Strategic Decisions for Project Leaders: Exploiting Risk and Opportunity (edX)

Once project risks are identified and quantitatively analyzed, the project manager needs to make decisions. Having created probabilistic models of project risks, powerful methods of decision science can be brought to bear in making optimal plans and creating contingencies.

While some strategies can be executed concurrently with proactive management, risk can also be transferred or eliminated using carefully-planned strategies. These methods open the possibility of smarter decisions with more risk-neutral tactics that take advantage of capital markets. Financial approaches to transferring risk by insurance, catastrophe bonding, and other mechanisms is a poorly understood but efficacious method for dealing with unique risks on large and potential consequential projects.

By leveraging the appropriate tools for estimation using Bayesian thinking, classical utility theory, and behavioral economics, the project management executive or project owner can exploit risk to their advantage. The opportunities for construction firms, facility managers, municipal governments, and investors is enormous and growing.

This course is part of the Project Risk Management: Effective Decision Making Strategies Professional Certificate.

What you'll learn

- Project decision making considering risk aversion and utility, calculating risk premiums using quantitative project risk models.

- Risk transfer via insurance and re-insurance. What are insurance and re-insurance and why can project managers use insurance, bonds, and other financial instruments?

- How to transfer risk and reduce transaction costs? How much should the PM pay to transfer risk?

- What is Alternative Risk Transfer (ART), including insurance-linked securities, risk pools, resilience bonds, and other instruments, and how can projects make use of them?

- What are catastrophe (CAT) bonds? When and where are they most useful?

Syllabus

Week 1: Decision Making

Week 2: Risk Aversion and utility theory

Week 3: Risk Transfer via Insurance

Week 4: Re-Insurance industry

Week 5: Cat Bonds and alternative risk transfer