Human Factors in Project Portfolio Risk Management
Laurie Bowman is a member of PMI Queensland and is a former director of the Asia Pacific Chapter of American Institute of Cost Engineering (AACE). Mr. Bowman is presently working with Synchrony Projects, a leading project and risk consultancy in Australia, as an adviser and trainer. His focus areas are on projects related to Defence, Transportation and Oil & Gas. His interests include teaching, mentoring and playing cricket.
This article is an excerpt from the virtual Engineering & Construction (E&C) Footprints helmed by Mr. Laurie Bowman on 13.03.2021.
At the outset, Mr. Bowman emphasised on the importance of social, economic and environmental impact of projects. The above three aspects are rapidly changing due to a wide ranging shift in climate laws, political scenarios, changing workplace dynamics and the presence of many rapidly emerging markets. Hence, projects must be defined in a manner that moves the current state of people, process & technology into a better future state. Projects should focus on inspiring and engaging people and also focus on sustaining the positive changes created. A major example is the advent of Artificial Intelligence , Machine Learning and the rapidly increasing digitisation of our daily lives.
Wide ranging benefits can only be achieved if a thorough risk analysis of the project is done. The two major reasons for project failures are planning fallacy and strategic misrepresentation. The concept of planning fallacy was proposed by Nobel laureate Daniel Kanhemann. Our plannings are influenced by two schools of thought – one where we think intuitively and rapidly and the second where it is slow and rational. Also decision bias and the tendency of project managers to hold onto irrelevant information also results in planning fallacy. The best solution in such cases is to seek expert intuition. For expert intuition to be successfully implemented, an organised structure in a regular world needs to be in place and the decision makers must have gained expertise through feedback. Hence having an expert and implementing his feedback is key to the success of any project. Project managers must follow the Plan Do Check Act (PDCA) cycle to weed out any chances of planning fallacy and decision bias.
At the portfolio level, the PDCA cycle involves risk and contingency assessment at several levels. The key areas are Strategic Management of existing assets and the individual Project Control cycle processes. The representation below indicates the flow of above control processes during the project life cycle.
Also implementing the above controls at a portfolio effect, reduces the risk levels at individual projects as learnings from one project can be implemented in another. The purpose of risk management is to create and protect value (social ,economical, environmental) derived from an individual project and from the portfolio as a whole.
Finally, the effectiveness of the risk management process should be evaluated by continuously measuring the KPI fulfillment levels at project & portfolio levels and also continuously evaluating the risk and contingency allocated at project & portfolio levels.
Project & Asset Lifecycle photo caption :
Credit : Mr. Laurie Bowman, EC Footprints, PMI Bangalore Chapter, Human factors in Project Portfolio Risk Management, 13.03.2021