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ASSESSMENT 1
(INDIVIDUAL ASSESSMENT)
2) RISK MANAGEMENT
Huge engineering projects are usually associated with high probability of
unanticipated outcomes due to the high stake games played by the stakeholders within the
internal context due to the amount of resources and substantial limitations in management,
and some external influence. Such billion dollar projects characterized by the irreversible
commitments to the system, which after being built will either be a great asset to the nation
or an unforgettable disaster. There are several instances in which, some of the projects
ended up having little use as per the original intended purpose. Hence a detailed analysis in
every possible outcome evaluating every impact it can bring in, must be done. It has to be
kept under consideration that , it may take some time for sufficient revenue generation
from such projects taking into account the large capital money invested , especially
government undertaken projects for the public welfare. Substantial front end expenses may
have to be undertaken. For every project, the main objectives include Cost, Time and
Quality. To meet all these, effective risk management is necessary. To complete within the
estimated budget before the completion date without compromising on the performance
and utility of the building is the ultimate goal. For a successful project, it has to be shaped
with risk resolution. Even though, it's often indeterminate and endogenous and hence it's a
real issue to manage risk. Most of the ideas and principles used in risk analysis and
management practice we have seen since 1970s and 80s has developed considerably. New
and more sophisticated techniques are developed and used in almost every societal sectors
today. Advances are made in many basic issues in this domain recently and the scope of this
report is to carry out a risk assessment of Melbourne Metro Tunnel project, based on these
advanced concepts and practices in risk assessment and project management.
Fig.1 Risk Management Process
The Melbourne Metro tunnel connects the Cranbourne / Pakenham and Sunbury
lines, the metropolitan lines which inter connects the city's largest growth corridors to north
west and south east. It will increase number of services in theses corridor and thereby
enables subsequent expansion of these networks and suburbs. It also enhances the capacity
of inner core network for 5 other lines namely Frankston, Upfield, Craigieburn, Sandringham
and Werribee lines as it releases the inner core capacity to be shared amongst these lines.
3) RISK IDENTIFICATION
Identification of the risk is obviously the first step to be implemented in risk
assessment. Many organization follow many strategies for risk identification process and is
uncommon to specifically stick to one single method for this. With the advancement in
research and development in this domain with respect to the importance of an effective
strategy for risk assessment, many new methods have been introduced to the industry
especially in the recent decades for managing the risk by either avoiding it, transferring it or
adopting alternate methods to it. Even though, most organization still rely on conventional
and common methods of risk identification like Brainstorming, Questionnaire survey, based
on previous experience, physical and visual inspections, Interviews, group discussions etc. It
has to be noted that, these conventional methods could be effective in identifying some
obvious and probable events that can occur and must not be avoided. But it doesn't imply,
that these methods are suitable enough to identify all the risk factors associated with the
project.
As this is the primary stage of risk assessment , utmost care must be given not to
miss any potential risks, because, unless its identified at this stage, that particular factor
may not be considered in the subsequent assessment stages and can be a major issue in the
future. Hence its very critical to undertake a well structured detailed and systematic
identification procedure to be followed especially in a huge scale project with a substantial
working life span. Every single risk which can be identified with respect to the
implementation, management, maintenance, future development must be studied carefully
whether or not that specific risk comes under the control of the organization. The
methodology accepted must be able to substantially justify what, where, why, when and
how something could happen and not just a vague idea about some of them. It should also
be understood that some of the risks and their impact depends on how it combine and
interact with the existing or proposed system of administration.
For large scale engineering projects, the major risks confronted would be associated
with 3 main areas, Completion risks, Institutional risks and Market-related risks. The timely
commencement and completion of construction works could be difficult and unmanageable.
Only with efficient technical and operational methodologies, this objective could be
achieved. Market-related risks must be considered one of the most important as the
primary objective of the project is for the service and utility for the customer. Institutional
risks, like checking with the regulations, standards prevalent and to ensure social
acceptability and reputation. Hence risks must be identified in all these fields separately and
to be assessed. Many risks are observed to emerge over time. Projects which were found
good enough at a certain period of time may suddenly become ungovernable. A forecasted
study of risk assessment is hence necessary. In short, the risk identification may seems
simple, but is the most important and critical part of assessment criteria. For a large scale
project like Melbourne Metro tunnel, I would recommend not to stick with one single
criteria of risk identification, but to undertake some different risk identification methods like
Brain storming, Interview with the public and stake holders, experience based on previous
exposure of working under similar projects and other methods like SWOT and history, failur
analysis etc. and the following risks were identified
The Melbourne Metro tunnel project is estimated to cost $10.9bn considering the
several peer review and calculation. Although, there exist a huge probability that there
might be some uncertainty in the estimation process. This cost has been estimated based on
the forecasted material, labour and other service costs for the period of construction which
can be variable from what has been anticipated. This cost, along with the probable
contingency may not be the final expenditure spent on the project as its calculated based on
the best case scenario. In the event of an unanticipated issue, say an increase in material
cost, there might be additional costs involved which can alter this amount which could be
identified as one of the major project risk.
The anticipated time frame for construction completion is 5 years. This time span is
calculated as per the timely progress and management of all the procedures involved. This is
also highly probable that may vary depending upon the different elements involved.
Different statutory approvals are yet to be confirmed, if under some circumstances,
it is delayed, the whole project completion period also will be varied. The Land and property
acquisition has not been completed. It has been learned that additional funding have to be
requested for this and may take some more time. Due to the constrained working
environment right in the middle of the city, many limitations are to be met which can
substantially affect the construction period.
One of the other major risk factor involve is the expected efficiency and performance
from the project which is at stake. It is proposed that the high capacity twin tunnel metro
project will greatly enhance the public transport system of the city. It is described that the
city loop congestion could be reduced with the introduction of this project. How much
positive impact it could bring about is yet another matter of discussion. Is it really worth the
huge amount spent on a project rather than improvising the existing system of rail network.
Whether it could be a good alternative to accommodate double the number of current
passengers in the rail networks .
The Construction techniques and methodologies planned may be inappropriate as
there may be variations from the anticipated site conditions. A good example would be a
difference in ground conditions. It is not uncommon that the geotechnical analysis may not
be 100% precise and accurate and is often encountered with variations. Also, the early
works carried out are not up to the expected standard and wasn't completed on the
specified time frame. The machinery and other assets used can be worse than prescribed
and limited availability of resources across the key stake holders and contractors etc. will
enhance the risk element.
Maintenance and other operations could be challenging taking into account the
construction carried out right in the heart of the city near to many buildings and
infrastructure. There is a huge chance that it can have an adverse impact on these
neighbouring structures. The construction activities also limit the public from utilizing the
different services and community facilities in and around the construction site and restrict
swift access to different locations around. The air and sound pollution caused by the
construction will be yet another issue to be faced by the public which will greatly impact the
acceptance by people.
No matter how much experiments and analysis are carried out, the ground always
remain unpredictable. Tunnelling projects thus raise huge risk to the different stake holders
involved especially the public. The ground water table, heavy machinery and transport
activities, Darkness, limited oxygen supply, limited space, high construction noise,
temperature , Dealing with explosives and high voltage equipments etc make tunnelling
projects dangerous and risky. The buildings and people around and above the tunnelling
sites could be affected by these factors. It may leads to safety hazard threats to both the
workers and public involved in and around the workspace. Ensuring the safety and
protection of them has to be the first and foremost importance during the execution of
project.
4) RISK ANALYSIS
The primary objective of undergoing risk analysis of the observed and identified risks
is to measure its impact. There is two major factors governing this criteria. The likelihood or
the probability of occurrence of the project and the consequence or severity of that
particular risk. However, any construction project will involve many variables, and is often
difficult to accurately determine the dependence and correlations and its required to follow
subjective analytical methods to assess the impact of risk and uncertainty. For a large scale
project like Melbourne Metro tunnel, I would recommend not to stick with one single
criteria of risk analysis, instead undergo some of the common and popular as well as
advanced methods. I consider two of the following qualitative analysis and two other
quantitative analysis for the project.
Risk Matrix
After determining the likelihood ranking and severity ranking the risk impact can be
verified. After the likelihood factor and severity impact has be independently y ranked, we
can relate to this risk map shown below. One major feature is that it shows risk of high
probability but low severity and low probability but high severity is similar. Based on the
Impact rating (Trivial, Minor, Moderate, Major and Extreme) and Probability (Rare, Unlikely,
Moderate, Likely and very likely) the Risk impact could be identified from the following table.
Try to follow any mitigation process to eliminate/ reduce/ transfer/control the risks with
high impact.
Fig.3 Typical Risk Matrix
High High risks that are most likely to arise and have potentially serious
consequences and require immediate attention
Medium Medium risks are likely to arise but not necessarily and can have some
potentially serious consequences and must be taken care of.
Low Minor risks exhibit only low consequences and are unlikely to occur that
may be managed by routine procedures
5) RISK EVALUATION
The evaluation of the risk is followed after analysing and understanding the risk
factors involved with the project so as to decide what has to be done about it. In this part
we have to make observations on the analysed risk so as to reach conclusions on whether
that risk needs treatment, should it to be prioritized and find out preferred options suitable
for the respect risk treatment. It is to be done through establishment of qualitative and
quantitative relationship between the benefits and associated risks. It has to clearly identify
the level of risks that can be acceptable, level of investment that can be necessary, existing
mitigation methods and its effectiveness. As we know, it's impossible to eliminate the total
risk involved with a project, hence based on the risk evaluation, risk acceptance criteria has
to be followed upon. The following risks are prioritized, undergone acceptance criteria and
classification, evaluated for existing measures to identify if further mitigation is found to be
relevant.
Budget overrun was identified as one of the most critical risk and can be given the
most priority. The amount of resources and services spent on a project will have a
substantial effect in determining the success of a project. Based on risk matrix the impact
was found out to be high as it has major impact and is likely to happen. Using Monte Carlo
simulation we can find the most probable budget. Although, the cost estimation for the
Metro tunnel project was carried out by Department and the Cost Adviser. The estimate has
undergone extensive review and refinement to ensure mitigation of the risk factor. (Refer
Fig.7 ).Evaluating the strategy implemented and measuring its effectiveness we can classify
this risk under "ADEQUATE" and opportunities for further mitigation is observed. Hence this
risk has to be considered for treatment process.
Time Delay is yet another critical risk to be considered with maximum priority. The
project is expected to be completed within 5 years. Any further delay to this can severely
impact on the system. There can be several factors involved which can lead to this cause. On
analysis on risk matrix, the impact was found to be high and necessary actions has to be
made at most urgent. Using Event tree analysis, we can list out the numerous factors which
can influence the construction time period and using the probability of occurrence of each
components, we could determine the probability of this event. Some of the main factors
which could substantially delay the time required for project completion was the delay that
can cause due to Planning and statutory approvals. To reduce the impact this could cause, a
comprehensive EES can be prepared informing minister for planning's assessment. In
addition a Planning and statutory approval program can be developed. One of the other
reason that can cause time delay is in land acquisition. For avoiding this risk, the land
requirements were identified at an early stage itself and was continued to be successful in
achieving appropriate milestones so far. Based on evaluation of existing criteria, this risk can
be have undergone 'STRONG' (Fig.7) methods to avoid the probable happening of the same.
Even though considering the scope of some improvements, it may be considered for further
Risk treatment procedures.
6) RISK TREATMENT
The process of risk treatment involves identifying the range of options for treating
the risk, how to evaluate them, and thereby preparing risk treatment pans and successfully
implementing them. The objective is analyse the available options so as to identify the best
possible measure to the risk considered. It's a process of selection and implementation of
the optimal and effective measures so as to modify the risk component. There are several
options for risk treatment, choosing the right one depends on how significant the risk is, the
cost of treatment commensurate with the potential advantage it can bring about to the
existing system. The following are the treatment options and associated implementation
plan which can be considered.
Risk acceptance
In several occasions, the only possible way to deal with the risk is to simply accept it.
Although, care must be taken into account with considerable impact and likelihood of its
occurrence. It is always recommended to adopt this method at circumstances where the risk
exhibits only a limited or small threat to the system and is highly unlikely to happen. But in
some cases, with the constrain in probable treatment methods we have to accept it, say as
in case of tunnel construction, the unpredicted ground behaviour. Irrespective of advanced
techniques and methodologies, it cannot be predicted and the only means of treatment is to
accept it. It means if it was to occur , the cost associated must be have to be met by the
sponsor. Although, Only risks of minimal rating are generally accepted. If in any case the risk
under considered is found to be avoidable, it has to be always preferred over the
acceptance of the risk
Risk avoidance
This is the most recommended and common risk treatment method as we annihilate
any chance of the occurrence of the risk under consideration. Although, its highly
recommended we may not always find efficient methods to totally avoid a risk. It is usually
practiced if the risk is observed to be of high impact and likely to happen. It can be
sometimes associated with the cancellation of an activity or even a set of activities.
Sometimes it is possible to modify the situations so as to avoid the risk. An example with
Metro tunnel project would be to avoid blasting methods for tunnelling and using TBM
machines to avoid probable risk which can cause due to explosives. As we had modified the
construction method, we had totally avoided the consequence of such a risk.
Risk Mitigation
If total avoidance of an identified risk is found to be impossible, we may have to
proceed with risk mitigation methods. By implementing this treatment methodology, we are
substantially reducing the potential impact which can the risk may exhibit. Measures have
to be taken to make sure that the risk mitigation is done to the maximum extent possible
with available resources so as to diminish the probable impact of such an event. This
method is the most common practice of risk treatment as its found to be more proven
technique. Using different standards and codes by the council and national regulatory
bodies have the primary objective of implementing this strategy. Using the minimum
recommended grade of construction material in tunnel construction as per the Australian
standards considering the adverse service environment expected underground, so as to
ensure the structural safety and strength of the infrastructure is a good example of this kind
of risk treatment method.
Risk Transferring
This is a powerful method of risk treatment in an organizational point of view. Even
though it may not ensure that the risk has been successfully managed. It is the mere
transfer of responsibility in full or in part from the particular project organization. The
liability or loss may not have to be met by the original project sponsor or contractor is the
main advantage of using this method. It will generally occur through contracts, bonds,
retention etc. for example your insurance contract is perhaps the most commonly used risk
transfer form used. Here a 3rd party accepts the risks of payment of a premium for covering
the damage, loss or the legal and personnel liabilities which can happen. Other examples
include lease agreements, waivers, disclaimers, tickets etc. The most common risk
transferring method under practice is the contracting method which is followed by almost
every construction projects in the industry. Here the primary contractor bifurcate its
responsibility and risk element involved to sub contractors on legal contract. There are
several types of contracts under practice like Lump Sum contract in which the primary
contractor agrees to pay a total sum of a fixed amount for the execution of a part of project.
Every risk involve with the completion of this part, now is transferred to this secondary
contractor. The secondary contractor will give a detailed scope of each and every work and
an amount is quoted for.
There is also a cost plus contract in which all costs are met with an additional profit
pay for the sub contractor. Here the risk involved is slightly lower than the lump sum
contract. Unit rate contract is fixed for the unit rate of different construction procedures.
Here there is no risk for the sub contractor if in case an additional work has to be met with,
as it may also be covered by the primary contractor.
9) REFERENCE
Authority, M.M.R., 2016. Melbourne Metro Business Case. Melbourne Metro Rail Authority.
Avestedt, L., 2012. Comparison of Risk Assessments for Underground Construction Projects A study
about distinctions and common features and suggestions for improvements.
Miller, R. and Lessard, D., 2001. Understanding and managing risks in large engineering
projects. International Journal of Project Management, 19(8), pp.437-443.
Skjong, R., Vanem, E. and Endresen, Ø., 2005. Risk evaluation criteria. SAFEDOR report D, 4(2).
Zou, P.X., Zhang, G. and Wang, J., 2007. Understanding the key risks in construction projects in
China. International Journal of Project Management, 25(6), pp.601-614.