RISK MANAGEMENT

In construction projects

Haytham Baraka
Civil Engineer
2012

Most projects contain myriad such risks (prices, schedule

durations, installation rates, etc.)

High-risk events are so classified either because they have

a high likelihood of occurrence coupled with at least

a moderate impact or they have a high impact with at Least
moderate likelihood. In either case, specific directe
management action is warranted to reduce the probability
of occurrence or the risks negative impact.

THIS BOOK IS IMPORTANT TO :

Managers, because it improves the basis for making

decisions to meet operational requirements and achieve
project goals
Project staff because it helps to identify things that can go
wrong in the project process and offers ways to address
them effectively.
Suppliers and contractors, because a sensible approach
to risk in projects leads to better planning and better
outcomes for sellers as well as buyers.
Financiers, who must ensure they obtain a financial
reward commensurate with the risks involved



--

principal
risk/return profile

.

,



risk /return profile


...

...

risk
71

 ..
71 ,
,

Risk management objectives:

The goals of risk management are to identify risks and develop

strategies to reduce or avoid risks.

Assists project managers in setting priorities

Allocating resources
Implementing actions and processes that
reduce the risk of the project
Minimize Adverse impacts to project scope,
cost, schedule and others


negative events
positive events
or opportunities
:
) )
( )

negative events

positive events

The six primary steps in project risk management are the

following:

Each step will be described

in this document


Tasks and outputs
Process
Tasks

Task Outputs
(deliverables)

Risk
management
planning

Risk management plan

Risk
identific
ation

Project risk list

Qualitati
ve risk
analysis

Prioritized list of
risks classified as
high, moderate, or
low.

Quantitat
ive risk
analysis
(Only if
the
project
includes
Value
Analysis)

An analysis of the
projects likelihood
of achieving its
cost and time
objectives

Process
Tasks
Risk
response
planning

Risk
monitoring
and control

Task Outputs
(deliverables)
Risk response plan,
including one or
more of the
following: residual
risks, secondary
risks, change
control, contingency
reserve (amounts of
time or budget
needed), and inputs
to a revised project
plan
Workaround plans,
corrective actions,
project change
requests (PCR), and
updates to the risk
response plan and to
risk identification
checklists for
future projects

And the following tabe shows Responsibilities

((stakeholdersroles ))
Process
Tasks

Role
Spon District Pro
Division jec
sor
Chief
t
for
Man
Program age
and
r
Project
Manageme
nt

Assista
nt
Project
Manager
/
Project
Managem
ent
Support
Unit

Funct
ional
Manag
er

Task
Mana
ger

Risk
managemen
t
planning

Risk
identific
ation

Qualitati
ve risk
analysis

Quantitat
ive risk
analysis
(Performe
d only as
part of
Value
Analysis)

Process
Tasks

Role
Spon District Pro
Division jec
sor
Chief
t
for
Man
Program age
and
r
Project
Manageme
nt

Assista
nt
Project
Manager
/
Project
Managem
ent
Support
Unit

Risk
response
planning

R,
A

Risk
monitorin
g and
control

R,
A

Legend:

R = responsible

S = support

A = approve

Funct
ional
Manag
er

Task
Mana
ger

when risk plan is to be created ?

Risk Management Process

System
Definition
Risk
Analysis
Risk
Definitio
Concept

Construction

Design

System Life Cycle

Risk
Evaluatio
Risk
Reductio
Risk
Managemen

The project team completes the risk management plan before

the project initiation document (PID) component ends. The
team updates the plan in each subsequent lifecycle
component and continues to monitor and control risks
throughout the life of the project.
If the project will undergo a value analysis (VA), the VA team
assists in preparing the risk management plan. If the risk
management plan is prepared with a VA study, the risk
management plan is included in the VA study report

It can be applied at all stages in the project cycle, from the

earliest assessments of strategy to the supply, operation,
maintenance and disposal of individual items, facilities or
assets.

Risk identification is critical phase, since the result of

on the succeeding this phase will have an effect
phases; as if this stage misses any risk consequently

phases will not take it into account. the following

Therefore, if risk is not identified it will not be
evaluated and managed.

Objectives of Risk Identification

,
(
new risks )
the identify and categorize risks that could affect
project , Assess how risks are related to other risks
and how risks should be classified and grouped for
evaluation and then document these risks .
The outcome of risk identification is a list of risks
(This list is not meant to be all-inclusive; it is just a
guide) that can be assigned to a team member.

 What is done with the list of risks

, (
, )



(
, )
,

mitigation and planning, Assessment, analysis,
updating allocation, and monitoring and

documents and tools that support the risk

identification process:
:



PROJECT-SPECIFIC
DOCUMENTS
Project description
Work breakdown
structure
Cost estimate
Design and construction
schedule
Procurement plan
Listing of teams issues
and concerns

PROGRAMMATIC
DOCUMENTS

Historic data
Checklists
Final project reports
Risk response plans
Organized lessons
learned
Published commercial
databases
Academic studies

TECHNIQUES

Brainstorming
Scenario planning
Expert interviews
Nominal group
methods
Delphi methods
Crawford slip
methods
Influence or risk
diagramming

The team considers:

Risks what might go wrong
Opportunities better methods of achieving the
projects purpose and need
warning signs that indicate whether each risk is
likely to occur

Risk Characteristics

: Knowns , source impact

: known-unknowns
: unknown-unknowns (
) impacts

Risk triggers Another characteristic of risks is

sometimes called risk symptoms or warning signs
: Risk triggers
indications that a risk has
occurred or is about to occur

identification process
monitoring and updating process
identification

 risk
71

..
71 ,
,

4 ( )
:

7 umbrella approah


2 intuitive approach

-3 ostrich approach

-4 brute force approach

AGAP
All goes according to pan

( )
WHIF
What happens if



:
)

(over est. -

( )

( ) strike
force majeure within budget - ( )

()

( )
( )

,
risk
management strategy
:

Certainty & uncertainty & risk

Certainly :
,

Risk :

Uncertainly :

Comparison between uncertainly & risk

,
Risk uncertainly

Risk
711 3
711

Uncertainly


( )



( )
uncertainly risk
uncertainly
risk opportunity

: controllable risk
( )
: uncontroable risk
critical
activity

Dependent & independent risks

There are three types of risk dependence :
1 no dependence

2- partial dependence

3- total dependence

Dynamic risk & static risk

Dynamic risk:



Static risk (pure risk):

 ( )



( )
( )
(
)



(( ........ ))

 identify risks

Each identified risk should be assessed

assessment
:
-7
-2 ,

) as a direct cost ( for example time , cost and so
as indirect cost ( for example
) increase review , planning , new members

Risk Assessment is the process of quantifying and

qualifying the risk events documented in the preceding
identification stage.
Qualitative risk analysis assesses the importance of the identified risks
and develops prioritized lists of these risks for further analysis or direct
mitigation .
The importance of each risk depends on it is probability to be actual event
and it is impact on the project goals also .
Team members sort the identified risks into high, moderate, and low risk
categories for each project objective (time, cost, scope).
Team members sort the identified risks into high, moderate, and low risk
categories for each project objective (time, cost, scope). They rank risks by
degrees of probability and impact, and include their assessment rationale
.
Team members revisit qualitative risk analysis during the projects lifecycle.
in general , Qualitative risk analysis can be not important but it is substantial
& very important in the case of making value analysis

Quantitative Risk Analysis

The result is a probability distribution of the projects cost and completion
date based on the risks in the project.
Quantitative risk analysis is a way of numerically estimating the probability
that a project will meet its cost and time objectives. Quantitative analysis is
based on a simultaneous evaluation of the impact of all identified and
quantified risks , Quantitative risk analysis involves statistical techniques
that are most easily used with specialized software

Risk assessment has two aspects:

1-Determines the likelihood of a risk occurring per unit of time
or some other convenient unit.
( note that likelihood in other papers may called frequency or
probability all words is the same concept ) .
Title

Score

Description

Very Low

20

Highly unlikely to occur; however, still needs to be monitored as certain

circumstances could result in this risk becoming more likely to occur during
the project

Low

40

Unlikely to occur, based on current information, as the circumstances likely

to trigger the risk are also unlikely to occur

Medium

60

Likely to occur as it is clear that the risk will probably eventuate

High

80

Very likely to occur, based on the circumstances of the project

Very High

100

Highly likely to occur as the circumstances which will cause this risk to
eventuate are also very likely to be created

2-The impact of the risk should it occur (consequences or

effects) .

Title

Score

Description

Very Low

20

Insignificant impact on the project. It is not possible to measure the impact

on the project as it is minimal

Low

40

Minor impact on the project, e.g. < 5% deviation in scope, scheduled enddate or project budget

Medium

60

Measurable impact on the project, e.g. 5-10% deviation in scope, scheduled

end-date or project budget

High

80

Significant impact on the project, e.g. 10-25% deviation in scope, scheduled

end-date or project budget

Very High

100

Major impact on the project, e.g. >25%% deviation in scope, scheduled enddate or project budget

Establish the priority of each risk by identifying the likelihood of
the risk's eventuating and its impact on the project. Once the
likelihood and impact scores have been allocated, the priority
score should be calculated as follows:
Priority equals the average Likelihood and Impact score
This is calculated as Priority = (Likelihood + Impact) / 2

Complete the following table (includes examples):

ID

Likelihood

Impact

Priority Score

Rating

1.1

20

80

50

Medium

1.2

80

60

70

High

1.3

100

40

70

High

2.1

40

20

30

Low

2.2

80

100

80

Very High

2.3

20

80

50

Medium

Priority Score
0 20
21 40
41 60
61 80
81 100

Priority Rating
Very low
Low
Medium
High
Very High

( )

Evaluate risks on their worst-case effects and their
relative likelihood of occurrence

Risks assessment objectives :

,
,
( , , )

Provides appropriate management decisions to control
risks


,

LIKELIHOODIMPACT MATRIX

And it is used to determine cost and schedule

contingency due to risks

( )
,

matrix is the presentation of information about risks in a matrix Risk

.each risk to be presented as the cell of a matrix format, enabling

Assessment is useful for screening and prioritizing

risks and for developing appropriate risk mitigation
and allocation strategies.
Assessment is best for estimating the numerical and
statistical nature of the projects risk exposure.
Assessment providing a basis for evaluating the
effectiveness of risk management or risk allocation
strategies.

Various methods have been developed to help classify

risks according to their seriousness. One common method
is to develop a two-dimensioned matrix that classifies
risks
into three categories based on the combined effects of
their frequency and severity.

Risk assessment process (adapted from Project Management Practices

 risk analysis
:
technical performance analysis


FMEA

)failure modesand effects analysis (FMEA
schedule risk analysis
( )
cost risk analysis

Distributions for risk analysis


, ,

Data required for risk analysis

- project configurations
- probability of each risk
- impact , response scenario for each risk


,



... (
, , ,
, )
mitigation

A Risk Plan must now be created which includes a set of actions

to be taken to avoid, transfer or mitigate each risk, based on
the priority of the risk assigned
Risk planning involves the thoughtful development,
implementation, and monitoring of appropriate risk response
strategies.
The DOEs Office of Engineering and Construction Management
formulation of a plan of defines risk planning as the detailed
the It is the process to do .action for the management of risk
following:
-Develop and document an organized, comprehensive,
and interactive risk management strategy.
-Determine the methods to be used to execute a risk
management strategy.
-Plan for adequate resources.

:
( ,
)

assembled containing the action The risk mitigation strategy is

benefits of plans and a risk account which shows the costs and
the mitigation strategy .

(
SWOT analysis ,
decision tree

Risk response
options
(mitigation options)
ignored (by default).

(absorbed by a matter of policy).

,
,
,

You can achieve this by

Modify the planning
Add a new resources
Change the scope

Reducing or eliminating the risk. (by

an alternative approach).

contract or insurance).
allowances ).



shared ( with others , joint venture ,
)Airbus R&D is done by several countries
above.


.
Certainly, the choice will depend on many factors like the
project circumstances, risk nature and so.

Risk response

( )
,

trigger

mitigation options contingency plan

risk event

( ( risk vent ,
, ,
: 2 accept , transfer ,
share and so
: 3 , 2

2 transfer
3
: 4

 trigger or action is the equipment

does not work

( , , , )....
( )

( priority
)

( )
, 7
% % 2
,
% 21
,

Because plans seldom materialize as estimated, it is common

practice to have contingency funds
The amount typically depends on the uncertainty and risk of
schedule and cost estimates:
A low risk project might have a contingency reserve of 1 to 2% of
the total cost.
This percentage might be up to 20% in high risk projects

?Schedule Risks ..how to response

Decrease the number of critical activities (before

)starting
good planning

)Time controlling and updating (during execution

,

 -7 :excuses

,


( )
)
( )
(

...



( critical activities
)

Understand the process -2

Communication -3

 ( )

Plan fallbacks -4
..
,

Risk Charters

is a management tool to identify, communicate, monitor,

and control risks

,
,

such as The risk charter may include relevant information

the following:

or days)

 :
.
.
.

Risk monitoring and control keeps track of the

identified risks, residual risks, and new risks. It
also ensures the execution of risk response plans,
evaluates their effectiveness and provide adata
base for future projects of the company .

(
)

The risk monitoring and updating process occurs

after the risk mitigation, planning, and allocation
processes.

Risk control involves:

Choosing alternative response
strategies
Implementing a contingency plan
Taking corrective actions
Re-planning the project

Example of risk status report

Cost and risk status report. From such project

Acase study may be published soon .

--------------------------------------------------------------------------------------------------------------

if you want to thank me,

develop yourself and help others to develop themselves.

 Risk assessment of international construction projects using the

analytic network process ,a thesis submitted to ,the graduate school
of natural and applied sciences of middle east technical university ,
by Amani Suliman Bu-Qammaz.
Fundamentals of Risk Analysis and Risk Management Edited by
Vlasta Molak President GAIA UNLIMITED, Inc. Cincinnati,
Ohio.
Project and program risk management , a guide to managing
project risks and opportunities edited by R.Max Wideman , fellow
PMI. Project Risk Management Guidelines Managing Risk in
Large Projects and Complex Procurements Dale F. Cooper,
Stephen Grey, Geoffrey Raymond and Phil Walker Broadleaf
Capital International.
Risk Assessment and Management for Engineers
by Dr. Attia H. Gomaa
PMBOK Arabic 4th Edition

About the writer

Personal
Name
: Haytham Saleh Baraka
Date of birth : 10/3/1990
Nationality : Egyptian
E-mail
: Haytham.Baraka@eng.zu.edu.eg
Phone
: 2-0128-5358138
Academic qualification
Zagazig University faculty of engineering-civil
engineering
Graduation
project:
construction
project
management (Cairo metro line No.3)
Graduation year: 2012
Courses attended

enough experience in

HD
Business administration

primavera
sap

Customer service

Etabs

Marketing

safe , AutoCAD 2d

Sales

excel, word

Interests
Construction, management and engineering programs

 For prior published papers :

Compaction
http://www.scribd.com/doc/79571984/compaction%D8%A7%
D9%84%D8%AF%D9%85%D9%831

Tower cranes
http://www.scribd.com/doc/79588723/TowerCranes
Tunnels construction
http://www.scribd.com/doc/79235582/Tunnel-Construction-ByHaytham-baraka

&
check (Ana Me3mare ) magazine every month
http://www.facebook.com/Ana.Me3mary

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