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Each week you will write and submit a brief summary of the important concepts learned during the week. The summary will include a summary of the instructor’s weekly lecture including any videos included in the lecture.

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• Use the APA template located in the Student Resource Center to complete the assignment.

Grading Criteria:

• This assignment will be graded using the UOTP Writing Rubric displayed below

MANAGING RISK AND
UNCERTAINTY IN AN

INTERNATIONAL PROJECT

Chapter

4

WHAT IS RISK IN THE CONTEXT OF PROJECT MANAGEMENT?

Risk is an uncertain event that, if it occurs, can have a
positive or negative impact on the project.

There are risks that can be anticipated (known-unknown),
and risks that emerge during the project (unknown-unknown).

Sources of risks that can be anticipated:

 Risk related to the management of the international project.

 Risk residing in the wider external project environment.

Risk management is influenced by the local cultures project
members were socialized in (see next slide).

2

Individuals from equality-oriented cultures

may involve the whole project team to identify

and monitor risk. They also may involve all

relevant group members into the decision

on

countermeasures. Project managers from

hierarchy-oriented cultures may identify risk

on their own and be the only one responsible

for taking countermeasures. Group members

may be very comfortable not having any

responsibility for this ‘dangerous’ task.

Equality Hierarchy

Individuals from cultures with high risk

avoidance tend to fear unfamiliarity and

ambiguous situations. They may try to ignore

risk. People from risk-embracing cultures may

be more actively seeking for risk, also to turn it

into an opportunity.

Embracing

Risk

Avoiding

Risk

People from individualistic cultures might be

more inclined to take decisions on their own in

risky and urgent situations, whereas persons

from group-oriented cultures may want to

consult with other group or network members

which is time-consuming.

Individual Group

THE IMPACT OF CULTURE ON RISK MANAGEMENT

3

THE RISK MANAGEMENT PROCESS

Risk that can be anticipated needs to be planned for.

Risk planning means identification of risk, analysis of risk
impact, planning responses to risk, monitoring and controlling
the project for risks that may occur.

These activities are also referred to as risk management.

Each step of the process contains the following sub-activities
(see next slide):

4

Required inputs:

Required Tools & Techniques:

1. Project status meetings

2. Environment scanning tools

1

3
2

4

Identifying

Risks

Analyzing &

Prioritizing

Risks

Performing

Risk

Planning

Monitoring &

Controlling

Risks

The Risk

Management

Process

1. Assess of impact of risks on main project
objectives

2. Combine impact of risks with probability
of risk occur

rence

3. Prioritize risks in terms of ‘high risk’,
‘medium risk’ and ‘low risk’

Main Output: Risk register outline

Required Tools & Techniques:

1. Documentation reviews, including
lessons learnt from previous projects

2. Information gathering techniques

3. Diagramming techniques

4. Risk checklists

5

. Tools to systematically analyse project
and organizational environment

1. Project scope statement

2. Work breakdown structure

3. Analysis of organization’s environment

Main Output:
Risk register with classification of risks, risk triggers,

assumptions, and risk owners

Required Tools & Techniques:

1. Probability and impact matrix

2. Probability distribution calculations

3. Sensitivity analysis

4. Expected monetary value analysis EMV

Required activities:

1. Select of risk response strategies for

identified risks

2. Compile of contingency plans

3. Estimate of cost and time for

contingency measures

Required Tools & Techniques:

Scheduling and costing for contingencies (cf. Chapter 5)

Required activities:
Required inputs:

1. Extended risk register with contingency plans

2. Change requests

3. Stakeholder management analysis

Not

discussed

in this book

Main Output:
Extended risk register including contingency plans (with budget

and estimated time)

Required activities:

1. Monitor risk status

2. Ensure appropriateness of response
plans

3. Monitor project environment for
emerging risks

4. Ensure proper execution of risk
management plan

Main Output: Updated risk register

5

RISK IDENTIFICATION TOOLS

PESTEL

 Tool that structures the political, economic, sociocultural,
technological, environmental and legal environment of a project
for ONE geographical market, typically a country.

 The cultural gap analysis tool introduced in Chapter 3 helps with
the analysis of the sociocultural environment.

Examples of industry specific tools:

 Hazard and Operability Study (HAZOP): Systematic analysis of
process systems, equipment and procedures to identify potential
hazards to people/project stakeholders and the environment.

 Fire Safety Study (FSS): Examines specific causes and impacts of
fire in the context of the project.

 Construction Safety Study (CSS): Identifies major hazards in the
construction plan.

6

Country

•Similarity of cultural norms

with organization’s home

country

•Religious habits and customs

•Quality of education

•Demographic development

•Language skills

•(Social) mobility

•Public opinion (e.g. on

environmental protection)

•Work-life balance

•Level of transportation and

communication infrastructure

•Level of innovation

•Technology clusters

•Environmental protection laws

•Availability of natural resources

•Use and reuse of energy

•Antitrust law

•Tax regime

•Health and Safety

•Labour law

•Product liability law

•Social insurance law

•Protection of intellectual

property

•Reliability of law

enforcement

•Political systems and its

stability

•Security risks like social unrest

•Sovereign risks like

expropriation

•Level and acceptance of

corruption

•Tariff and non-tariff barriers to

trade

•GNP trends

•Level of interest rates

•Inflation rate

•Volatility of currency

•Purchasing power

•Employment rate

•Capital supply

Legal Socio-

cultural

EXAMPLES OF FACTORS TO BE CHECKED WITH THE PESTEL TOOL

7

RISK ANALYSIS

Probability and impact matrix.

 Low-tech tool for risk prioritization.

 Combines the likelihood of risk occurrence with the effect the risk
will have on the project objectives.

 Provides stakeholders with overview of risk propensity.

 Categorization of risks in terms of project impact can be three
stage (low, medium, high) or five stage (insignificant, minor,
moderate, major, horrible).

 For ease of control and communication, it is recommended to use
colour coding:

 RED for risks that are likely to occur and have a big impact on the project.

 AMBER for risks with medium impact on project results and/or medium to
low likelihood of occurrence.

 Green for risks with low probability of occurrence and low impact on the
project’s objectives.

8

STRATEGIES TO COPE WITH

FORESEEABLE RISK

1. Risk avoidance.

2. Risk mitigation.

3. Risk acceptance.

4. Risk transfer.

5. Risk absorption or pooling.

9

Risk register

Risk

No.
Risk description

Cause of

risk

Probability

of occur-

rence

Impact

on

project

Contin-

gency

measure

Cost in

Yen

Date of

entry

Example of risk register
First, the risk needs to be identified (field ‘risk description’). To analyse the risk and

to plan for counter measures or contingency measures, the cause of the risk has to

be known (field ‘cause of risk’). Information on risk propensity, impact on project

results, cost of potential counter measures, and date of risk occurrence has to be

added

10

PLANNING THE INTERNATIONAL
PROJECT IN TERMS OF TIME,

COST, AND QUALITY

Chapter

5

THE CHALLENGE OF PLANNING AN INTERNATIONAL PROJECT

Why planning a project?

 Planning reduces uncertainty and brings structure into
chaos.

Issues with planning in international project.

 Planning needs to be constantly revised due to a fast
changing international environment.

 The international environment is complex and difficult to
predict.

 More factors need to be included into project planning than
for planning standard

projects

.

2

THE PLANNING PROCESS

The planning process can be divided into four major tasks:

1. Planning time.

2. Scheduling under resource constraints.

3

. Planning cost.

4

. Planning quality.

The objective of planning is to:

 Minimize project duration.

 Minimize the resource availability cost.

 Maximize quality.

3

Required inputs:

1

3
2

4

Planning

Time

Scheduling

under

resource

constraints

Planning

Cost

Planning

Quality

Planning

Time, Cost,

Quality of the

International

Project

1. Work Breakdown Structure

2. Organizational Breakdown
Structure

3. Analysis of skill sets of
available staff beyond
academic and job titles (based
on CVs and interviews)

4. Overview of holiday
entitlements of international
staff in different locations

Main output: Gantt chart or network
diagram

Required tools and

techniques:

– Project Network Diagram,
mainly Activity on Arrow
(AoA)

as basis for CPM, CPA,
PERT, PDM etc.

– Gantt chart or bar chart

1. Project Scope Statement

2. Work Breakdown Structure

3. Estimates for activity duration

4. Establishment of relationships
between single activities in form of
precedence

5. Calendar with international holidays
relevant to the international project

Main output:
Resource loaded Gantt chart

Required tools and
techniques:

– Loaded Gantt chart

Required inputs:
1. Financial objective / available budget

2. Cost estimates

3. Overview of international locations

involved in the project

4. Overview of salaries, facilities,

equipment and other costs in the

relevant international locations

5. Cost for risk mitigation or contingency

plans (cf. Chapter 4)

6

. Development of currency fluctuations

Required tools and techniques:
– Step counting cost-estimating techniques

– Exponential cost-estimating techniques

– Parametric cost-estimating techniques

– Even-loading, front-loading, back-loading budget

methods

– Periodic cost spreadsheet

– Cumulative cost spreadsheet

Required inputs:
Required inputs:

1. Project scope statement incl. cross-check of

customer’s expectation level

2. Cultural gap analysis regarding perception of quality

in involved countries and cultures

3. Functionality of product/service/project result

Not

discussed

in this

book

Main output:
Budget spreadsheets

Required tools and techniques:
– Standard quality control techniques

– Pareto diagrams

– Checklists for partner selection

– Spider diagrams for training assessments

Main output:
Definition of quality known to all project

members

Water-tight specification sheets

Final output of cycle: project master

plan (additional input needed for master
plan: OBS/responsibility chart cf.

Chapter

6)

Cf.

Chapter

6

Not discussed

in this

book
Not
discussed
in this
book
4

CULTURAL IMPACT ON PLANNING

National culture determines the attitude of a project member
or stakeholder towards the effectiveness of planning.

It also has an influence on the detail level and structure of
the plans.

The attitude towards planning is influenced by the external
environment, e.g. frequency of natural disasters, reliability of
infrastructure.

The following two slides will use the cultural gap tool and
apply it to the area of project planning.

5

Project managers who are rather hierarchy

–

oriented tend to create a plan on their own.

More equality-oriented PMs will tend to involve

their team.

Equality Hierarchy

Project managers and members who are

afraid of risk tend to put more effort on

planning details than risk embracing project

managers and teams.

Embracing

Risk

Avoiding

Risk

Project managers and other stakeholders with

a universal background tend to create a

Master Plan which is to be applied at all sites

and to situations. Circumstantial people tend

to stick to high-level planning with flexibility.

Universal
Circumstan-

tial

Project managers and other stakeholders who

are task-oriented tend to create Work

Breakdown Structures and to-do lists.

Relationship-oriented individuals tend to

spend much more time on networking with

main stakeholders than on creating a plan.

Task Relationship

CULTURAL GAP TOOL FOR PLANNING (1 )

6

Achievement
Standing /

Status

Project managers and members with a

sequential approach tend to follow the

planning process, with the creation of

estimates of time, cost, and links to resource

availability. People from synchronic cultures

may put less effort in sequencing.

Sequential Synchronic

Project managers and members who are more

oriented towards theory tend to attach more

importance and put more effort into planning.

People from pragmatic cultures may tend to

focus on learning by doing and spend less

time on the creation of plans.

Theoretical Pragmatic

Project managers who are more

achievement-oriented tend to ‘follow the

textbook’ in order to obtain the given targets.

Project managers and members with a

stronger status orientation might have a

separate agenda partially contradictory to the

project goal.

CULTURAL GAP TOOL FOR PLANNING (2)

7

SCHEDULING

Scheduling comprises of the following activities:

 Estimating the duration of the activities outlined in the Work
Breakdown Structure.

 Determining the sequence of these activities.

 Optimizing the sequencing of activities to minimize the
overall duration of the project.

Tools used for scheduling:

 Gantt chart.

 Network diagram.

The prerequisite of scheduling is the assumption that time can
be measured, and duration needs to be minimized. This
prerequisite is not given in all local cultures.

8

Integration

start

0

Finalize

new

strategy

10

Decide on

new

processes

5

Test pilot

10

Roll out

new

processes

30

Integration

end

0

Build new

intranet

14

Feed with

new
processes

7

Identify key

users among

personnel

5

Language

trainings

15

General

process

trainings

8

9

Estimating activity durations in an activity on arrow network diagram

Activity 1 Activity 2

Activity 1 Activity 2

Activity 1 Activity 2
10

After durations have been estimated, the logical
relation between activities needs to be determined.

Determining relations between activities

Activity Name

Earliest

Start Time

Latest

Start Time

Latest

Finish Time

Earliest
Finish Time

Float or Slack

Activity Duration

1 2

34 5

11

The structure of a node of a network diagram

Integration
start

0
Finalize

new
strategy
0

0 10

1010

–
Decide on
new
process
10

10 15

1

55

–
Test pilot
15

15

25

2510

–
Roll out
new
process
25

25 55

5530

–
Integration
end
55

55 55

550

Build new
intranet
0

4 18

1414

4
Feed with
new
processes
15

18 25

227

3
Identify key
personnel
0

27 32

155

17

Language
trainings
15

32 47

3015

17
General
process
trainings
30

47 55

388

17
12

The complete network diagram with duration, float, and interdependencies

Factors
impacting

international
project

scheduling

Additional time for
coordination,

communication and
training

Additional time for
local adaptations (of
processes, products,

or services)

Additional time for
team building

activities

Consideration of
different public
holidays and
vacation time

Consideration of
different calendars
and auspicious days

13

Particularities of scheduling international

projects

ADDING RESOURCES TO SCHEDULING (1)

To finalize the scheduling activities, the project manager has to
take quantitative and qualitative aspects of resources into
account:

 Quantitative aspects means that sufficient financial and
human resources need to be available to carry out the tasks
as depicted in the WBS.

 Qualitative aspects are extremely important for scheduling
international projects:

 Availability of qualified staff.

 Limited mobility and flexibility of staff.

 Task allocation to minimize interfaces.

14

ADDING RESOURCES TO SCHEDULING (2)

Staff planning involves the following main activities:

 Determine whether the team members are 100 per cent
dedicated to the project.

 Perform resource levelling in case of over-commitment of
resources:

 Re-schedule tasks.

 Re-prioritize tasks.

 Negotiate for additional time or resources.

 Reduce the scope of the project.

15

Peak Units:

Calendar week

Calendar week

TL: Team leader

Over-allocated

resources

Allocated

resources

16

Example of resource-loaded Gantt chart

PLANNING COST

Purpose of cost planning:

 Minimization of financial resources needed to realize the
project’s objective.

Cost planning activities:

 Estimating cost.

 Putting cost into a budget.

 Controlling/monitoring cost in order to revise estimations
where necessary.

Types of costs:

 Direct costs.

 Solely linked to the project the budget is planned for.

 Indirect costs.

 Costs that cannot clearly be allocated to one single project,
such as general administrative costs.

17

EXAMPLES OF COST COMPONENTS

Labour

Materials

Plant and equipment

Travel and transportation

Subcontract

Training

Legal support

Investment cost

Rent

Overhead and administration

Fees and taxation

Inflation

Contingency (covers oversights or unknowns as a sort of buffer)
18

Simplified Cumulative Cost Spreadsheet: Production Transfer from Europe to China

P = Plan

Total Budget € 1 million A = Actual

Cost

categories

Period to date in months

1 2 3 4 5 6 7 8 9 10

Labour

P

20

,000 45,000 75,000 115,000 200,000 260,000 330,000 410,000 480,000 550,000

A

Travel /

expenses

P 16,000 32,000 64,000 96,000 130,000 170,000 200,000 240,000 300,000 380,000

A

Others

(consulting,

supplier

dev.,

prototypes,

logistics

etc.)

P 0 3,000 7,000 14,000 20,000 28,000 35,000 43,000 61,000 70,000

A

Total 36,000 80,000 146,000 225,000 350,000 458,000 565,000 693,000 841,000 1,000,000

19

Example of budget for international project

PARTICULARITIES OF INTERNATIONAL PROJECTS REGARDING COST
AND TIME ESTIMATES

Fluctuations of currency rates need to be closely monitored.

Travel expenses

 There is the tendency to underestimate cost for travel in
international projects.

Selection of sites involved

 Check infrastructure level of sites involved to avoid additional
costs and delays.

 Pay attention to local laws, e.g. on Health and Safety. These
may incur additional costs, e.g. required translations of
documents.

20

PARTICULARITIES OF INTERNATIONAL PROJECTS REGARDING
QUALITY PLANNING

There needs to be a common understanding about quality
among the major project stakeholders.

Never take things for granted

 Are the specifications clear?

 Are the specifications comprehensive?

 Is the applied measurement system commonplace?

 Are the specifications adapted to the markets where the
product/service is used?

Pay special attention to training needs and the selection of co-
operation partners.

21