Risk management Flashcards
What is a risk in the context of a construction project?
An uncertain event or set of circumstances that, should it occur, will have a negative effect on the project’s objectives
What is a risk assessment?
An assessment of the risk to identify the likelihood and severity of the risk being released
What is the difference between a quantified and a qualitative risk assessment?
- Qualitative Risk Assessment provides a qualitative approach for assessing risks in terms of their relative impact/likelihood
- Quantitative Risk Assessment provides a quantitative approach for assessing risks in terms of possible money/schedule costs
What is Monte Carlo simulation?
Uses computer software to predict the risk
What is a risk register?
A document listing all the risks identified for the project, explaining the nature of each risk qualitatively and quantitatively
How do you go about creating a risk register for a new project?
- All members of the team come together and brainstorm as many elements of project risk as possible
- Usually, the project manager will collate risks identified and add them to the register
How do you use the risk register?
- Continually monitor risk items identified in an initial risk register and make it a working document to identify project risks for the remainder of the project
- Assign ‘likelihood’ and ‘impact’ scores to each risk to give an overall risk score
What is risk allocation?
- 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
What are the risk management strategies?
- Avoidance - action needs to be taken to ensure risk does not occur, e.g. remove or alternative solution considered
- Reduction - if such a risk does occur the impact will be reduced as much as possible
- Transfer - transfer the risk through to another party or insurance
- Share - share between the parties, usually achieved through the construction contract
- Retention - Noting and keeping the risk and controlling it. Must ensure dedicated manpower and budget are dedicated to monitor and control it
What are the benefits of risk management?
- Increased confidence in achieving project objectives and success
- Reduced cost/time overruns
- Team understands and recognises the use and composition of contingencies
- Enable decision making to be made on an assessment of known variables available
- Risk management workshops can facilitate team development and encourage communication
Why is risk management needed in construction?
- Projects are typically complex, all have time, cost and quality targets which must be met.
- Risk is present in all projects and surveyors are routinely involved in making decisions which have a major impact on risk
- Risk management cannot eliminate risk, but techniques can be used to reduce the impact of events that may cause failure to reach the desired targets
What is the purpose of risk management?
- Risk events can be managed, uncertain events cannot. Fundamental rule of risk is to reduce uncertainties to a minimum
- Events have a likelihood of occurring (probability) and a consequence (impact)
- Impossible to manage uncertainties, usual way to manage them is to include programme float and/or contingency
How do you report/monitor risks?
- Using risk register: Risks are logged, tracked through the life of the project
- Item: Threats/Opportunities likelihood/impact. Placed in category e.g. client control, share
- Needs regularly updating
What is risk allowance?
- A sum included in the estimate to cover unknown expenses or unmitigated risks during the project
- An estimate of the cost of dealing with an individual risk should it materialise
What are the 4 main risk allowance categories?
- Design development risk
- Construction risk
- Employer’s change risk
- Employer’s other risk
