Risk management - Level 1

Question 1

Tell me more about the importance of a risk register.

Answer 1

A risk register is a risk management tool generally adopted as a central repository for all risks and threats identified. For each threat or risk identified, information in relation to each risk is included, such as a description of the risk, risk consequences, impact rating, risk owner and so on.

Proper risk identification, assessment, monitoring and control are therefore a prerequisite of realistic cost estimates and of minimising the consequential costs arising from the employer’s residual risk exposure.

Question 2

Explain the process of pricing risks and how it feeds into the identification of a project contingency sum.

Answer 2

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.

These provisional quantities are however distinct from contingency or risk allowances, where a contingency is an allowance set aside or a plan as a precaution against future need.

Question 3

Tell me about some theories and assessment methods that are commonly used for the quantification of risks.

Answer 3

o Probability Trees
o Central Limit Theorem
o Monte Carlo
o Fault Tree Analysis
o Event Tree Analysis
o Percentage Addition
o Simple Method of assessment
o Probabilistic Method
o Sensitivity Analysis

Question 4

What are the typical risks that you would find on a construction project?

Answer 4

• Construction programme
• Design programme
• Cost certainty
• Control of design/quality
• Performance of design teams
• Performance of main contractor
• Performance of subcontractors
• Quality of construction

Question 5

Tell me about typical risk management strategies.

Answer 5

A typical risk-management strategy would cover:
* details of the client’s risk appetite
* a definition of who is responsible for risk management
* a description of how risks will be identified, analysed (qualitatively/quantitatively), managed and reviewed * the frequency of risk review meetings
* the software tools and techniques that will be used
* reporting forms and structures and
* if required, identification and reporting of trends, providing appropriate mitigation actions and advising on the decisions.

Question 6

In embedding a risk-management approach what following areas are likely to be considered?

Answer 6

• an understanding of the link between corporate and project requirements
• the identification of current maturity level and any gaps
• a development of the risk approach that may include training and specific tools
• the implementation of the risk-management process and
• how to improve the process and monitor its effectiveness. The level of detail at which risk management is applied should vary depending on the size and complexity of the project.