Project Management

Project Risk Management

Jiwei Ma

Content
Concepts Risk Identification Risk Assessment Risk Control

Concept
Risk
The possibility of loss, damage, or any other undesirable event

Project Risk
Any loss, damage, or undesirable event that may impact the project to be accomplished on time, under budget, and to required quality standard

Project Risk Management

Effort in project management to reduce the occurrence possibility, minimize the impact of project risks, and assure the success of the project

Risk Identification
To locate and identify the potential risks existing within the system or in the environment Methods
Previous statistical data Previous experience Survey Brainstorm

Project Risk Identification

Methods
Survey or brainstorm
Applicable for small project

Systematic approach
Component analysis Process analysis Participant analysis Project objective analysis Project environment

Risk Assessment
Concept
A scientifically based process of evaluating risks and the likelihood of exposure to those risks, and then estimating the resulting impact

Methodologies
Qualitative To distinguish risks as high, medium and low level Semi-quantitative To prioritize risks in relation to one another Quantitative To measure, calculate and analyze the value of risks and the impact

Risk Assessment
Basic procedure
To clarify the risks which have significant or measurable impacts on project To analyze the consequences of the risks occurrence To evaluate the severity of the impact caused by the risk To prioritize risks by calculating risk impact, and then formulate possible improvements or preventive measures

Risk Assessment Techniques

Fault tree analysis
Used to identify the causal relationships leading to the undesirable event Based on deductive logic Can be qualitative or quantitative

Risk Assessment Techniques

Event tree analysis
Used to illustrate the sequence of the outcome after the occurrence of a selected initial event Based on inductive logic Mainly used in consequence analysis

Risk Assessment Techniques

Cause-consequence analysis
A blend of fault tree and event tree analysis Based on both deductive and inductive logic The risk level of the system can be established by calculating probabilities of various consequences with the probabilities of various events

Risk Assessment Techniques

Frequency

Frequency/severity diagram

Low

Medium

High

Used to evaluate the impact of risks and prioritize the preventive measures Based on consequence evaluation and probability calculation Can be semiquantitative or quantitative Risk value = Severity Severity x Frequency

High Medium Low

Risk Control
To identify, select, and implement measures that can be applied to reduce the risk identified and evaluated during the previous phases Measures
To To To To To avoid risk remove/reallocate risk share risk reduce risk mitigate damage caused by risk

Construction Project Risks

List of risks
Planning and selection risks Contract formation risks Entity formation risks Entity management risks Site risks Resource risks Environmental risks Technology risks Communication risks Expectation risks

Construction Project Risks

List of risks
Financial risks Completion risks (cost) Completion risks (time) Completion risks (quality) Payment risks Project administration risks Force majeure risks Political risks Currency risks

Construction Project Risk Control

Major measures
Improved procurement method to minimize implementation risks Safety programs to reduce on-site accidents Strict construction measurements to confine environmental hazards Various insurance to reallocate risks Bond company involved to share risks with owner and contractor

Construction Project Risk Control

Improved procurement method
Performance based procurement Construction management / management contracting Contractor prequalification in competitive bid Contract negotiation after bid opening Partnering or building long-term relationship

Construction Project Risk Control

Safety programs
On-site safety management program including owner, contractor, sub contractor, etc. Regulatory safety control by government bodies Safety control and education by professional organizations, i.e. OSHA, BG, HSC, etc.

Construction Project Risk Control

Insurance
Contractors liability insurance Workers compensation Employers liability Commercial general liability Automobile liability Owners liability insurance Usually general liability insurance Management protective liability insurance Professional liability insurance Property insurance Project owners obligation

Construction Project Risk Control

Bond
Types of bond
Bid bond Performance bond Payment bond

Impact of bond
Contractor classification and prequalification Review of contractors financial sustainability Assurance of contractors performance and behavior

Thank You Jiwei Ma

jiweima@hotmail.c om