risk management in the built environment qualitative and quantitative risk management by professor...
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Risk Management in the Built Environment
Qualitative and Quantitative Risk Management
By Professor Simon Burtonshaw-Gunn – licensed under the Creative Commons Attribution – Non-Commercial – Share Alike License
http://creativecommons.org/licenses/by-nc-sa/2.5/
Risk Management in the Built Environment
School of the Built Environment
MSc Construction Management
Risk Management in the Built Environment
Presentation 1: Risk Identification
Professor Simon Burtonshaw-Gunn
Risk Management in the Built Environment
• Risks are usually spoken about using a Condition- Cause- Consequence approach, for example:
• There is a risk that lack of support will cause the project to stall resulting in team being deployed on other work.
• There is a risk that our customer will be unable to specify the internal fit-out requirements in a timely fashion caused by their lack of experience in procuring this type of equipment resulting in delayed payment, project overrun, and delayed initiation of support contracts.
• There is a risk that the client will wish to bring forward the completion date for the project and cause us to execute the work by additional shift working or more resources resulting in an overall cost increase from that contractually agreed.
Risk Management in the Built Environment
Risk = Probability x Consequence
• Probability = Likelihood of… …an incident/accident occurring…loss of control
…the hazard being released(Inevitable through to impossible)
• Consequence = The outcome of the incident/accident following release of the hazard (Death through to no injury)(Environmental catastrophe through to no effect)
In order words . . . the chance (big or small) of harm actually being done
Risk Management in the Built Environment
Probability
Very Low
Low Medium High Very High
Impact Very High 4 6 8 10 12
High 3 5 7 9 11
Medium 2 4 6 8 10
Low 1 3 5 7 9
Risk Management in the Built Environment
Cost Impact
Very High … jeopardise the business budget due to a substantial provision for consequential damages.
High … endanger the project financial viability ie pose a significant margin threat so that substantial re-planning requires the re-assignment of business’s resources sufficient to harm other projects or cause considerable consequential delay costs.
Medium … require significant re-work or the selection of alternative subcontractors or cause significant consequential delay costs and adjustment of the risk-margin balance.
Low … require additional or higher rated resources or a change to alternative suppliers or cause some consequential delay costs.
Very Low: … require adjustment of resource profiles, resulting in non-optimum efficiency.
Risk Management in the Built Environment
Schedule Impact
Very High … cause significant programme completion non-compliance, unrecoverable by re-planning.
High … cause unavoidable programme milestone non-compliance for which re-planning is required.
Medium … cause overrun and certain work for which re-planning is required.
Low … require probable re-work.
Very Low: … require some re-scheduling of tasks.
Risk Management in the Built Environment
Performance Impact
Very High … result is a serious non-compliance or degradation in performance sufficient to terminate the project.
High … cause a problem or degradation in performance so significant that a substantial non-compliance is unavoidable.
Medium … cause partial compliance that requires concessions or difficult negotiations.
Low … cause a problem that requires trade-off studies or negotiations to resolve.
Very Low: … require some adjustment in the solution.
Risk Management in the Built Environment
Impact Definitions
ProjectObjectiv
e
Very Low Low Medium High Very High
0.05 0.1 0.2 0.4 0.8
Cost Insignificantcost increase
<5% cost increase
5-10% cost increase
10 -20% cost increase
> 20% cost increase
Schedule InsignificantSchedule slippage
Schedule slippage
<5%
Overall project
slippage 5 -10 %
Overall project
slippage 10 - 20 %
Overall project
slippage >20 %
Scope Scope decreases,
barely noticeable
Minor Areas of Scope are
affected
Major Areas of Scope are
affected
Scope reduction
unacceptable to client
Project End. Item is
effectively useless.
Quality Quality degradation
barely noticeable
Only very demanding applications are affected
Quality reduction requires
client approval
Quality reduction is unacceptable to client
Project End. Item is
effectively unusable.
Risk Management in the Built Environment
Customer Project management ProcurementCommercial FinancialEngineeringManufacturing System design and integrationTechnologySubcontractor capabilitiesInterfacesRegulatory involvement
EnvironmentalPolitical visibilityNumber of key project participantsComplexityLabour skills availability and productivityFunding/ cost sharingMagnitude / type of contaminationQuality requirementsSitePublic involvementNumber of locations/ site access/ site ownership
Using this list as a starting point give examples of these types of project risk . . . .
Risk Management in the Built Environment
Make/ buy planning, design, production capacity, new tools/ equipment requirements, test requirements, new manufacturing or test processes, incorporating change during manufacture
Manufacturing
Feasibility, technology transfer, complexity, dependencies, resourcing, special standards/ documentation requirements, prototypes, maturity, manufacture, process
Engineering
Profit margin, accurate cost forecasts, payment plan, penalty charges
Financial
Subcontractor agreement, interpretation of Terms and conditions
Commercial
Planning, vendor appraisals, critical lead-times, reliance on single source, component obsolescence, market volatility
Procurement
Planning, resourcing, resource capabilities, dependencies, stakeholders, organization / interfaces, communication, constraints, process, transition and services
Project management
Customer focus, specification quality, changing requirements.
Customer
Typical Examples . . . Project Management Risk
Risk Management in the Built Environment
Tools and Techniques for Risk IdentificationThere are a number of tools and techniques available for use in risk identification, these could be:
• Document review
• Assumptions analysis
• Diagramming techniques
• Checklists – See also supporting information of
“Checklist for Risk Identification”
• Information gathering techniques – brainstorming, interviewing etc
• Learning from experience / previous project close out reviews
Risk Management in the Built Environment
School of the Built Environment
MSc Construction Management
Risk Management in the Built Environment
Presentation 1: Risk Planning and Identification
Professor Simon Burtonshaw-Gunn