Risk Management Flashcards
What is risk in the context of a construction project?
- Uncertain event / set of circumstances that, should it occur, could have a negative effect on the project’s objectives
- Can be predicted to a degree, but it is known whether actuality will have positive/negative effect on budget / programme
- Risk measured in terms of likelihood (probability) and consequence (impact)
What is an uncertain / unforeseen event?
Random event defying prediction
What is a Risk Event?
Event predicted to some degree, based on historical data / experience and making decision according to probability of event occurring
What is a risk assessment?
Identifies likelihood and severity of risk being realised
Examples of risks in construction projects?
- External factors - economic uncertainty, legislation / policy change
- Financial risks - exchange rates, cost of borrowing
- Site - restricted access, planning difficulties, environmental isues
- Client - lack of experience, muulti-headed client, likelihood of post contract changes
- Design - inapt consultant team, poor team ethos, incomplete design, lack of design coordination
- Construction / delivery - adverse weather, H&S, resource availability
What is a Monte Carlo simulation?
- Assesses probability of achieving certain targets
- Computational risk analysis tool applied to situations- uncertain or variable
- Mathematical way of predicting outcomes of a situation / set of circumstances by giving a range of possible outcomes and assessing risk impact of each
What are risk analysis techniques?
- Set out to achieve better understanding of risks identified, quantify effects in terms of probability and impact
Methods:
- Subjective probability
- Decision analysis
- Sensitivity analysis
- Monte Carlo Simulation
- Intuition and experience
How do you carry out risk analysis and risk management?
- Risk management workshop organised with all design team members to identify project specific risk items
- Risk register updated during meeting, basis of risk management throughout project
- Risks continually monitored as project progresses
- Identified risks either removed / mitigation measures / risk transferred etc
What risks are there for clients working on overseas projects?
- Potential unfamiliar contract conditions / legislation (from both sides)
- Exchange rates may fluctuate - pricing uncertainty
- Different cultures - potential different working hours
Who owns risk under JCT?
Apportioned between either client / contractor
Difference between a risk and an issue?
- Issue has already occurred / is certain to occur
- Risk is not certain to occur
Difference between a threat and an opportunity?
- Threat = negative risk
- Opportunity = positive risk
How might you develop a threat into an opportunity?
i.e. if identifying a risk and the contractor offers commercially attractive offer to take on risk (La Plata - offering adding in more plots)
Quantitative vs qualitative risk analysis?
- Quantitative - more detailed evaluation, provides basis for pricing, programming, forming management strategy
- Qualitative - more basic, for initial prioritisation
Risks associated with existing buildings?
- Asbestos
- Structural
- Extent of foundations
What documents can be provided to inform contractor of this risk?
- Asbestos register and management plan
- Structural survey
What is a risk register?
- Management document used to accumulate and track potential risks within project
- Used to organise each risk, categorise and assign team members who will address
- Serves as a place to include additional info about each risk, i.e. nature of risk and how it will be handled
How do you create a risk register for a new project?
- Project team come together early in project life cycle and brainstorm potential risks associated with project
- Risk checklists ensuring most common areas of project risk are considered - useful as ‘prompts’ to facilitate brainstorming
- Usually PM collates risks and adds them to risk register
Once potential risks have been brainstormed, what is typically included on a risk register?
May include:
- Risk identification number
- Description
- Probability risk rating (likelihood of occurring)
- Impact risk rating (severity / consequence)
- Risk score (probability x impact)
- Actions required- to mitigate effect
- Risk ownership - assigned to team member/party
- Review date
- Status
What is risk management?
- Process for identifying, assessing and responding to risks associated with delivering construction project
- Establishes set of procedures by which risks are managed
- Project teams look to manage risk in more proactive manner
Why is risk management needed in construction?
- Projects typically complex, with time/cost/quality targets to be met
- Risk present in all project, surveyors can be involved in making decisions having impact on risk
- Risk can’t always be eliminated, but techniques can reduce impact of events that may cause failure of reaching desired targets
- More informed decision making
- Reduce uncertainty
Benefits of risk management?
- Increased confidence achieving project objectives - success
- Reduced likelihood of cost and time overruns
- Team understands and recognise use and composition of contingencies
- Enables decision making to be made on assessment of known variables available
- Workshops can facilitate team development and encourage communication
What happens during a risk workshop?
- Project team formed prior, facilitator appointed
- Facilitator briefs team, issues apt info about scheme and purpose and objectives of workshop- allows prep to occur prior to workshop
Operations:
- Identify risk, generate risk register
- Identify risk probability and impact
- Allocate risk items to owner
- Agree upcoming actions
- Agree dates for following workshops
Stages of risk management?
- Identification
- Analysis
- Response
- Monitor and control