Almaty Management University

PhD, Senior lecturer, Aiman M. Kazybayeva

Master of economic sciences, Lecture,

Vladislav V.Ostrovskiy

Development of theory in project risk management

Project risk management is considered as an integral part of the project management process, and the history of the development of these scientific disciplines are inextricably linked to each other. Milestones in the formation of the theory of project management in the last five decades (Table 1), help to determine the most significant moments in the development of the mechanism of project risk management. The historical aspect of research contributes to the research of current state of the theory of the project risk management and the prospects of its development.

Modern set of methods in project management dates back to the 50s of XX century. The most important stage is the development of methods of scheduling. The importance of planning, supply management and administration provided the basis for the formation of the theory of project management. The development of methods in project management, continued in the 60s of the last century, was particularly influenced on the establishment of management structures and formation of teamwork methods, which were introduced into the management of production in the '70s.

In the 80s of XX century, development and new ideas of projects modeling and automation of management process began to be applied successfully. The basis for this was the development of computer technology. The fast establishement of methods of quality management also influenced on the content of the theory of project management.

Table 1 – Development of theory in project risk management (Stamatelatos M., 2002)

Period	Key moment of the development
	Theories of project management	Theories of project risk management
1950-1959	Administration; Supply; Planning	Graphs of network models
1960-1969	Scheduling; Systems of project management	Scheduling; Probabilistic network models
1970-1979	Organizational structures; Leadership; Commands	Probabilistic models; Decision trees; Subjective probabilities
1980-1989	Computer models and applications; Quality management	Software for the calculation of the probability of events; Check-lists; Lists of retaliatory actions; Diagrams of influences; Contract administration
1990-1999	Processes; Information and communication technologies; Computer networks	Teamwork; Communication; The accumulation of knowledge of the organization; Conclusions from the faulty actions; Process of risk management and organizations, specialized in risk management
2000-2009	Models of collaboration; Virtual organizations; Creativity; Training; Companies, specialized on the project realization	Database of risk management as the tool of accumulation of knowledge of the organization; Training; Creativity; Planning of retaliatory actions

Impulse to the development of modern methods of risk management was quantification of risk, which was given in the early 80-ies by S. Kaplan and B.J. Garrick (Stamatelatos M., 2002, p.45). The risk, in their opinion, is composed of three parts: a description of the scenario, the probability of this scenario and the consequences of this scenario, provided that the consequences may be different at the same scenario.

In the mid 80's the mechanism of risk management began to be widely condemned in the literature on project management. A risk management process was formed, which that time consisted of identifying risks, risk assessment, development of responses and monitoring (Karlos A. Artto, David L. Hawk., 1999). Quantitative risk assessment, was mainly based on subjective probabilities and their distributions. In industry, the basis of risk management was to analyze the possibilities of monetary and time losses. Diagrams of influences, risk checklists and questionnaires, methods for dealing with risky situations and also important principles for the allocation of risks in the construction contracts are widely used.

During the 90s of the last century, the basis of the theory of project management was the introduction of network technologies, methods of cooperation and management of business processes as projects. The rapid development of international business, quality improvement and cheapening of information technologies and data transmission technologies opened new opportunities to manage projects in a geographically distributed business environment.

At the same time the concept of risk management changed. The transformation took place towards greater understanding of the importance of risk management, rather than a quantitative risk analysis. Thus, the process of risk management and its integration into the project management process are now the basis for further development of the risk management mechanism.

By the end of 90s of XX century new methods of risk management, based on studying the experience of the realization of previous projects and development of solutions based on the experience of reducing the impact of adverse events to acceptable level. That is to say the knowledge, accumulated about failed projects or adverse situations and consequences, are used for the study and understanding of the causes of negative situations, losses, associated with them, and response to reduce the consequences.

The risk management of the project is now understood as a complex of pre-planned activities, aimed at identifying possible adverse situations and reduction of their potential impact on the project to acceptable level.

The current direction of scientific development of the theory of project risk management is presented in the form of improving the creative approaches and approaches related to the study of risk management experience. One of the ways to improve the effectiveness of these approaches is the use of computer databases in the process of risk management, which should contain not only classified list of risks, but also valuable information about retaliatory actions on the occurrence of a particular risk situation, information about risk management planning and other information to make specific decisions in the process of project risk management. Formation of these databases are going continuously throughout the whole project on the basis obtain information on risks and retaliatory actions. Information about risks is valuable time when its formation is carried out in real time mode, which works toward database of risks.

The history of development of the theory of project risk management shows that at present decade current approaches are likely to improve to risk management based on modern ideas and concepts, and this is confirmed by the increased interest of scientists to problem of project risk management.

The author considered a significant number of domestic publications on the topic of risk management in the last five years. On the basis of the performed analysis, it was concluded that the vast majority of publications are based on earlier proposals, made in the early and mid-90s of the last century. This contributed to the appealing to foreign experience and that is why the methodological basis of the present research today are the largest, publicly available methodological approaches to project (program) risk management, which were developed in different countries.

Unfortunately I didn’t get a chance to find public information resources, related to risk management in the realization only of construction projects, except one, containing a methodical approach, developed by Finnish experts from the Institute VTT Building Technology (Skanska Financial Services AB, 2002).

However, today there are universal guidelines for risk management, intended for all kinds of projects (Project Management Institute, 2000, Broadleaf Capital International Pty Ltd, 1999, The Association for Project Management,1997).

Moreover, a comparison of data of the recommendations and study of specific recommendations, such as recommendations of NASA (NODIS Library, 2002), ECSS (ESA Publications Division, 2000), DoD (US Department of Defense, Defense Acquisition University, 2002), DoE (USA: DoE Office of Engineering and Construction Management, 2000), and others, showed that today there develops a typical risk management mechanism that does not depend on the type of project.

In the study of modern concepts of risk management, the author used a comparative analysis as a basis for the study. This method of scientific knowledge is the most efficient in the context of this thesis research. This is due to the fact that the analysis assumes the separation of methodological approaches that are the prototype of this research, to the relatively small elements and a comprehensive study of them. Herewith the comparison allows finding the similarities of elements that show the general trends of development of the theory of risk management. On the basis of this, on the analogy, conclusions and suggestions are formed in the plan of improving risk management mechanism.

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