Pergamon Internattonal Journal of Project Management Vol. 15, No. 5, pp.

297-312, 1997
1997 Published by Elsevier Science Ltd. All rights reserved
Printed in Great Britain
0263-7863/97 $17.00+0.00

PII: S0263-7863(96)00082-8

Practices, barriers and benefits of

using risk management approaches
in selected Hong Kong industries

V M Rao Tummala*, H M Leung, C K Mokt, J F Burchett~ and

Y H Leung
Department of Manufacturing Engineering, City University of Hong Kong, Kowloon, Hong Kong

This paper summarizes and compares the current practices, the benefits realized and the barriers
faced in using risk management approaches based on the results obtained by conducting surveys
in building services cost estimation, public transportation and electricity supply industries in
Hong Kong. A few recommendations of overcoming the barriers in successfully implementing
and using risk management techniques are also suggested. 1997 Elsevier Science Ltd and
IPMA
Keywords: risk management,practices, barriers, benefits, selected industries, Hong Kong

1. Introduction assess the risks involved and risk adjustment is sometimes

Project management operates in a complex and dynamic
environment that is constantly confronted with various
risks and uncertainties. It is therefore imperative that
project managers should identify all potential risk factors
affecting a given project, enumerate the consequences and
their severity, and assess their probabilities in order to
develop response actions to control and manage the
identified risks. The risk management approaches devel-
oped by Hertz and Thomas, and Hayes et al., provide
effective frameworks to achieve this purpose.l'2 A number
of successful studies reported in the literature support that
risk management can increase quantitative information and
knowledge on the risks inherent in a project and would lead
to better decision outcomes. 3-8
In practice, risk handling methods can be considered to
fall into two categories: simple risk adjustment and
probabilistic risk analysis techniques. The simple risk
adjustment techniques are based on intuitive and subjective
adjustments to either the underlying cash flows or the
evaluation models, e.g. increasing the discount rate or
reducing the playback period for higher-risk projects. They
are easy to understand and apply, but they usually do not
*On leave from the College of Business, Eastern Michigan University,
Ypsilanti, MI, USA.
~'Currently employed as Budding Services Engineer m Architectural
Services Department,Hong Kong Government,Hong Kong.
:~Currently employed as Semor Transmission Contracts Engineer, China
Light and Power CompanyLimited (CLP), Hong Kong.
Currently employed as Mechanical Engineer, Mass Transit Railway
Corporation (MTRC), Hong Kong.
made without real understanding of the inherent risks. Also,
as stated by Ho and Pike, the simple risk adjustment
methods could lead decision makers to accept decisions
against their original attentions if the assumptions are not
clearly understood. 9 Furthermore, they rely heavily on
single point estimates; consequently it is difficult to capture
large uncertainties surrounding the project by using these
single point estimates.
In contrast, the probabilistic risk analysis techniques
require rigorous analysis and are based on comprehensive
awareness of the risks associated with critical variables and
their probabilities, and provide more quantitative informa-
tion about the risks inherent in a project. Some authors
assert that the greater the understanding of the precise
nature and level of the risk, the better the decision and
ultimately, the firm's performance. 1"8 In-depth studies of
firms using these methods suggest that management relies
heavily on risk analysis techniques for evaluating complex
strategic projects, and that corporate success can be partly
attributed to the use of such approaches. Probabilistic
analysis techniques include sensitivity analysis, basic
probability analysis, decision-tree analysis, Monte Carlo
simulation, and capital asset pricing method.
However, some of the literature studies and surveys
reported indicate that probabilistic risk analysis is not
widely accepted in capital investment projects. As pointed
out by Hall, many managers refuse to use risk analysis
because there is little evidence that use of risk analysis can
improve corporate profitability. 1 In a survey of financial
modeling users in the UK, McGregor found that only about
10% of the firms used probabilistic risk analysis in making

297
Practices, barriers and benefits of risk management: V M Rao Tummala et al.
investment decisions. He further pointed out that the major
problems in building risk-analysis models were lack of
sufficient data, difficulties in obtaining probability esti-
mates and understanding probability concepts, correlation
assumptions between variables and across time, and
understanding of the output information. 11
Another survey of large-sized firms in UK was
conducted in 1989 by Ho and Pike to determine the extent
and variety of techniques used in risk analysis for capital
budgeting. 12 The results of this survey show no evidence
that the adoption of probabilistic risk analysis can lead to a
significant change in relative capital expenditure and
profitability within firms. Ho and Pike further pointed out
that the major reason for the lack of acceptance of risk
analysis is that it is marred by some inherent and
implementation problems still to be resolved. Indeed, the
findings revealed that the limitations frequently found in
the application of risk analysis are obtaining input
estimates, and managers' inadequate understanding of the
risk analysis approach. The major problem is that managers
simply lack the required knowledge to apply formal
technique, or are unable to find an approach which is
systematic, easy to apply and cost effective. 12
More recently in 1994, three surveys were conducted in
Hong Kong industries to examine the local practices of risk
management. The industries include building services,
electricity supply, and public transportation. 13-15 The
survey in building services industry was conducted by
Mok to examine the current practices in preparing building
services cost estimates. 13 Similarly, the survey in the
electricity supply industry was conducted by Burchett to
examine the risk management practices in capital budget-
ing. 14 The survey in the public transportation industry is
related to using risk management approaches in project
appraisal and selection which was conducted by Leung. 15
The electricity supply industry survey was conducted
worldwide including Hong Kong while the other two
surveys were conducted with respect to Hong Kong
companies. The reason for the worldwide survey is due
to the fact that there are only two utility companies in Hong
Kong and one of them did not participate in the survey for
confidentiality reasons.
The purpose of this paper is to provide a comparative
analysis of the three surveys findings to obtain an insight
into the understanding of the current risk handling
practices, and find out the difficulties and problems to
successful implementation of risk management approaches
in the selected Hong Kong industries. In addition, some
possible suggestions to bridge the gap between theory and
practice are also discussed. Since Hong Kong is one of the
dominant global competitive partners, the results of the
analysis would be beneficial to Hong Kong and to its global
partners in terms of understanding the practices, the
benefits realized and the barriers faced in using risk
management approaches, and developing strategies to
overcome the identified barriers. The words risk analysis,
probability risk analysis, risk management and risk
management process are used interchangeably in this paper
to mean the same approach.
Since the three surveys were conducted at the same time,
Burchett, Leung and Mok used a survey instrument which
is similar to the one used by Ho and Pike, but tailored to
satisfy their survey purposes so that a broader under-
standing of risk management practices, and the problems
and difficulties faced in applying risk management
approaches can be obtained among the selected Hong
298
Kong industries. ~6 Also, this would enable us to develop a
comparative analysis of the three industries. Before we
develop a comparative analysis, we shall first summarize
the survey results of each industry with respect to current
practices and their reasons, barriers faced and benefits
realized of using risk management approaches.
2. Risk management practices for cost estimation
in building services
In order to examine the current practices adopted, and to
obtain an insight into the understanding, use and applica-
tion of risk management process in preparing building cost
estimates, Mok conducted a survey involving 120 building
service engineers who are responsible for cost estimation in
the Building Service Branch of Architectural Services
Department, Hong Kong Government, and eleven private
consulting firms who are known to do the work for Building
Services Branch. 13 Of these, 52 completed questionnaires
were returned with a response rate of 43.3%. In fact, 48% of
the respondents are from Building Service Branch and the
other 52% are from private firms. 13 The job titles of the
respondents covered a wide range and varied from assistant
engineer to director, even though the majority of the
respondents were project engineers or engineers. Over 57%
of them have more than 5 years' experience in preparing
cost estimates which indicates that the respondents are very
experienced in preparing building services cost estimates.
About 22.4% of the respondents worked for small finns
with less than 100 employees and 61.2% were from medium
firms with 100-5000 employees. The remaining 16.3%
worked for large firms with 5000 or more employees. From
these characteristics of the respondents and their firms, it
can be assumed that the sample provides a realistic profile to
represent the general practices of cost estimation currently
used as well as the general views on the use of risk man-
agement process within the Hong Kong building services
industry.
2.1. Current practices of building services cost estimation
Figures 1-3 summarize the current building services cost
estimation practices adopted by the respondents. The
respondents were asked on a six-point scale (Never= '1',
R a r e l y = ' 2 ', L i t t l e = ' 3 ' , Sometimes='4', O f t e n = ' 5 ' and
Very Often = '6'), the extent to which the responding firms
use each of the risk analysis techniques. With respect to
deterministic vs. probabilistic techniques used, the respon-
dents in the building services industry indicated that 53%
use deterministic methods often or very often (see Figure
1). The probabilistic techniques are used by about 19% of
%
20 40 60 80 100
Deterministic
Methods
Probabilistic
Methods
I Sometimes [ ] Often [ ] Very Often ]
Figure 1 Cost estimation methods used
 Practices, barriers and benefits of risk management." V M Rao Tummala et al.
0 20
Single-figure (most likely)
estimates
Three-point estimates
Range of estimates with
the probabilities
Figure 2
I 1 Sometimes [ ]
Presentation of cost estimates
the respondents often or very often. Thus the deterministic
techniques are found to be the most popular techniques that
are used by building services engineers in preparing
building services cost estimates.
As shown in Figure 2, the use of single-figure (most
likely) estimates is found to be the most popular method
relative to the use of three-figure or range of estimates as
the respondents indicated their use often or very often with
75%, 6% and 9%, respectively. Similarly, the use of
subjective or intuitive assessment (with 47% indicating its
use often or very often) is found to be more popular than
the use of sensitivity analysis (with 8%) or risk manage-
ment process 9with 2%). Thus the sensitivity analysis and
risk management process are rarely used in assessing risks
and uncertainties in building services cost estimation.
2.2. Reasons for using risk management
Four major categories of projects like government vs.
commercial, size, technical complexity and contract types
are considered in examining the reasons for using risk
management approaches. Within each of these categories,
several subcategories are considered as shown in Figure 4.
Respondents were asked to indicate how much they agreed
or disagreed with each item (Very Unimportant='l',
Somewhat Unimportant = '2', Neither Important Not Un-
important= '3', Somewhat Important='4' and Very Im-
0 10 20
No explicit allowance
Subjective or Intuitive
assessment
Sensitivity analysis
Risk Management Process
I t Sometimes [ ] Often
Figure 3 Methods used to assess risks and uncertainties in cost estimation
40 60 80 1 O0
Often [] VeryOften I
p o r t a n t = ' 5 ' ) . The respondents indicated that both
government and commercial projects as important reasons
for using risk management approaches with 82% and 66%
of the respondents, respectively, indicating somewhat
important to very important. Of these two, they felt
government projects as the more compelling reason for
using risk management approaches.
Over 96% of the respondents agreed that risk manage-
ment is somewhat important to very important for projects
of costs above HK$100 million. Also, it is interesting to
observe that the perception of using risk management is
increasing with the size of the projects. About 94% of the
respondents believed that risk management is somewhat
important to very important for 'very complex' projects.
Similarly about 88% indicated the use of risk management
for 'complex' projects. As for contract types, about 76%,
65% and 68,5 of the respondents viewed that using risk
management as justified for "Cost Reimbursement",
"Schedule of Rates" and "Approximate quantities" types
of contracts, respectively. As in the case of size of projects,
the use of risk management approaches is perceived to be
more important as the technical complexity of projects is
increasing. The same is true for contract types in terms of
complexity.
Simple correlation analysis was conducted to assess the
relationship between the characteristics of a project and
30 40 50 60 70 80
[ ] Very Often
299
Practices, barriers and benefits of risk management." V M Rao Tummala et al.

Tvpe of Proiect
l [~ SomewhatImportant [ ] Very Important

Government project ,~,~\\.\\\\\\\\\\\"

\\~. ~'%\\\\\\\'%\\\~ ~\\\~%.\\XXX\'\\'~.,%X\\\\\.\\\\",.\\\'~~\~\\NN\~\\NX%~ I
1 I
Commercml project x~N~\~\\\\\\\\\~ x%.\\\\~\\\\\\\~ ~\\\\\\\\\\\\\\\"~ ~\\\\\\\\\\\\\\'~ ~\'~1 ]

SiZe of Project
Below HK$10 mdhon ~\\\\\~\\\\'\\~.

HK$10 - 50 mdhon ~\~\\\\N~\\N~\\~

i

HK$ 50 - 100 mdhon ~\\\\\N~\\\~\\'~

Above HK$100 million ~\\\\\\\.\~\~ t

Technical C o m p l e x i t y
Very complex ~.\~\\\\\\\\\\~
1 I I
I
Complex ~\\\\\N\\N\\\\'N ~,,NN\N~\~\\"N~ N~\~NNN
Average
Simple ~\\\\\\N.\\\\\\\\~, ~\\\~\XXNNN\\\\\~~\\\%.X~ I

Very simple ~\~\\\\~ ~\\%,\%.\\\\\\"~1 I

Contract Tvnes
I
Type B ,,%,\\\\\'%\\\\\\'~
1
Type C ~.\-~,,\\\~.\\\\\'~ ~\\\\\\XX~\\\~\'~~\X\\\X\\\\\\\\~ ~\\\\\~\\\%,X\\~~\\\\\\\\\\~ ]
I I
Type D ~\\~\\~\~\\"~
I I
Type E .~\\\\~N,\\\\\\\\\~

10 20 30 40 50 60 70 80 90 100
%

T y p e A : Lump sum contract based on drawings and specification

T y p e B : Lump sum contract based on bill of quantities
Type C : Measurement contract based on bill of approximate quantities
Type D : Measurement contract based on schedule of rates
Type E : Cost reimbursement contracts

Figure 4 Reasons for using risk m a n a g e m e n t (budding services)

different risk management methods used. We expect that asked the extent to which "inherent problems" and "bar-
the characteristics of the project are major factors that riers to implementation problems" were encountered on a
would affect what type of risk management method should five-point scale (Strongly D i s a g r e e = ' l ' , Disagree='2',
be chosen. However, the results of the correlation analysis Neutral = '3', Agree = '4' and Strongly Agree = '5'). The
indicated that there is no strong relationship between inherent problems include: 13
different risk management techniques and characteristics of AI: Difficulty in obtaining input estimates and
a project. ~3 In the current practices, the risk management is assessment of their probabilities;
not significantly employed in large projects. On the A2: Time involvement;
contrary, the risk management (Sensitivity Analysis and A3: Difficulty in understanding and interpreting out-
Risk Management Process) is significantly employed in the comes of risk management process;
projects for which the technical complexity is very simple. A4: Managers cannot agree on quantification of
This is somewhat surprising as we expect the contrary. This uncertainty/subjective probability assessment;
indicates that risk management is not well understood by A5: Cost-justification of risk management process
the respondents in Hong Kong. It can also explain why the techniques.
risk management is not widely accepted in the current
practice. We believe that there are some barriers existing in As shown in Figure 5, about 78% of the respondents
the current practices. These barriers can occur both in the agreed or strongly agreed that 'time involvemnet' and
organization itself and in its management. They are also difficulty in obtaining input estimates and assessment of
related to the questions of resources, knowledge and tools their probabilities will affect successful application of risk
used as discussed in the next section. management. Similarly, about 62% of the respondents
agreed or strongly agreed that there will be difficulty in
2.3. Barriers to successful implementation of risk management understanding and interpreting outcomes of risk manage-
From the literature review, a number of barriers in using ment process and 58% of them questioned about cost-
risk management were found. 7'1'12 The respondents were justification of risk analysis techniques. In addition, 46% of

300
 Practices, barriers and benefits of risk management: V M Rao Tummala et al.
%
10 20 30 40 50 60 70 80
' I

A1

A2 m I

A3 M I

A4

A5 ............................. .....................................................

[[m Agree [--]StronglyAgree I

Figure 5 Inherent problems encountered (building services)

the respondents felt that managers cannot agree on quan-
tification of uncertainty/subjective probability assessment.
Similarly, the "barriers to implementation problems"
include: 13
B 1: Lack of middle managers/supervisors support;
B2: Managers' understanding of risk management
process techniques;
B3: Lack of top management support;
B4: Human/organizational resistance to change;
B5: Lack of computing resources and assistance.
For implementation problems encountered, Figure 6
shows that about 56% and 60% of the respondents,
respectively, agreed or strongly agreed that managers'
understanding of risk management techniques and human/
organizational resistance to change are the problems that
need to be overcome. Similarly, about 53% of respondents
agreed or strongly agreed that lack of computing resources
and assistance will affect the implementation of risk
management. Only 37% and 41% of the respondents,
respectively, felt that lack of top management support and
lack of middle managers/supervisors support will be
problems in implementing risk management.
0 10 20
2.4. Factor analysis of barriers to successful implementation
of risk management
The barriers to successful implementation of risk manage-
ment can be further analysed through factor analysis by
identifying a relatively small number of factors that can be
used to represent relationships among sets of many inter-
related variables. ~7 Table 1 shows the rotated factor matrix
for the inherent problems encountered. The first factor
shows positive correlation with problems A1, A2 and A3.
These inherent problems include "difficulty in obtaining
input estimates and assessment of their probabilities",
"time involvement" and "difficulty in understanding and
interpreting outcomes of risk management process". The
second factor is positively correlated with problems A4,
and A5 which include "managers cannot agree on
quantification of uncertainty/subjective probability assess-
ment" and "cost-justification of risk management process
techniques".
Similar analysis was repeated for the implementation
problems encountered. Table 2 shows the corresponding
rotated factor matrix. The first factor shows positive
correlation with the questions B1, B3, B4 and B5,
respectively. These implementation problems include
"lack of middle managers/supervisors support", "lack of
%
30 40 50 60 70

B1 'i
B2

B3 ~\",~ I
B4

B5 J,
I

[ ] Agree [ ] Strongly Agree

Figure 6 Implementation problems encountered (building services)

301
Practices, barriers and benefits of risk management." V M Rao Tummala et al.

Table 1 Rotated factor matrix (inherent problems encountered) Table 2 Rotated factor matrix 0mplementation problem encountered)

Factor 1 Factor 2 Factor 1 Factor 2

AI 0.83528 -0.04610 BI 0.84122 0.22976
A2 0.73453 0.11718 B3 0.76646 -0.09304
A3 0.54072 0.42286 B4 0.71714 -0.20559
A4 -0.02818 0.83884 B5 0.66722 0.10699
A5 0.18848 0.80701 B2 0.00827 0.97917

top management support", "human/organization resistance
to change" and "lack of computing resources and assis-
tance". The second factor is only positively correlated with
question B2, which includes "managers' understanding of
risk management process techniques".
2.5. Perception of benefits of using risk management
The respondents were asked to indicate their perception of
benefits of using risk management on a five-point scale (To
a very lettle extent= '1', To a little extent = ' 2 ' , To some
extent = ' 3 ' , To a great e x t e n t = ' 4 ' and To a very great
extent = '5'). The results are summarized in Figure 7.
The major benefits perceived by the respondents are
summarized as follows:
allows judgement and intuition in decision making to be
presented in a meaningful way;
provides a systematic and logical approach to decision
making;
makes it easier in interpreting the cost estimates;
enables the decision maker to confront risk and
uncertainty in a realistic manner;
provides a few guidelines to aid problem formulation;
is useful for complex decision problem;
permits a thorough analysis of alternative options.
From these findings, we find that most of respondents
believe that risk management can provide a realistic and
systematic approach to obtain more information on the
risks inherent in a project in order to develop response
actions, and that it would lead to increase the confidence in
decision making.
3. Risk management practices in public
transportation industry
A survey involving Hong Kong public transportation com-
panies was conducted by Leung. is He has selected and
mailed 50 questionnaires to engineers and managers of
major transportation companies in Hong Kong including
Mass Transit Railway Corporation (MTRC), Kowloon
Canton Railway Corporation (KCRC)--Heavy Rail Divi-
sion, KCRC--Light Rail Division, Kowloon Motor Bus,
China Motor Bus and Hong Kong Tramway. These 50
individuals were selected mainly on the basis of their
experiences and accessibility of project managers and pro-
ject engineers as a representative sample of the transporta-
tion industry in Hong Kong. Of these, 36 completed
questionnaires, representing a return rate of 72%, were
returned.
3.1. Current practices of assessing risks
Figure 8 summarizes the risk analysis techniques used by
the practicing managers in project appraisal and selection.
The respondents were asked on a six-point scale
( N e v e r = ' l ' , R a r e l y = ' 2 ' , L i t t l e = ' 3 ', S o m e t i m e s = ' 4 ' ,
O f t e n = ' 5 ' and Very Often = '6'), the extent to which the
responding finns use each of the risk analysis techniques.

1 Provides a systematic and logical approach to

decision making
Permits a thorough analysis of altematMve
2
options
3 Enables the decision-maker to confront risk m
a realistic manner

4 Helps communication within the organization

Allows decision-maker to judge how much

5
information to gather in a decision problem
6 Allows judgment and intuition in decision
making to be presented in a meaning way

7 Provides a few guldehnes to aid problem

formulation

8 Is useful for complexdecis=on problem

9 Is accepted by members of orgamzation

10 Is easy in obtaining probability assessments

11 Makes it easier in interpreting the output of the

risk analysis process

0 10 20 30 40 50 60 70 80 9
%

I t To a some extent [ ] To a great extent [ ] To a very great extent

Figure 7 Perceived impact of risk management (building services)

302
 Practices, barriers and benefits of risk management: V M Rao Tummala et al.
%
10 20 30 40 50 60 70 80 90 100

No explicitassessment

Subjectiveor Intuitive
assessment

Sensitivityanalysis

Risk discounted cash flows

Hertz type simulation

Risk ManagementProcess

I BB Sometimes [] Often [ ] Very Often I

Figure 8 Use of risk assessment techniques(public transportation)

Among the various techniques listed, sensitivity analysis
and risk discounted cash flow analysis are found to be the
most commonly used techniques. The subjective or
intuitive assessment (analyzed by assessing project risk as
low, medium or high level etc.) is the next most commonly
used technique with about 72% using them often to very
often. The least popular techniques are found to be Hertz-
type risk simulation (about 43%, followed by the risk
management process (about 33%).
3.2. Reasons for using risk management
Figure 9 summarizes the main reasons for using risk man-
agement approaches. Respondents were asked to indicate
how much they agreed or disagreed with each item as in the
case of building services cost estimation. Analysis of these
results indicate that the size of a project (89%) and
complexity of projects (75%) are the most important
factors in the utilization of risk analysis (somewhat
important to very important). Introducing new product
(41%), avoiding delay (33%) and initiating long payback
period (34%) are also found to be the next important
reasons in preferring risk analysis. However, new market
(23%) and client's requirements (28%) are identified as
least popular reasons for using risk analysis techniques) 5

%
0 10 20 30 40 50 60 70 80 90
I I I
Size of project ~ / ~ ~ ~
I
Complexity of [
,,,-oje=
,,,ew,.o.uc.

Newmarket ~ ~ I

period
Client's "
requirement J'~J ~ i

I [ ] Somewhat Important [] Very Important

Figure 9 Reasonsfor using risk management(public transportation)

303
Practices, barriers and benefits of risk management." V M Rao Tummala et al.

0 10 20 30 40 50 6O 7O 80
i t I

A1 ~ ~ ~ I

A2 ~ ~ ~ ~ I

A4 ~%.~.~ ~ ~ ~ ~ ~.~

A5 I
I~-~ Agree [] Strongly Agree

Figure10 Inherentproblemsencountered (public transportation)

In order to assess the relationship between the risk
analysis methods used and the reaons of using risk
management, a number of simple correlation coefficients
were found. Based on this information, we concude that
sensitivity analysis is positively correlated with the size of
project. On the contrary, Hertz type simulation and risk
management process are not positively correlated with any
of the listed reasons of using risk analysis. 15 This appears
contrary to the results stated above regarding the use of
Hertz-type risk simulation and risk management process.
From these results, we may concude that risk management
approaches are not widely used in project appraisal and
selction in the Hong Kong public transportation industry.
The analysis on the barriers to successful implementation is
described in the next section.
3.3. Barriers to successful implementation of risk
management
As in the case of building services industry survey, the
respondents were asked the extent to which "inherent prob-
0 10 20
lems" and "barriers to implementation problems" were
encountered on a five-point scale ranging from "strongly
disagree to strongly agree". Figures 10 and 11 summarize
the respondents' views on the barriers to successful im-
plementation of risk management. The "inherent problems"
include: 15
AI: Difficulty in obtaining input estimates and
assessment of their probabilities;
A2: Time involvement;
A3: Difficulty in understanding and interpreting out-
comes of risk management process;
A4: Managers cannot agree on quantification of
uncertainty/subjective probability assessment;
A5: Cost-justification of risk management process
techniques.
Among these inherent problems, about 75% of the
respondents perceived the problem of obtaining input
estimates and assessment of their probabilities is found to
be the most serious problem. As perceived by 72% of the
%
30 40 50 60 70 80

B3 ~ l I

BS

B6 ~ ~ ~ ~ ]

B7 ~ ,~N.'%~%.'~~ . ~ ~..~x~ ~-'~ ~-x,~l

B8 ~ ~%~-~ ~ ~ ~-%_'%.~ I

I Ira Agree [ ] Strongly Agree

Figure11 Implementationproblems encountered (pubhc transportation)

304
 Practices, barriers and benefits of risk management: V M Rao Tummala et al.

respondents, the second serious problem is managers Table 3 Rotated factor matrix (inherent problemsencountered)
cannot agree on quantification of uncertainty/subjective Factor 1 Factor 2
probability assessment. About 47% of the respondents
perceived excessive time involvement is the next barrier. A4 0.88181 0.00682
Similarly, 44% of the respondents perceived that difficulty A1 0.82735 -0.08126
A5 0.58173 0.30205
in understanding and interpreting outcomes as another
A3 -0.01939 0.82667
barrier, and 31% of the respondents questioned about the A2 0.08936 0.70131
cost-justification of risk management process techniques.
Similarly, the barriers to implementation problems
include: 15
with statements of negative or unfavorable impacts, more
B3: Lack of top management support; people indicated their disagreement rather than agreement.
B4: Human/organizational resistance to change; For example, 42% of the respondents perceived from 'very
B5: Lack of computing resources and assistance; little extent' to 'little extent' while only 25% perceived
B6: Finding suitable risk management methods; from 'great extent' to very great extent' regarding the
B7: Non-availability of acceptable risk standards; benefit of risk management in lowering the capital
B8: Lack of training in risk management process. investment. Similarly, regarding the benefit of risk manage-
Figure 11 indicates that 73% of the respondents are ment in making it difficult to accept good proposal, 50% of
concerned with the non-availability of acceptable risk the respondents disagreed while only 25% agreed] 5 Thus,
standards. About 55% perceived that human/organization the majority of respondents agreed that risk management is
resistance to change as the next problem. Lack of training particularly useful for providing an insight into the project
in risk management process (53%) and finding suitable risk decision, and increasing the chance of the project's success.
management methods (47%) are the next important areas of
concern for implementation. The findings also indicate that 4. Risk management practices in electricity supply
relatively few managers suffer from lack of top manage- industry
ment support (only 17%) and availability of computing
resources and assistance (only 9%). As mentioned earlier, a questionnaire was prepared for
issue to electric utilities worldwide to obtain an insight into
3.4. Factor analysis of barriers to successful implementation their understanding, use and application of risk manage-
of risk management ment approaches in the evaluation of capital budgets and
The factor analysis related to the inherent problems examine the barriers to successful implementation of risk
encountered indicated two factors as shown in Table 3. management in electricity supply industry. 14 A question-
The first factor shows a positive correlation with the naire was mailed to senior managers by name of 140
problems A4, A1 and A5, which include "managers cannot electric utilities worldwide, who were considered suffi-
agree on quantification of uncertainty/subjective proba- ciently able to coordinate and collect the information
bility assessment", "difficulty in obtaining input estimates necessary for each type of question. Thirty questionnaires
and assessment of their probabilities" and "cost-justifica- were received with a response rate of 21.5%.
tion of risk management process techniques". The second
factor is positively correlated with problems A2 and A3, 4.1. Current practices of risk management and assessment
which include "time involvement" and "difficulty in
The respondents were asked on a six-point scale
understanding and interpreting outcomes of risk manage-
(Never = ' 1', Rarely = '2', Little = ' 3 ' , Sometimes = '4',
ment process".
O f t e n = ' 5 ' and Very O f t e n = ' 6 ' ) , the extent to which
With respect to implementation problems, the first factor
responding finns use each of the risk analysis techniques.
shows positive correlation with problems B3, B7 and B4 as
Among the various risk analysis methods listed, sensitivity
shown in Table 4. These problems include "lack of top
analysis was found to be the most commonly used
management support", "non-availability of acceptable risk
technique, with almost 60% using often to very often (see
standards", and "human/organizational resistance to
Figure 13). The next popular techniques were subjective or
change". The second factor shows positive correlation
intuitively assessment and three-point estimates with about
with problems B5 and B8, which include " l a c k of
43% and 26%, respectively. Indeed, these risk analysis
computer resources and assistance" and "lack of training
techniques require the use of subjective information and
in risk management process". The third factor is only
judgement, and is therefore found by managers to be
correlated with problem B6 which is "finding suitable risk
reliable and easy to use. It is found that about 37% of
management methods".
respondents use probability distributions in cash flows and
3.5. Perception of benefits of using risk management expected values. Other more advanced techniques, such as
risk management process and capital asset pricing models
The respondents were asked to indicate their perception of
the benefits of using risk management on a five-point scale
(To a very little e x t e n t = ' l ' , To a little e x t e n t = ' 2 ' , To Table 4 Rotated factor matrix 0mplementatlonproblemsencountered)
some e x t e n t = ' 3 ' , To a great e x t e n t = ' 4 ' and To a very Factor 1 Factor 2 Factor 3
great e x t e n t = ' 5 ' ) . Eight specific items covering both
positive and negative impacts were used in the question- B3 0.82119 0.7669 -0.02341
naire. The results are summarized in Figure 12. B7 0.67691 -0.40071 0.51954
B4 0.59314 -0.20628 0.17824
The survey findings show that the majority of respon-
B5 0.27742 0.85214 0.23876
dents are reasonably happy with their use of risk manage- B8 -0.41257 0.80468 -0.16104
ment. In general, more people agreed rather than disagreed
B6 0.7790 0.10783 0.95443
with statements of a positive or favorable impact. However,

305
Practices, barriers and benefits of risk management." V M Rao Tummala et al.

0 10 20 30 40 50 60 70 80 90
Positive Impacts
Provides a good insight
mL J --]
Increases the chance of success
I
Improves effectiveness of
investment decision m
Enhances communication among
managers m mmm
Reduces implementation time
m m m m J
Negative Imoacts

Makes difficult to accept good

proposal

Lowers capital investment

Reduces manager enthusiasm to

generate proposals

[ ] To a Some Extent [ ] To a Great Extent [ ] To a Very Great Extent

Figure 12 Perceived impact of risk management (pubhc transportation)

(CAPM) are rarely used, with only about 10% and 18%
using often to very often, respectively as shown in Figure
13. These findings reveal that the advanced risk analysis
techniques are highly developed in theory, but have not
been in widespread use in major firms. A pilot study using
the same questionnaire was conducted in China Light and
Power Ltd, Hong Kong, and found similar comparative
results in the use of risk analysis techniques. 14
4.2. Reasons for using risk management
As in the other two situations, this survey also examines the
reasons for utilizing the risk analysis techniques. Respon-
dents were asked to use the six-point scale (Never = '1',
R a r e l y = ' 2 ', Little='3 ', S o m e t i m e s = ' 4 ', O f t e n = ' 5 ' and
Very Often = '6') to indicate the extent to which they used
the risk analysis techniques. For easy comparison with the
results as described in Sections 2.2 and 3.2 in which a five-
point scale was used, we combined score 5 with score 6 to
become a scale of 'Very Important', and score 4 to become
a scale of 'Somewhat Important'.
Figure 14 shows that the size of project (89%) and
complexity of project (85%) are the most important factors
in the utilization of risk analysis (somewhat important to
very important). Avoiding project delay (74%), determin-
ing payback period for a project (64%), evaluating new
product development (64%), and avoiding cost overrun
(66%) are found to be the next important reasons of using
risk analysis techniques. New market (57%) and client

%
0 10 20 30 40 50 60 70 80 90

No explicit assessment

Subjective or intuitive
assesmnt

Three point estimates

Sensitivity analysis

Probability distributions in
cash flow

CAPM

Risk Management Process

I l l Sometimes [ ] Often [ ] Very Often

Figure 13 Use of risk assessment in capital investment decisions (electricity supply)

306
 Practices, barriers and benefits of risk management." V M Rao Tummala et al.
%
0 10 20 30 40 50 60 70 80 9O

I I I i L I
Size of Project ~ M m]i
Complexity of project
I I I i I
New product
I I 1
New market
I I I
Deterring payback period I I I I
Client requirement
I I I
Potential for project I
delay

To avoid cost overrun I ' ~ , ~ ~'~\~,'~ ~.~'~

I t I

m Somewhat Important [ ] Very Important

Figure14 Reasonsfor using risk management (electricity supply)

requirement (59%) are identified as the less popular reasons
for using risk analysis techniques. 14
A number of correlation coefficients were found to
assess the relationship between the use of risk analysis
techniques and the reasons for using it. 14 The correlation
analysis demonstrated a wide use o f different risk
assessment tools but of particular interest is the require-
ments of the project sponsor which shows no correlation
with sensitivity analysis but a positive and significant
correlation with risk management approaches. Also, it
indicated a wide use of probability distributions for net
cash flows and producing expected value of NPV, which
provides support for growing popularity of the use
probability distributions and related analysis in risk
assessment. Thus sensitivity analysis and probability
distributions are applied generally and widely advocated,
wherease risk management techniques appear to be applied
to meet specific demands which are of concern to project
sponsors, who may consider that uncertainty of a capital
investment needs further attention.
4.3. Barriers to successful implementation of risk
management
As in the earlier two surveys, Figures 15 and 16 summarize
the respondents' views on problems for successful
implementation of risk management approaches. The
respondents were asked the extent to which "inherent
problems" and "implementation problems" were encoun-
tered on a six-point scale. For easy comparison with the
results as described in Sections 2.3, and 3.3 where a five-
point scale was used, we combined score 4 with score 5 to
become a scale o f " A g r e e " , and score 6 to become a scale
of "Strongly Agree". The inherent problems include: 14
* A I : Difficulty in obtaining input estimates and
assessment of their probabilities;

0 20 40 60 80 100
A1

A2

A3 I

A4

A5 ~ I

A6 I

[[] Agree [] Strongly Agree

Figure15 Inherentproblems encountered(electricity supply)

307
Practices, barriers and benefits of risk management: V M Rao Tummala et al.
o lO 20
B2
B3
B4
B6
B6
[ [] Agree
Figure 16 Implementation problems encountered (electricity supply)
A2: Time involvement;
A3: Difficulty in understanding and interpreting out-
comes of risk management process;
A4: Managers cannot agree on quantification of un-
certainty/subjective probability assessment;
A5: Cost-justification of risk management process
techniques;
A6: Difficulty in determining tradeoff between risk and
return.
As regards inherent problems (Figure 15), about 85% of
the respondents agreed or strongly agreed that time
involvement is the most important problem. As perceived
by 77% of respondents, the second most important problem
is difficulty in obtaining input estimates and assessment of
their probabilities. About 76% of them found that managers
cannot agree on quantification of uncertainty/subjective
probability assessment. Similarly, 65% of the respondents
felt that it is difficulty to determine the tradeoff between
risk and retum and 62% of the respondents perceived that
there is difficulty in understanding and interpreting out-
comes of the risk management process. In addition, about
58% of the respondents questioned about the cost-
justification of risk management process techniques.
Similarly, the "barriers to implementation problems"
include: 14
B2: Managers understanding of risk management
process techniques;
B3: Lack of top management support;
B4: Human/organizational resistance to change;
u B5: Lack of computing resources and assistance;
* B6: Finding suitable risk management methods.
For implementation problems encountered, Figure 16
shows that 68% of respondents felt that human/organiza-
tional resistance is the most important problem. About 67%
and 60% of the respondents, respectively, agreed or
strongly agreed that finding suitable risk management
methods and managers' understanding of risk management
techniques are the other barriers. In addition, 40% and 24%
of the respondents, respectively, felt that lack of top
management support and lack of computing resources and
assistance are the problems which need to be overcome.
308
30 40 50 60 70
[ ] Strongly Agree
4.4. Factor analysis of barriers to successful implementation
of risk management
Table 5 shows that two factors are identified to represent
relationships among the six items or variables used for
inherent problems encountered. The first factor shows
positive correlation with the A3, A4 and A5. These inherent
problems include "difficulty in understanding and inter-
preting outcomes of risk management process", "man-
agers cannot agree on quantification of uncertainty/
subjective probability assessment" and "cost-justification
of risk management process techniques".
Similarly, the second factor is positively correlated with
A6, A1 and A2 as shown in Table 5, which include
'difficulty in obtaining input estimates and assessment of
their probabilities', and 'time involvement'. With respect to
implementation problems, it appears that all of the above
mentioned problems (B2-B6) would affect implementation
as they are not positively correlated with any factor.
4.5. Perception of benefits of using risk management
As in the earlier two surveys, the respondents were asked to
indicate their perception of benefits of using risk manage-
ment on a five-point scale (To a very little extent =` 1', To a
little e x t e n t = ' 2 ' , To some e x t e n t = ' 3 ' , To a great
extent= '4' and To a very great extent = '5'). The results
are summarized in Figure 17. The majority of respondents
perceived that the major benefits brought about by using
risk management include "provides a useful insight into
the project", "increases confidence in investment deci-
sions", "increases quality of investment decisions",
" m a k e s it easier to accept proposals", " i m p r o v e s
efficiency of investment decisions", "enhances commu-
nication among managers", and "improve ultimate project
performance". From these results, it can be seen that the
Table 5 Rotated factor matrix (inherent problems encountered)
Factor 1 Factor 2
A3 0.86972 0.26957
A4 0.85232 -0.08856
A5 0.71275 0.54290
A6 0.15599 0.85931
A1 0.49789 0.74415
A2 0.02064 0.74134
 Practices, barriers and benefits of risk management: V M Rao Tummala et al.
0 10 20
Provides a useful insight into the
project
Improves quality of investment
decisions
Increase confidence in investment
decision
Improves efficiency of investment
decisions
Enhances communication among
managers
Improves ultimate project
performance
Makes it more easier to accept
proposals
Increases managers' enthusiasm
to generate/sponsor projects
Leads to lower capital expenditure
l [] To Some Extent [ ] To a Great Extent
Figure 17 Perceived impact of risk management (electricity supply)
respondents consider risk management very useful; they
believe that risk management can provide more informa-
tion and increase confidence in the final decision making.
5. Discussion and conclusions
From the analysis of the results of the three surveys, we
conclude that the simple risk adjustment methods are still
adopted in three local industries in Hong Kong. The most
popular techniques used among the three industries in risk
management are the subjective or intuitive assessment and
sensitivity analysis. Risk discounted cash flows is very
popular in public transportation and electricity supply
industries. Use of three point estimates appears to be very
popular in electricity supply industry. Indeed, decision
makers will find that these methods are easy to use due to
their simplicity and use of subjective information and
judgement, and the support provided by computerized
spreadsheet packages. Other more advanced risk analysis
techniques, such as probabilistic risk analysis/simulation
and CAPM, although highly developed in theory, have not
been widely used in assessing and managing risks.
On the other hand, the survey results from the three local
industries show that the size of project and its complexity
are the most important factors in the utilization of risk
management. Contract types, schedule delays, cost over-
runs and customer requirements appear to be playing
significant roles in the application of risk management
approaches in buildiong services and electricitry supply
industries. This is not surprising since they are very
important factors in the construction activities. Most of
these findings are similar to those obtained by McGregor,
He and Pike. 9:1 These results also indicated that the
application of risk management is not primarily correlated
with the type but rather the use is very much dependent on
management's perception of risk within the specified
project.
As mentioned earlier, the main reason for the lack of
acceptance of risk analysis is that it is marred by some
30 40 50 60 70 80 90 100
[] To a Very Great Extent
inherent and implementation problems. As shown in Table
6 which summarizes the survey results obtained, all the
three industries show that: (1) obtaining input information;
(2) human/organizational resistance to change; (3) time
involvement; (4) understanding and interpreting outcomes
of risk management process; (5) quantification of un-
certainty/subjective probability assessment; and (6) cost-
justification, are the major limitations in applying risk
analysis. Finding suitable methods of risk management
appears to be another roadblock for public transportation
and electricity supply industries, whereas non-availability
of acceptable risk standards and lack of training in risk
management techniques are found to be two major barriers
in the public transportation industry.
With respect to inherent problems encountered, it
appears that the time involvement of using risk manage-
ment seems to worry most practitioners in building services
and electricity supply industries, whereas the existence of
difficulty in obtaining input information and assessment of
probability distributions seems to worry most of them in all
three industries surveyed. Undoubtedly, performing prob-
abilistic risk analysis requires more time than simple risk
adjustment methods. However, with the aid of computers
and the use of software systems, the actual time spent in
conducting the analysis can be significantly reduced.
Indeed, the increasing widespread use of microcomputers
and computer-based decision support systems would
enhance the potential ease of use and efficiency of risk
management techniques. These, would in turn, justify the
cost aspects of using risk management.
As regards to the existence of difficulty in obtaining
input estimates and assessment of their probability, there is
a general misconception that risk management requires a
very accurate measurement and assessment of risks. In fact,
risk management requires the analyst to determine the
probability distribuitions of risk factors, many of which are
determined using subjective beliefs and judgement rather
than objective information. On the other hand, if objective
information is available, they can use it in assessing
309
Practices, barriers and benefits of risk management: V M Rao Tummala et al.

Table 6 S u m m a r y of the inherent and implementation problems encountered

% of total reflecting agree to strongly agree

Inherent problems encountered Building services Transportation Electricity supply

A1 Difficulty in obtaining input estimates and assessment of their probabilities 78 75 77

A2 Time involvement 78 47 85
A3 Difficulty in understanding and interpreting outcomes of risk management process 62 44 62
A4 Managers cannot agree on quantification of uncertainty/subjective probabihty assessment 46 72 76
A5 Cost-justification of risk management process techniques 58 31 58
A6 Difficulty in determining tradeoff between risk and return * * 65
Implementation problems encountered
B1 Lack of middle managers/supervisors support 41 *
B2 Lack of managers understanding of risk management process techniques 56 * 60
B3 Lack of top management support 37 17 40
B4 Human/organizational resistance to change 60 55 68
B5 Lack of computing resources and assistance 53 9 24
B6 Finding statable risk management methods 47 67
B7 Non-availability of acceptable risk standards 73 *
B8 Lack of training in risk management process 53 *

probability distributions. Several software packages are
available to fit an appropriate distribution for a given risk
factor based on the objective data) 8 Also, several easy-to-
understand and effective tools of encoding subjective beliefs
and judgement with use of computers are now available. We
expect that these tools would enable managers to assess
probability distributions without difficulty. The problem of
quantification of uncertainty/subjective probability assess-
ment would also be resolved.
Meanwhile, it seems that the difficulty in understanding
and interpreting outcomes of risk management process is
another major inherent problem among the practitioners of
building services and electricity supply industries. The
same is true for cost-justification of risk management
techniques. This is possibly due to the people not having
enough training and understanding of the risk management
approaches. Indeed, risk analysis only requires the users to
have some basic knowledge on statistics and risk manage-
ment tools so that they can understand, use and interpret the
outcomes of risk management techniques.
Regarding the implementation problems encountered,
the major concern as reflected in all three surveys is the
human/organizational resistance to change. Indeed, people
with little background in statistics and other quantitative
methods of analysis would find the risk management
techniques are diffficult to use. However, when risk
management is implemented for some time, and given
sufficient training and education, the human/organizational
resistance problem will be lessened when people become
familiar with the use of risk management techniques and
realize the benefits the technique provides. The problems of
not understanding risk management methods and balancing
risk/return tradeoffs would also be resolved. It appears that
there is sufficient top management support in utilizing risk
management approaches in all three industries. This would
encourage faster changes in the employee attitudes in using
risk management techniques.
On the other hand, the survey findings show that the per-
ceived impact of risk management have been substantial.
Even though some respondents believed that risk manage-
ment will provide some negative impact, the results from
the three local industries also tend to agree that formal risk
management can provide a useful insight into the project,
enhance communication among managers, allow manage-
rial judgement, improve project performance, and provide a
systematic and logical approach to decision making. These
conclusions are supported by the conclusions that are
obtained by Hertz and Thomas, and Ho and Pike) '7'9
Furthermore, the respondents in the electricity supply and
public transportation industries indicate that formal risk
management improves quality of investment decisions and
increases confidence in investment decisions which are
further supported by Hertz and Thomas, and Ho and Pike. It
appears that the percentages of respondents indicating
improved quality, and increased confidence in investment
decisions are larger than those obtained by McGregor, and
Ho and Pike. This indicates that the risk management
techniques may become accepted by the selected Hong
Kong industries and hence we can expect their increased
use in the future.
To establish the trend in the application of risk
management in Hong Kong, respondents were asked if
the importance of risk analysis in their firms had changed
over the last five years. They were then asked to estimate
the changes over the next five years. In fact, it can be
identified that the respondents' attitude on the use of risk
management is positive. As shown in Table 7, the three
survey results also show that risk management will become
more important in the next five years. We can envisage that
the application of risk management will be widely spread in
the future. Indeed, if the observed trend continues, formal
risk analysis may become a standard technique for larger
projects.
Overall, this paper provides a critical examination of
Hong Kong practices of risk management in building
services, public transportation and electricity supply

Table 7 Changes in the role of risk management

Over the last five years risk analysis has been (%) Over the next five years risk analysis will become (%)

Less important No change More important Less important No change More important

Building services 36 38 26 4 20 76
Transportation 64 11 25 6 14 80
Electricity supply industry 19 15 66 0 7 93

310
 Practices, barriers and benefits of risk management: V M Rao Tummala et al.

industries. These findings show that formal risk manage- 14. Burchett, J. F., Risk mangement in transmission construcUon
ment has not been widely adopted in the past in the local projects. MSc Dissertation in Enginering Management, Department
of Manufacturing Engineering, City Polytechnic of Hong Kong,
industries, because it has been marred by some inherent and Kowloon, Hong Kong, 1994.
implementation problems still to be resolved. However, the 15. Leung, Y. H., The application of risk management process to project
survey findings show that perceived impact of risk appraisal in rolling stock section of MTRC. MSc Dissertation in
management is substantial. Most respondents tend to agree Engineering Management, Department of Manufacturing Engineer-
lng, City Polytechnic of Hong Kong, Kowloon, Hong Kong, 1994.
that formal risk management would offer useful informa- 16. Ho, S. S. M. and Pike, R. H., Risk analysis in strategic capital
tion to decision makers in making decisions. Indeed, the budgeting: a review and survey. The Chinese University of Hong
three survey results show that the application of risk Kong. Working Paper Series, 1989.
management will become more important in the future. 17. SPSS for Windows Base System User's Guide release 6.0. SPSS Inc.,
1993.
18. BesO'it User's Guide. Palisade Corporation, New York, NY, 1993.
Acknowledgements
The material in writing this paper was extracted from the
three MSc dissertations which were submitted by Mr John Professor V M Rao Tummala is the
F Burchett, Mr Y H Leung and Mr C K Mok in successfully professor of productions~operations
completing their masters program in Engineering Manage- management at Eastern Michtgan
ment, Department of Manufacturing Engineering, City Universtty, USA. He is currently on
leave from EMU, and teaching in the
University of Hong Kong, Hong Kong. Professor V M Rao Manufacturing Engineering Depart-
Tummala, who is the dissertation supervisor for all three ment of the City University of Hong
dissertations, has further analyzed with statistical analysis Kong. He is the leader of the depart-
and summarized the survey results to provide the ment's systems team. His field is
decision analysis and his current
comparative analysis with the assistance of Mr H M
research interests include the analytic
Leung. The authors wish to express their gratitude for all hterarchy process, the risk manage-
survey participants in taking time and completing the ment process, project management
questionnaires. and quality management.

References
1. Hertz, D. B and Thomas, H., Risk Analysis and Its Application. John
Wiley & Sons, Chichester, 1983. Mr Leung Hon Ming received a
2. Hayes, R. W., Perry, J. G., Thompson, P. A. and Willmer, G., Risk BEng(Hons) in Mechanical and Man-
Management in Engineering Construction--Implications for Project ufacturing Engineering from the Uni-
Managers Project Management Group, UMIST, Thomas Telford versity of Melbourne in 1994. He is
Ltd, London, 1986. now an MPhil student and a Research
3. Baxendale, T., Construction resource models by Monte Carlo simu- Assistant with the Manufacturmg En-
lation. Construction management and Economtcs, 1984, 2, 201-217. gineering Department of the City
4. Bennett, J. and Ormerod, R. N., Simulation applied to construction Umversity of Hong Kong. His current
project. Construction Management and Economics, 1984, 2, 225- research interests include the areas of
263. project risk management and knowl-
5. Birnie, J. and Yates, A., Cost prediction using decision/risk analysis edge-based systems.
methodologies. Construction Management and Economics, 1991, 9,
171-186
6. Flanagan, R., Kendell, A., Norman, G. and Robinson, G. D., Life
cycle costing and rask management. Constructton Management and
Economies, 1987, 5, $52-$71.
7. Hertz, D. and Thomas, H., Practical Risk Analysis--An approach
Through Case Histories. John Wiley & Sons, Chichester, 1984.
8. Cooper, D. and Chapman, C., Risk Analysis for Large Projects--
Models, Methods & Cases. John Wiley & Sons, Chlchester, 1987.
C K Mok obtained his BSc(Eng)
9. Ho, S. S. M. and Pike, R. H., The use of risk analysis techniques in
degree in electrical engineering from
capital investment appraisal. In Risk Analysis Assessment and
University of Hong Kong in 1981
Management, eds J. Ansell and F. Wharton. John Wdey & Sons,
After graduation, he joined Public
Chlchester, 1992.
Works Department of Hong Kong
10. Hall, W. K, Why risk analysis isn't working. Long Range Planning,
Government and started his career in
1975, 18,25-29.
building services engineering. He is
11. McGregor, J. M., What users think about computer models. Long
now with the Architectural Services
Range Plannmg, 1983, 16, 45-57.
Department as Budding Services En-
12. Ho, S. S. M. and Pike, R. H., Risk analysis in capital budgetary:
gineer. In 1994, he obtained his
barriers and benefits. OMEGA International Journal of Management
Master of Science degree in Engineer-
Science, 1991, 19, 235-245.
ing management from City University
13. Mok, C. K., The application of risk management process in building
of Hong Kong. His dzssertation paper
services cost estimation. MSc Dissertation m Engineering manage-
is on the application of risk manage-
ment, department of Manufactunng Engineering, City Polytechnic of ment.
Hong Kong, Kowloon, Hong Kong, 1994.

311
Practices, barriers a n d benefits o f risk m a n a g e m e n t : V M R a o T u m m a l a et al.

John Burchett started his career with o,:. . . . "~ .... ~ ~ ~ o Y H Leung is the Mechanical Design
anelectricalpowerplantmanufac- ~ i Section Engineer in Rolling Stock
turer in England and then with an Design Section of Mass Transit Rail-
international power consultant Ken- way Cooperation. He is responsible
nedy & Donkin. He joined China Light for the mechanical design of rolhng
and Power Company Limited (CLP) in stock projects including Eastern Har-
1980 as Substation Design Engineer bour Crossing, Chopper Conversion
and was responsible for the engineer- and Additional Rolling Stock. He is
ing and construction of many major interested in risk-based project man-
multi-storey Primary Substations in agement. He obtained his MSc degree
Kowloon and New Territories of Hong in City University of Hong Kong. He is
Kong. Since 1991 he has directed and a member ofHong Kong Institution of
managed the building of new 400kV Engineers and a member of lnstltutlon
overhead lines from Black Point of Mechanical Engineers.
Power Station, including wayleave
acquisition; the first outlet was' completed in 1995 and the final hne
will be completed in 1996. In 1994 he obtained a Master of Science in
Engineering Management from City Polytechnic (University) of Hong
Kong with a dissertation on risk management. He has been acttvely
involved in the promotion of continous improvement processes In
1995 he co-authored papers "presented at the International Symposium
on Total Quality Management at the City University and APSCOM in
Hong Kong. He is a member of the CLP Transmission Business Group
(TBG) Change team. His current responsibdities include the procure-
ment of materials and services for asset creation in TBG.

312