23 - Risk Management

Question 1

962 - What is a risk in the context of a construction project?

Answer 1

An uncertain event or set of circumstances that, should it occur, will have a negative effect on the projects objectives

Question 2

963 - What is a risk assessment?

Answer 2

An assessment of the risk to identify the likelihood and severity oof the hazard being realised.

Question 3

964 - What is the difference between a quantified and a qualitative risk assessment? (2)

Answer 3

1) QUALITATIVE risk assessment provides a qualitative approach for assessing risks in terms of their relative impact / likelihood.
2) QUANTITATIVE risk assessment provides a quantitative approach for assessing risks in terms of possible money / schedule costs.

Question 4

965 - What is a Monte Carlo simulation?

Answer 4

Uses computer software to predict the risk.

Question 5

966 - What is a risk register?

Answer 5

A document listing all the risks identified for the project, explaining the nature of each risk qualitatively and quantitatively.

Question 6

967 - How do you go about creating a risk register for a new project? (2)

Answer 6

1) All members of the team come together and brainstorm as many elements of project risk as possible.
2) Usually, the project manager will collate risks identified and add them to the register.

Question 7

968 - How do you use the risk register? (2)

Answer 7

1) Continually monitor risk items identified in initial risk register and make it a working document to identify project risks for the remainder of the project.
2) Assign ‘likelihood’ and ‘impact’ scores to each risk to give an overall risk score.

Question 8

969 - What is risk allocation?

Answer 8

Risks should be allocated to those best able to manage it, in a manner likely to optimise project performance. The allocation should be clearly identified to an ‘owner’ on the risk register.

Question 9

970 - What are the risk management strategies? (5)

Answer 9

1) AVOIDANCE - action needs to be taken to ensure risk does not occur e.g. remove or alternative solution considered.
2) REDUCTION - If such a risk does occur the impact will be reduced as much as possible.
3) TRANSFER - transfer the risk through to another party or insurance.
4) SHARE - share between the parties, usually achieved through the construction contract.
5) RETENTION - nothing and keeping the risk and controlling it. Must ensure dedicated manpower and budget are dedicated to monitor and control it.

Question 10

971 - What are the benefits of risk management? (5)

Answer 10

1) Increased confidence in achieving project objectives and success.
2) Reduced cost / time overruns.
3) Team understands and recognises the use and composition of contingencies.
4) Enable decision making to be made on an assessment of known variables available.
5) Risk management workshops can facilitate team development and encourage communication.

Question 11

972 - Why is risk management needed in construction? (3)

Answer 11

1) Projects are typically complex, all have time, cost and quality targets which must be met.
2) Risk is present in all projects and surveyors are routinely involved in making decisions which have a major impact on a risk.
3) Risk management cannot eliminate risk, but techniques can be sued to reduce the impact of events that may cause failure to reach the desired targets.

Question 12

973 - What is the purpose of risk management? (3)

Answer 12

1) Risk events can be managed, uncertain events cannot. Fundamental rule of risk is to reduce uncertainties to a minimum.
2) Events have a likelihood of occurring (probability) and a consequence (impact).
3) Impossible to manage uncertainties, usual way to manage them is to include programme float and / or contingency.

Question 13

974 - How do you report and monitor risks? (3)

Answer 13

1) Using a risk register; risks are logged and tracked through the life of the project.
2) Item; threats / opportunities, likelihood / impact. Placed in a category e.g. client control, share etc.
3) Needs regular updating.

Question 14

975 - What is risk allowance? (2)

Answer 14

1) A sum included in the estimate to cover unknown expenses or unmitigated risks during the project.
2) An estimate of the cost of dealing with an individual risk should it materialise.

Question 15

976 - What are the 4 main risk allowance categories? (4)

Answer 15

1) Design development risk.
2) Construction risk.
3) Employers change risk.
4) Employers other risk.

Question 16

977 - How can the project team reduce the design risk? (4)

Answer 16

1) Use a trusted / experienced design team.
2) Transfer the risk in procurement (contractors design portion and D&B).
3) Effective management of the risk register.
4) Early contractor involvement (buildability input).

Question 17

978 - Who owns specific risks?

Answer 17

This should be the most appropriate party in the construction project that can deal with the risk.

Question 18

979 - How would you calculate your risk allowances?

Answer 18

At order of cost estimate stage this is likely to be a percentage, however in cost plans risk allowances would be applied after compiling a risk register, you should use risk analysis to identify the value of risks and chance of them occurring to work out what cost to allow for, not ust based on percentages once more information is available.

Question 19

980 - What are the problems to the QS regarding cost control with piling? Whose risk is the piling?

Answer 19

The end depth of the piles are never a certainty and the procurement route used determines who takes the risk.

Question 20

981 - How is a risk register used in the post contract phase of a project?

Answer 20

The risk register is regularly updated throughout the post contract stage (usually during progress meetings). Any new risks identified will be added to the risk register and any risks that have not materialised and are no longer a risk will be closed out. The risk register can then be used to re-allocate or give back to the client the risk allowances if they are no longer required or to obtain additional risk allowances if deemed necessary.