risk management yulvi. introduction time quality cost project constraints success introduction

RISK MANAGEMENTYULVI

Introduction

TimeQuality

Cost

ProjectConstraints

SuccessIntroduction

DelaysPoor

Quality

Costoverrun

ProjectConstraintsRisks

Risk

Unknown

Unexpected

Undesirable

Unpredictable

endeavor

action

What is the risk

Risks in Construction

Contractor Supplier

ProjectManager

Engineer

Architect

Client

QuantitySurvey

Inspector`

Soci

al Fa

ctors

Political Factors

Economic Factors

Envir

onm

enta

l Fa

ctors

Physical

Risks

Financial

Economic

&Actsof

God

Political

Environ.&

Design

Const.Related

Types of Risks in Construction

Types of Risks in Construction

Physical

Risks

Financial

Economic

&Actsof

God

Political

Environ.&

Design

Const.Related

Acts of God

Flood

Earthquake

Landslide

Fire

Wind damage

Types of Risks in Construction

Physical

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

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 specifications

Types of Risks in Construction

Physical

Risks

Financial

Economic

&Actsof

God

Political

Environ.&

Design

Const.Related

Construction Related

Labor disputes

Labor productivity

Different site conditions

Design changes

Equipment failure

Risk Management

A 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

ControlledRisk

Environment

RiskAnalysis

Risk Management Life Cycle

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 AnalysisTechniques

Probability analysis

Sensitivity analysis

Simulation techniques

Quantitative

Risk Response

Risk Response Methods

Elimination Transfer ReductionRetention

Risk Response

Risk 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 Response

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 Response

Risk 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 Response

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 .

Risk Monitoring and Control◦Risks can be monitored on a continuous basis to check if any change is

made. New risks can be identified through the constant monitoring and assessing mechanisms.

Risk Management Process

◦Each person involved in the process of planning needs to identify and understand the risks pertaining to the project.

◦Once the team members have given their list of risks, the risks should be consolidated to a single list in order to remove the duplications.

◦Assessing the probability and impact of the risks involved with a help of a matrix.

In deciding how serious a risk is we tend to look at two parameters:

◦ Probability – the likelihood of the risk occurring

◦ Impact – the consequences if the risk does occur.

Impact can be assessed in terms of its effect on:

◦ Time

◦ Cost

◦Quality.

There is also a third parameter that needs to be considered:

◦ Risk proximity – when will the risk occur?

Scale Probability Impact

Very low Unlikely to occur Negligible impact

Low May occur occasionally

Minor impact on time, cost, or quality

Medium Is as likely as not to occur

Substantial impact on time, cost or quality

High Is likely to occurSubstantial impact on time, cost or quality

Very high Is almost certain to occur

Threatens the success of the project

The analysis is based on the risk level of investment risk factor equation where the magnitudes of the risk factors are overview of the level of investment risk that happening.

RF = L + I – (L x I) (1)

Where: RF = Risk Factor (scale 0 – 1)

L = Risk Probability (scale 0 – 100%)

I = Risk Impact

RISK ANALYSIS

Risk Category & Quadrant Risk MappingRF Value Category Step Handling

>0.7 High Risk Should be done a decreased risk of lower level

0.4 – 0.7 Moderate

Risk

Required corrective measures within a specified period

< 0.4 Low Risk Corrective measures if needed

Risk category based on Quadrants Risk Mapping, they are:

◦ Low risk, where the risk is usually overlooked because of the relatively low probability of occurrence, and if it happens, then the impact is relatively small.

◦Moderate Risk, where one of the probability and the impact is relatively low, so it is necessary for action to manage it.

◦High Risk, where the probability of occurrence and impact is relatively high, so it needs to be made and a decreased risk management plans that may occur

continue

◦Split the team into subgroups where each group will identify the triggers that lead to project risks.

◦The teams need to come up with a contingency plan whereby to strategically eliminate the risks involved or identified.

◦Plan the risk management process. Each person involved in the project is assigned a risk in which he/she looks out for any triggers and then finds a suitable solution for it.

conclusion◦ An organization will not be able to fully eliminate or eradicate risks. Every project

engagement will have its own set of risks to be dealt with. A certain degree of risk will be involved when undertaking a project.

◦ The risk management process should not be compromised at any point, if ignored can lead to detrimental effects. The entire management team of the organization should be aware of the project risk management methodologies and techniques.

◦ Enhanced education and frequent risk assessments are the best way to minimize the damage from risks.

Assessment 1

1. Chose 1 project

2. Identification the risks

3. Identification potentials impact

4. Risk response

5. Risk Monitoring and Control