Risk Management: Construction Projects

INTRODUCTION TO
RISK MANAGEMENT
FOR
CONSTRUCTION PROJECTS
Prof. Reda Abdulaal

Vice Presidency for Projects
December 2009
Objectives & Outcomes of this Presentation
Objectives
Enrich the participants with: 1- Some definitions related to risk management 2- The project risk management cycle 3- The techniques of project risk identification
December 2009
Introduction to Risk Managment for Construction Projects
Objectives & Outcomes of this Seminar
Outcomes
1- We will agree that identifying & managing project risks are so important 2- We will identify a preliminary list of risks in the construction projects at KAU
December 2009
Stages of Project Risk Management

Start here
Define types of risks
Project Risk Management
Define probability & frequency of risks
Develope risk management policies
Rank risks to management priority

4
December 2009
First of all
What do we mean?
?
Risk Management
?
December 2009 Introduction to Risk Managment for Construction Projects 5
What do we mean?
December 2009
If you didYou will get !
When you see the following caution signs; Give your comments in one word or one statement
December 2009
What is Risk?
The likelihood (probability) of occurrence of an undesirable event that will have an impact (positive or negative) on objectives
A possibility of loss not the loss itself!
December 2009
FACT
There is no human activity which does not have risks
December 2009
What we know so far?
Some definitions
Risk Management
?
What do we mean?
Risk Management
December 2009
11
December 2009
12
What is Risk Management?
Is a systematic method of identifying, analyzing,
treating, and monitoring the risks involved in any

activity or process.
Is to a methodology that minimize the risks of not achieving the objectives.
December 2009
13
Who is involved in Risk Management?

Customer .. Students End-User .. KAU Project Team .. .. .. Manager .. .. .. Contractor .. .. .. Subcontractor.. .. .. Consultants .. ZFP Suppliers .. .. .. Workers .. .. ..
December 2009
14
FACT
Risk management is communication!
December 2009
15
Some definitions
Risk Management
What do we mean?
December 2009
17
What is Project Risk?
It is an event or condition that, if it occurs, has a positive or negative effect on at least one project
objective, such as time, cost, scope, or quality.
What is Project Risk Management?
A process that assists project managers in setting
priorities, allocating resources and implementing

actions that reduce the risk of the project not achieving its objectives.
Is it important to managing project risks?
Research highlights that only one in eight information technology projects can be considered truly successful
failure being described as those projects that do not meet the original time, cost and (quality) requirements criteria the cost of project failure across the European Union was 142 billion in 2004.
http://www.bcs.org/server.php?show=ConWebDoc.19584
December 2009
19
FACT
If you act, manage and report regularly on risks and issues, you will have substantially improved your chances of project success!
December 2009
20
Some definitions
Risk Management
Cycle of Project Risk Management

Start here
Define types of risks
Project Risk Management
Define probability & frequency of risks
Develop risk management policies
Rank risks to management priority

22
December 2009
Project Risk Management STAGE #1
Risk Classification
Internal ~ External Project Life Cycle Project Requirements Project participants -------------------------------------------------------
STAGE #1
Risk Identification
Let us take some examples

Example 1
Project Risks
Internal Risks
External Risks
Owner
Designer
Contractor
Economic
Political
Natural
Delayed payment to contractor
Defective design
Construction accidents
Inflation rate
War threats
Unexpected inclement weather

Unforeseen site conditions
Unreasonably imposed tight in schedule
Deficiency in drawings
Poor quality
Currency fluctuation
Labor sticks
December 2009
24
Example 2
Project Risks
Owner
Contractor
Shared
Delayed payment on contract Changes in work Lack of scope of work Improper intervention Delays in obtaining site access
Labor and equipment availability Productivity of labor & equipment Accidents & Safety Accuracy of work Contractors incompetence
War threats Acts of God Financial failure Changes in laws Culture differences
December 2009
25
What is after Risk Identification?
December 2009
26
Risk Assessment (data collection on Probability & Impact)

Risk 1 2 3 4 5 6 7 Identification Owner's delayed payment to contractor Owner's unresonably imposed tight schedule Change of design required by owner Lack of work definition by owner Low productivity of labor & equipment Delay of material supply by suppliers Changes in laws and regulation Probability of occurance Low Medium High Magnitude of impact Low Medium High
December 2009
27
Risk Evaluation (data analysis)
Risk Control (actions to be taken)

So, What is the next step?

Fill out the two risk forms given to you and return them back within two days to the project manager
Risk Form Section #1
December 2009
31
Risk Form Section #2
December 2009
32
THANK YOU
Q&A

Risk Management: Construction Projects

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INTRODUCTION TO

Prof. Reda Abdulaal

Objectives & Outcomes of this Presentation

Introduction to Risk Managment for Construction Projects

Objectives & Outcomes of this Seminar

Introduction to Risk Managment for Construction Projects

Stages of Project Risk Management

Define types of risks

Project Risk Management

Define probability & frequency of risks

Develope risk management policies

Rank risks to management priority

Introduction to Risk Managment for Construction Projects

Introduction to Risk Managment for Construction Projects

If you didYou will get !

Introduction to Risk Managment for Construction Projects

A possibility of loss not the loss itself!

Introduction to Risk Managment for Construction Projects

There is no human activity which does not have risks

Introduction to Risk Managment for Construction Projects

What we know so far?

Introduction to Risk Managment for Construction Projects

Introduction to Risk Managment for Construction Projects

What is Risk Management?

Is a systematic method of identifying, analyzing,

treating, and monitoring the risks involved in any

Is to a methodology that minimize the risks of not achieving the objectives.

Introduction to Risk Managment for Construction Projects

Who is involved in Risk Management?

Introduction to Risk Managment for Construction Projects

Risk management is communication!

Introduction to Risk Managment for Construction Projects

What we know so far?

December 2009 Introduction to Risk Managment for Construction Projects 16

Introduction to Risk Managment for Construction Projects

What is Project Risk?

objective, such as time, cost, scope, or quality.

What is Project Risk Management?

A process that assists project managers in setting

priorities, allocating resources and implementing

Is it important to managing project risks?

Introduction to Risk Managment for Construction Projects

Introduction to Risk Managment for Construction Projects

What we know so far?

December 2009 Introduction to Risk Managment for Construction Projects 21

Cycle of Project Risk Management

Define types of risks

Project Risk Management

Define probability & frequency of risks

Develop risk management policies

Rank risks to management priority

Introduction to Risk Managment for Construction Projects

Project Risk Management STAGE #1

Let us take some examples

Delayed payment to contractor

Unexpected inclement weather

Unreasonably imposed tight in schedule

Introduction to Risk Managment for Construction Projects

Introduction to Risk Managment for Construction Projects

What is after Risk Identification?

Introduction to Risk Managment for Construction Projects

Risk Assessment (data collection on Probability & Impact)

Introduction to Risk Managment for Construction Projects