RISK Flashcards
Ascertaining Risks
The ability to group risks into centres or clusters helps to identify & manage risks
Common Project Risk Centers & Clusters
Inadequate survey information Poor initial briefing Poor management Poor funding Poor planning for uncertainties
Project Risk Centers & Clusters
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
Approaches used to identify risks
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
Sources of risk
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
Defining risk
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
Risk Management Process
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
How to deal with risk
4 stages Avoided Reduce or control Transfer or shared Accepted or retain
2 main industry standard practical guides to risk management
1 - APM - Project Risk Analysis & Management Guide
2 - ICE - Risk Analysis & Management of Projects
4 golden rules to identify & assess risks
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.
Risk register tools
Risk Registers
Risk Checks & prompt lists
Risk severity scoring
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
Risk categories in RICS New Rules of Measurement
1 - Design development risks
2 - Construction risks
3 - Employer change risks
4 - Employer other risks
Purpose of a Risk Register
Is to capture and maintain key information on all identified risks & opportunities
Items typically included in a Risk Register
Risk title Likelihood / probability Date register was lats updated Risk category Consequence Description Risk owner Action owner Risk number & status Impact
Qualitative Analysis Definition
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.
Quantitative Risk Assessment (GRA)
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
Quantitative Risk Assessment
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
Some ways to respond to risk
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.
Types of risk management
Risk acceptance Risk Avoidance Risk Limitation Risk transfer Risk management
To be competent at risk management
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.
Risk issues that may be faced on construction projects
Delays Injury or damage Defective work Insolvency Cost overruns
Client delays under JCT contract
Variations Architects instructions Delayed possession Suspension due to late payment Impediment, prevention or default by the employer or consultants
JCT Specific Perils & Force Majeure
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.
Damages & clause number for events covered by insurance under the JCT contract
- 7 & Schedule 3 - Damage to the works - fire, flood etc.
- 1 - Injury to third parties
6.2 - Damage to third property
Employers Liability - Injury to persons working on the site.
- 12 - Damage arsing from design problems
- 8 - Specified Perils & Excepted Risks
Areas to check when vetting the financial health of a potential stakeholder
Financial Size Profitability Liquidity Solvency Final Considerations
Extra levels of security to commercially manage a project within JCT contracts
Retention - clauses 4.18 & 4.20
Retention Bond - Clause 4.19
Performance Bond - No specific reference
Parent Company Guarantees - No specific reference
The key methods available for mitigating risk within a contract
Delays / Liquidated Damages. Solvency Vetting. Insurances - including PI. Special Risks & Force Majeure Guarantees & Bonds
Risk Registers should include
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)
