RISK MANAGEMENT

INTRODUCTION

• It is the process by which risk or uncertainty in the project is minimized and project is completed in optimum duration, qualitatively and with maximum return.

• The basic objective of risk management system is to achieve and maintain a reduced cost of risk and Evaluating and assessing all risks of loss

Steps in Risk Management

1. Risk Identification: Risks have to be identified first

2. Risk Measurement: Tools for measurement of each one of the identified risks need to be put in place to measure each one of the risks in numerical form.

3. Risk Control and Monitoring

4. Capital Allocation

5. Risk-adjusted Performance Measurement:I t is a performance metric that asseses reward with some adjustment for risks

Requirements for Risk Management System

1. Well informed Board of Directors and Oversight of Board

2. Capable Management

3. Adequate Risk Management Policies and Processes

4. High quality MIS for Risk Management

5. Appropriate Staffing of the Risk Management Function

Risk in Construction

• Business Risk

• Financial Closure Risk

• Technology Risk

• Project Development Risk

• Political Risk

Stand alone project risk

• Completion Risk• Price Risk• Resource Risk• Technology Risk• Political Risk• Casualty Risk• Environmental Risk• Permission Risk

Role of Risk Manager• Identifying the risks involved• Manager must analysis and evaluates the probable risk with required

causes and effects• Classify risk as

ISR=Insignificant riskNR=Normal riskSRI=Serious risk

• Prepare contiguities plans• Train people to manage risk• Prepare report for effective decision making• Review the risk regularly and throughout the project

Risk Management and Insurance• Insurance is defined as “Social device for reducing risk by

combining a sufficient number of exposure units to make their individual losses collectively predictable.

• Requisites of an Insurance Risk:1. Accidental Loss2. Loss should be large3. Unlikely to produce loss to majority4. Homogeneous exposure units5. Loss should be definite

Insurable Risk

• It is a risk that meets the ideal criteria for efficient insurance.• Types of Insurable Risks

– Property Risks: Damage to Physical Assets• Acts of God• Accidents• Break down

– Financial Risks: Monetary Loss from• Theft and Burglary• Business Interruption• Bad Credit

Insurable Risk contd…– People Risks: Loss to Employees

• ILL Health and accident• Death• Overseas travel

– Liabilities Risks: Loss from Operations• Product liabilities• Public liability• Directors and Officers liabilities• Errors and Omissions

CASE STUDY

• The Millennium Wobbly Bridge,London

Date: June 2000

-Featured a 4 m wide aluminium deck flanked by stainless steel

balustrades and supported by cables.

- Risk: Deck swayed about and many reported feeling seasick.

- After series of testing it was decided to adopt passive damping system

which would harness the movement of structure to absorb the energy

- After 2 years the bridge was again opened to public in feb 2002

- The alteration caused extra £5 million.

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