For the DMO to achieve the ambitious goals that the Government has set for it, we must be one of Australia's best managers of risk. We have to identify, select, mitigate and manage the vast array of engineering, operational, commercial, financial, regulatory and other risks in our business.
As a Risk Manager the DMO Faces Some Daunting Challenges
The DMO is Australia's largest project management and engineering services organisation. It has an average strength of some 6,600 personnel, rising to 6,800 beyond 2006 (a mix of Australian public servants, ADF personnel and external service providers) and works directly with over 20,000 personnel in Australian and international industry. It operates Australia-wide, in numerous overseas locations, and in direct support of ADF operations world-wide. As the DMO operates in several international jurisdictions, its business may be impacted by the actions and decisions of numerous domestic and international companies and governments.
The DMO is engaged in a complex, high-risk enterprise, acquiring, modifying and sustaining high technology capabilities. In many cases, this involves innovative and leading-edge technology and highly complex systems integration. In such activity, the DMO is highly exposed to the risk of its partners failing to meet required deliverables, or of non-DMO related events impacting on their businesses.
The Government's and Defence's Expectations of the DMO are High
In order to maximise the effectiveness of its investment in Defence, the Government expects that the DMO will deliver and sustain the required capability at optimum cost and to tight schedules. This requires the acceptance and management of a high level of risk. It would not be acceptable for the DMO to remove risk by significantly increasing project cost and schedule. While this would ensure that the DMO nearly always met its deliverables with minimal risk, it would have a major impact on the Defence Capability Plan, through the significant opportunity cost of funds tied up unnecessarily in additional contingency funds, delayed starts for new projects, and unnecessary overlaps in the retirement of old platforms and the introduction of new ones.
Nor is it feasible for Defence to take a more conservative approach by acquiring only tested and fielded technology and platforms. This would not meet the Government's policy requirement of maintaining a technology edge within ADF capability, and would not provide adequately for Australia's defence. A more conservative approach would itself be more risky, albeit in other ways, with the risks mostly borne by ADF members.
Instead, the Government and Defence expect the DMO to manage a high level of risk—prudent, not reckless risk; risk accepted only after calculated and sensible assessments, mitigated where practicable, and in all cases, carefully monitored and intensively managed.
Inevitably, in some circumstances, the DMO or industry will fail to meet fully Defence's plans and targets. The DMO's task is to minimise such shortfalls, pick up problems early and effectively manage risk-related issues as they arise. If there were no shortfalls, the DMO might rightly be criticised for having an insufficient risk appetite. It must therefore manage the challenges, maximise the successes and continue to improve outputs and productivity.