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(RISK-3658) Uncertainty Management Includes Risk Management

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Level: Basic
TCM Section(s):
7.6. Risk Management
Venue: 2021 AACE International Conference & Expo

Abstract: This paper describes the Norwegian best practice method of uncertainty management, including how it works and some of its results. Uncertainty analyses of investment costs are a key component of the decision-making basis (decision & risk management (DRM)) in project management and portfolio management and a central component of quality reviews conducted before decisions are reached in major government projects. Uncertainty analyses are used in an interdisciplinary advisory capacity and for quality review purposes. They are used by Norwegian companies, project portfolios, the real estate industry, and government ministries.

While average overruns of investment cost (CAPEX) reported in international studies typically have been over 30 per cent [1], or between 12 and 24 per cent [2], Norwegian studies report average overruns of two per cent [3]. The motivation behind this paper is the observation that projects practicing uncertainty management appear to reduce project cost overrun and increase project success rates. The method practiced in Norway has some methodological differences from the one presented by John K. Hollmann [4] and in traditional risk management methods. Risk management is an integral part of uncertainty management.

Over the last 20 years it has been different challenges related to combine risk management and uncertainty management. These changing, complex and uncertain times require better, integrated leadership, and the value of handling risk and uncertainty has increased. The author therefore wishes to share this best practice knowledge with AACE members. The COVID-19 pandemic has also granted the uncertainty management process, with its high-quality digital facilitations, and the opportunity to improve the analytical process independent of geographical area.