Introduction to Project Risk Management

This document provides information to Project Managers, project teams, and staff involved directly or indirectly with project risk management. It provides: • Uniformity in project risk management activities. • Techniques and tools for project risk management. • Data requirements for risk analysis input and output. • The project risk management role in overall project management. • Guidance on how to proactively respond to risks. Understanding project risks enables project teams to more effectively fulfill public service expectations. Assessing project risk and uncertainty informs decision making in our project development and delivery mission. These decisions contribute to public safety and clarify project expectations. Informed project risk management adds value on many levels to every project we deliver. Estimating the cost of transportation projects is a fundamental responsibility of the Washington State Department of Transportation (WSDOT). In recognition of the fundamental and strategic importance of cost estimating, these guidelines provide consistent practices across the agency to enhance methods for meeting this responsibility. These guidelines were developed by the Strategic Analysis and Estimating Office (SAEO), with contributions from a number of specialists in cost estimating and project development.

Estimators must be shielded from pressures to prepare estimates that match any preconceived notions of what a project should cost. Estimators need to prepare estimates based on the scope of the project, the schedule of the project, and the bidding conditions that are anticipated.

Value of Risk Management

Project risk management delivers a number of values to the project, including:

·         Recognizes uncertainty and provides forecasts of possible outcomes.

·         Produces better business outcomes through more informed decision making.

·         Has a positive influence on creative thinking and innovation.

·         Creates better project control—reduces overhead and time, and enhances benefits.

·         Contributes to project success.

Project risk management is an integral component of project management and is found at the heart of WSDOT’s project management processes.

Risk management is also a key component of project cost estimating and scheduling, as noted in National Cooperative Highway Research Program (NCHRP) Report 574. This report is available at the WSDOT library along with other publications on project management and risk management.

Exhibit 1-1 and depict project risk management through project development and balanced risk management. With effective risk management as an integral and required part of project management, we can not only predict possible future outcomes, we can take action to shift the odds for project success in our favor.