Project Management and the
Relationship to Corporate Governance
by Andrew Willis and
Michael Porier
July 18, 2002
Company Background
Protiviti is an independent business and technology risk consulting firm that specializes in information security,
technology and operational risk consulting, internal audit, and financial and commodity risk consulting.
Our Risk Consulting services trace their origins back to 1989, as many of our team members were formerly
aligned with the Andersen professional services firm. From Andersen, we bring with us thirteen years of
investment in tools, methodologies, and people which has prepared us to provide a broad spectrum of services
across all industries. We have already made the investment and our clients are the beneficiaries of our
cumulative experiences.
Risk Consulting
Approximately 800 Professionals
Representing 75 Different Universities,
Possessing 40 Representative Degrees,
and 50 Professional and Technical
Certifications
Technology
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Business Process
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Internal Audit Services
Trading and Marketing
Treasury Operations
Environmental
Supply Chain Management
Construction Risk Management
IT Internal Audit
IT Process Assessment
Enterprise Security
Application Controls and Effectiveness
Business Continuity Planning
Project Risk Management
Financial & Commodity
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Deal Structuring & Accounting
Market Risk Management
Risk Systems
Risk Measurement & Valuation
Our vision at Protiviti is to be the premier provider of independent risk consulting services. Our clients
immediately gain access to over 50 partners and more than 750 professionals across the United States, which
represent a national pool of resources unfettered by restrictions in scope of practice or independence conflicts.
We have 13 partners and over 175 professionals in the Houston and Dallas offices, who possess deep
knowledge and experience providing unique solutions to clients from all parts of the corporate value chain. We
enjoy critical mass in key offices and across key industries, and our strategic alliances enhance our range of
solutions.
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Company Locations
We have hundreds of senior professionals in 25 major markets with unparalleled experience gained from
working with world-class global companies.
Atlanta, GA
Chicago, IL
Cincinnati, OH
Cleveland, OH
Dallas, TX
Denver, CO
Ft. Lauderdale, FL
Houston, TX
Kansas City, MO
Los Angeles, CA
Milwaukee, CA
Minneapolis, MN
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New York City, NY
Orlando, FL
Philadelphia, PA
Phoenix, AZ
Pittsburgh, PA
Sacramento, CA
Salt Lake City, UT
San Francisco, CA
San Jose, CA
Seattle, WA
St. Louis, MO
Tampa, FL
Vienna, WA
“I cannot imagine any condition which could cause this
ship to flounder. I cannot conceive of any vital disaster
happening to this vessel.” E.J. Smith, Captain of the Titanic
Trends in Project Management Today
Project Management Statistics
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•
•
•
31.1% of projects will be cancelled before completion
52.7% of projects will cost 189% of their original estimates
16.2% of software projects are completed on-time and within budget
9.2% of projects within large companies are completed on-time and
within budget
• 222% of the original estimate is the average time overrun on projects
• $145 billion will be spent on unsuccessful projects
Reasons for Project Failures
Poor project
management
skills
32%
Lack of
effective
Source: Michael O’Malley
communication
Website: http://www.smu-training.com
Article Title: Project Failures Spur Management Back to Basics
20%
5
Inability to cope
with technology
14%
Improperly
defined
objectives
17%
Unfamiliar
scope
17%
Project Success by Size (in dollars)
According to a study performed by The Standish
Group, the chance of a successful project decreases as
the project size increases.
100
Project Success Rate (%) )
80
60
40
20
0
Less than
$750K
$750K to
$1.5M
$1.5M to $3M
$3M to $6M
Project Size (in dollars)
Source: Standish Group
Website: www.standishgroup.com
Article: CHAOS: A Recipe for Success
6
$6M to $10M
Over $10M
Examples of Failed Projects
Project
Objective
Create a more
efficient billing
system
Reasons for Project
Failure
Result
Inconsistent leadership
and constant scope
expansions
Completed project, but
overdue and millions of
dollars over budget
Implement an ERP
system
Change in deadline
12% drop in sales ($150
million) during the quarter
after the system went live
Convert to a new
order entry system
Inability to operate new
technology
40% increase in operating
costs and a loss of franchises
to its customers
Other potential impacts of poor project management
• Business performance/return on investment will suffer
• Loss of confidence in the organization’s ability to successfully complete projects and
causing future initiatives to suffer
• Loss of customers
• Legal repercussions
Source: www.fortera.com/44NFailchart.pdf
Article Title: Top 10 Corporate Information Technology Failures
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What is Project Management?
Project Management
“Project management is the application of knowledge, skills, tools, and
techniques to project activities in order to meet or exceed stakeholder needs
and expectations from a project. Meeting or exceeding stakeholder needs
and expectations invariably involves balancing competing demands among:
•Scope, time, cost, and quality
•Stakeholders differing needs and expectation
•Identified requirements (needs) and unidentified requirements
(expectations)”
Source: Project Management Institute - Project Management Body of Knowledge
Page: 6
8
Project Risk Management Framework (source)
The PRM framework
illustrates Protiviti’s approach
to managing project
management risk. Our
methodology, depicted by the
outer circle, is a continuous
process of risk management
activities targeted to
minimizing the potential
impact of risks to the success
of a project.
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Confidential: This document is for your company's internal use only and may not be distributed to any third-party.
Project Management Component Processes
A stimulus such as a
business need, project
plan, or market
demand will spark
the need for another
project or project
phase to begin.
During the initiating
processes, the
organization realizes
and commits to this
need.
In the planning stage
of the project or
phase, a plan is
established to address
the needs of the
project and to reach
the project objectives.
Source: Project Management Institute - Project Management Body of Knowledge
Page: 29
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Executing involves
gathering the
necessary resources to
perform the project
plan activities and the
actual execution of the
plan.
Controlling processes
primarily involve the
monitoring of project
progress to identify
significant variances
to prevent problems
from arising.
During the closing
processes, final open
items will be resolved
and a formal
acceptance of the
project or phase
completion will occur.
Project Risks
These four risks are inherent in any project and within all of the 5 processes of the
project life cycle:
Communication
Resources
Scope
Change
Project Management
Risk
Business Integration
Project Support
Quality
Project Management Office
Time
Cost
Design
Planning
Strategic alignment
Testing
Project Life Cycle
Development
Rollout
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Implementation
Competition
Project environment
Stakeholders
Culture
Business environment
Project Elements
Strong control environment
ensures that project risks are
mitigated and the primary
goals of quality, time, and
cost are achieved.
Project management is the
balancing of quality, time,
and cost. It is difficult to
achieve all three goals on
one project.
Is the project
being completed
in a timely
manner?
People
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Is the project
satisfying the needs
for which the project
was undertaken?
Process
The foundation of a
project control
environment is
comprised of the
people, processes,
and technology.
Tools
Is the project
being completed
within the
approved budget?
PRM Methodology
Steps to ensure a strong project
management framework. These
steps should be part of a
continuous improvement
methodology to ensure that
projects continue to deliver needs
and expectations to stakeholders.
Through these methodologies, we will assist your
organization:
•Evaluate your current risk management process,
•Target areas for improvement,
•Enable change, and
•Perform ongoing monitoring and improvement.
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Do you Need PRM?
Is there a high dependency upon technologycentric projects to support or drive business
strategy and key business processes?
Does the implementation of major new systems
or products have significant impact on business
strategy?
Does the introduction of unproven or unfamiliar
technologies have strategic business impact?
Is your infrastructure highly complex,
fragmented and/or immature?
Have you experienced significant personnel
turnover, open positions, and gaps in key
technical and management positions?
Have you experienced significant or rapid
changes in the business?
Does management have concerns about cost
containment and ROI?
Has management been dissatisfied with project
management issues?
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What is Corporate Governance?
•
“Corporate governance is about promoting corporate fairness, transparency, and
accountability.” – J. Wolfensohn, president of the World Bank. July 21,1999
•
“Corporate governance deals with the ways in which suppliers of finance to
corporations assure themselves of getting a return on their investment.” – Journal
of Finance, 1997
Directors Company Mgmt Shareholders Stakeholders
Directors Company Mgmt Shareholders Stakeholders
Fairness
Responsibility Accountability
Accountability Transparency
Fairness
Responsibility
Transparency
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Why Bother with Governance?
Provides assurance that management is acting with integrity
Creates competitive advantage
Reduces fraud and malpractice
Shareholder protection
Affects valuation
Compliance with laws and regulations
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Governance Framework
Shareholders
Audit Committees
Board of Directors
Executive
Management
Management
Employees
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Other Stakeholders
IT Steering
Committee
Perception vs. Reality
Perception
• IT projects deliver quality, are on
time and within budget
• Harness and exploit IT to return
business value
• Leverage IT to improve efficiency
and productivity while managing
risks
Reality
• Business losses/damaged
reputations and lost market
position
• Enterprise and core process
inefficiencies due to IT
• Failure of IT initiatives to bring
innovation or deliver promise
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Enterprise Governance
Corporate Governance
Traditionally includes:
Duties of Directors/Leaders
Legislative/Fiduciary Compliance
& Control
Ethics & Integrity
Business Operations, Risks &
Control
Financial Accounting & Reporting
Asset Management
Corporate Governance focuses
on the enterprise’s:
Future Health
Strategy
Accounting Management
Risk Management
Manage Critical Events
Trustee Financial Resources
Source: Ron Saull, IT Coordinators Association
Presentation Title: IT Governance in Use
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IT Governance
Covers:
Enterprise/IT Objectives
Legislative/Fiduciary
Compliance & Control
IT Resources
Information
Knowledge Management
Systems
Communications
Net Centric Technology
IT Operations, Risks, &
Control
e-Commerce/EDI/EFT
IT Asset Management
IT Governance focuses on IT’s:
Alignment with enterprise objectives
Use of IT resources
Management of IT related risks
Value delivery
Key issues confronting project sponsors
• Do not receive adequate
decision support information
Status reports do not support management
Minimal to no third-party assessments
• Projects tend to be initiated
under irrational assumptions
In an effort to “do the deal” significant
warning indicators are often overlooked
Political agendas skew decisions
• Project financing has not
adequately allocated commercial
risks
SPE’s and other finance mechanisms
capitalize projects
•Underlying data does not have
transparency or integrity
Project management and control systems
are not effectively operating
Processes and internal controls inadequate
•Public Confidence
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