Risk Management Flashcards
What is an overview of Risk Management?
“Risk Management involves a set of procedures to mitigate risk.
There are 4 stages - IDENTIFY, ANALYSE, RESPOND, REVIEW
1) IDENTIFY - involves identifying & prioritising those uncertainties that may have an adverse effect on the project (workshops, experience, risk registers).
2) ANALYSE - involves assessing the impact of those identified risks and those most critical to the project in terms of time & cost (judgement, probability matrix, monte carlo, decision trees).
3) RESPOND - involves implementing effective strategy to mitigate the impact of each risk (accept - monitor, reduce - mitigation measures, transfer - insurance / contract, avoid - change design) - In order to effectively manage those risks that cannot ultimately be avoided it must be allocated to the party best able to manage it.
4) REVIEW - Regular reviews carried out & feedback to identify new risks & monitor existing risks upto completion”
Define risk?
Exposure to an adverse event that may result in a positive or negative effect on the project objectives
What is a risk register? Describe it’s format?
“Schedule of risks involved in a specific project. Typically include:
1) a description of the risk
2) owner
3) a risk grouping
4) a risk premium (total estimated cost)
5) A probability of occurrence (%)
6) Impact upon occurrence (£/wks)
7) risk factor (probability x impact)
8) action required
9) review date
10) status (open / closed)”
- How do you use the risk register?
- Continually monitor risk items identified in initial risk register and make it a working document to identify project risks for the remainder of the project.
- Assign levels of likelihood to each risk identified in an attempt to iron out the possibility
- What is Monte Carlo simulation?
- Monte carlo simulation is a form of probabilistic risk analysis (assesses the probability of achieving certain targets).
- Uses random sampling to assess variables that change simultaneously.
- The simulation is based on information generated by the project team who will identify a triangular distribution for each risk (optimistic / likely / pessimistic)
- What is a “Risk Event”?
- An event that can be predicted to at least some degree, generally based on historical data or experience and making a decision according to the probability of a particular event occurring.
- What is an uncertain/ unforeseen event?
- A random event that defies prediction
- Why is risk management needed in construction?
- Projects are typically complex, all have time, cost and quality targets which must be met.
- Risk is present in all projects and surveyors are routinely involved in making decisions which have a major impact on risk.
- Risk management cannot eliminate risk, but techniques can be used to reduce the impact of events that may cause failure to reach the desired targets.
- What is the purpose of risk management?
- Risk events can be managed, uncertain events cannot.
- Fundamental rule of risk is to reduce uncertainties to a minimum.
- Events have a likelihood of occurring (probability) and a consequence (impact)
- Impossible to manage uncertainties, usual way to manage them is to include programme float and/ or contingency.
- What approaches can you use to identify risks?
- Assumption analysis - High prob/ high impact, high prob/ low impact, low prob/ high impact, low prob/ low impact.
- Lists + brainstorming
- Delphi techniques (Design team, client, contractor individually identify risks prob/ impact in questionnaires, info collected and reported against)
- Can you give me some examples of risk in a construction project?
a. External risks: economic, legal, political
b. Financial risks: exchange rate, funding
c. Site risks: Restricted, occupied site, planning difficulties, access, environmental
d. Client risks: lack of experience, multi-headed client, likelihood of post contract changes.
e. Design risks: inappropriate consultant team, poor brief, incomplete design, co-ordination.
f. Selection of appropriate contractor: inadequate selection process
g. Construction and delivery risks: weather, constructability, H&S, availability of resources.
- What is a risk management strategy?
Provides a structured and coherent approach to identifying, assessing and managing risk
- What is Risk Allocation?
- Risks should be allocated to those best able to manage it, in a manner likely to optimise project performance.
- Financial allocation of risk should be done through the contract documents.
- How do you report/ monitor risks?
- Using a risk register: Risks are logged, tracked through the life of the project.
- Item: Threats/ Opportunities likelihood/ impact. Placed in a category e.g. client control, share.
- Needs regularly updating.
- What are the benefits of risk management?
a. Increased confidence in achieving project objectives and success
b. Suprises reduced cost/ time overruns
c. Team understands and recognises the use and composition of contingencies
d. Enable decision making to be made on an assessment of known variables available
e. Risk management workshops can facilitate team development and encourage communication.