Overview

After you have completed your project planning process and developed your project
management plan, you should have also set your appropriate project baselines. It is
then time to start executing your project plan. Project execution involves the
following tasks:

Figure 4.1 Project execution tasks

The execution phase in short entails performing the required tasks for the project, as
well as monitoring and controlling of this performance.

In addition, the project manager will also have to assemble the project team and
make sure they are well-prepared and well-equipped (with the right skillsets and right
resources) to implement the project.

In this unit, we will examine the topics of risk management as well as how to manage
time and resource constrained projects.

Projects are always confronted with obstacles and challenges that constitute project
risks.

Risk management attempts to recognise and manage potential and unexpected

obstacles that may occur when a project is implemented.

Hence, as a good manager, you will need to be able to identify, assess, track and
respond effectively to the various project risks that may be inherent in your project.

In order to manage a project efficiently, you will need to be able to develop a project
resource schedule in order to allocate the right amount of resources at the right time
to a project. Hence, this time-based budget will help form a budget baseline which
will help you ensure the proper tracking and monitoring of your project’s progress.

As you read the textbook, please also consider how you would answer the following
questions:

1. What is the risk management process?

 2. What are the different kinds of risk?
3. How do you develop a risk profile for a project?
4. How do you develop a robust risk assessment process?
5. What is a risk severity matrix?
6. What are the ways that you can respond to a risk?
7. What are the types of resource constraints?

Chapter 4: Project Execution

4.1 Managing Risks
Risk is inherent in all projects. However, the probability and impact posed by each
risk event changes over the project life cycle, as articulated in Figure 4.2:

Figure 4.2 Risk management challenge( Source: Larson & Gray, 2014)

It is with this intent that you, as a project manager, embark on a risk management
process. The risk management process is a proactive and preventive process
designed to help minimise the occurrences of risk events and the consequences
posed by the risk event in the event it happens.

Project risks can/cannot be eliminated if the project is carefully planned. Explain.

Suggested Answer
The risk management process comprises the following components:

Step 1 risk identification – analyse the project to identify sources of risk

Step 2 risk assessment – assess risks in term of severity of impact – likelihood of

occurring controllability

Step 3 risk response development – develop a strategy to reduce possible damage –

develop contingency plans

Step 4 risk reposne control – implement risk strategy – monitor and adjust plan for
the new risk – change management

4.1.1 Risk Identification

Risk identification is the first step of the risk management process. In order to do
this, you will have to form a risk management team comprising the project team
members as well as the relevant project stakeholders. Each member of the risk
management team should be able to make accurate judgement on risks based on
his or her experience and expertise.

One key point to note is that the risk identification process should focus on events
that can produce a negative consequence or impact to the project (and not on the
project objectives). Also, the process should look at risk events that will affect the
whole project rather than a specific segment of a project.

A risk profile is a useful tool which includes a list of questions that address traditional
areas of uncertainly on a project. In this case, a risk profile is a set of questions
developed and refined from previous similar projects that helps a project manager
identify and categorise potential risk events in the current project. An example of a
risk profile for a product development project is shown below in Table 4.1:

Table 4.1 Risk profile Quality

Technical requirements Are quality considerations built into the

design?
Are the requirements stable?

Design Management
 Does the design depend on unrealistic or Do people know who has authority for
optimistic assumptions? what?

Testing Work Environment

Will testing equipment be available when Do people work cooperatively across

needed? functional boundaries?

Development Staffing

Is the development process supported by a Is staff inexperienced or understaffed?

compatible set of procedures, methods, and
tools?

Schedule Customer

Is the schedule dependent upon the completion Does the customer understand what it
of other projects? will take to complete the project?

Budget Contractors

How reliable are the cost estimates? Are there any ambiguities in contractor
task definitions?

(Source: Larson & Gray, 2014)

4.1.2 Risk Assessment

After you have completed a systematic process of risk identification, the next step
you will take would be to assess the risks. You will need to develop ways to evaluate
and prioritise the list of risk events that you should pay attention to. This process of
the risk management is known as risk assessment. The dimensions of risk
assessment occur in two manners, namely: likelihood of probability – impact or
severity

To ensure a robust risk assessment process, you will need to define different levels
of risk probabilities and impacts. You can apply this to the key areas of scope, time,
cost and performance/quality in order to create a scale of application.
 Table 4.2 An 1 2 3 4 5
example that Very Low Low Moderate High Very High
illustrates
defined
conditions for
impact scales
of a risk

Project
Objective

Cost Insignificant < 10% cost 10-20% 20-40% cost >40% cost
increase cost increase increase
increase

Time Insignificant < 5% time 5-10% time 10-20% time >20% time
increase increase increase increase

Scope Insignificant Minor areas Major areas Scope Project end

affected affected reduction item is
unacceptable effectively
to sponsor useless

Quality Insignificant Only very Quality Quality Project end

demanding reduction reduction item is
applications requires unacceptable effectively
are affected sponsor to sponsor useless
approval

(Source: Larson & Gray, 2014)

When determining the probability and impact of a risk event, you and your team
should assess how difficult it would be to detect that the risk event is going to occur.
This is in addition to both the probability and impact of the risk event. In order to do
so, you can use a risk severity matrix, which is a risk heat-map that allows you to
classify risk events based on their probability and impacts. This will allow you to have
a clear visualisation of where you should devote your risk response actions to.
Figure 4.5 A risk severity matrix with a corresponding risk response measure(Source: Stuart G
Hamilton / Wikimedia Commons / CC-BY-SA-3.0)

A general rule of thumb with regard to risk response measures to the risk severity
matrix would be summarised in Table 4.3 below. You would want to focus on risk
events that will have a high probability or likelihood of occurring and pose a severe
impact to your project. These risk events will form the top priority of your focus. On
the other hand, risk events with low likelihoods and consequences should not be
ignored, but you can place them on a lower priority and maintain a periodic
monitoring on them.

Table 4.3 Risk response table with Likelihood Response Actions

response actions

Consequence

High High Proactive response to continuously

review

High Low Continuous monitoring in case risk

likelihood increases
 Table 4.3 Risk response table with Likelihood Response Actions
response actions

Consequence

Low High Periodic review to ensure that the risk

impact remains low

Low Low Generally low risk; periodic monitoring

It is important to note that no assessment scheme is absolutely fool-proof. Hence,

you will need to learn to adapt the risk management process based on the nature
and characteristics of your project. Other forms of risk assessment techniques which
you can use but we will not cover in detail in this module include the following:

 FEMA or Failure mode and effects analysis – formula to compute a

risk event to generate a risk value.

 Decision trees – used to assess alternative course of action using

expected values.

 Statistical variations of net present value (NPV) – to assess cash

flow risks in projects.

 Correlation between past projects’ cash flow and cumulative

project cost curve over the life of the project (S-curves) – to assess
cash flow risks.

 PERT or Programme evaluation and review technique – to review

activity and project risks.
Reflect 4.2

Probability or Severity? Which factor do you think is more important to you as a

project manager in your project planning and execution? Justify your answer with a
list of reasons.

4.1.3 Risk Response

When a risk has been identified and assessed, a response needs to be developed to
manage it. There are four main ways in which you can respond to risk:

 Mitigating risk – you decide to focus on reducing the risk using two
strategies:

o Reduce the likelihood that the event will occur

o Reduce the impact of the risk even should it occur

 Avoiding risk – you decide to change the project plan to eliminate the
risk event altogether.

 Transferring risk – you decide to pass the risk to another party, often
through outsourcing certain parts of the project or through purchasing
insurance.

 Accepting risk – you make a conscious decision to accept the risk of

the event occurring (e.g. an earthquake or a flood).

Figure 4.6 Risk response(Source: Nrijal stha / Wikimedia Commons / CC-BY-SA-3.0)

There is actually a fifth method to respond to risk, which is to develop a contingency

plan. You can create a contingency plan to respond to the risk in the event that it
happens. The contingency plan defines the actions of your project team to reduce or
mitigate the negative impact of the risk event. The key difference between a risk
response and a contingency plan is that a response is part of the actual
implementation and action that is undertaken before the risk can materialise, while a
contingency plan is not part of the initial implementation plan and only comes into
effect after the risk is materialised.

4.1.4 Risk Response Control

The fourth and last step of the risk management process is the risk response control.
Here, you will develop a risk register to capture all the identified risks and its
associated information such as descriptions, category, likelihood of occurrence,
impacts, responses, contingency plans, risk owners as well as the current status.
Also known as a risk log, a risk register typically resembles the following:

 Description of the identified risks

 The root causes of the risk

 The probability should this risk even occur

 The potential responses

 The response owner or owners

 The risk category

 The assigned priority

Table 4.4 shows a typical risk register developed for a landscape project.

Table 4.4 Risk register for a landscaping

project

(Source: PM Exam Smart Notes)

 Activity 4.1

The Manchester United Soccer Tournament project team (Review Manchester

United case at the end of Chapter 4) has identified the following potential risks to
their project:

a. Referees failing to show up at designated games.

b. Fighting between teams.

c. Pivotal error committed by a referee that determines the outcome of a

game.

d. Abusive behaviour along the side-lines by parents.

e. Inadequate parking.

f. Not enough teams sign up for different age brackets.

g. Serious injury.

How would you recommend that they respond (i.e., avoid, accept,) to these risks and
why?

Suggested Answer

Lesson Recording
Developing a Project Risk matrix

4.2 Scheduling Resources and Costs

The project resource schedule is a schedule that takes into consideration the
availability of resources to implement the project activities. This is important as the
non-availability of the right amount of resources at the right time will potentially delay
a project. With the development of a project resource schedule, you can then
compare between the time-phase budget and the actual project expenditure. The
figure below shows the process of project planning:

Figure 4.7 Project planning process(Source: Larson & Gray, 2014)

In this stage of the project planning process, you will need to address the following
questions:

 Will the assigned manpower as well as the equipment be adequate and

available to meet the project requirements?

 Will third-party contractors have to be used?

 Do unforeseen resource dependencies exist?

 How much flexibility do you have in using these resources?

 Is the original deadline still realistic?

Figure 4.8 Resource smoothing and resource-constrained scheduling

For both approaches, what you are doing is to consider the three areas of scope,
time and cost and determine how to better optimise resources and cost.

4.2.1 Types of Resource Constraints

There are three types of resource constraints which you will need to know:
  People – Human resources are usually classified by the skills they
bring to a project. Sometimes, the availability of a specialised skill is
crucial to the success of a project. At other times, some skills are general
enough to be interchangeable.

 Materials – Project materials that are needed for the implementation of

some project activities. This can include chemicals for a scientific project,
concrete for a road, etc.

 Equipment – Equipment is usually presented by type, size, and

quantity. This is the most often overlooked resource during project
implementation especially if an organisation owns the equipment.

Hence, a time-constrained project is one that must be completed by an imposed

date. Although time is critical here, the usage of resources should not be more than
what is necessary to get the job done.

A resource-constrained project is one that assumes that the level of resource

available cannot be exceeded. In this situation, you can explore ways to extend the
project duration by a little.

4.3 Resource Allocation Methods

To perform the scheduling process for time-constrained projects, you can
use levelling techniques. This is to minimise the fluctuation of resource demands
over the course of project implementation. However, please note that certain
resources such as manpower or human resources are not easily adjustable over
time.

To perform this scheduling process for a resource-constrained project, you will need
to prioritise and allocate resources to minimise project delay without exceeding the
resource limit or altering the technical network relationships. A parallel method can
be used to apply heuristics to the resource-constrained project.
 Reflect 4.3

How does resource scheduling reduce flexibility in managing projects?

Suggested Answer

4.4 Project Cost Baseline

A project cost baseline is an approved time-phased plan. Once you have developed
a detailed budget and have it approved, you should publish this baseline and set it
as a point of comparison for actual performance progress. The cost baseline has
several important components that need to be understood by the project manager
because each of these components is used in different ways. In some cases, the
project manager may not even use them at all. In contract work, for example, the use
of these components has a legal aspect that can cause serious problem for the
organisation if they are not used in accordance to standard accounting practices.

Table 4.5 Baseline cost example

(Source: Round Table Project Management

Blog, [Link]

Simply adding up all the partial earned values in Table 4.5, and dividing those by the
Baseline Project Cost can generate the Percentage Complete for the project. By
dividing the Actual Project Cost by the Baseline Project Cost, you can determine the
Percentage Budget Spent. These values will be useful not only to you as a project
manager but also to the customer.
 Baseline Cost = (Work * Standard Rate) + (Overtime Work * Overtime Rate) +
Resource per Use Cost + Task Fixed Cost

The importance of Earned Value is that when a project using it is 15% complete, one
can predict with 90% accuracy how much above or under budget it would be at
completion. Any discrepancy which you find at 15% project completion holds through
until the end of the project within 90% accuracy. This calculation has been proven by
auditing thousands of government projects, small to large, using earned value
calculations for decades

Risk assessment
What is project risk
What does risk assessment entail
How is risk assessment matrix developed
What could be some issues with interpreting the risk matrix

Developing risk matrix

Making a risk assessment is a second step in the process of risk
management
Follows the first step of filling up risk assessment form to determin the
potential risks
Risk is essentially cause and effect on defined scale
The components of risks usually manifests in two forms:
Hazard or harm
Hazrads represent the potential source of harmful event or cause
Harms are the resulting damages to products perosns and eniroment
effect

Likelihood and severity

When to quantify hazards and harm – most organisatiosn loko at two
metrics
Likelihood and sverity
Risk is likelihood x severity
Often third metric can also be used as detectability
Likelihood
Range form 5 -1
Frequent – hazard likely oto occur
Probably is hazard will be experienced
Occasional is some manifesttaions of the hazards are likfely to occur
Remote is manifestations of the hazard ar eposisbel but unlikely
Improbably is manifesttaions ofteh hazard are very unlikely
Severity
Catastophci likely to result in death
Critical is potential for sevre injury
Moderate is potential for moderate injurt
Minor is potential for minor injury
Negligible isno significant risk of injury

Risk assessment table

If you graph the scales you will arrive at numerical matrix
Which highlights the risk zones by the multiplied number on the axis
Green is low risks or generally acceptable risk zone
Red is high risk or generally unacceptable risk zone
Grey is the zone of subjectivity
Why grey zone is complicated
Grey zone is complicated
Some companies have to weight the cost veruss benefits on theses risks
without creating a disproportionate cost to risk