Risk Management

What is a risk ?
Risk is an uncertain event
that may have a positive
or negative impact on the
project.
Risk management is
the process of identifying
and migrating the risks

What is a Risk?
Unknown

endeavor

Risk

Unexpected

action
Undesirable

Unpredictable

Success

Cost

Project
Constraints

Quality

Time

Cost
overrun

Risks
Poor
Quality

Project
Constraints

Delays

Why is it important?
Risk affects all aspects
of your project your budget,
your schedule, your scope,
the agreed level of quality
and so on
Increase probability of
positive event
Reduce the occurrence of
negative event

Risks in Construction
Economic Factors
Client

Social Factors

Quantity
Survey

Architect
Project
Manager

Engineer

Environmental Factors

Supplier

Contractor

Inspector`
Political Factors

Types of Risks in Construction

Physical
Financial
&
Economic

Acts
of
God

Risks
Political
&
Environ.

Const.
Related

Design

Types of Risks in Construction

Physical
Financial
&
Economic

Acts
of
God

Acts of God

Flood
Earthquake

Risks

Landslide
Fire
Wind damage

Political
&
Environ.

Const.
Related

Design

Types of Risks in Construction

Physical
Financial
&
Economic

Acts
of
God

Physical

Damage to structure
Damage to
equipment

Risks

Labor injuries
Fire

Political
&
Environ.

Const.
Related

Theft

Design

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Types of Risks in Construction

Physical
Financial
&
Economic

Acts
of
God

Financial & Economic

Inflation
Availability of funds

Risks
Political
&
Environ.

Exchange rate
fluctuations
Const.
Related

Financial default

Design

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Types of Risks in Construction

Physical
Financial
&
Economic

Acts
of
God

Political & Environmental

Changes in laws
and regulations

Risks

Requirement for
permits
Law & order

Political
&
Environ.

Const.
Related

Design

Pollution and safety

rules

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Types of Risks in Construction

Physical
Financial
&
Economic

Acts
of
God

Design

Incomplete design
scope
Defective design

Risks
Political
&
Environ.

Errors & omissions

Const.
Related

Inadequate
specifications

Design

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Types of Risks in Construction

Physical
Financial
&
Economic

Acts
of
God

Construction Related

Labor disputes
Labor productivity

Risks

Different site
conditions
Design changes

Political
&
Environ.

Const.
Related

Equipment failure

Design

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Risk Management
A systematic approach to
control the level of risk to
mitigate its effects.
The objectives of project
risk management are to
increase the likelihood and
impact of positive events,
and decrease the likelihood
and impact of negative
events in the project.

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What does it include?

Risk management planning
Risk Identification
Qualitative Analysis
Quantitative analysis
Risk Response Planning
Risk Monitoring and Control
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Risk management planning

The process of defining how to conduct risk
management activities for a project

The key benefit of this process

is it ensures that the degree, type,
and visibility of risk management
are commensurate with both the
risks and the importance of the project
to the organization. The risk management
plan is vital to communicate with and
obtain agreement and support from
all stakeholders to ensure the risk
management process is supported and
performed effectively over the project life
cycle.

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Risk management plan

Schedule risk
Cost risk
Quality risk
Scope risk
Resource risk
Customer
satisfaction risk

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Plan risk Management: tools and techniques

Analytical techniques
Analytical techniques are used to understand and define
the overall risk management context of the project.
Risk management context is a combination of
stakeholder risk attitudes and the strategic risk exposure
of a given project based on the overall project context.

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Plan risk Management: tools and techniques

Expert Judgment
To ensure a comprehensive establishment of the risk
management plan, judgment, and expertise should be
considered from groups or individuals with specialized
training or knowledge on the subject area, such as:
Senior management,
Project stakeholders,

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Plan risk Management: tools and techniques

Meetings
Project teams hold planning
meetings to develop the risk
management plan. Attendees
at these meetings may include
the project manager, selected
project team members and
stakeholders,anyone in the
organization with responsibility to
manage the risk planning and execution activities,
and others, as needed.
High-level plans for conducting the risk management
activities are defined in these meetings.
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Identify risks
Identify Risks is the process of
determining which risks may affect
the project and documenting their
characteristics. The key benefit of
this process is the documentation
of existing risks and the knowledge
and ability it provides to the project
team to anticipate events.

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Participants in risk identification activities may include the

following: project manager, project team members,
risk management team (if assigned), customers, subject matter
experts from outside the project team, end
users, other project managers, stakeholders, and risk
management experts. While these personnel are often key
participants for risk identification, all project personnel should
be encouraged to identify potential risks.
Identify risks is an iterative process, because new risks may
evolve or become known as the project progresses
through its life cycle.

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Risk Analysis
Estimating the potential impacts of risk to decide what risks to retain and what risks
to transfer to other parties

Risk Analysis
Techniques

Quantitative

Qualitative

Probability analysis

Ranking options

Sensitivity analysis

Comparing options

Simulation techniques

Descriptive analysis

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Qualitative risk Analysis

Perform Qualitative Risk Analysis is the process of prioritizing
risks for further analysis or action by assessing and combining
their probability of occurrence and impact. The key benefit of
this process is that it enables project managers to reduce the
level of uncertainty and to focus on high-priority risks.
Perform Qualitative Risk Analysis assesses the priority of
identified risks using their relative probability or likelihood of
occurrence, the corresponding impact on project objectives if
the risks occur, as well as other factors such as the time frame
for response and the organizations risk tolerance associated
with the project constraints of cost, schedule, scope, and
quality
.
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Quantitative risk Analysis

Perform Quantitative Risk Analysis is the process of numerically
analyzing the effect of identified risks on overall
project objectives. The key benefit of this process is that it
produces quantitative risk information to support decision
making in order to reduce project uncertainty.
Perform Quantitative Risk Analysis generally follows the
Perform Qualitative Risk Analysis process. In some
cases, it may not be possible to execute the Perform
Quantitative Risk Analysis process due to lack of sufficient
data to develop appropriate models. The project manager
should exercise expert judgment to determine the need
for and the viability of quantitative risk analysis.
.
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Risk Response
Risk Response Methods
Elimination

Transfer

Retention

Reduction

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Risk Response
Risk Response Methods
Elimination

Transfer

Retention

Reduction

Risk Elimination Practices

Tendering a very high bid
Placing conditions on the bid
Pre-contract negotiations as to which party takes certain risks
Not biding on the high risk portion of the contract

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Risk Response
Risk Response Methods
Elimination

Transfer

Retention

Reduction

Risk Transfer
Two basic forms.
(a) The activity responsible for the risk may be transferred, i.e.
hire a subcontractor to work on a hazardous process
(b) The activity may be retained, but the financial risk
transferred, i.e. methods such as insurance.

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Risk Response
Risk Response Methods
Elimination

Transfer

Retention

Reduction

Risk Retention
Handling risks by the company who is undertaking the project.
Two retention methods, active and passive.
Active retention is a deliberate management strategy after a
conscious evaluation of the possible losses and costs of
alternative ways of handling risks.
Passive retention occurs through negligence, ignorance or
absence of decision.

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Risk Response
Risk Response Methods
Elimination

Transfer

Retention

Reduction

Risk Reduction
Continuous effort.
Related with improvements of a companys physical, procedural,
educational, and training devices.
Improving housekeeping, maintenance, first aid procedures and
security.
Education and training within every department .

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Monitor and control risk

Risk reassessment(scheduled regularly to
identify new risk).
Monitor overall project performance

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What are the benefits?

Effective use of recourses

Promoting continuous improvement
Fewer shocks and failures
Raised awareness of significant risks

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