Megaprojects, Psychology and Risk Management

Megaprojects, Psychology and Risk Management

Aug 28th, 2014

Megaprojects, Psychology and Risk Management

Often, projects are led by planners and managers who keep changing throughout the long project cycles that apply to megaprojects, have little knowledge of risk management and risk based decision making leaving leadership weak and promoters overexposed.

There are numerous biases that can interfere with good mega-projects management.

“Uniqueness bias” can be defined as the tendency of planners and managers to see their projects as singular. This particular bias stems from the fact that new projects often use non-standard technologies and designs, leading managers to think their project is more different from other projects than it actually is. Uniqueness bias impedes managers’ learning, because they think they have nothing to learn from other projects because their own project is unique. This lack of learning may explain why managers who see their projects as unique reportedly perform significantly worse than other managers: they become a liability for their project and organization. The larger the project the larger the liability.

Misinformation about costs, schedules, benefits, and risks is common throughout project development and the decision-making process. The result are cost overruns, delays, and benefit shortfalls that undermine project viability during project implementation and operations.

If one combines large cost overruns and benefit shortfalls it becomes easy to understand that current practice, including of course poorly made risk assessments, foster internal and public distrust. Rail projects, highways, tunnels commonly end-up with 20%-70% increase and sometimes (for tunnels) multiples of the initial cost estimates. Loading of the infrastructures (traffic, passengers, Mto/year) is often critically overestimated.

These errors and biases in the forecasts trickle through design and decision process totally undetected, sometimes voluntarily (misrepresentation), sometimes totally involuntarily. When they become apparent, it is often too late.

In many countries deliberate misrepresentation is a crime. There is a formal “obligation to truth” built into most democratic constitutions and also in legislation for corporate governance.

Tagged with: , , , , , , ,

Category: Consequences, Hazard, Mitigations, Probabilities, Risk analysis, Risk management

Leave a Reply

Your email address will not be published. Required fields are marked *

Riskope Blog latests posts

  • Wells Fargo judgement and Tailings risks
  • 1-02-2023
  • We thought of Wells Fargo judgement and Tailings risks in follow-up to the recent judgement against a number of bank’s…
  • Read More
  • Prefeasibility hazard adjusted NPV
  • 25-01-2023
  • A mining company asked us to perform a Prefeasibility hazard adjusted NPV evaluation. Our action first focused on bringing clarity…
  • Read More
  • OpenAI’s ChatGPT applied to tailings dams and associated risks
  • 11-01-2023
  • As everyone else, we got excited about the new ChatGPT so we tried OpenAI’s ChatGPT applied to tailings dams and…
  • Read More
  • Get in Touch
  • Learn more about our services by contacting us today
  • t +1 604-341-4485
  • +39 347-700-7420

Hosted and powered by WR London.