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How to Manage Project Opportunity and Risk: Why uncertainty management can be a much better approach than risk management

Book Description

Since I wrote the Foreword for the second edition of this book, risk management processes have become much more widely used, but controversy about what should be done and how best to do it has grown. Managing risk is a risky business. Chapman and Ward provide an in-depth explanation of why it is important to understand and manage underlying uncertainty in all its forms, in order to realise opportunities more fully and enhance corporate performance. They show what best practice should look like. The implications go well beyond the conventional wisdom of project risk management, providing an enlightening new perspective.

Professor Tony M. Ridley

Imperial College London, Past President, Institution of Civil Engineers

Chris Chapman and Stephen Ward continue to educate the profession with this masterful exposition of the differences between, and the potentials for combinations of, risk, uncertainty and opportunity. Particularly welcome is the way they integrate this trio into the project lifecycle – the bedrock of project management control and organization.

Peter W.G. Morris

Head of School and Professor of Construction and Project Management University College London

Chris Chapman and Stephen Ward's books on Project Risk Management have been an essential part of my repertoire for twenty years, and they are top of my recommended reading for the courses I do on that subject. In this book they have enhanced their previous work to focus on uncertainty management and emphasise more strongly opportunities for improving project performance, rather then just identifying what can go wrong. A structured process is an essential part of managing project uncertainty, and their process is one of the most powerful. This book will be added to my repertoire.

Rodney Turner

Professor of Project Management, SKEMA Business School Lille

A profoundly important book. With How to Manage Project Opportunity and Risk, Chris Chapman and Stephen Ward take a good thing and make it better. Members of the project management profession have been influenced for years by their insights into project risk management. With this latest instalment the authors demonstrate that risk and uncertainty needn't be dreaded; in fact, the reverse side of the 'risk coin' has always been opportunity. My sincere appreciation to Chapman and Ward for turning this particular coin over and showing readers, academic and practitioner alike, the opportunity embedded in managing projects.

Jeffrey K. Pinto

Andrew Morrow and Elizabeth Lee Black Chair in Management of Technology Sam and Irene Black School of Business, Penn State Erie

Table of Contents

  1. Cover
  2. Contents
  3. Title
  4. Copyright
  5. Dedication
  6. Foreword to this edition
  7. Foreword to the second edition
  8. Foreword to the first edition
  9. Preface and overview by the authors
  10. Acknowledgements
  11. Part I: Setting the scene
    1. Chapter 1: Uncertainty in and around projects
      1. Projects and the associated ‘asset/change’ concepts
      2. Operations, corporate and project-related uncertainty
      3. Ontario Hydro example
      4. Operations, project and corporate aspects of a single asset
      5. A lifecycle stage structure with a ‘purpose’ focus
      6. Simplifications and elaborations for the nominal lifecycle
      7. The seven Ws framework
      8. Sources of uncertainty as both components and composites
      9. Four different types of uncertainty component
      10. A ‘performance lens’ and a ‘knowledge lens’ for uncertainty
      11. Criteria–plan and knowledge–plan relationship structures
      12. Conclusion
    2. Chapter 2: Uncertainty, risk and opportunity
      1. A minimum clarity approach to quantifying uncertainty
      2. The probability-impact grid (PIG) – a tool that needs scrapping
      3. Getting beyond the limitations of a focus on risk
      4. Towards a focus on uncertainty management
      5. Quantification of uncertainty for the Highways Agency
      6. Developing initial trust and sustaining trust between key parties
      7. A simple approach to contracting risk
      8. Evaluating risk for option choices
      9. An office manager’s photocopier decision
      10. Conclusion
    3. Chapter 3: Key motives for uncertainty management
      1. Trust
      2. Documentation
      3. Developing a clarity efficient approach
      4. Qualitative and quantitative analysis
      5. Targets, expectations and commitments
      6. Understanding uncertainty and communicating understanding
      7. Risk efficient choices and linked opportunity management
      8. Facilitating creative thinking
      9. Searching for opportunities as ‘fun’
      10. Constructive insubordination
      11. Conclusion
    4. Chapter 4: An overview of generic process frameworks
      1. Some alternative process frameworks
      2. Limitations of standards and professional guidance
      3. A cautionary tale
      4. The key role of planned and unplanned iterations
      5. The basic PUMP framework
      6. The PUMP pack framework
      7. Ambiguity about responsibility for risk and opportunity
      8. Gateway anticipation
      9. Ambiguity about the nature and role of governance
      10. Some relevant history from the late 1950s to the early 1990s
      11. The PRAM guide
      12. The RAMP guide
      13. The PMI PMBOK guide
      14. Shortcomings in common practice processes
      15. Conclusion
  12. Part II: The generic process in one key lifecycle stage
    1. Chapter 5: Define the project
      1. A high clarity example to begin discussion
      2. Project lifecycle stage structure
      3. Project context: the where
      4. Project parties: the who
      5. Project objectives: the why
      6. Project design: the what
      7. Four kinds of whichway plans
      8. Project resources: the two kinds of wherewithal plans
      9. Project timing: the when
      10. Define phase deliverables fit for purpose?
      11. The ongoing and integrative nature of the define phase
      12. Lower levels of clarity
      13. Conclusion
    2. Chapter 6: Focus the process
      1. Clarify the process lifecycle
      2. Clarify the process context
      3. Clarify the process parties
      4. Clarify the process objectives
      5. Top-down uncertainty appreciation
      6. Consolidating the process strategy and scope
      7. Process scope and strategy fit for purpose?
      8. Select a process approach
      9. Determine the resources required
      10. Determine the process timing
      11. Process plan fit for purpose?
      12. Focus phase and define phase joint deliverables
      13. The ongoing nature of the focus phase
      14. Focus phase short-cuts and specific PUMPs
      15. Conclusion
    3. Chapter 7: Identify all the relevant sources of uncertainty, response options and conditions
      1. Clarify immediate priorities
      2. Decompose the next priority source if this is appropriate
      3. Clarify the relevant primary responses
      4. Clarify the relevant secondary sources and responses
      5. Clarify the relevant conditions
      6. Approaches to identification and documentation
      7. Clarify the immediate need for more depth or more breadth
      8. Ordering and considering all relevant performance criteria
      9. Ordering and considering all other relevant aspects of the seven Ws
      10. Sources in other stages of the project lifecycle
      11. Links and dependencies anticipated in the identify phase
      12. Generalizing ‘more depth’
      13. Different contexts leading to different starting positions
      14. Keeping it simple when lower clarity is appropriate
      15. Identification phase deliverables fit for purpose?
      16. Conclusion
    4. Chapter 8: Structure all uncertainty
      1. Review key plan components and associated sources
      2. Review other plans and Ws and associated sources
      3. Identify general responses and order responses
      4. Examine links between sources and responses
      5. Develop diagrams and review associated model structures
      6. Structure phase deliverables fit for purpose?
      7. Low and intermediate levels of clarity
      8. Conclusion
    5. Chapter 9: Clarify ownership
      1. Clarify the objectives of the contracting strategy
      2. Identify owners for uncertainty and response options
      3. Select a contract approach
      4. Select contract terms
      5. Determine the timing of responsibility transfers
      6. Three separate fit for purpose tests?
      7. The ongoing nature of the ownership phase
      8. A simple example
      9. Other low clarity examples involving clarity efficiency
      10. Conclusion
    6. Chapter 10: Quantify some uncertainty
      1. Using data to develop ‘objective’ estimates
      2. Subjective estimates when data is limited or absent
      3. An outline of the quantify phase
      4. Start ordering the sources
      5. Clarify associated conditions
      6. Assess the next priority source
      7. Size a source using a histogram approach when data is available
      8. Size a source without data using a simple scenario approach
      9. Broader interpretation of all first-pass estimates and revisions
      10. Refine and restructure a source
      11. How many intervals for a rectangular histogram approach?
      12. The reliability of subjective estimates of uncertainty
      13. Managing the subjective probability elicitation process
      14. Dealing with contradictory data or a complete absence of data
      15. Extend the ordering of the sources
      16. The fit for purpose test
      17. Selective refining and restructuring of sources
      18. An example illustrating refine/restructure tradeoffs
      19. A ‘cube factor’ view of bias control
      20. Quantify phase treatment of dependence
      21. Conclusion
    7. Chapter 11: Evaluate all the relevant implications
      1. Select an appropriate subset of sources
      2. Specify dependence and combine the selected subset of sources
      3. Portray the effect of a set of sources
      4. Diagnose the implications
      5. Analysis fit for purpose?
      6. An overview of alternative integration procedures
      7. Conclusion
  13. Part III: The generic process in all lifecycle stages
    1. Chapter 12: Fully integrating the strategy shaping stages
      1. Strategy gateway PUMPs and associated interim reports
      2. Support and convince at a strategic level
      3. DOT shaping PUMPs
      4. DOT gateway PUMPs and interim reports
      5. Concept shaping PUMPs
      6. Concept gateway PUMPs and interim reports
      7. NatWest Bank information systems example
      8. A contractor’s perspective on the strategy shaping stages
      9. Having a clear view of relevant stakeholder perspectives
      10. Portfolio/programme/project boundary issues
      11. Conclusion
    2. Chapter 13: Fully integrating the strategy implementation stages
      1. Tactics shaping PUMPs and tactics gateway PUMPs
      2. Execution and delivery PUMPs
      3. Operations and support (O&S) PUMPs
      4. Termination PUMPs
      5. Project, operations and strategy linkages
      6. Conclusion
  14. Part IV: Key corporate implications
    1. Chapter 14: Developing PUMP capability as a project
      1. A seven Ws perspective
      2. A project lifecycle perspective
      3. Conclusions
    2. Chapter 15: Contracts and governance as frameworks for enlightened relationship management
      1. An enlightened relationship management approach to contracts
      2. Consequences of two simple contract payment terms
      3. Well-founded willingness to own uncertainty
      4. Transparent pricing
      5. Efficient allocation of uncertainty
      6. Incentive contracts
      7. Multidimension incentive contracts
      8. Intra-organizational relationships and governance
      9. Conclusion
    3. Chapter 16: A corporate capability perspective
      1. Wide application potential for a PUMP approach
      2. Enterprise risk management
      3. Further implications of a PUMP approach – a corporate perspective
      4. Infrastructure for uncertainty management
      5. Supporting organizational capabilities
      6. Some concluding speculations
  15. References
  16. Glossary of terms as used in this book
  17. Index