Risk Management Flashcards
What is a risk defined as?
An uncertain event, that should it occur, will influence the achievement of the project objectives measured in terms of likelihood (probability) and impact.
What are the risk response strategies? STARR
- Share: NRM approach – dealt with using provisional sums - pricing risk being delegated by the contractor and the quantification risk being allocated to the employer
- Transfer: transfer to another party able to control the risk more effectively, usually involving a premium to be paid.
– (e.g. transferring risk of removing potentially contaminated topsoil to contractor) - Avoidance: risks have such serious consequences on the project outcome that they are totally unacceptable – may require removal or alternative solution considered/different design
– (e.g. not building on potentially contaminated topsoil) - Reduction: If such a risk does occur the impact will be reduced as much as possible. Alternative solutions: need to ensure adequate man power and budget are dedicated to mitigating the risk.
– (e.g. carrying out site investigations to better understand a risk, using different materials/suppliers to avoid long lead times or using different construction methods) - Retention: Noting and keeping the risk and controlling it. Must ensure dedicated manpower and budget are dedicated to monitor and control it
How does NRM classify risk? (NRM1 Risk Categories)
- Design Development – allowance for design development, changes in estimating data, third-party risks (e.g. planning requirements, legal agreements, covenants, environmental issues and pressure groups), statutory requirements, procurement methodology and delays in tendering.
- Construction – for the risks associated with site conditions (e.g. access restrictions/limitations, existing buildings, boundaries, and existing occupants and users), ground conditions, existing services and delays by statutory undertakers.
- Employer change - change in scope of works (both design and construction)
- Employer other – e.g. early handover, postponement, acceleration, availability of funds, liquidated damages or premiums on other contracts due to z provision of accommodation, unconventional tender action and special contract arrangements
What are the general risk categories as per the RICS guidance note – management of risk?
- Political and business (occurrence of one of the below having adverse effect on business)
- Benefits – failure to deliver performance expected
- Consequential
- Project
- Programme – not just individual projects – funding, organisational issues etc.
What is the difference between quantitative and qualitative risk analysis?
- Qualitative - measures both the likelihood of a specific risk event occurring during the project life cycle and the impact it will have on the overall schedule should it hit (subjectively)
- Quantitative – builds upon qualitative by using verifiable data to analyse the effects of risk in terms of cost overruns, scope creep, resource consumption, and schedule delays.
As a QS, how do you manage risk?
I take a proactive role in the whole Cost Management Process:
* Setting and managing contingency fund appropriately
* Undertake risk analysis to ensure accuracy of funds available & released when no longer required
* Assist in decision making process by providing estimates with a degree of certainty & carry out simulations to determine level of risk
* Provide advice when bidding for work on the level of risk & financial exposure to the company / understanding of market conditions & impact on the project & rates,
* Regular cost updates, forecasting and forecasting against AFP
* Option appraisal
* Following the early warning process
Give an example of a risk that you have managed
On the Woodford DDS project, there was a risk that as a part of the site investigations, an additional trial hole would be required outside of the site boundary and in the nearby road. To account for this, I engaged with the consultant’s design team to understand the likelihood that this would be required and began building up a price from first principle.
This entailed accounting for labour, plant and materials that would be required to deliver the trial hole based on the suggested size as well as the cost of engaging the local council and arranging for traffic management. An expected monetary value could then be derived. I suggested that the risk should be accepted as a Cadent risk.
What is contingency?
A sum included in the estimate to cover unknown expenses of unmitigated risk during the project.
What is the process for drawing down on your risk allowance?
At Cadent, there is a section in the monthly forecasting for explaining any variances to the risk allowances. An internal EWN form would also be sent within the business to ensure that the Client had oversight of any major changes and can act accordingly.
How does the NEC4 ECC allocate risk?
Via Core Clause 8 – Liabilities and Insurance
How is risk apportioned on the 4 main forms of procurement in terms of design and construction?
- Traditional - Contractor responsible for time & cost. Client risk relates to design.
- D&B - Contractor retains time, cost & design risk.
- MC/CM - Time, cost & design risk generally remains with the Client
Why is it important to quantify risk?
- to build a risk allowance that could be part of a project contingency
- where clients need to report upwards in their organisation or to a third party
- where the project forms part of a larger programme of projects
- to motivate people into following through management actions
- where clients insist on it as part of their procedures or have capped funds
- where it is desirable to link risk to contingency
- where it is required or provides comfort to funders or other third parties.
What is meant by P10, P50 and P90 ranges?
These are statistical confidence levels for an estimate (typically used in Monte Carlo)
* Proved (P90): The lowest figure. It means that 90% of the calculated estimates will be equal or exceed P90 estimate.
* Median (P50): This is the median.
* Possible (P10): The highest figure, it means that 10% of the calculated estimates will be equal or exceed P10 estimate.
What is Expected Monetary Value? (EMV)
Probability of occurrence x impact to project if occurs
What are the headings in your risk register?
Cadent
* Risk Title and Description
* Status
* Quantitative Assessment - % Probability, likely/min/max cost and time impacts, EMV
* Dates – risk to materialise and end
* Risk owner and response strategy
