them to help you out in figuring out the project success and failure.

05
Jul 2010
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