Risk Management Level 1 Flashcards
What is the definition of risk?
There are varying definitions, however essentially a risk is an uncertain event or circumstance, that if it occurs, will impact the outcome of a project.
What is the purpose of risk management?
It aims to minimise the impact of a risk to a project through 6 key stages:
- Initiate
- Identify
- Analyse
- Evaluate
- Respond
- Monitor
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 a quantitative and qualitative risk assessment?
Qualitative - assesses risk in terms of the impact / likelihood, describes / defines the risk without allocating a value to it
Quantitative - provides a quantitative approach to assessing risks in terms of possible cost or programme / schedule costs
How is a qualitative risk assessment carried out?
An assessment is made of the likelihood that the risk will occur and the magnitude of its impact - each is scored
The simplest method is to multiply the 2 scores together to give an overall score
Sometimes the risks will be weighted for risks with greater influence
How is a quantitative risk assessment carried out?
Scored / % of probability / likelihood
Likely cost or time impact
Multiply the two together to gain overall risk value
Can add all values of risks together to provide an overall risk allowance within costs
What is a Monte Carlo simulation?
A computer generated simulation used to model outcomes
The probability value for each risk is inputted
Assessment of their impact is inputted (minimum, most likely and maximum)
Software then produces graphs to demonstrate:
- probabilities of completion at various costs
- distribution of out-turn cost outcomes
- identification of risks that have the most impact on outcome
Only as good as the information inputted
What is a risk register?
A document listing all the risks identified for the project, explaining the nature qualitatively and quantitatively
Aim to capture and maintain key information on all identified risks and opportunities relating to the project
How do you go about creating a risk register for a new project?
All members of the team come together and brainstorm as many elements of project risk as possible
Usually the PM will collate risks identified and add them to the register
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 ‘likelihood’ and ‘impact’ scores to each risk to give an overall risk score
How do you report / monitor risks?
Using a risk register: Risks are logged, tracked through the life of the project
Log the threats / opportunities, likelihood / impacts, place in a category over who owns the risk
Needs regularly updating
What are the risk mitigation strategies according to NRM?
avoidance
reduction
transfer to contractor
sharing by the employer and contractor
retention by the employer
What is risk allocation?
To ensure risks are managed, each risk must be allocated to the party best able to deal with the risk - this owner should be noted on the risk register
What is the role of the ‘owner’ of a particular risk on the risk register?
Analyses the risk and determines what actions / controls should be taken
Identifies level of resources that needs to be committed to the risk action plans
Prioritise which risks are most important at which stage
What is risk allowance?
A sum included in the estimate to cover unknown expenses or unmitigated risks during the project
An estimate of the cost of dealing with an individual risk should it materialise
What are the 4 risk categories according to NRM?
Design development risk
Construction risk
Employer’s change risk
Employers other risk
How can the project team reduce design risk?
Use a trusted / experienced design team
Transfer the risk in procurement (Contactors Design Portion and D&B)
Effective management of the risk registers
Early contractor involvement (buildability input)
How are risk allowances calculated?
OCE Stage - qualitative risk analysis
CP - quantitative following the compilation of a risk register
What are the benefits of risk management?
increased confidence in achieving project objectives and success
Reduced cost / time overruns
Team understands the use and composition of contingencies
Enables decision to be made on an assessment of known variables available
Risk management workshops can facilitate team development and encourage communication
Common methods of identifying risk?
Risk workshops / brain storming sessions
Design reviews and appraisals
Project documentation
PESTEL analysis
SWOT analysis
What are common sources of risk?
Environmental / planning issues
Stakeholder interests
Finance and funding
Client leadership / management
Information quality
What is meant by risk avoidance?
Where risks have such serious consequences that they are deemed totally unacceptable
Risk avoidance measures may include:
- review of the employers brief and reappraisal of the project
- may lead to an alternative design solution that eliminates the risk
What is meant by risk reduction?
Where the level of risk is unacceptable and actions must be taken to reduce the chance of risk occurring or the impact should it occur
Actions to reduce risk many include:
- further investigation to improve information
- using different materials or suppliers to improve lead times
- using different construction methods
What is meant by risk transfer to the contractor?
Risks which are believed to be better managed or controlled by another party
For example:
- transfer of design risk to the contractor by D&B Procurement
