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Principles and guidelines for project risk management

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  • Michael J. Pennock
  • Yacov Y. Haimes

Abstract

The increasing size and complexity of acquisition and development projects in both the public and private sectors has begun to exceed the capabilities of traditional management techniques to control them. This situation had led cost overrun, late delivery, and performance shortfalls to become commonplace. One way to contain these adverse consequences of complexity is through the principled application of risk management. This paper presents a general discussion of the concepts involved in conducting project risk management, which is in large part based on tools and methods currently employed by the authors. While some of these tools and methods are from previously published work, this paper presents them in an integrated methodology and introduces some recent modifications and improvements unpublished heretofore in the literature. Central to these new modifications is an improved method of risk tracking, the objective of which is to monitor risks continuously and to contain them before they get out of hand. The methodology presented in this paper covers risk identification, risk filtration, risk assessment, risk management, and risk tracking for large scale socio‐technological systems such as acquisition or development projects. The emphasis is on the use of ratio scales for risk tracking and avoiding the pitfalls of algebraic operations on ordinal scales for risk filtration. The described methodology is demonstrated via an example involving aircraft development, and there is a discussion of the lessons learned from the application of risk tracking to a government acquisition project. © 2002 Wiley Periodicals, Inc. Syst Eng 5: 89–108, 2002

Suggested Citation

  • Michael J. Pennock & Yacov Y. Haimes, 2002. "Principles and guidelines for project risk management," Systems Engineering, John Wiley & Sons, vol. 5(2), pages 89-108.
    • Handle: RePEc:wly:syseng:v:5:y:2002:i:2:p:89-108
    DOI: 10.1002/sys.10009
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    References listed on IDEAS

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    1. Stanley Kaplan & B. John Garrick, 1981. "On The Quantitative Definition of Risk," Risk Analysis, John Wiley & Sons, vol. 1(1), pages 11-27, March.
    2. Yoram Wind & Thomas L. Saaty, 1980. "Marketing Applications of the Analytic Hierarchy Process," Management Science, INFORMS, vol. 26(7), pages 641-658, July.
    3. Stan Kaplan & Yacov Y. Haimes & B. John Garrick, 2001. "Fitting Hierarchical Holographic Modeling into the Theory of Scenario Structuring and a Resulting Refinement to the Quantitative Definition of Risk," Risk Analysis, John Wiley & Sons, vol. 21(5), pages 807-807, October.
    4. Reichelt, Kimberly & Lyneis, James, 1999. "The dynamics of project performance: benchmarking the drivers of cost and schedule overrun," European Management Journal, Elsevier, vol. 17(2), pages 135-150, April.
    5. Yacov Y. Haimes, 1991. "Total Risk Management," Risk Analysis, John Wiley & Sons, vol. 11(2), pages 169-171, June.
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    Cited by:

    1. Jengchung Victor Chen & I-Han Lu & David C. Yen & Andree E. Widjaja, 2017. "Factors affecting the performance of internal control task team in high-tech firms," Information Systems Frontiers, Springer, vol. 19(4), pages 787-802, August.
    2. Jengchung Victor Chen & I-Han Lu & David C. Yen & Andree E. Widjaja, 0. "Factors affecting the performance of internal control task team in high-tech firms," Information Systems Frontiers, Springer, vol. 0, pages 1-16.
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    5. Dennis A. Perry & Bill Olson & Paul Blessner & Timothy D. Blackburn, 2016. "Evaluating the Systems Engineering Problem Management Process for Industrial Manufacturing Problems," Systems Engineering, John Wiley & Sons, vol. 19(2), pages 133-145, March.

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