Risk Management

Question 1

What is a risk?

Answer 1

An uncertain event or set of circumstances that, if happened, would have a negative impact on the project’s objectives.

Question 2

What is a risk assessment?

Answer 2

An assessment of the risk to identify the likelihood and severity of the risk being realised.

Question 3

How do you quantify risk using NRM1?

Answer 3

Risk is quantified based on actual probability and impact to the project, not as a % under NRM.

Question 4

What are the 4 risk categories in NRM?

Answer 4

• Employer change risk
• Employer other risk (legal, insurances)
• Design development risk
• Construction risk

Question 5

What sort of risks are covered by insurance?

Answer 5

• Design Risk - Professional Indemnity (PI)
• Construction Risk - Contractors All Risk
• Social Risk - Public Liability

Question 6

What are the 5 techniques to managing a risk?

Answer 6

Shrink
Accept
Distribute (make sure it’s to the right person)
Eliminate
Monitor

Question 7

How does risk vary between different forms of procurement?

Answer 7

• Traditional - design risk with client, often lump sum so commercial risk with contractor
• D&B - design risk with contractor, if lump sum cost risk with contractor
• Approx. quantities - cost risk with client

Question 8

How would you cost a risk?

Answer 8

Only cost those that have a cost impact.
Cost the outcome as if the risk occurred - multiply by the risk score (total risk rating) - so don’t include the full cost, only the Expected Monetary Value (EMV)

Question 9

What is Expected Monetary Value (EMV)?

Answer 9

Quantitative way to asses risk. Multiply the monetary impact by the probability of the risk occurring.

Question 10

What other Risk calculation methods could you use?

Answer 10

Monte Carlo simulation - technique that predicts the probability of multiple scenarios (uses computer software)

Question 11

What is a risk register?

Answer 11

Management document used to accumulate and track potential risks associated with a project.
Register is used to organise and categorise each risk and assign team members who will address them.

Question 12

What should be included in a risk register?

Answer 12

1. Risk reference / identification
2. Risk description
3. Probability risk rating (usually scale of 1 to 10, T&T 1 to 5)
4. Impact risk rating (severity/consequence - usually scale of 1 to 10, T&T 1 to 5)
5. Risk score (probability) = prob x impact
6. Risk response - how to mitigate its effect on the project
7. Risk owner - assigned to team member. Responsible for deploying mitigation measures and monitoring
8. Revised probability/impact/score
9. Risk status (Open / closed)
10. Cost impact, if any
11. Response
12. RAG Rating
13. Date