Risk Managements
Risk Management in
Construction Projects
Presented by:
Karim Mostafa BSc. MSc. MRICS
Course Agenda - Brief :
▪ Description:
▪ What is the Risk?
▪ Risk Identification.
▪ Qualitative Analysis.
▪ Quantitative Analysis.
▪ Response Strategies
2
Risk is an uncertain event which if
occurred will affect the project
performance and objectives in
terms on cost, time and quality.
Risk is usually measure by its
probability and impact.
Risk Management 1. Risk Identification:
Process : - Prepare Risk Register Format.
Managing - Identification Process starts in
1. Risk Identification the early stages of design.
Risks
2. Risk Analysis - Risk Identification Meetings
should take place.
3. Risk Response Plan Major Techniques:
- Brainstorming Meetings
4. Reporting and - Questionnaires and Interviews
Feedback - Historical risk registers.
- Checklist
- Research.
Risk Management 1. Risk Identification:
Process : Most Important output is the
“Risk Register”
Managing 1. Risk Identification
Risks Risk Register is a dynamic live
document subject to updates
2. Risk Analysis from the early stages of the
project until the end of
construction.
3. Risk Response Plan
Usually, administrated by the
PM or occasionally the Cost
4. Reporting and Consultant (QS).
Feedback
Risk Management 2. Risk Analysis:
Process : Qualitative Methods:
- High/ Low Heat Diagrams
Managing 1. Risk Identification Low Impact & Low Impact &
Risks probability High probability
2. Risk Analysis
3. Risk Response Plan
High Impact &
4. Reporting and Low probability
High Impact &
probability
Feedback
Quantitative Methods:
- Monte Carlo simulation
- Fault Tree
- Sensitivity analysis
- Equivalent Value
Risk Management 2. Risk Analysis:
Process : Most Common:
- Monte Carlo simulation:
Managing Accurate Modelling Method
1. Risk Identification but requires large sources of
Risks
data for probabilities and
2. Risk Analysis impacts
3. Risk Response Plan
- Equivalent Value:
4. Reporting and EV = Impact X Probability
Feedback
Example: There is 20%
probability that project cost will
increase by EGP 5,000,000
EV = 5M X20% = EGP 1 M
Risk Management 2. Risk Analysis:
Process : Role of Quantity Surveyor is to provide
risk quantification in terms of cost
impact and to calculate the risk
Managing 1. Risk Identification allowances.
Risks
Risk Allowances shall be:
2. Risk Analysis - based on Monte Carlo Simulation,
- Sum of EVs
- or simply sum of the significant risks
3. Risk Response Plan
4. Reporting and
Feedback
Risk Management 2. Risk Response Plans:
Process : - Risk Acceptance or Retention:
Usually for low probability low impact
Managing 1. Risk Identification risks.
Risks
- Risk Transfer:
2. Risk Analysis By subcontracting or contractual
provisions.
Usually for risks with medium severity
and specialized works.
3. Risk Response Plan
- Risk Mitigation:
For any risks which have either
4. Reporting and chances to reduce probabilities or
methods to limit the impacts.
Feedback - Risk Avoidance:
Usually for high probability and impact
risks.
We simply cannot afford this risk!
- Risk Sharing: is similar to a partial Risk
Transfer strategy.
Risk Management 4. Risk Reporting &
Feedback:
Process :
- Provide more accurate historical
Managing data for identification and analysis
1. Risk Identification in the future.
Risks
- Report efficiency and cost of
2. Risk Analysis response plans for the future.
- Manage risk allowances.
3. Risk Response Plan
4. Reporting and
Feedback
Develop a Risk Register:
Impact Probability Time Impact Equivalent Response Plane Impact Actual Status
Cost Value after Costs
response
Plan
Soil 30 M 25% 2 Months 2,500,000 Mitigation 1,000,000 Occurred
settlemen - Architecure (Soil investigation)
t renovation & 250,000 +750,000 =
wall finishes 1,000,000 + 2,000,000
- Micro piles
- Repair of Str
systems. Transfer:
- Fees for Get a specialized
Professional of contractor.
Geotech
consultants. Acceptance:
Other Mitigation:
Piles
Loss of 20% 1Month Closed/
produc Canceled
due to
traffic
Legislatio 20% 3 Months Open
n
11
High 10% None Closed/
Think of your current Project potential risks and apply the following:
- Identify several risks.
- Rank your risks in terms of cost impact and probability.
- Provide risk response plans.
- Provide cost estimation of the impacts.