Vessel Design and Shipbuilding Management: Risk Management Plan

VESSEL DESIGN AND SHIPBUILDING MANAGEMENT

RISK MANAGEMENT

MANAGING THE DESIGN AND
MANUFACTURING OF VESSELS

FROM NOW ON, WE
WILL REFER TO ALL
OF OUR PROBLEMS
AS OPPORTUNITIES.

D
Dilbert.com DilbertCartoonist@gmail.com

ONE OF YOUR IDIOT
SPAWN WAS PLAYING
WITH THE OVEN AND
BURNED DOWN YOUR
HOUSE.

CAMPING
OPPORTUNITY?

9:24-09 02001 Scott Adams, Inc./Dist. by UFS, Inc.

DON'T CONFUSE RISK WITH ISSUE

• Risk is something that may occur, thus it has to be properly manage also in order to
  reduce the change of occurrence
  Issue has occurred, thus it has to be managed only in terms of impact
• Don't call risk something you are sure that is going to happen

RISKS AND UNCERTAINTIES

Risk is an uncertain event or condition that, if it occurs, has a positive or
negative effect on a project objective.

Risk is an uncertain event or set of circumstances that, should it occur,
will have an effect on the achievement of the projects objectives.

Effects or impacts are generally negative, but, sometimes, they can be
positive (referred to as opportunities).

Uncertainty is present throughout the Project Lyfe Cycle,
but particularly in:

• Variability associated with estimates
• Uncertainty about the basis of estimates
• Uncertainty about design and logistics
• Uncertainty about objectives and priorities
• Uncertainty about fundamental relationships between
  project parties

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TYPE OF RISKS

Project managers need to overcome various risks in order to ensure the success of their
projects. While some of these issues are unique to each work, there are common risks that
your team will encounter time and time again.

2. Costs
The bane of many a project manager
and PMO is to keep a lid on costs.
External factors like interest rates or
banking fees can be issues, as well as
unforeseen spending on just about
anything you can think of .!

1. Scope Creep
A well-defined project can easily get
derailed when stakeholders identify
changes, the market adjusts, or the team
finds an internal issue that needs working
on to aid delivery.anything you can think of .!

4. Technology
Getting the technology right for
your projects will be a big factor
into whether they're successful.
Your team need the right tools to
do all the jobs you ask of them.

3. Time
Everyone dreads a project overrunning.
The lesser talked about risk is a project
coming in too early - not all risks are
negative ones. Lots of factors contribute to
a project going over time, yet most can be
negated.

5. People
You can plan for paid leave requests
during the life of a project, but what about
sickness or caring requirements? There's
also the risk of an impromptu resignation.

6. Communications
There needs to be swift and effective
comms between projects and your
PMO, which means these things get
challenging. You need to make sure
that nothing gets lost in translation
and everyone is working toward the
same strategic goals.

7. Procurement
Ever been to the supply cupboard to find
the office is devoid of staples? You can find
yourself out of much more than the basics
with unstable supply chains or not able to
get all the bits and pieces you need for
your project.

RISK DESCRIPTION

LIKELIHOOD
IMPACT
MITIGATION ACTIONS

Change in request by customer
Medium
High
Establish a change management process and communicate
cost/schedule impact clearly.

Insufficient budget to carry out
the work
Medium
High
Set contingency funds, set budget priorities, make periodic
reports, swap budgets

Lack of technology/software
Medium
High
Evaluate technology feasibility during planning, ask team
leaders feedbacks, and allocate budget for upgrades.

Lack of expertise to carry out
the project
Low
High
Evaluate skill needs during planning, consider external
consultants for specialized tasks.

Communication breakdowns
between departments
Medium
Low
Schedule regular check-ins, and ensure information flow
through centralized tools.

Conflict within the team
Medium
Low
Foster open communication, clearly define roles, and establish
a conflict resolution process.

Overrun task deadlines
High
Low
Use project tracking tools and emphasize prioritization during
planning.

Supplier delays impacting
timelines
Medium
High
Identify multiple suppliers, establish buffer times, and monitor
procurement closely.

Errors in documentation
Low
Medium
Implement peer reviews and ensure proper version control
practices are in place.

Occasional absence of team
members
Low
Low
Cross-train team members and ensure backups for key
responsibilities.

KEY FACTOR IN DESCRIBING RISK

• Probability that the event occurs or not
• Impact resulting from the occurrence of
  the event
• Trigger or warning condition
• Possible timing within the project
  phases
• Possible occurrence frequency of events
• Possible threshold or tolerance of risk
  acceptability

PROBABILITY

Risk always involves the
likelihood that an undesired
event will occur

QUALITATIVE OR
QUANTITATIVE

IMPACT

Risk should consider the
severity of consequence the
event should it occur

QUALITATIVE OR
QUANTITATIVE

RISK = PROBABILITY x IMPACT

Likelihood
Severity

MED
RISK
LOW
HIGH

The objective of the risk management is

• reducing the probability and the impact of
  "negative events"
• increasing the probability and the impact
  of "positive events“
• List the stakeholders involved in risks
  Risk management is a process. Risks may
  change, appear, evolve during project life-
  cycle.

Iterative process that
identifys potential risks and
to document them through
a structured list, the Risk
Register. Include focus
group with stakeholders
and task leader

Evaluation of the
potential outcomes
and impacts
(quantitative and
qualitative analysis)

Keep under control the
risks evaluated in the
previous phases verifying
the effectiveness of the
actions, identify new risks,
improve communication
within teams

PLAN RISK
MANAGEMENT

IDENTIFY
RISKS

PERFORM
QUALITATIVE
RISK
ANALYSIS

PERFORM
QUANTITATIVE
RISK ANALYSIS

PLAN RISK
RESPONSES

IMPLEMENT
RISK
RESPONSES

MONITOR
RISKS

>
Decide how to
manage risk on
this project

7
Find the risks
through
various
techniques

Classify and
rank the risks

Undertake
numerical
analysis of the
risks

Decide how
we are going
to deal with
the risks

Ensure our risk
responses are
carried out

Continually
check the
effectiveness of
our risk
processes

Define the methods,
tools, techniques,
thresolds and all the
information needed
for risk management

Classification in
terms of priorities
and importance
(qualitative
analysis)

Identify a set of actions
aimed at reduce the risks
and their effects or
transform risks into
possible opportunities
according to the Life Cycle

V
1
1

RISK MANAGEMENT PLAN

• Roles and responsibilities: team members responsible for each type of activity in risk
  management plan
• Risk categories: how to classify and group potential causes of risks
• Definitions of risk probability and impact: providing useful assessments of probability
  and impact.
• Probability and impact matrix: method that relies on a consistent probability and impact
  matrix throughout the project to prioritize risks
• Revised owner/boss/stakeholders' tolerances: stakeholders' tolerances of
  acceptability / unacceptability
• Reporting formats: contents and format of the Risk Register
• Tracking: the way to record risk activities and audit risk management processes

PROBABILITY - IMPACT RISK MATRIX

>
Likelihood
Very unlikely
[1]
Unlikely
[2]
Possible
[3]
Probable
[4]
Very likely
[5]
100%
Catastrophic
[5] 80%
5
10
15
20
25
Significant
[4] 60%
4
8
12
16
20
Impact
Moderate
[3] 40%
3
6
9
12
15
Low
[2] 20%
2
4
6
8
10
Negligible
[1]
1
2
3
4
5

A Risk Matrix is a visual tool used in project management to assess and prioritize risks by
evaluating two key factors:

• Probability (Likelihood): How likely is it that a particular risk will occur?
• Impact (Severity): How severe would the consequences be if the risk occurs?

1
2
3
Low: Acceptable risks that don't require immediate action.
8
12
Medium: Risks that should be monitored and mitigated if possible.
15
High: Significant risks requiring proactive management.
20
25
Extreme: Critical risks needing immediate action to avoid major
project failure.

QUALITATIVE RISK ANALYSIS

This process consists in the classification of the identified risks in terms of priorities
and importance

• It is based on the cross analysis between the probability assigned to each single event
  and the magnitude of the resulting impact
• It's useful to identify risks that require more attention
• It is a prerequisite to the quantitative analysis and to the risk response plan

QUANTITATIVE RISK ANALYSIS

numerical data, probabilities, and statistical models to quantify the possible outcomes
for the project and probabilities

• Identify realistic and achievable cost, schedule, or scope targets given the project risks
• Determine the best project management decision when some conditions or outcomes
  are uncertain

TOOLS:

• Expected monetary value analysis: it calculates the average outcome when the future
  includes scenarios that may or not may happen
  Decision tree analysis: structured using a decision tree diagram that describes a
  situation under consideration and the implications of each of the available choices

EMV (EXPECTED MONETARY VALUE )= PROBABILITY x IMPACT

Risk Identified: Budget overrun due to material cost fluctuation.
- Probability of material price increase: 40%.
- Potential increase in cost: 200,000 €
- EMV = 0.4 x 200,000 = 80,000 €

DECISION TREE ANALYSIS

60%
Strong Demand
($200M)
$80M
$80M = $200M -$120M
Build New Plant
(Invest $120M)

$36M = . 60 ($80M) +
.40 (-$30M)
Weak Demand
($90M)
-$30M
Build or Upgrade?
EMV (before costs) of Build
New Plant considering demand
-$30M = $90M-$120M
Decision EMV = $46M
(the larger of $36M
and $46M)

60%
Strong Demand
($120M)
$70M
$70M= $120M - $50M
Upgrade Plant
(Invest $50M)

Decision Node
40%
Weak Demand
($60M)
$10M
Chance Node
$46M = . 60 ($70M) +
.40 ($10M)
End of Branch
EMV (before costs) of Upgrade
Plant considering demand
$10M = $60M-$50M
40%