Risk Management

Question 1

What are the stages of risk management?

Answer 1

Identify
Analyse
Respond
Monitor

Question 2

What are the various risk response strategies?

Answer 2

Retain
Reduce
Transfer
Avoid
Share

Question 3

What are the NRM risk categories?

Answer 3

Employer Change Risk
Employer Other Risk
Design Development Risk
Construction Risk

Question 4

What is the key to good risk management?

Answer 4

Ownership of risks.
Identifying as many risks as possible, quantifying them as much as possible.
Ensuring that the party most able to take on the risk does so.
Monitoring & recording

Question 5

What happens to risk allowances if the risk does not occur?

Answer 5

If it’s a central contingency pot, this should be reduced proportionally as the project progresses. If there are allowances contained within various works packages then I would release them into the central contignency pot

There are 2 methods of reporting general risk allowances
1) General risk allowance maintenance method
2) General risk allowance progressive release method

1) Costs incurred for which no other provision was made in the budget should be set against the general risk allowance. The balance of remaining risk allowance is maintained through the project
2) Costs incurred for which no other provision was made in the budget should be set against the general risk allowance. The balance of remaining risk allowance is progressively reduced on an agreed basis, either pro-rata to completion date or pro-rata % completion of cost

Question 6

Can you give me some examples of risk in a construction project?

Answer 6

External risks: econoic, legal, political (BREXIT)
Financial risks: exchange rate, funding, inflation, solvency
Site risks: restricted site, occupied site, planning difficulties
Client risks: lack of experience, mulit-headed client, likelihood of post-contract changes, failture to take bond,
Design risks: inapproproate consultant team, poor brief, incomplete design, co-ordination
Contrcator selection: inadequate selection process
Construction: weather, buildability, H&S, availability of resources
Ground conditions, limitations in liability, sequencing, design, economics

Question 7

What is central limit theory?

Answer 7

It is a method of risk allowance qunatification based on the average of previous projects
It is a risk analysis tool which calculates a contingency pot allowance with 90% degree of certainty

Question 8

What is the difference between qualitative and quantitative risk management?

Answer 8

Quantitative quantifies risks numerically 1-5
Qualitative categorises them in descriptive terms such as low to very high

Question 9

What is an issue?

Answer 9

It is something that is occurring now. i.e. a risk that has already materialised.
An event which has either occurred or certainly accorded and will impact the forecast final cost and / or programme

Question 10

What common risks affect construction projects?

Answer 10

Pricing fluctuations post tender
Client unable to secure funding
Ground obstructions
Contamination

Question 11

How are risk registers used?

Answer 11

Used to Identify, Analyse, Respond to and Monitor risks

Question 12

How does procurement route affect risk?

Answer 12

Procurement route affect the apportionment of risk.
E.G D&B v MC
Some routes reduce risk to the client however this risk will be included in the contractor’s tender price.

Question 13

What is a risk

Answer 13

A risk is an uncertainty which have have a positive or negative effect on a project

Question 14

Risk is an uncertainty which has a positive or negative effect on a project

Answer 14

To quantify risks so we know what an appropriate risk pot would be
Also to idenfiy which risks pose the greatest threat to the scheme
Identify risk management strategies and risk champions in order to transfer / control / reduce / eliminate these

Question 15

What is the least risky procurement strategy? How do you mitigate the risks within it?

Answer 15

Not one of the procurement strategies is universally least risky, as it depends on the parameter s of each scheme. For example a D&B procurement route might be the least risky for say a warehouse with limited design needs, but the most risky for a project where vast engineering is needed (perhaps a laboratory or nuclear facility)
D&B as cost and time is fixed. Quality / design could be the risk. Mitigate it by making sure the ER documents are thorough, design to stage 3, novate design team, little changes from Ers.

Question 16

What are the qualitative risk analysis techniques.

Answer 16

Qualitative risk analysis is scoring risks based on a scale of importance. The techniques quite often use the probability vs severity technique and can use heat maps to categorise.

Question 17

What contractual machanisms protect the contractor and / or client?

Answer 17

Contractor
- insurance
- payment

Client
- Damages
- insurance
- termination

In JCT, the Relevant Events and Matters protect the contractor from serctain events outside their control. From the Client side, the liquidated damages clause protect him against loss in the event of a delay to the completion date by the contractor

Question 18

Is a risk register used to build up all your contingency / risk allowance?

Answer 18

Generally speaking, no. It can be at the outet of a project, but it isn’t advisable to keep doing throughout the life of the project as it will vary the pot too greatly. It can give you an indication of whether your risk pot is sufficient

Initially a rrisk allowance can be created using a % allocation as detailed in NRM.Then from there the risk register breaks down these risk allowances. Risk management should start from feasibility.

Question 19

Is a risk always bad? Can you name any good ones?

Answer 19

No, with risk comes reward. It is good to take risks on items which you have a large amount of control for example if you are a highly skilled contractor who specialises in building houses, you are well placed to take on a housing project.
Risk could be an opportunity, this could include provisional sums being greater than the firm cost.

Question 20

Tell me about the importance of risk registers.

Answer 20

Help to identify, analyse, monitor, manage and respond to potential hazards and risks

Question 21

Tell me about risk mitigation measures that can be implemented.

Answer 21

Retain
Reuce
Transfer
Manage

Question 22

Explain the process of pricing risks and how it feeds into the identification of a project contingency sum.

Answer 22

Look at potential cost of a risk occuring - muliple by a factor of probability and severity if it occurs = value to be carried forward into a contingency allowance

Question 23

Tell me about some theories and assessment methods that are commonly used for the quantification of risks.

Answer 23

Simplistic method - cost of risk x probability to give a value
Probabalistic method - cost x probability for best , likely , worst (must all equal to 100) = value to each risk.
Probability trees - used to establish overall risk associated with a series of related risks
Monte Carlo - computer generated simulation
Percentage addition - % of cost plan

Question 24

What current challenges is Covid and/or Brexit bringing to Risk Management?

Answer 24

How do you allow for price increases?
Flunctations in contracts
Who takes risk of covid
Material delays

Question 25

Tell me about your experience in a typical more risk workshop. What was your contribution?

Answer 25

Collate risk register
Keep records up to date of risk profiles, if risks become higher / lower probability
Ensure owners are aware & managing risks
Co-ordinate construction, design and client teams to work together to manage and mitigate risks

Question 26

You state that you “led the identification of risks at Barton Court.” Were you chairing a workshop?

Answer 26

Yes
Led identification of risks in risk workshop pre-contract - Brexit images on labour / materials, risk in dark ground, ecology risks, planning condition risks.
Also led post contract workshops around covid internally on what impacts from CLC updates & gov requirements.

Question 27

What did you do with the information from the Risk Workshop?

Answer 27

Collated meeting minutes of actions
Collated risk register and/or updated existing to reflect any changes
Action risks to be transferred to supply chain.

Question 28

What were some of the typical examples included in this risk register?

Answer 28

Dark ground below existing buildings
Contamination (coal tar) in playground
Ecology issues - birds & newts - insufficient surveys
Limited asbestos surveys - agree with client to commission contractor to undertake R&D surveys and reprice this elemt pre-contract.
S278 works unagreed

Question 29

Did you price the cost implication of these risks? How did you go about pricing them?

Answer 29

Dark ground - benchmarking
Contamination - market tested
ecology - priced surveys and B/L/W case
Asbestos surveys - priced surveys & market tested surveys
S278 - transferred risk back to client.

Question 30

How can this help you with in terms of project budgets or project cost control?

Answer 30

Helps identify risks early, quantification with liklihood & severity - allows realistic risk allowance to be included in budget

Question 31

Monte Carlo

Answer 31

Computer based - avoids bias - random sampling - probability - average of chances occuring

Question 32

Expected Monetary Value

Answer 32

cost x probability = EMV

Question 33

What is the difference between a hazzard and a risk

Answer 33

A hazard is the potentially detrimental event that could occur.
A risk is the probability and impact of that hazard occuring.