RISK

Question 1

Ascertaining Risks

Answer 1

The ability to group risks into centres or clusters helps to identify & manage risks

Question 2

Common Project Risk Centers & Clusters

Answer 2

Inadequate survey information
Poor initial briefing
Poor management
Poor funding
Poor planning for uncertainties

Question 3

Project Risk Centers & Clusters

Answer 3

Inadequate survey information
Poor initial briefing
Funding uncertainties
Poor management
Planning uncertainties
Poor specification or design
Lack of labor & materials
Contractual uncertainties
Impact from Building Regulation changes, H&S issues, economic factors, natural events & disasters

Question 4

Approaches used to identify risks

Answer 4

Workshops
Brainstorming sessions
Structured interviews
Design reviews & design appraisals
Project documentation
Risk identification form distributed to the workshop team prior to the session
Reports & desktop studies
SWOT analysis
Risk checklists
Historic information
Cause & effect diagrams

Question 5

Sources of risk

Answer 5

Environmental & planning issues
Stakeholder Interests
Finance & Funding
Client Leadership & Management Effectiveness
Management Systems
Technical Characteristics
Information Quality
Contracts & Costs
Programming & Scheduling
Human Resources
Heal, Safety, & Natural Events

Question 6

Defining risk

Answer 6

Risk is defined as an event that is known and measurable.

Residual risk is used to describe a risk that cannot be managed or mitigated - most important to manage these risks.

Uncertaninty is often associated with confusion & ambiguity

Question 7

Risk Management Process

Answer 7

6 Steps to risk management process
1 - Initiate - the process by identifying the project & its context
2 - Identify - the risks
3 - Analyse - the risks in terms of likelihood & impact
4 - Evaluate - & prioritise the risks by importance & significance
5 - Respond - or treat the risk by implementing one of the risk management strategies
6 - Monitor - & control the system & individual risks by checking, supervising & recording progress & change

Question 8

How to deal with risk

Answer 8

4 stages
Avoided
Reduce or control
Transfer or shared
Accepted or retain

Question 9

2 main industry standard practical guides to risk management

Answer 9

1 - APM - Project Risk Analysis & Management Guide

2 - ICE - Risk Analysis & Management of Projects

Question 10

4 golden rules to identify & assess risks

Answer 10

1 - The principal that the importance of risk is determined by the probability of it occurring multiplied by its likely impact.

2 - Management of the risk should be given to the person / body most capable of bearing / owning it.

3 - All risks should be regularly reviewed & updated.

4 - Level of formality & complexity of managing the risk should be determined by the complexity of the job and the size / risk maturity of the organisation.

Question 11

Risk register tools

Answer 11

Risk Registers

Risk Checks & prompt lists

Question 12

Risk severity scoring

Answer 12

The severity of a risk can be calculated by assessing / scoring the :-

Probability - Rare, Unlikely, Possible, Likely, Almost Certain

Impact - Insignificant, Minor, Moderate, Major, Critical

Question 13

Risk categories in RICS New Rules of Measurement

Answer 13

1 - Design development risks
2 - Construction risks
3 - Employer change risks
4 - Employer other risks

Question 14

Purpose of a Risk Register

Answer 14

Is to capture and maintain key information on all identified risks & opportunities

Question 15

Items typically included in a Risk Register

Answer 15

Risk title
Likelihood / probability
Date register was lats updated
Risk category
Consequence
Description
Risk owner
Action owner
Risk number & status
Impact

Question 16

Qualitative Analysis Definition

Answer 16

Risk has a Time & Cost implication on projects.

Where you describe or define a risk without allocating a number to it.

It should be carried out during the first phases of the risk management process.

Question 17

Quantitative Risk Assessment (GRA)

Answer 17

Used increasingly on major projects where it is desirable to quantify risks in terms of cost & time.
Used to inform the effect on cost or schedule

Question 18

Quantitative Risk Assessment

Answer 18

Reasons for using GRA:-
To give additional level of confidence in the projects ability to manage risk
Where clients stakeholders request it - it is becoming normal for public sector projects
Where projects are considered to be complex or high risk
Where management of contingency is key to the project
Where it builds confidence of funders or other third parties

Question 19

Some ways to respond to risk

Answer 19

Risk avoidance - items that have unacceptable consequences on the project outcome

Risk reduction - items that have a level of risk, or exposure to risk, that is unacceptable

Risk transfer - Used where accepting the risk gives the client best value for money and transfers the risk onto a third party

Risk sharing - Used in procurement methods that apply a pain / gain formula

Risk retention - Used where risk retained by the client, but should be deliberate, considered & a planned decision.

Risk needs to be monitored regularly.

Question 20

Types of risk management

Answer 20

Risk acceptance
Risk Avoidance
Risk Limitation
Risk transfer
Risk management

Question 21

To be competent at risk management

Answer 21

Be aware of the benefits to be gained and the techniques and processes used to manage risk.

Have an understanding of how risk is dealt with on projects.

Have knowledge of the nature of risk and the risks associated with your area of business.

Question 22

Risk issues that may be faced on construction projects

Answer 22

Delays
Injury or damage
Defective work
Insolvency
Cost overruns

Question 23

Client delays under JCT contract

Answer 23

Variations
Architects instructions
Delayed possession
Suspension due to late payment
Impediment, prevention or default by the employer or consultants

Question 24

JCT Specific Perils & Force Majeure

Answer 24

Specified Perils - fire, lightning, explosion, storm, blood, escape of water, earthquake - Contractual entitlement to an EOT and covered by All Risk Insurances

Force Majeure - An ‘Act of God’ - Contractor entitlement to an EOT in the case of excepted risks such as radiation, pressure waves & terrorism. Contractor not required to insure against these.

Question 25

Damages & clause number for events covered by insurance under the JCT contract

Answer 25

6. 7 & Schedule 3 - Damage to the works - fire, flood etc.
7. 1 - Injury to third parties

6.2 - Damage to third property
Employers Liability - Injury to persons working on the site.

6. 12 - Damage arsing from design problems
7. 8 - Specified Perils & Excepted Risks

Question 26

Areas to check when vetting the financial health of a potential stakeholder

Answer 26

Financial Size
Profitability
Liquidity
Solvency
Final Considerations

Question 27

Extra levels of security to commercially manage a project within JCT contracts

Answer 27

Retention - clauses 4.18 & 4.20
Retention Bond - Clause 4.19
Performance Bond - No specific reference
Parent Company Guarantees - No specific reference

Question 28

The key methods available for mitigating risk within a contract

Answer 28

Delays / Liquidated Damages.
Solvency Vetting.
Insurances - including PI.
Special Risks & Force Majeure
Guarantees & Bonds

Question 29

Risk Registers should include

Answer 29

Likelihood of the risk occurring on a scale of 1-5
Impact of risk occurring on a scale of 1-5
Risk Status - Likelihood x Impact
Actions required & comments
Action by
Close out
Cost (any financial impact of the risk occurring)