Risk Management Flashcards
Can you tell me what your understanding of risk management is?
Risk management is the process of identifying, assessing, and prioritizing risks followed by coordinated efforts to minimize, monitor, and control the probability or impact of unfortunate events.
How did you go about quantifying risk?
For very early estimates, where not a lot of information was available, i would use the percentage addition technique where you rake a percentage of something, i.e. for design development, 5% of total construction cost.
For later cost plans with the accompanying information I would use quantification techniques like the expected monetary values.
Can you tell me the ways of dealing with a risk?
The main ways of dealing with risk are:
Risk avoidance - completely alternative solution/change of brief in order to avoid the risk. Usually used when the risk is so serious that it is totally unacceptable.
Risk reduction - where risk in its present form is unacceptable and needs to be controlled/mitigated.
Risk transfer - risk transfer is used where accepting the risk would not give the employer best value for money, so it may better to transfer the risk to a party better able to control the risk, usually involving a premium, i.e. design development risk allowance may be included by the contractor in response to designing the scheme under a D&B project.
Risk retention - Risk retention occurs when the employer retains the risk that are not necessarily controllable, but is mitigated by setting aside contingency in the event it materialises.
Risk sharing - this occurs when the risk is not entirely transferred and the employer retains some element of the risk - i.e. pain / gain clause in a project where risk of going overbudget.
What is risk mitigation?
Risk mitigation involves developing strategies and actions to reduce the likelihood and impact of identified risks.
Can you tell me how would you approach carrying out a risk assessment when undertaking your role as a quantity surveyor?
I would propose a meeting with the project team and go through the risk register, establishing the likelihood and impact of individual risks, usually giving a score out of 5 for each.
What is the difference between QCRA an QSRA?
Quantitative Cost Risk Analysis (QCRA) and Quantitative Schedule Risk Analysis (QSRA) are both techniques used to assess and manage risks in projects, but they focus on different aspects:
QCRA is concerned with assessing the financial risks associated with a project. QCRA involves using the baseline cost estimate and adding potential cost impacts from identified risks. This is often done using Monte Carlo simulations to generate a range of possible cost outcomes and their probabilities. The result is a probabilistic cost estimate that helps in determining appropriate contingency budgets and making informed financial decisions.
QSRA deals with the time-related risks in a project schedule. QSRA involves applying a mathematical model to the project schedule, often using Monte Carlo simulations. This helps to identify the probability of meeting project milestones and the overall project completion date. The result is a probabilistic schedule that provides confidence levels for achieving specific dates, helping project teams to manage time risks effectively.
How did you decide on 3% risk allowance for non-competitive tender?
Within the London team, there have numerous examples of fitout projects that have started as negotiated tenders but were non-viable, and then when re tendered they have shown a trend of between 2%-5% construction costs savings.
How is contingency dealt with in NRM?
NRM1 deals with risk by dividing it into 4 categories, which are:
Employer change risk - risk of client requesting a change.
Design Development risk - risk of cost of design increasing as more details are known and translated into more comprehensive drawings, i.e. a concept layout might have 4 classrooms and an open plan layout, but the client may receive market intelligence that leads them to ask for 6 classrooms and this brings more cellularisation costs.
Employee other risk - this is an allowance for other client risks (i.e. early handover - if a client specifies they are amenable to early handover within a contract, the contract could finish earlier, this could leads to unexpected costs in insurance in having to take over the site earlier than anticipated).
Construction risks - an allowance for use during the construction process to provide for risks associated with site conditions (e.g. existing buildings, access restrictions/limitations, ground conditions etc).
What is risk allocation?
Risk allocation refers to the distribution of risk between parties, i.e. a client may prefer to transfer more risk to a contractor and pay a premium for this (i.e. a risk allowance such as inflation).
What is the difference between scope creep and design development?
- Scope creep is the uncontrolled expansion of a project’s scope without corresponding adjustments to time, cost or resources.
- Design development is a natural phase of design in which design develops according to the level of information received.
- One is a natural, structured phase of design. One is an unprompted process that generally leads project delays/budget overruns due to unclear project objectives or poor communication between parties.
How have you work with project teams to reduce design risk?
- I have worked with project teams to eliminate design risk by sitting on design team meetings, offering opinions and providing cost-based advice on proffered solutions, i.e. evaluating the cost difference between a suspended ceiling vs an exposed one (less ceiling cost vs increased costs in acoustics and higher rate of m2 of partitions).
What risks did you identify on a project and how did you mitigate them?
On the enabling works, I identified the risk of the client’s lengthy internal approval process leading to changes being deemed to be accepted due to not meeting the NEC’s strict timelines. I mitigated this by suggesting they request a level of financial autonomy on changes under £50k in order to ensure proper adherence to NEC governance and project progress.
How did you go about creating a risk register for a new project?
- You can re-hash an existing one from a project with similar characteristics or you can simply host a risk review meeting in which the project will leverage their construction experience to produce one, i.e. I might raise the risk of unexploded ordnance from having worked in the area before.
What is a risk register?
A risk register is a list of risks associated with a project that have been identified, evaluated and assigned to an owner and an appropriate control measure.
What is risk in the context of a construction project?
Risk in the context of a construction project refers to the potential for events or conditions to negatively impact the project’s objectives, i.e. the scope/budget/programme/quality.
What is a monte carlo simulation? How does a monte carlo work?
A Monte Carlo simulation involves running a large number of simulations to model the probability of different outcomes in a process that cannot easily be predicted due to the intervention of random variables.
An example is:
What is the difference between risk allowances and a contingnecy?
A contingency is employed to cover for unforeseen costs i.e. price fluctuations in materials due to market conditions, whereas a risk allowance is cover for a known potential cost, i.e. a design development risk allowance included in an early stage element when there are several more RIBA stages to progress through.
