Understanding and managing risks in large engineering projects
By: Donald Lessard [and] Roger Miller.
Contributors: Miller, Roger LeRoy.; Sloan School of Management.
Series: Sloan working paper -- 4214-01; Working paper (Sloan School of Management) -- 4214.
Publisher: Alfred P. Sloan School of Management, Massachusetts Institute of Technology
Published: 2001
Place of publication: [Cambridge, Mass
Language: eng
Number of pages: 17
Description: Large engineering projects are high-stakes games characterized by substantial irreversible commitments, skewed reward structures in case of success, and high probabilities of failure. Drawing on 60 real life projects, this article shows that successful projects are not selected but shaped with risk resolution in mind. Rather than evaluating projects at the outset based on projections of the full sets of benefits, costs and risks over their lifetime, successful sponsors start with project ideas that have the possibility of becoming viable. Successful sponsors then embark on shaping efforts to influence risk drivers. Keywords: Risk Management, Project Finance, Institutional Strategy, Governance.