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RICS APC QS (JL) > Risk Management > Flashcards

Risk Management Flashcards

1
Q

What is risk in the context of a construction project?

A
  • 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)
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2
Q

What is an uncertain / unforeseen event?

A

Random event defying prediction

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3
Q

What is a Risk Event?

A

Event predicted to some degree, based on historical data / experience and making decision according to probability of event occurring

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4
Q

What is a risk assessment?

A

Identifies likelihood and severity of risk being realised

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5
Q

Examples of risks in construction projects?

A
  • 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
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6
Q

What is a Monte Carlo simulation?

A
  • 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
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7
Q

What are risk analysis techniques?

A
  • 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

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8
Q

How do you carry out risk analysis and risk management?

A
  • 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
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9
Q

What risks are there for clients working on overseas projects?

A
  • Potential unfamiliar contract conditions / legislation (from both sides)
  • Exchange rates may fluctuate - pricing uncertainty
  • Different cultures - potential different working hours
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10
Q

Who owns risk under JCT?

A

Apportioned between either client / contractor

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11
Q

Difference between a risk and an issue?

A
  • Issue has already occurred / is certain to occur
  • Risk is not certain to occur
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12
Q

Difference between a threat and an opportunity?

A
  • Threat = negative risk
  • Opportunity = positive risk
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13
Q

How might you develop a threat into an opportunity?

A

i.e. if identifying a risk and the contractor offers commercially attractive offer to take on risk (La Plata - offering adding in more plots)

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14
Q

Quantitative vs qualitative risk analysis?

A
  • Quantitative - more detailed evaluation, provides basis for pricing, programming, forming management strategy
  • Qualitative - more basic, for initial prioritisation
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15
Q

Risks associated with existing buildings?

A
  • Asbestos
  • Structural
  • Extent of foundations
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16
Q

What documents can be provided to inform contractor of this risk?

A
  • Asbestos register and management plan
  • Structural survey
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17
Q

What is a risk register?

A
  • 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
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18
Q

How do you create a risk register for a new project?

A
  • 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
19
Q

Once potential risks have been brainstormed, what is typically included on a risk register?

A

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

20
Q

What is risk management?

A
  • 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
21
Q

Why is risk management needed in construction?

A
  • 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
22
Q

Benefits of risk management?

A
  • 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
23
Q

What happens during a risk workshop?

A
  • 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

24
Q

Stages of risk management?

A
  • Identification
  • Analysis
  • Response
  • Monitor and control
25
Q

What are risk response strategies?

A
  • Avoidance (reduce scope or omit completely)
  • Transfer (shift consequence to third party, usually involves payment premium - guarantee, performance bond)
  • Mitigation (reduce probability i.e. use less complex processes, more testing, more stable supplier)
  • Acceptance / retention (don’t change current plan- contingency plan required in case risk occurs)
26
Q

What is risk allocation?

A
  • Risks generally allocated to those best able to manage, in manner likely to optimise performance
  • Financial allocation - achieved through contract documents
27
Q

What is the Identify, Assess, Respond approach?

A
  • Identification occurs after project and objectives have been well defined - risks can’t be effectively managed before identified, so risk identification ASAP
  • Assessment carried out to determine probability and impact of each item- qualitative approach can be undertaken
  • Response actions aims to reduce / mitigate risk impact
28
Q

How can a project team reduce design risk for employer?

A
  • Use trusted and experienced design team
  • Transfer design risk in procurement (i.e. D&B, CDP)
  • Effective, regular management of risk register
  • Early contractor involvement (buildability input)
29
Q

How do you monitor risks throughout the life cycle of your project?

A
  • Identify, monitor cost element of risks, including planned responses and financial allowance
  • Corrective action when risk materialises
  • Monitor actions of risk owner to ensure mitigation strategy deployed
  • Measure effectiveness of risk responses
30
Q

Once project risks have been identified, how do you allocate risks to a specific ‘owner’?

A
  • Individual / party best able to manage it
  • Allocation clearly identified on risk register
31
Q

What role does the QS play in risk management?

A

Within cost management:
- Managing contingency - analysing funds available and managing release when no longer required
- Provide estimates determining level of risk - aid decision making process
- Advice when bidding for work- level of risk and financial exposure to company (understand market conditions, impact of project and rates)

32
Q

What are the 4 risk categories identified in NRM for cost estimating purposes?

A
  • Employer Change
  • Employer Other (fund availability, acceleration, sequencing, special contractual arrangements)
  • Design Development (change in scope, statutory/legal/planning requirements)
  • Construction (access restrictions, existing buildings/conditions/surveys, statutory authority delays
33
Q

What is a risk allowance?

A

Monetary allowance set aside on risk register to cover costs should risk be realised

34
Q

Can risk be calculated?

A
  • To an extent- suitable provision can be made but it can’t be calculated exactly
  • Risk involves probability of something occurring and potential impact
  • Can be assessed via a number of methods - I have most experience using risk registers in workshops to identify and assess impact on cost and programme
35
Q

How would you calculate risk allowances?

A
  • Order of cost stage - simple % (unless detailed info available)
  • Cost plan onwards - risk allowances assessed based on total cost of risk (should it be realised) and probability of occurrence
36
Q

Techniques available to quantify risk?

A

Expected monetary value, monte carlo

37
Q

What is Expected Monetary Value (EMV)?

A
  • Probability x impact
  • Used to establish overall monetary value of risks within project
  • Probability - fraction / %
  • Impact - Positive/negative monetary value
38
Q

Your client wants to use a D&B contract with GMP, what are the risks?

A
  • Client will pay premium for contractor taking on cost risk
  • Any deviation from original specification can result in costly changes
39
Q

Your client is concerned about entering into contract with preferred contractor, what can be done to alleviate cost risk through contractual mechanisms?

A

Retention bond, performance bond/PCG, advance payment bond, materials off site bond

40
Q

How did you arrange a risk workshop on xxx project?

A
  • Benchmarked initial risks from similar prev projects to populate risk register
  • Liaised with wider design team to identify further risks
  • Presented populated risk register at meeting, discuss likelihood and monetary impact to calculate expected monetary value
41
Q

How did you monitor and quantify risk through design stages on one of your projects?

A
  • Initially benchmarked risk %, comparing other projects, level of design, abnormals, procurement/tender route
  • Review % at each RIBA design stage
  • Produced risk register, continuously monitored throughout
  • Drew down on contingencies when required
42
Q

How do you calculate risk at RIBA stage 2?

A
  • Benchmark against similar projects
  • Assessed design accuracy, site abnormals, procurement and tendering strategy
43
Q

What documents are included in the tender pack to inform the management of risk?

A

Pre-construction information (contains site location, operating hours, access route, evacuation plans, any asbestos surveys, contract details, permits required)

44
Q

How might you allocate risk in an NEC contract?

A
  • Clause 60.1 (compensation events)
  • Clause 80.1 (Employers other risk )
  • Optional X clauses
  • Bespoke Z clause amendments

RICS APC QS (JL) (23 decks)

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