Investigation of Project Risk Management: A Comprehensive Report

This report delves into the critical knowledge area of project risk management, exploring its significance in achieving successful project outcomes. The report begins with an introduction to project risk management and its importance, followed by an in-depth analysis of the risk management process, including risk identification, analysis (qualitative and quantitative), and response planning. The report highlights the interdependencies between project risk management and other PMBOK knowledge areas, demonstrating how effective risk management contributes to the overall project framework. A detailed case study of the Sydney Opera House construction project is used to illustrate the consequences of inadequate risk management. The report also examines the crucial role of the project manager in implementing project risk management, emphasizing the necessary skills, attributes, and competencies for effective leadership. The report concludes by summarizing the key findings and reinforcing the importance of project risk management for project success.

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Table of Contents
Introduction................................................................................................................................3
Risk Management of project and its importance........................................................................3
Risk Management of project for Successful completion of Project & Inter-dependencies with
other Knowledge Areas..............................................................................................................5
Role of Project Manager to Implement correct Risk Management of project...........................7
Conclusion..................................................................................................................................8
References..................................................................................................................................8
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Introduction
The (PMBoK) project management body of knowledge has explained that the overall project
can be divided into 10 major knowledge areas. Out of the 10 areas, 'risk management of
project' shall be discussed in this document. The working of every step of the risk
management of project shall be discussed with developing the interlinkages between the risk
management of project and other knowledge areas of PMBoK. The report will discuss the
successful implementation of risk management of project and its importance for completing
the project succcessfully. The case study which is selected to discussed with respect to the
risk management is the famously failed project in Australia. The project is the Sydney Opera
House construction. Jørn Utzon was the project manager for the project and the overall cost
to complete has been $102 Million in place of only $7 Million. It took around 14 years
duration to complete in the place of a scheduled duration of 4 years (Flyvbjerg, Garbuio &
Lovallo, 2009). Therefore, the project is selected so that the problems occurred in this project
can be considered as learning and are reflected in this report with respect with the risk
management knowledge area. Finally, the project manager and the level of skill shall also be
discussed as a part of this assignment.
Risk Management of project and its importance
Project risk management is performed to address various types of uncertainty present in the
project. All the variables are identified in a single sheet of paper which is called risk register.
As per the risk management methodology of project management, all the risks identified in
the registered are analysed to obtain the ranking. The ranks are provided according to the
importance of having severity of impact and the chances of occurring the risk (PMI, 2013).
Accordingly, additional cost and time are also allocated to each and every high rank risk.
This concept of managing the risk provides information to the management or the sponsor of
the project for making the necessary supports ready to address the risk. The supports are the
additional requirement of time and the additional fund requirement. These requirements are
also termed as management reserves which are not implemented in the working budgeted
schedule but are kept aside as a part of contingency reserve to address the risk if at all they
happen. All the figures can be obtained by conducting the qualitative and quantitative
analysis and at the same time developing the appropriate mitigation plan.
The risk can be divided into two major factors which can impact this project. The two factors
are the negative factor which is also called as threat and the positive factor which is called as
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opportunities. In the current project scenario, both the type of risks is required to be analysed
to have the most effective mitigation plan (Muriana & Vizzini, 2017). All the negative risks
are required to be identified so that the management reserve or the contingency reserve can
be planned right at the beginning of the project and at the same time the opportunities should
also be identified. The identification of opportunity provides flexibility with the project
manager to have a reduction in the management reserve and fund arrangement by the
sponsor. By enhancing or exploiting the opportunity the project can be made more beneficial
for the customer and helps in delivering better satisfaction to the stakeholders. The risk
analysis can be performed by using the graphical representation of the possibility of
Figure 1: Risk Matrix Sample
Source: (O'Carroll, 2014)
the impact’s occurrence and severity. This graphical representation of risk factors can provide
the level of serious action that is required to be taken to address the risk.
To sustain any business the profitability is required to be maintained and so different angles
of the project are required to be analysed from the risk point of view. There can be resource
related risk, or there can be technical, business related, economic or financial, the political
issues, the environmental issues and so on (Junkes, Tereso & Afonso, 2015) (Porananond &
Thawesaengskulthai, 2014). Therefore, it is understood that the probability of having
successful completion of a project can be increased by using the appropriate risk management
methodology. Overall performance and the cost performance along with schedule
performances can be improved by using this knowledge area of PMBoK (Hwang, Zhao &
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Toh, 2014). From this one thing could be made clear that unless and until the risk
identification and its analysis are performed properly, the outcome cannot be maintained with
a proper result. Therefore, the appropriate techniques like the brainstorming and use of
Delphi technique along with expert review can be used for obtaining the most applicable
response (Cagliano, Grimaldi & Rafele, 2014). This can help in managing the properly
properly and reducing the level of complexity present in the current project scenario
(Carvalho & Rabechini, 2014).
Project Risk Management for Successful completion of Project &
Inter-dependencies with other Knowledge Areas
There are total of 10 numbers of knowledge areas shown in the PMBoK including the project
risk management. All the knowledge areas of PMBoK are interlinked with each other and
develop the overall framework for managing the project properly. All the interlinking
between risk management and rest 9 knowledge areas are presented below:
i. For the execution of project risk management, the beginning stage is the development
of the plan for risk management. For executing the first step, the input requirement is
the plan for project management and the charter of project. These two inputs can be
obtained from the knowledge area of integration management of PMBoK.
ii. The second step of risk management framework development process is the
identification of risk (Yamami, Ahriz, Mansouri, Qbadou & Illousamen, 2017). For
executing the second stage ‘identify the risk’, the procurement documentation is
required along with project documents. The procurement documentation can be
obtained from the knowledge area of ‘project procurement management’. The output
of the planning of procurement management will be required for the identification of
risk.
iii. The third step of risk management is to perform the qualitative analysis of all the
identified risk in the risk register. For conducting the qualitative risk analysis, the
expert judgment and brainstorming are required to be performed to identify the
probability and impact scale (Arashpour, Abbasi, Arashpour, Reza & Yang, 2017).
The tools of data gathering and its analysis for the risk categorization can be obtained
by using the appropriate stakeholder management plan. The project stakeholder
management knowledge area will provide the stakeholder engagement plan and so
accordingly they can be engaged in this process of developing risk management and
qualitative analysis of the same.
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iv. The fourth stage of risk management involves the quantitative analysis of the
identified risks. This process is similar to the earlier step. The quantitative analysis
can be performed by involving multiple stakeholders according to the communication
management plan (Crnković & Vukomanović, 2016). The communication
management knowledge area can be used to identify the communication management
plan and accordingly the stakeholders should be involved.
v. The fifth stage is the planning of the responses according to the result of qualitative
and quantitative analysis of each risk. The risk response is developed to have the
contingency reserve in the project to address each identified risk. Therefore, the
output of this process will have the update in the plan of project management which is
interlinked with the knowledge area of integration management and the update of the
project document will be performed with respect to schedule management, scope
management, cost management, and the quality management. The risk update is also
required to have the cushion with the resources, and so, is interlinked with the project
resource management knowledge area.
vi. Finally, the risk responses shall be implemented and monitored throughout the project
life cycle. During this process, it will have interlinkages with the other knowledge
areas as discussed above to deliver the project successfully.
The selected case study project was missing the use of risk management knowledge area
throughout the project life cycle. As because during the planning stage of project, the
necessity of developing the plan of risk management is very much important which was
missed by Jørn Utzon (the Project Manager) so the project has got failed. This responsibility
belongs to project manager for developing the risk management plan. There were multiple
risks present with the case study project related to the non-availability of drawing, time
schedule, and cost estimate in detail. The non-availability of details can also be considered as
one of the risks because the project team has to assume several data for the project which
may not works correctly for the project and become a negative risk (Adafin, Rotimi &
Wilkinson, 2016). Exactly the same has happened in this project where due to the non-
availability of information, the project risk has got increased. Due to the non-availability of
information regarding the exact scope of work the sponsor that is NSW government has kept
on adding the scope of the project while the project was in progress. The sponsor has added 2
more theatres in the project which has increased the scope and so the time and cost. All these
kinds of risk were present in the project which was nor documented by the project manager
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and neither communicated and so the identification of risk has also not been performed
properly. Now once the identification is not done, then the question of doing the quantitative
and the qualitative analysis of the risk automatically does not apply with the project. As a
result, the risk response plan could not be developed by the team members of project. The
contingency reserve could not be advised by the project manager and so the issues also could
not be addressed during the planning stage. It has resulted in the subsequent addition of a
scope and further addition of time and cost without the knowledge of the stakeholder. As it is
discussed above, that risk management plan is interlinked with all other 9 knowledge areas,
and so, because of the absence of the risk management of project in the case study project, it
has affected other 9 knowledge areas of that project. It is because the risk management was
not conducted, so the constraint over the scope, time, cost, and quality could not be
maintained properly. Even communication management was also could not be performed
properly. Therefore, from this, we can understand that the risk management of the project is
very much important to make any project successful.
Duty of Project Manager to implement correct Project Risk
Management
The project manager should possess various qualities to implement the framework of project
risk management properly in project. Because implementing project risk management
properly can help in completing the project successfully. The successful completion of the
project will depend on various qualities of project manager and the availability of various
skills. The project manager should have clarity of communication and possess the quality to
communicate with all the stakeholders throughout the life cycle of project (Anantatmula,
2010). A project manager should also possess the quality of defining roles and
responsibilities and provide the expectations to all to complete the project activities as per
plan. And project manager should also be able to establish trust and provide support to
manage the project outcome result. The risk management also requires the identification of
risk and analysing them qualitatively and quantitatively. During this process, the high
requirement of communication with all the stakeholders is very much necessary. The quality
to handover the project properly can be obtained by having these skills which can also help to
implement the risk management of project properly. The project manager should
continuously communicate with all the stakeholders throughout the project lifecycle for
informing about the project schedule, budget, scope, resources, and risk status (Devi, 2013).
The communication should happen related to the use of all these parameters and the
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expectation to complete to keep the stakeholders satisfied throughout the project life cycle
(Al-Hajj & Zraunig, 2018). The project manager should possess the skill of communication
and management of the risk as per the risk response plan until the project is getting closed.
Conclusion
From the above discussion on the risk management knowledge area of PMBoK, it is
concluded that without the use of this knowledge area, the project cannot be completed
successfully. Therefore, the project manager should possess all the skill and knowledge
related to this knowledge area. The risk should always be analysed properly throughout the
project life cycle and controlled so that it does not have any negative impact on the project
and help in identifying the probable cause of the project delay and overrun. The continuous
identification of risk and threats by the use of 'identification of risk' procedure, and analysing
the qualitative and quantitative factor, the risk can be measured properly. The risk response
plan should be developed along with the contingency reserves so that it can take care of all
the risk if at all they occur during the project lifecycle. The project manager should
communicate every step of risk management with all the stakeholders throughout the project
so that the stakeholders can be kept engaged and satisfied. The project manager should
understand the process of risk management and implement in project to successfully
complete, unlike the case study project where the project has got tremendously delayed and
cost overrun due to the non-use of the risk management process.
References
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Cagliano, A. C., Grimaldi, S. & Rafele, C., 2014. Choosing project risk management
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Carvalho, M. M. D. & Rabechini, R. J., 2014. Impact of risk management on project
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