PROJECT RISK MANAGEMENT WITHIN AVIONICS PROJECTS AT SAAB GRINTEK DEFENCE by DANIëL DU TOIT submitted in fulfilment with the requirements for the degree of MASTER OF COMMERCE in the subject BUSINESS MANAGEMENT at the UNIVERSITY OF SOUTH AFRICA SUPERVISOR: PROF GS DU TOIT OCTOBER 2009 PROJECT RISK MANAGEMENT AT SAAB GRINTEK DEFENCE ABSTRACT The worldwide aerospace industry is often characterised by major delays in development and delivery of large aircraft programmes. Suppliers often suffer financial losses and reputational damage as a result of underestimating project risks. This research investigates the quality of project risk management within one of the players in the South African avionics industry, Saab Grintek Defence (SGD). The research investigates the knowledge level, application of risk management principles and behaviour of project teams within SGD. The research study concluded that the quality of project risk management within SGD is of an average standard. The main contributor to project risks in SGD is time risk, followed by human resource risk. KEY TERMS Project risk management, aerospace, avionics. Page ii PROJECT RISK MANAGEMENT AT SAAB GRINTEK DEFENCE TABLE OF CONTENTS ABSTRACT II KEY TERMS ERROR! BOOKMARK NOT DEFINED. TABLE OF CONTENTS III LIST OF TABLES IIX LIST OF FIGURES X GLOSSARY XII CHAPTER 1 1 INTRODUCTION 1 1.1. Background 1 1.2. Characteristics of the aerospace industry and aerospace programmes 1 1.3. Main players in the aerospace industry 2 1.4. Typical aerospace programmes 3 1.5. Avionics 3 1.6. Avionics products 3 1.7. Classification of avionics products 4 1.8. Players in the avionics field 5 1.9. Project risk management 5 1.10. Goal of the study 6 1.11. Objectives of the study 6 1.12. Hypothesis 6 1.13. Purpose of the study 7 1.14. Research methodology 7 1.15. Importance of the study 8 1.16. Limitations of the study 9 1.17. Layout of the research report 9 Page iii PROJECT RISK MANAGEMENT AT SAAB GRINTEK DEFENCE CHAPTER 2 12 AN INTRODUCTION TO PROJECT MANAGEMENT 12 2.1. Introduction 12 2.2. Project management governance 12 2.2.1. The PMBOK 12 2.2.2. ISO 10006 14 2.2.3. ISO 21500 15 2.3. What is a project? 16 2.4. Main objectives of projects 17 2.5. Characteristics of projects 17 2.6. Examples of projects 18 2.7. What is project management? 18 2.8. Management by project management 20 2.9. The role of the project manager 21 2.10. The project manager’s responsibility 22 2.11. The role of the project team 24 2.12. The project life-cycle 25 2.13. Characteristics of the project life-cycle phases 28 2.14. Characteristics of the project life-cycle 28 2.15. Project organisational structures 30 2.15.1. Functional organisational structure 30 2.15.2. Pure project organisational structure 31 2.15.3. Pure project organisational structure 32 2.16. Project management processes 34 2.17. The project environment 35 2.18. Project management information systems 37 2.19. Summary 38 CHAPTER 3 39 PROJECT RISK MANAGEMENT 39 3.1. Introduction 39 Page iv PROJECT RISK MANAGEMENT AT SAAB GRINTEK DEFENCE 3.2. Defining risk 40 3.3. Categorising risk 42 3.4. Key areas of operational risk 43 3.5. Key success factors for risk management 44 3.6. Project risk 45 3.7. Project risk management 47 3.8. Objectives of project risk management 47 3.9. Challenges in project risk management 48 3.10. Risk through the project life-cycle 50 3.11. Risk model 52 3.12. Project-specific risks 53 3.13. Project risk management process 56 3.13.1. Project risk identification 58 3.13.1.1. Categorising project risk 62 3.13.1.2. How to look for risks 63 3.13.1.3. Information gathering techniques 64 3.13.2. Project risk analysis 65 3.13.2.1. Risk analysis techniques 67 3.13.2.2. Qualitative risk analysis techniques 68 3.13.2.3. Computer applications 69 3.13.3. Project risk prioritisation 70 3.13.4. Project risk response/ resolution 72 3.13.5. Project risk monitoring and control 73 3.14. Project risk management principles and benefits 75 3.15. Defining project success 76 3.16. Project failure 77 3.16.1. Level 1: Failures in the project management context 77 3.16.2. Level 2: Failures in the project management system 78 3.16.3. Level 3: Failures in the planning and control processes 80 3.17. Project teams that effectively apply project risk management principles 84 3.17.1. Knowledge and experience characteristics 85 3.17.2. Procedural compliance characteristics 85 Page v PROJECT RISK MANAGEMENT AT SAAB GRINTEK DEFENCE 3.17.3. Attitudinal characteristics 85 3.18. Project risk management lessons learnt in high tech industries 86 3.19. Summary 87 CHAPTER 4 88 PROJECT RISK MANAGEMENT IN THE AEROSPACE INDUSTRY 88 4.1. Introduction 88 4.2. Main contributors to project failure in the aerospace industry 88 4.3. Governance in the aerospace industry (AS/EN9100) 89 4.4. Project risk management lessons learnt on aerospace programmes 90 4.5. Project risk management on the JSF programme 91 4.6. Project risk management at NASA 93 4.7. Similarities with pharmaceutical industry development projects 96 4.8. Summary 97 CHAPTER 5 98 INTRODUCTION TO THE SOUTH AFRICAN AEROSPACE INDUSTRY AND AVIONICS PROGRAMMES 98 5.1. Introduction 98 5.2. The South African aerospace industry initiative 98 5.3. Main players in the South African avionics field 100 5.3.1. Ansys 100 5.3.1.1. Product offering 101 5.3.1.2. Organisational capabilities 103 5.3.2 ATE 104 5.3.2.1. ATE product offering 105 5.3.3 Aerosud 105 5.3.4 Denel Aviation 107 5.3.5 Saab Grintek Defence 108 5.3.5.1. Product area: Electronic Warfare 109 5.3.5.2. Product area: Recording and Monitoring 110 5.3.5.3. Product area: Antenna Systems 110 Page vi PROJECT RISK MANAGEMENT AT SAAB GRINTEK DEFENCE 5.3.5.4. Product group: Airborne Communication Management Systems 111 5.3.5.5. Saab Aerotech South Africa 111 5.4. The avionics new products development process 112 5.5. Summary 114 CHAPTER 6 115 RESEARCH METHODOLOGY AND DESIGN 115 6.1. Introduction 115 6.2. Theoretical introduction to the design strategy 115 6.2.1. Understanding the research problem 116 6.2.1.1. Hypothesis 116 6.2.1.2. Purpose of the study 116 6.2.1.3. Need for research in this field 116 6.2.2. Identification of resources 117 6.2.3. Deciding on the research design procedure 117 6.2.4. Deciding on the data requirements 118 6.2.4.1 Sample population 118 6.2.4.2 Sample size 118 6.3. Design of the survey questionnaire 119 6.3.1. Preliminary considerations 120 6.3.2. Pretesting the questionnaire 120 6.3.3. Structure of the questionnaire 120 6.3.4. Administration of the questionnaire 122 6.3.5. Processing received responses 122 6.3.6. Statistical analysis of the data 123 6.3.6.1 Analysis of correlation within multiple choice survey results 123 6.3.6.1.1. Background 123 6.3.6.1.2. Requirements 123 6.3.6.1.3. Methodology 124 6.3.6.1.4. Interpretation 125 6.3.7. Validity and reliability 125 6.4. Summary 126 Page vii PROJECT RISK MANAGEMENT AT SAAB GRINTEK DEFENCE CHAPTER 7 127 RESULTS, DISCUSSION OF RESULTS AND FINDINGS 127 7.1. Introduction 127 7.2. Respondent profile 127 7.2.1. Representivity 128 7.2.1.1. Breakdown of respondents per organisational level 128 7.2.1.2. Representation of respondents per product area 128 7.2.2. Educational level profile of respondents 129 7.2.3. Respondents’ membership of professional organisations 129 7.2.4. Respondents’ project and project risk management training 129 7.3. Results of knowledge level questions 130 7.3.1. Project management questions 130 7.3.2. Summary of the results for all project management questions 135 7.3.3. Project risk management questions 137 7.3.4. Summary of the results of all project risk management questions 146 7.4. Results of project management questions 148 7.5. Results of project risk identification questions 157 7.6. Results of project risk analysis questions: 168 7.7. Results of project risk prioritization questions 175 7.8. Results of project risk monitoring and control questions 179 7.9. Results of project risk resolution questions 186 7.10. Results of project risk specific questions 193 7.11. Results of project risk management attitudinal questions 224 7.12. Results of efficiency analysis of project risk management 230 7.13. Results quality of project and project risk management within SGD. 245 7.14. Results rated as contributors to project risk at SGD. 247 7.15. Summary 251 CHAPTER 8 253 CONCLUSIONS AND RECOMMENDATIONS 253 8.1. Introduction 253 Page viii PROJECT RISK MANAGEMENT AT SAAB GRINTEK DEFENCE 8.2. Evaluation of the research conclusion 253 8.2.1. Goal of the study 253 8.2.2. Objectives of the study 253 8.2.3. Purpose of the study 254 8.3. Specific conclusions 256 8.3.1. Quality of project management at SGD 256 8.3.2. Quality of project risk management at SGD 256 8.3.3. Knowledge of project management theory 257 8.3.4. Knowledge of project risk management theory 257 8.3.5. Level of compliance with project risk management best practices 258 8.3.6.