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The brief will describe how to develop a risk analysis applied to a project , through a sequence of steps: risk management planning, risk identification, risk classification, risk assessment, risk quantification, risk response planning, risk monitoring and control, process close out and lessons learning. The project risk analysis and management process will be applied to large engineering projects, in particular related to the oil and gas industry. The brief will address the overall range of possible events affecting the project moving from certainty (project issues) through uncertainty (project risks) to unpredictability (unforeseeable events), considering both negative and positive events. Some quantitative techniques (simulation, event tree, Bayesian inference, etc.) will be used to develop risk quantification. The brief addresses a typical subject in the area of project management, with reference to large engineering projects concerning the realization of large plants and infrastructures. These projects are characterized by a high level of change, uncertainty, complexity and ambiguity. The brief represents an extension of the material developed for the course Project Risk Analysis and Management of the Master in Strategic Project Management (Erasmus Mundus) developed jointly by Politecnico di Milano, Heriot Watt University (Edimburgh) and Umea (Sweden). The brief may be used both in courses addressing project management subjects and by practitioners as a guide for developing an effective project risk management plan.

Inhaltsverzeichnis

Frontmatter

Chapter 1. Introduction

Abstract
In Large Engineering Projects (LEPs), for instance those developed in the oil and gas industry, project effectiveness is a composite measure, combining economic performance, technical functionality, social acceptability, environmental sustainability, political legitimacy and economic development. Such projects need large capital investment, have long time horizons and often use non-standard technology.
Franco Caron

Chapter 2. Large Engineering Projects Strategy

Abstract
The project execution strategy of LEPs involves choices about issues such as partnership, outsourcing, modularity, etc. Projects must interact with their complex and uncertain environment and adapt their execution strategy to the ongoing changes. As a consequence, LEPs cannot be defined once and for all, rather they are shaped progressively from the initial concept by the dialectical interaction of stakeholders.
Franco Caron

Chapter 3. Large Engineering Projects: The Oil and Gas Case

Abstract
Oil and gas projects are often indivisible investments, irreversibly set in a location for a specific use. Moreover, such projects require large capital investment and have long time horizons, involving as a consequence a high level of uncertainty.
Franco Caron

Chapter 4. Project Management

Abstract
Traditional Project Management represents an organized way of dealing with the typical challenges stemming from uncertainty and complexity.
Franco Caron

Chapter 5. Improving the Forecasting Process in Project Control

Abstract
Among the typical project management processes, planning plays a decisive role in reducing a project’s uncertainty. Project planning may be thought of as resulting from the interaction of the project team with the project and the project context.
Franco Caron

Chapter 6. Robustness and Flexibility

Abstract
The traditional approach to Project Management focuses on the stability of the project plan as a critical success factor. However the increasing level of complexity and uncertainty in the business context requires a high level of adaptability to changes.
Franco Caron

Chapter 7. Project Risk Analysis and Management

Abstract
Focusing on a project’s robustness, Project Risk Analysis and Management represents a typical proactive approach dealing with anticipated favorable/unfavorable events (see Chapters 11, 12, 13, 14).
Franco Caron

Chapter 8. Real Options

Abstract
Contrary to the traditional system engineering approach, which optimizes a fixed design based on a set of fixed specifications, once the system and its objectives are defined, the Real Option approach recognizes that changes are inevitable over time and purposefully introduces flexibility into the project in order to address them.
Franco Caron

Chapter 9. Stakeholders as Uncertainty Sources

Abstract
LEPs are not defined once and for all, rather they are shaped progressively from an initial concept by the dialectical interaction of stakeholders (Arrto et al. 2008; Miller and Lessard 2001), and hence specific attention should be devoted by management to the attitude of the various stakeholders. It should also be noted that the dialectical interaction of the stakeholders may generate unpredictable consequences (Cooke-Davies et al. 2007) and changes of stakeholders’ interests may result in the re-planning of the project (Soderholm 2008).
Franco Caron

Chapter 10. Project Organizational Model

Abstract
In particular, the degree of responsiveness of the project to unexpected events reflects the critical role played by the human factor in terms of adaptability to new game rules compared to the project outset, ability to interpret the emerging situation and to generate and implement a suitable response strategy (Saynisch 2010). It should be noted that in this case the project requires re-planning and learning instead of just triggering preplanned contingency responses as in Project Risk Management (Pitch et al. 2002). In this perspective, a project organizational model should focus on several points:
Franco Caron

Chapter 11. Introduction to Project Risk

Abstract
All projects are risky ventures since they are unique and temporary undertakings based on assumptions about the future, affected by risks and subject to the influence of multiple stakeholders.
Franco Caron

Chapter 12. Project Risk Analysis

Abstract
Project Risk Analysis sets out to answer at the early stage of the project such questions as: what can go wrong? how can it happen? how likely is it to happen? what are the potential consequences if it does happen? In the succeeding phase risk management tries to answer such questions as: what can we do to respond to risks? what should we do? What should be the results of our actions?
Franco Caron

Chapter 13. Project Risk Management

Abstract
The process of project risk management aims at implementing suitable response actions for each single major risk that has been identified. To do this, we need a systematic approach to provide a comprehensive set of effective actions otherwise we will only be able to rely on the experience and imaginative capacity of the risk owner.
Franco Caron

Chapter 14. Quantitative Analysis of Project Risks

Abstract
Whilst the Risk Assessment process focuses on each single major risk and aims to identify suitable response actions, the Risk Quantification process provides insights into the joint impact of the overall uncertainty—both risk events and parameter variability—on the project. The focus moves from the single risk to the overall riskiness of the project.
Franco Caron

Chapter 15. Conclusions

Abstract
Large Engineering Projects (LEPs) are typical examples of complex projects. Such projects need large capital investment, have long time horizons and often use non-standard technology. Moreover, they are characterized by a large number of stakeholders involved in the decision making process. For instance, for those developed in the oil and gas industry, project effectiveness is a complex measure, entailing economic performance, technical functionality, social acceptability, environmental sustainability, political legitimacy and economic development.
Franco Caron

Backmatter

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