Risk Management Student Moraru Gabriel Second Year of Master ISE

7/27/2019 Risk Management Student Moraru Gabriel Second Year of Master ISE

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Risk Management

Student: Moraru GabrielGroup: I.S.E. 2nd year of master

Professor: Diego Varela

Risk Management for Design and ConstructionOvidiu Cretu,Robert Stewart,Terry Berends


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A project manager responsible for thedelivery of a new office building identifies aperrmitting concern that could delay theapproval of her project.

A structural engineer is assessing thequality of the data of a technical report thatwas performed and fears that the abutmentsof the bridge he is designing could

experience differential settlement.A general contractor fears that the

recent volatility in the price of steel could turn

a profitable project into a money loser.


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Risk Management includes theprocesses conducting riskmanagementplanning, identification, analysis, responses,

and monitoring and control on a project.

The objectives of project risk managementare to increase the probability and impact of

positive events and decrease the probabilityand impact of negative events in the project.


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Risk management should:

create value

be an integral part of organizationalprocesses

be part of decision making

explieitiv address uncertainty be systematic and structured

be based on the best availableinformation

Why and what is Risk Management?

1.2 What Is Risk Management?


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Research has shown that historically themajority of construction projects experience

cost and/or schedule overruns.

A study focused on analyzing the costs of

public works projects in Europe and North

America found that the incidence and severity

of cost overruns was significantly higher thanindicated by the previous source. This same

study found that cost overruns were found in 86

percent of the 258 projects that were sampled.


1.3 Why Risk Management?


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Further, actual costs were, on average, 2.8percent higher than estimated costs. The

authors of the study concluded that the

following factors were the primary culprits in

cost overruns: Lack of proper risk analysis in developing

estimates

Poorly defined scope at the time initial projectbudgets were developed

Larger public projects are prone to intentional

underestimation due to political


1.3 Why Risk Management?


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1.4 The Limitations of Risk Management

How can you manage the future?The use of probability distributions, which werefirst developed by the Germanmathematician Carl Freidrich Gauss (1777-

1855), were never designed for the purposesmodeling complex future events, they are stilluseful, provided we acknowledge these

limitations and ensurethat those who make decisions based onthem are made aware of them.


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The dangers of modeling risks usingstatistical methods are abundane.g.:stockmarket crash of 2008.

Risk analysis will always be limited by theassumptions onwhich the calculations arebased, Financial markets are far too complexto include all data, and any quantitativemodel is therefore only as good as the

information and algorithms used, which cannever match the real world.


1.4 The Limitations of Risk Management

2 P j t t d h d l E ti t


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Cost estimate- aprediction of quantities,cost,and/

or price of resources required by the scope of an

asset investment option ,activity,or project.As aprediction, an estimate must adress risks and

uncertainties.

Schedule estimate-identifies a plan of work to beperformed showing the order in which tasks are

to be carried out and the amount of time

allocated to each of them.

Base cost estimate-the cost which can resonablebe expected if the project materializes as

planned. The base cost estimate must be

unbiased and neutral- it should not be optimistic

or conservative.

2. Project cost and schedule Estimates

2.1 Introduction


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2.2 Cost estimate process


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2.2 Cost estimate process

The cost estimating process includes the

following steps:

-determine the bias estimate-prepare the estimate

-review estimate

-determine risks and set contingency

-determine estimate communication approach-conduct independent review and obtain

management endorsement


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3.1 RBE-The process

The risk-based estimate (RBE),known as

cost risk analysis is an important part of projectmanagement as well as the project cost andschedule estimating.

The advantages of using RBE approachincludes:-It minimizes the number of suprises during

project development and delivery by providingfor the identification and quantification of riskevents


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3.1 RBE-The process

-it creates opportunities to study what-ifscenarios using a rigorousand statisticalapproach

-it allows reasonable control over the projectsestimate through project risk management-it is a collaborative effort that improvesproject communication and transfer ofinformation amoung the project teammembers, stakeholders, and the public.


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3.1 RBE-The process

The diagram illustrates the situation when theanalysis assumes that changes may occur only

for the cost, and the schedule is fixed .

Documents

Risk Management Student Moraru Gabriel Second Year of Master ISE