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Exposing the Myth of Predictability

In: Risk Navigation Strategies for Major Capital Projects

Author

Listed:
  • Asbjørn Rolstadås

    (Norwegian University of Science and Technology)

  • Per Willy Hetland

    (Norwegian School of Management)

  • George Farage Jergeas

    (University of Calgary)

  • Richard E. Westney

    (Westney Consulting Group, Inc.)

Abstract

This chapter shows that there are types of project risks currently not sufficiently understood and managed. There is a situation where too much attention is given to defining performance risks and too little attention is given to understanding organization and background risks. The traditional way of managing risk is focused on predicting the future more accurately to obtain less risk exposure. Yet, the industry still experiences major cost overruns and delays on mega-projects. This is in spite of a well-developed profession. The need for additional new solutions is discussed. Such solutions must take both strategic and contextual risk into account in addition to the traditional operational risks. Since strategic and contextual risks do not necessarily reduce with time, they have and retain significant uncertainty which can be expressed as volatility. The relationship between risk exposure and volatility provides a new way of looking at project risk.

Suggested Citation

  • Asbjørn Rolstadås & Per Willy Hetland & George Farage Jergeas & Richard E. Westney, 2011. "Exposing the Myth of Predictability," Springer Series in Reliability Engineering, in: Risk Navigation Strategies for Major Capital Projects, chapter 0, pages 11-14, Springer.
    • Handle: RePEc:spr:ssrchp:978-0-85729-594-1_2
    DOI: 10.1007/978-0-85729-594-1_2
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