APM
RISK MANAGEMENT IN
CONSTRUCTION
© EP 1
Introduction
Cost Success
Project
Constraints
Quality Time
© EP 2
Introduction
Cost
overrun
Risks
Poor
Quality
Project
Constraints Delays
© EP 3
What is a Risk?
Unknown
Unexpected
endeavor
Risk
action
Undesirable
Unpredictable
© EP 4
Risks in Construction
Economic Factors
Client
Environmental Factors
Supplier
Social Factors
Contractor
Architect Quantity
Survey
Engineer Project
Manager
Inspector`
Political Factors
© EP 5
Types of Risks in Construction
Physical
Acts Financial
of &
God Economic
Risks
Political
Const.
&
Related
Environ.
Design
© EP 6
Types of Risks in Construction
Physical
Acts Financial
of & Acts of God
God Economic
Flood
Earthquake
Risks Landslide
Fire
Wind damage
Political
Const.
&
Related
Environ.
Design
© EP 7
Types of Risks in Construction
Physical
Acts Financial
of & Physical
God Economic
Damage to structure
Damage to
equipment
Risks
Labor injuries
Fire
Political
&
Const. Theft
Related
Environ.
Design
© EP 8
Types of Risks in Construction
Physical
Acts Financial
of & Financial &
Economic
God Economic
Inflation
Availability of funds
Risks
Exchange rate
fluctuations
Political
Const.
Financial default
&
Related
Environ.
Design
© EP 9
Types of Risks in Construction
Physical
Acts Financial
of & Political &
Economic
God Environmental
Changes in laws
and regulations
Risks Requirement for
permits
Law & order
Political
Const.
&
Related Pollution and safety
Environ.
rules
Design
© EP 10
Types of Risks in Construction
Physical
Acts Financial
of & Design
God Economic
Incomplete design
scope
Defective design
Risks
Errors & omissions
Inadequate
Political
Const.
specifications
&
Related
Environ.
Design
© EP 11
Types of Risks in Construction
Physical
Acts Financial
of & Construction
Economic
God Related
Labor disputes
Labor productivity
Risks Different site
conditions
Political
Design changes
Const.
&
Environ.
Related Equipment failure
Design
© EP 12
Risk Management
A systematic approach to control the level of risk to mitigate its effects.
Risk
RiskIdentification
Identification
Risk
RiskMonitoring
Monitoring
Controlled
Risk Risk
RiskEstimation
Estimation Risk
Analysis Environment
Risk
RiskResponse
Response
Risk
RiskEvaluation
Evaluation
Risk Management Life Cycle
© EP 13
Risk Analysis
Estimating the potential impacts of risk to decide what risks to retain and what risks
to transfer to other parties
Risk Analysis
Techniques
Quantitative Qualitative
Probability analysis Ranking options
Sensitivity analysis Comparing options
Simulation techniques Descriptive analysis
© EP 14
Risk Response
Risk Response Methods
Elimination Transfer Retention Reduction
© EP 15
Risk Response
Risk Response Methods
Elimination Transfer Retention Reduction
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
© EP 16
Risk Response
Risk Response Methods
Elimination Transfer Retention Reduction
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.
© EP 17
Risk Response
Risk Response Methods
Elimination Transfer Retention Reduction
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.
© EP 18
Risk Response
Risk Response Methods
Elimination Transfer Retention Reduction
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 .
© EP 19
Thank You!!
© EP 20