Planning, Tracking, and Reducing a Complex Project’s Value at Risk

Abstract

Uncertainty, risk, and rework make it extremely challenging to meet goals and deliver anticipated value in complex projects, and conventional techniques for planning and tracking earned value do not account for these phenomena. This article presents a methodology for planning and tracking cost, schedule, and technical performance (or quality) in terms of a project's key value attributes and threats to them. It distinguishes four types of value and two general types of risks. The "high jumper" analogy helps to consider how high the "bar" is set for a project (its set goals) and therefore how challenging and risky it will be. A project's capabilities as a "jumper" (to clear the bar and meet its goals) determine the portion of its value at risk (VaR). By understanding the amounts of value, risk, and opportunity in a project, project managers can design it for appropriate levels of each. Project progress occurs through reductions in its VaR: Activities "add value" by chipping away at the project's "anti-value"-the risks that threaten value. This perspective on project management incentivizes generating results that eliminate these threats, rather than assuming that value exists until proven otherwise.

Teams and Project Performance: An Ability, Motivation, and Opportunity Approach

“…The number of problems identified captures unforeseen difficulties in the project (project data; average of 5.1 for all projects). When hidden problems are discovered, a certain amount of reworking—with implications for costs and scheduling—can be expected (Browning, 2019). Therefore, the identification of a problem implies an escalation to a higher level, which leads to additional actions.…”

Sourcing structures and the execution efficiency of information technology projects: A comparative evaluation using stochastic frontier analysis

“…Additionally, the extent of environmental certainty (or uncertainty) associated with the project has been known to influence project outcomes and has been recommended as an important input variable to be included in the frontier analysis of work systems (Melville, Gurbaxani, & Kraemer, ; Sinha & Van de Ven, ). At a broader level, the extent of certainty associated with project activities directly reduces the project's overall value at risk (VaR) and may determine the extent to which a project is able to satisfactorily meet or exceed its planned value (Browning, ). In the case of our study, the execution of IT projects requires the project personnel to engage in problem solving and information processing to understand the business requirements and the architectural interfaces across different components of a project.…”

Executives’ Decision Processes at the Front End of Major Projects: The Role of Context and Experience in Value Creation

“…Project management risk, including at the front end, has been well researched, but there is no consensus on how to best manage that risk (Sanchez-Cazorla et al, 2016; Williams et al, 2019). Project management entails risk management (Browning & Eppinger, 2002), and although an estimated 38 risk tools and processes are in use (Raz & Michael, 2001), they may still be inadequate to manage project concepts at the front end (Browning, 2019).…”

“…Moreover, the impact of risk management decisions made in the early stages of megaprojects has not been studied in the later stages of these projects (Sanchez-Cazorla et al, 2016). Some have argued that lowering the expectations of a project’s goals can decrease project risk; however, this might also lower the overall commercial value of the project (Browning, 2019).…”

“…For example, in contexts where exploration of the unknown and highly uncertain (March, 1991) is required to identify high-risk, high-reward project opportunities, the processes of opportunity identification and evaluation may look quite different from the normative project management guidelines. Research on managing risk in projects (to facilitate value creation and protect the value created) also agrees (Browning, 2019; Sanchez-Cazorla et al, 2016).…”