Project Management Skills and Techniques
Risk Management Seminar for Built Environment Procedures and Organisation
Dr Andrew KimmancePhD, BSc (Hons), MSc-Eng, MCIOB, MAPM, CEng
Learning Outcome Explain the concepts and definitions of Risk Introduction to Risk (Session 1) What is Risk? Risk in Construction Types of Risk in Construction Risk Management Explain the types of risk in construction Risk Response Methods Risk Assessment (Session 2)
Definition of Risks Any definition of risk is likely to carry an element of
subjectivity, depending upon the nature of the risk and to what it is applied.
In the context of assessment, risk is defined as the likelihood that harm from a particular hazard will be realised; that is, the probability of an event and its consequences. Where as,
Risk management is the practice of using processes, risk methods and tools for managing these risks.
Risk Process : Stages or Steps Risk Analysis: Techniques Method Approach Risk Assessment: Product - Process Output
All real projects carry risk through uncertainty, and are faced with various levels (H,M,L) of risk exposure.
Each activity/task which make up the process of completing a project faces risks that could present threats to its success.
Risk management focuses on identifying what could go wrong in a project (and its activities), evaluating which risks should be dealt with and implementing strategies to deal with those risks.
Construction managers that have identified the risks within a project will be better prepared and have a more cost-effective way of dealing with them.
Definition of Risk....Cont
Introduction to Risk
Time
Quality
Cost
ProjectScope
ConstraintsRequirements
Success
Session 1
Introduction…Cont
Costoverrun
ProjectConstraintsRisks
DelaysPoorQuality
What is a Risk?
Risk
Unknown
Unexpected
Undesirable
Unpredictable
endeavor
action
Key Forms of Risk
Strategic
External and
InternalFinancial
Operational
Hazards
Risks in Construction
Contractor Supplier
ProjectManager
Engineer
Architect
Client
QuantitySurvey
Inspector`
Soci
al F
acto
rs
Political Factors
Economic Factors
Envi
ronm
enta
l Fac
tors
Types of Risks in Construction
Physical
Risks
Financial
Economic&
Actsof
God
Political
Environ.&
Design
Const.Related
Risks in Construction..ContPhysical
Risks
Financial
Economic&
Actsof
God
Political
Environ.&
Design
Const.Related
Acts of God Flood (heavy rains) Earthquake Landslide Fire (volcano) Wind damage Extreme heat
Types of Risks in ConstructionPhysical
Risks
Financial
Economic&
Actsof
God
Political
Environ.&
Design
Const.Related
Physical Damage to
structure Damage to
equipment Labor injuries Fire Theft
Types of Risks in Construction….Physical
Risks
Financial
Economic&
Actsof
God
Political
Environ.&
Design
Const.Related
Financial & Economic Inflation Availability of
funds Exchange rate
fluctuations Financial default Delay in Payment
Types of Risks in Construction…..
Physical
Risks
Financial
Economic&
Actsof
God
Political
Environ.&
Design
Const.Related
Political & Environmental Changes in laws
and regulations Requirement for
permits Law & order Pollution and
safety rules
Types of Risks in Construction
Physical
Risks
Financial
Economic&
Actsof
God
Political
Environ.&
Design
Const.Related
Design
Incomplete design scope
Defective design Errors &
omissions Inadequate (site)
specifications or investigations
Types of Risks…ContPhysical
Risks
Financial
Economic&
Actsof
God
Political
Environ.&
Design
Const.Related
Construction Related Labour disputes Labour productivity Different site
conditions (weather) Design changes Equipment failure
Risk ManagementA systematic approach to control the level
of risk to mitigate its effects.
Risk IdentificationRisk Identification
Risk EstimationRisk Estimation
Risk EvaluationRisk EvaluationRisk ResponseRisk Response
Risk MonitoringRisk Monitoring
ControlledRisk
Environment
Risk IdentificationRisk Identification
Risk EstimationRisk Estimation
Risk EvaluationRisk EvaluationRisk ResponseRisk Response
Risk MonitoringRisk Monitoring
RiskAnalysis
Risk Management Life Cycle
Control It
Share orTransfer It
Diversify orAvoid It
RiskManagement
ProcessLevel
ActivityLevel
Entity Level
RiskMonitoring
Identification
Measurement
Prioritization
RiskAssessment
Risk Analysis
Risk AnalysisEstimating the potential impacts of risk to decide what risks to retain and what risks to transfer to other parties
Ranking options
Comparing options
Descriptive analysis
Qualitative
Risk Analysis Techniques
Probability analysis
Sensitivity analysis
Simulation techniques
Quantitative
Evaluation
Risk Response Process
Risk Response Methods
Elimination Transfer ReductionRetention
RiskProcess
Evaluation
Acceptance
Identifying
Risk Evaluation Undertaken at regular intervals after risk
analysis is finished, and Need to compare against a risk criteria:
Associated costs and benefits Legal requirements Social, economic and environmental factors Management, shareholders concerns
Used to enhance the decisions taken to either accept specific risks or ways of controlling or treating risks
Risk Acceptance The systematic process using specific criteria
by which relevant stakeholders agree that risk may be accepted
Usually the final stage in risk management to ensure that every risk has been reviewed at the appropriate level
Have everything been done that is Reasonably Practicable to reduce the level of Safety Risk posed by the identified Accidents, individually and in total?
And: Are they now Broadly Acceptable or Tolerable and
As Low As Reasonably Practicable?
Risk Acceptance Cont... Undertaken to ensure all risks has been reviewed at
appropriate management levels prior to approval of the Risk (Safety) Assessment Plan and Report
Various techniques can be used, such as: 3x3 or 5x5 matrix , (1, 2, 3,..10), (high, median, low) SWOT Analysis (e.g., threats and opportunities) Questionnaires (surveys) Brainstorming and/or problem solving (sessions) Incident (accident) Investigation Auditing and Inspecting Criteria Risk assessments (health and safety analysis)
Identifying Risks Strategic Level: (capital, reputation, changes, legal,
agreements, political, environmental) Operational (day to day issues from strategic concerns,
contract disputes, performance and workmanship,) Financial (credit, exchange rates, interest rates,
markets, earnt value performance (EVM)) Compliance (CDM, health & safety, regulations, EU,
environmental constraints, trade acts, Knowledge Management ( communication systems,
Information technology, suppliers, materials)
Risk TreatmentRisk Response Methods
Elimination Transfer ReductionRetention
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
Risk Treatment Cont….Risk Response Methods
Elimination Transfer ReductionRetention
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.
Risk Treatment….ContRisk Response Methods
Elimination Transfer ReductionRetention
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.
Risk Treatment Cont….Risk Response Methods
Elimination Transfer ReductionRetention
Risk Reduction Continuous effort. Related with improvements of a company’s
physical, procedural, educational, and training devices.
Improving housekeeping, maintenance, first aid procedures and security.
Education and training within every department .
Factors Involved in Writing a
Risk Assessment?
Session 2
Risk Assessments (facts) The construction industry is subject to more
risk and uncertainty from injuries, recession, bankruptcies, than perhaps any other industry.
Risk assessments form the cornerstone of health and safety legislation in the UK, EU, and
The requirement for construction organisations to prepare risk assessments are clearly outlined in a number of health and safety acts and regulations.
Risk Assessment Cont... A Risk Assessment is used in construction
safety to identify, document and eliminate or reduce hazards in a particular work activity or process.
A risk assessment evaluates a company's work activities, and considers areas where there may be losses for employers, customers and employees.
A risk assessment should be carried out for anything that has the potential (all activities) to cause harm or injury to an employee (anyone).
Risk Assessments Cont.... Ultimately a risk assessment is a process which
helps Construction Managers (employers) identify such factors as:
when a hazard may occur, the severity of that hazard, frequency of exposure, and possibility of minimising or avoiding harm.
The process involves a review of workplace safety, inspections, identification of task/hazard pairs, and prioritising for elimination or control.
Risk Assessment Process• Risk assessment also fits into a four-part
process for risk control, through the setting of health and safety standards, as follows:1. Hazard identification. 2. Risk assessment and evaluation. 3. Risk control - the selection of suitable
measures to eliminate or control risks. 4. Implementing and maintaining
(monitoring) control measures.
Risk Assessment Cont...In deciding upon preventive and protective control measures, the following key principles should be applied:
1. It is always best, if possible, to avoid the risk altogether.
2. Combat risks at source.3. Wherever possible, adapt the work to the
individual.4. Take advantage of technological and
technical progress.5. They should form part of a coherent policy
and approach.
Risk Assessments Cont....6. Give priority to these measures which
protect the whole workplace.7. Workers need to be involved, and
understand what they need to do.8. A positive 'safety culture' should be
developed within the organisation.9. PPE should only ever be relied upon as the
last line of defence against a known hazard.
Risk Process Example
Exercise OnePrepare a Risk Assessment for a small construction project of your choosing: The risk assessment will need to identify
and evaluate the risks that are presented by the activities that are undertaken each day on your construction project,
You will need to develop control measures to either eliminate or control the effects of the hazards.