Polytechnic University of the Philippines
College of Engineering
Bachelor of Science in Civil Engineering
CIEN 30293
Construction Methods and Project Management
Construction Risk Management
Module-8
Dr. J. Berlin P. Juanzon, CE, MSCM
Subject Specialist
Construction is inherently risky
but, it is argued, is less technically
complex than projects in industries
such as software, defense and
engineering.
This is because it is simply about
using specialists in design and
construction to produce a project
within a specified timescale
Source: Risk Management in Construction | process of
managing risk
[Link]
[Link]#cooke
RISK SIGNS
Thelikelihood
(probability) of
occurrence of an
undesirable event
that will have an
impact (positive or
negative) on
objectives
A possibility of loss –
not the loss itself!
Construction Risk Defined
A construction risk can be defined as any
exposure to possible loss. Because every
construction project is different, each
offers a multitude of varying risks. To
ensure the success of a project, a
contractor starting on a construction
project must be able to recognize and
assess those risks.
RISK MANAGEMENT
Is a systematic method of identifying,
analyzing, treating, and monitoring the
risks involved in any activity or process.
Is to a methodology that minimize the
risks of not achieving the objectives.
What is Project Risk?
Itis an event or condition
that, if it occurs, has a
positive or negative effect
on at least one project
objective, such as time,
cost, scope, or quality.
What is Project Risk Management?
A process that assists
project managers in setting
priorities, allocating
resources and implementing
actions that reduce the risk
of the project not achieving
its objectives.
STAGES OF PROJECT RISK MANAGEMENT
Stage 1
Stage 1-Classification of Risk
Stage 1
Risk Identification
Risk identification is the
first and perhaps the most
important step in the risk
management process, as it
attempts to identify the
source and type of risks. It
includes the recognition of
potential risk event
conditions in the
construction project and
the clarification of risk
responsibilities
Risk Identification
Key questions that may assist your identification
of risks include:
− For us to achieve our goals, when, where,
why, and how are risks likely to occur?
− What are the risks associated with achieving
each of our priorities?
− What are the risks of not achieving these
priorities?
− Who might be involved (for example,
suppliers, contractors, stakeholders)?
Risk Assessment / Analysis
Risk analysis involves the consideration of
the source of risk, the consequence and
likelihood to estimate the inherent or
unprotected risk without controls in
place. It also involves identification of the
controls, an estimation of their
effectiveness and the resultant level of
risk with controls in place (the protected,
residual or controlled risk).
Evaluate the Risk
Once the risks have been analyzed they
can be compared against the previously
documented and approved tolerable risk
criteria. When using risk matrices this
tolerable risk is generally documented
with the risk matrix. Should the protected
risk be greater than the tolerable risk
then the specific risk needs additional
control measures or improvements in the
effectiveness of the existing controls.
Example Risk Matrix
Treat the Risk
An unacceptable risk requires treatment. The
objective of this stage of the risk assessment
process is to develop cost effective options for
treating the risks. Treatment options, which are
not necessarily mutually exclusive or
appropriate in all circumstances, are driven by
outcomes that include:
− Prevention / Avoiding the risk,
− Mitigation / Reducing the risk,
− Transferring (sharing) the risk, and
− Retaining (accepting) the risk.
Identify the following situation:
Which one is Mitigation, Preparedness and
Prevention?
Prevention Mitigation
Preparedness
Monitoring the risk
The ocurrency of identified risks needs to
be regularly monitored. New risks and
their impact on the organization may to
be taken into account.
This step requires the description of
how the outcomes of the treatment will
be measured.
Milestones or benchmarks for success
and warning signs for failure need to be
identified.
Documentation
Documentation is essential to demonstrate that
the process has been systematic, the methods
and scope identified, the process conducted
correctly and that it is fully auditable.
A documented output from the above sections
(risk identification, analysis, evaluation and
controls) is a risk register for the site, plant,
equipment or activity under consideration. This
document is essential for the on-going safe
management of the plant and as a basis for
communication throughout the client
organization and for the on-going monitor and
review processes.
Who is at Risk and What are the Risks
Who is at Risk
Owner
Architect
Contractor
Marsh
What are the Risks
Owners Risks
Damage to the project
Delay in start up
3rdparty Bodily Injury / Property
Damage
Force Majeure
Error in design - change orders
Environmental
Marsh
What are the Risks
Architects Risks
Error in design
3rd Party Bodily Injury / Property Damage
Marsh
What are the Risks
Contractors Risks
Damage to project
3rdparty Bodily Injury / Property
Damage
Delay by performance
Environmental
Marsh
Thank you very much!