Risk Management (11) Flashcards
When performing a Monte Carlo simulation, a mutually ________ risk event is an event that can only occur if another risk event occurs first.
inclusive
A quantitative risk analysis method that relies on repeated random sampling to obtain a range of possible outcomes is called what type of simulation?
Monte Carlo Analysis
Under which of the following project delivery methods would the contractor’s degree of risk be the least?
Multiple prime
Risk management is a ________ activity commensurate with the scope, size, complexity, and risk profile of the project.
scalable
Under which of the following contracting methods does the CM assume the most risk?
Design-build
The most important part of the comprehensive risk management process is:
mitigation
When should risk management be applied to a project?
Throughout the life of the project
An advanced risk register usually contains additional fields with specific quantitative definitions and a formula for scoring the overall risk. Which of the following would most likely be included in this advanced risk register?
Probability score
Which of the following provisions would be considered a common risk allocation method?
- Retainage
- Insurance
- Differing site conditions
During a qualitative analysis, each risk’s potential severity is assessed. Which of following categories would represent the most likely highest impact for a major project in most category descriptions?
Serious, major, critical
(SMC)
In developing a project risk management plan, the initial major step is to:
Identify the risks
During the conception phase of a project, which of the following is the only form of assessment able to be performed?
Qualitative Analysis
The risk management plan should include:
Statement of _______
Terminology _______
Identification of _______
Mitigation ________
Performance _______
- Statement of purpose and objective
- Terminology definitions
- Identification of risk and mitigation methods
- Performance objectives
The two distinct types of risk analysis are:
Qualitative and quantitative
The CM should regularly hold risk management meetings to review the _______, a risk tracking database.
Risk register
The risk identification process should include team members with the:
most product knowledge
A thorough risk management plan helps to reduce _______ losses, lessen the frequency of ______ losses, and maximize the potential of _______.
- Reduce large losses
- Lessen the frequency of small losses
- Maximize the potential of opportunities
Purchasing insurance is one way of _________ risk.
Transferring
According to the International Partnering Institute (IPI), partnering helps to:
Reduce _____
Produce cost ______
Reduce project _______
Enhance project _______
Promote greater _________ for the entire team
Reduce claims
Produce cost savings
Reduce project delivery time
Enhance project safety
Promote greater job satisfaction for the entire project team
Partnering does not establish legal relationships, nor does it change any contractual obligations.
An integrated risk management process is a tool that CM can use to enhance project ______
Project delivery and performance
Alternative Dispute Resolution (ADR) are used in an attempt to settle claims in a timely, cost effective, and controlled method, rather than bringing a lawsuit to trial. ADRs can include:
Mediation
Arbitration
Dispute review board (DRB)
The use of alternative dispute resolution (ADR) methods help to avoid litigation. The CM can recommend ADR to the Owner as an option that results in cost benefits to the:
Owner
The most common risk allocation provisions are:
- Differing site conditions and pre-construction site conditions
- Indemnification and negligence
- Insurance and waiver of subrogation
- Contract time, including LDs, early completion incentives
- Ambiguity or conflict in contract documents
- Changes and claims
- Notice requirements
- Weather and force majeure
- Responsibility for safety
- Payment terms, retainage, pay when paid, or pay-if-paid clauses
- Suspension and termination
- Submittals and approvals
- Errors and Omissions Insurance
Design-Build (DB)
Control is the key risk factor.
Owners often feel they give up control to the DB firm through the design process, because they are not present during every decision.
Contractor has some High risk
Owner has some Low risk
CM would have Highest risk because managing the design and construction.
Design-Bid-Build (DBB)
The key risks is the design phase duration and total project cost.
Design changes/design delays/revisions will delay contractor bid/selection.
Owner and Contractor risk is even.
Contractor has medium Risk
Owner medium Risk
CM at-Risk (CMAR)
The key risk is the relationship between the CM and the architect and/or contractor.
The point during a project’s lifecycle at which CM is brought on board is of great importance.
CMs should be involved at the beginning of a project, in order for the CM to influence the design, by ensuring the design considers the Owners budget and schedule constraints.
Contractor has some Low Risk
Owner has some High Risk
Integrated Project Delivery (IPD)
The biggest risk associated with IPD is its newness to the industry. Since it is so new, its failures are not supported by case law that helps shape the behaviors of involved parties.
Like CM at-Risk, another risk of IPD is the souring of relationships between parties.
Unlike CM at-Risk, IPD intentionally selects parties based on each party’s ability and willingness to work harmoniously with one another to achieve a common goal.
A guiding principal for risk management is to allocate risk to the party that is ____
best capable of managing it
Public Private Partnership
Contractor has Highest Risk
Owner has Lowest Risk
Multiple Prime
Contractor has Lowest Risk
Owner has Highest Risk
When dealing with residual risk, use bid ______ , maintain risk ______ and assign risk _______ appropriately.
- Bid allowances in bid
- Maintaining risk visibility
- Assign risk responsibility appropriately
Risk management process includes monitoring, ____, and ____
Monitoring
Reporting
Adjusting
A continuous, integrated risk management process will help reduce unidentified _____, improve _______ between parties and maintain focus on risk objectives.
- Reduce unidentified risks;
- Improve communication
- Maintain risk objectives
Risk management is a continuous process and needs to continue throughout the _______ of a project.
lifecycle
New risks and opportunities should be _______ and other risks will be retired/______.
Identified
Retired/Resolved
A comprehensive ___________ can improve or detract from a risk management process
Risk register
A highly-detailed risk register should be housed in a ___________ in order to make make maintenance and reporting more manageable.
database system
A pre-_______ meeting allows the project team to more easily plan risks/mitigation
Pre-Mitigation
The person responsible for managing a risk and carrying out the risk mitigation measures for that risk is called the:
Risk Owner
The action item includes the targeted ____ by which the risk mitigation action should be completed.
Due Date
A post-_________ meeting allows the project team to more easily discuss risk/mitigation results
Post-Mitigation
“Risk should be owned by the party best able to manage it.”
The most important part of the risk management process
Mitigation
Risk Responses categories are: Avoid, _____, _____, and ______.
(AMTA)
Avoid
Mitigate
Transfer
Accept
(AMTA)
Opportunity Responses categories are: Exploit, _____, _____, and ______.
(ESEA)
Exploit
Share
Enhance
Accept
(ESEA)
Monte Carlo Method: A software based methodology that relies on repeated random sampling to obtain a range of possible outcomes and the probabilities that they will occur for any choice of action.
It is used to:
Understand potential risks to cost and schedule
Example of Quantitative Analysis (during which figures are estimated for severity and percentages are estimated for likelihood to better define potential risk impacts and probability)
Monte Carlo Analysis
Severity
How great an impact will the event have on the project if it does happen?
(MMSMC)
NOTE: If the risk has effect in multiple categories, use the highest ranking consequence.
- Minor: Minor severity, unlikely to occur.
- Moderate: Moderate through major severity, possible to likely chance of occurrence.
- Serious: High severity or likelihood of occurrence, lower likelihood or severity, resulting in a risk that the project team needs to consider as serious.
- Major: A risk with a combination of high levels of both severity and likelihood.
- Critical: A risk with a combination of the highest levels of severity and likelihood.
Likelihood
How likely is it that the event will happen?
(MUPLA)
- Minor: Very small chance the risk will occur.
- Unlikely: Small chance the risk will occur.
- Possible: This category is used when a risk has an equal chance of occurrence or nonoccurence.
- Likely: Large chance the risk will occur.
- Almost Certain: Very large chance the risk will occur.
Qualitative Analysis
The objective of qualitative risk analysis is to evaluate the probability and impact of each risk in the risk register to determine the top risks to the project.
* Subjective: No figures are estimated
*The matrix of likelihood and severity results help the project team to identify where to devote their mitigation efforts
Step 1: Likelihood
Step 2: Severity
Step 3: Combined Likelihood & Severity
Establish A________
Prioritize E________
Adjust Project B________ and S_____
Update the R_____R_____
Accountability,
Efforts,
Budget & Schedule
Risk Register
Benefits of a Risk Management Plan include increased confidence in project objectives (budget, schedule, quality, and scope) by creating a systematic framework that:
Minimize ___ and ___maximize
Improves decision making by _____ responsibilities
Provides information to _______
Enhances project delivery
Allocates resources
- Minimize losses and maximize gains
- Improves decision making by clarifying responsibilities
- Provides information to stakeholders
- Enhances project delivery;
- Resource allocation
For large projects, the risk manager will likely be __________, an individual with specific training and expertise in decision making and risk mitigation.
the risk specialist
For medium and small projects, with owner concurrence, the _______ may act as the risk manager.
CM
Risk Score is absent of any control measures.
The value of a risk has a formula:
Value of Risk =
Value of Risk = (Risk Event Probability) x (Risk Event Value)
Example. Risk value is $250,000 and probability is 25% = (250k x 25%)= $62,500 Value of Risk
Cost, Schedule, Quality, Safety, Public Relation, Legal/Regulatory are examples of:
Consequence categories
Very Likely, High, Medium, Low, Very Low, are examples of:
Severity categories
Consequence categories and severity categories are determined based on project _______
Project Specific data
The 2 elements of Qualitative Risk Analysis:
Likelihood
Consequences
Probable, Likely, Possible, Unlikely, Improbable
Likelihood categories
Risk identification is a team effort that starts ______ in the project lifecycle.
Early in the project lifecycle
Describe the risk management process:
Risk Planning,
Risk Identification
Risk Analysis Qualitative (Likelihood & Consequence) and Quantitative (Monte Carlo)
Risk Reponses and Mitigation Actions (Avoid, Mitigate, Transfer, Accept)
Cost of Risk
Risk Monitoring and Control (Monitor& Evaluate, Revise/Re-baseline & Update, Report & Communicating)
Risk Monitoring and Control can include:
- Monitor & Evaluate
- Revise/Re-baseline & Update
- Report & Communicate
Which Risk Analysis is based on relative frequency, degree-of-belief and subjective confidence:
Qualitative (Likelihood & Consequence)
When more information becomes available the CM moves the team from Q__________ stage (no figures are estimated) to Q_______ stage (figures are estimated).
Qualitative: no figures are estimated
Quantitative: figures are estimated
The first step in risk management strategy is acknowledging that the potential for risk consequences can be mitigated but not:
not eliminated.
Risk management strategy and objectives:
(Identify, Analyze, Mitigate, Monitor)
- Identify and assess risk
- Analyze Adequacy of Budget/Schedule
- Manage Project/Mitigate Risk
- Monitor/Review Performance
These Risks are examples of:
* Project personnel safety
* Public safety
* Landmark buildings/historical/cultural sites
* Endangered species/work restrictions for migration seasons
* Wetland permit
Environmental Risks & Safety Risks
Environmental Risks
- Landmark buildings/historical/cultural sites
- Endangered species/work restrictions for migration seasons
- Wetland permit
Safety Risks
- Project personnel safety
- Public safety
These Risks are examples of:
* Weather conditions
* Logistics and staging
* Testing and commissioning
* Contractor resources
* Unforeseen site conditions
* Scope changes during construction
* Labor disputes
Construction Risk
Design Risks
- Design, estimating, and scheduling uncertainty
- Incomplete or preliminary design development
- Scope changes
Technical Risks
- Unproven technologies that could fail
These Risks are examples of:
* Lack of adequate resources / qualified personnel to manage the project
* Regulatory changes
* Funding delays
* Poorly defined project purpose and objective
* Approvals not made in a timely manner
Organizational Risk & Political Risk
Political Risks
- Regulatory changes
Organizational Risk
- Lack of adequate resources or qualified personnel
- Funding delays
- Poorly defined project purpose and objective
- Approvals not made in a timely manner
In order to help track project risks, they should be organized using a Risk Breakdown Structure (RBS).
RBS provides a way to:
Categorize risks and improves the team’s ability to understand and effectively manage those risks
Risk is known to be inherent to major capital construction projects:
- adverse weather
- differing site conditions
- required or desired scope changes
- resource unavailability
- unanticipated environmental factors
- community pressures
How should risks be grouped:
Risks should be organized using a Risk Breakdown Structure (RBS) such as:
Organizational risks
Design risks
Environmental risks
Construction risks
Safety risks
Technological risks
Political risks
Risk is defined as an uncertain event or condition that, if it occurs, has a positive or negative effect on a project’s objectives. Such as:
Negative, Opportunity & Uncertainty
A _________ risk is an unforeseen occurrence which has the potential to negatively impact a project’s baseline cost, schedule, quality, or safety performance.
Negative risk
Negative risks impact a project’s:
- cost
- schedule
- quality
- safety
The opposite of a risk is an __________
Opportunity
An Opportunity if acted upon has the potential to positively impact a project by:
- Reducing overall costs
- Reducing overall schedule
- Improving quality
Uncertainties are known items in the project baseline that have uncertain but quantifiable impacts to the project’s:
final cost or duration
The risk identification process should include an estimate of the:
potential impact of identified risks
The risk identification process should include the development of a:
Tracking report (risk register)
A key to successful project and risk management is a well-drafted __________ with clearly defined _________ and properly allocated risks and _______.
- Well-drafted contract
- Clearly defined expectations
- Properly allocated risks and responsibilities
Categorize a risk item that is unlikely but would be critical impact to project if it occurred:
Likelihood: Unlikely
Severity: Critical
