Risk Management Flashcards
What is a risk?
A risk can be defined as an uncertain event or circumstance that, if it occurs, will affect the outcome of a programme/project - ‘The likelihood of an event or failure occurring and its consequences or impact’ (NRM1, RICS, 2012)’
What is the definition of an issue?
Unlike risks, which are uncertain events, issues (sometimes known as trends) are usually classified as events, that are happening now or will almost certainly happen in the future
What is a risk management strategy?
Strategic risk management is the process by which the strategy of an organisation (or a strategic programme) is formally accessed for any risks that might affect them. You can deliver a project or programme on time, to budget and meet all your declared programme objectives; likewise, all your business operations could be functioning as expected.
Risk Strategy Methods?
- Risk avoidance: Where risks have such serious consequences on the project outcome that they are totally unacceptable.
- Risk avoidance measures might include a review of the employer’s brief and a reappraisal of the project, perhaps leading to an alternative design solution that eliminates the risk or even project cancellation
- Risk reduction: Where the level of risk is unacceptable, and actions are taken to reduce either the chance of the risk occurring, or the impact of the risk should it occur. Typical actions to reduce the risk can include further site investigation to improve information, using different materials/suppliers to avoid long lead times or using different construction methods
- Risk transfer to the contractor: Risks that may impact the building programme are transferred to another party able to control it more effectively, usually involving a premium to be paid. If the risk materialises, the impacts are carried by the other party
Risk sharing by both employer and contractor: This is when a risk is not wholly transferred to one party and some elements of the risk are retained by the employer. In accordance with NRM, the approach for dealing with risks that are apportioned between the client and the employer will normally be dealt with using provisional quantities, with the pricing risk being delegated by the contractor and the quantification risk being allocated to the employer - Risk retention by the employer: In the event where risks are to be retained by the employer, the appropriate risk allowance identified in the cost plan will be reserved and managed by the employer
Risk identification techniques?
More effective when it is used to identify and manage risks from the earliest project stages
- Brainstorming
- Cause and effect diagrams
- Checklists
- Lessons Learned
Risk breakdown structure
Helps to categorise risk to help determine overall risk exposure
Risk Categories
- external – uncontrollable - The event occurs due to circumstances outside of the project’s control.
- external – influenceable - The event occurs due to circumstances outside of the project’s control
- internal – client operations (controllable) - The event occurs due to action(s) taken by the client organisation.
- internal – user requirements (controllable) - The event occurs due to action(s) taken by the client and the project team
- internal – project processes (controllable) - The event occurs due to action(s) taken by the project team.
Risk ownership v procurement route
Traditional - the client owns the risk in terms of
time, cost and information as they retain control of the design and of the required quality
Design & Build - For a single-stage procurement process the contractor owns the risk in terms of design and construction.
For a two-stage procurement process there is an interim share when the client appoints a design team that is later novated to the contractor and risk of design and construction is owned by the contractor
What is a risk assessment?
An assessment of the risk to identify the likelihood and severity of the risk being released
What is the difference between quantified and qualitative risk assessment?
- Qualitative risk assessment provides a qualitative approach for assessing risks in terms of their relative impact/likelihood
- Quantitative risk assessment provides an quantitative approach for assessing risks in terms of possible money/schedule costs
What is the Monte Carlo simulation?
Uses computer software to predict the risk
What is a risk register?
A document listing all the risks identified for the project, explaining the nature of each risk qualitatively and quantitatively
How do you use a risk register?
- Continually monitor the risk items identified in initial risk register and make it a working document to identify project risks for the remainder of the project
- Assign likelihood and impact scores to each risk to give an overall risk score
What is risk allocation?
Risks should be allocated to those best able to manage it, in a manner likely to optimise project performance. The allocation should clearly be identified to a “owner” on the risk register
What are the benefits of risk management?
- increased confidence in achieving project objectives and success
- Reduced cost/time overruns
- Team understands and recognises the use and compositions of contingencies
- Enable decision making to be made on an assessment of known variables available
- Risk management workshops can facilitate team development and encourage communication
