Project Risk Governance

To develop a PRG approach is challenging for a number of reasons. There is the need to integrate project risk with organisational risk activities. Tensions may arise because of the inherent need for flexibility and responsiveness (for example to react to new customer demands) as compared to the traditional, more static, corporate management approach. A more dynamic risk management approach is therefore required including the capability to quickly adapt projects to business conditions while still monitoring the overall risk environment. PRG is further complicated by the nature of risk itself (for example, it can be positive or negative) and the risk management capabilities of the organisation.

While it is recognised that knowledge about PRG is still in its infancy, a number of issues became apparent when researching and writing this book. They are associated with the key objective of this book, namely recognising the objective of PRG as value-protecting and value-creating. These themes will become apparent to the reader and are reflected in the following governance activities:

• aligning business and project strategy by taking into account project risk objectives, particularly those of positive risk;

• developing a project portfolio that achieves a risk profile acceptable to the organisation;

• constructing a business case for project investments that recognises the impact of risk on value-protecting as well as value-creating strategies;

• designing relational mechanisms in the form of steering committees and the Project Management Office (PMO) to link PRG processes and structures;

• adopting best practices in strategic and project management to provide a high level of PRG performance;

• referring to maturity models to guide the organisation to achieve a high level of PRG sophistication;

• providing organisational leadership from the board of directors downwards when executing PRG responsibilities.

The Objectives of this Book

This book examines risk management in modern organisations, particularly those that are project-based, through the lens of governance. In essence, it develops PRG principles that outline strategies to integrate business risk activities with project risk activities to ensure overall organisational success. Insights and guidance are provided on their design and implementation.

The second objective is to view PRG as having the dual objectives of value- creating and value-protecting. The book seeks to stress the management of positive risk by providing a roadmap that will ensure that the opportunities created by taking on project risk are successfully exploited.

To meet the above objectives, the book identifies and analyses relevant issues, provides insights into the topic and offers guidelines on how best to meet PRG responsibilities. It does so by addressing the following core questions:

1. How are projects managed within organisations?

2. Why is project risk management a governance responsibility?

3. How do project and corporate risk activities interact?

4. What are the PRG processes and structures that guide the organisation?

5. What are the contextual factors that influence PRG?

6. How is risk best managed at the project level?

7. What steps need to be followed to reach PRG maturity?

The Design of this Book

The content of this book covers what is referred to in the profession as the 'front end' of project management (Morris 2009). Topics relate to governance, strategy, value management and building enterprise-wide PRG capabilities. As such, it reflects the 'governance' school of thought in project management (Bredillet 2008). The quality of the management of risks in the project portfolio, programmes and projects is determined by the effective governance performance of the board of directors, project sponsors, project managers and the PMO. Elements of the 'success' school of thought are included as they identify factors critical to the success of projects and PRG. Drawing on the 'behaviour' school of thought, the book outlines human resources management practices relevant to the transient nature of projects within project-oriented organisations.

The chapters are designed to provide a logical flow of issues related to PRG. They first examine the role of projects in organisations and the need to integrate project and business strategy within the framework of the project-based organisation. Next, PRG is introduced via its links with corporate and project governance. The scope of PRG is covered in two chapters that identify relevant processes, structures and relationship mechanisms. Contextual influences on PRG are recognised in the following chapter and cover a broad range of issues, from the professionalisation of project management to paradigmatic implications for its practise.

The 'back end' of PRG is covered in a chapter that identifies the essential requirements for managing risks at the project level. This is preceded by a chapter that gives insights into the concept of project risk to increase the reader's understanding of uncertainty, risk events, probabilities and so on. In a recent study by the author (Fink 2012), Australian project managers rated 'understanding the risk concept' as the number one key issue that confronts them. To assess the sophistication in current approaches and enable improvements to be made, the final chapter provides a roadmap along the stages and dimensions of a PRG maturity model.

The Benefits of this Book

This book is unique for two reasons. First, it places project risk management in the context of today's organisations, in which objectives are increasingly implemented through projects to better respond to fast-changing markets. Second, it applies a governance perspective to examine project risk at the project and corporate levels, an approach which is significantly under-researched and for which theoretical knowledge and professional practice are at an early stage of maturity.

By following the recommendations contained in this book, there is greater certainty of gaining value from exploiting project risks in project investments while, at the same time, reducing project failure by controlling project risks. Issues in achieving these outcomes are identified, thereby increasing the reader's understanding and his/her ability to influence project outcomes in a positive manner. Importantly, by applying the checklists provided in the book, the reader is able to self-assess the maturity of his or her PRG environment. Where self-assessment reveals a broadly unsatisfactory response this is a dear indication that the organisation needs to conduct further investigations.

The book makes a contribution to meeting the need for increasing the number of effective and risk-savvy project management professionals at all levels within the organisation. As stated in the Australian publication Project Manager (2012), 'good project managers will buck unemployment trends' and, more importantly from the perspective of this book, 'the hunger for project management basics, in particular risk management, will continue to surge'.

Suggested Audience

As this book draws on theoretical concepts, as well as professional practice, it is eminently suitable for a wide audience. They indude members of boards of directors and senior management charged with responsibilities for corporate, project and risk governance. Their advisors will also benefit since the topic of PRG is covered across horizontal (within projects) as well as vertical (within organisations) lines.

At the project level, project sponsors will gain clarity on how project risk activities interact with those at the corporate level. This should give them confidence in making the right investment decisions and measuring project performance. Project managers and project risk managers will gain insights into the tools and techniques that are most critical to completing projects successfully.

Students and researchers interested in corporate governance, project governance and risk governance will benefit from this book. They are provided with a synthesis of the underlying literature, both academic and professional, and given insights into how theory is reflected in practice. In addition, the listed references provide further depth should the reader wish to learn more about a specific topic.

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