Project Risk Management - MIT OpenCourseWare

ESD.36 System Project Management

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- Project Risk Management

Instructor(s) Prof. Olivier de Weck

Lecture 11

October 16, 2012

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Outline

Layers of Risk and Classical Risk Management Review: Project NPV, Value at Risk (VAR) Concept Example: Garage Case

- ESD.36J SPM

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Layers of Risk Classical Risk Management

- ESD.36J SPM

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- Projects entail many types of risks

Projects bring together many risks In energy (petroleum) field .....

Subsurface (e.g. Macondo well) Fiscal Market Technology Partner, contractor Project execution Operability

Project Manager authority and influence limited relative to set of risks that matter

Nature, degree of manageability and, therefore, desired mental model , differs by risk type, nature of outcome

- ESD.36J SPM

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Layers of Risk

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Market Risks

Country/Fiscal

? Commodity Prices

Industry/Competitive Technical/

? Exchange rates

? Political stability ? Interest rates

? Terrorism

? Risk premium

? Financial,

Project Risks

? Industry evolution

economic stability,

? Construction ? Operations ? Partner/ally ? Technical ? Project management

? Demand, growth rates ? Supply conditions ? Competition ? Infrastructure

inflation ? Regulatory stability

or intervention ? Contract

enforcement ? Legal stability

Natural Risks

? Geology ? Weather

High Influence

Context: Energy Industry

- ESD.36J SPM

Low Influence

Source: D. Lessard

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Risk Categories

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Technical Risk

Market/Threat Change

Programmatic Risk

Cost Risk

- ESD.36J SPM

Schedule Slips

Schedule Risk

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