RISK MANAGEMENT

YULVI
 Introduction

Introduction
Success

Cost

Project
Constraints
Quality Time
 Cost
overrun

Risks
Poor
Quality
Project
Constraints Delays
What is the risk
Unknown

Unexpected
endeavor
Risk action
Undesirable

Unpredictable
 Risks in Construction
Economic Factors
Client

Contractor Supplier

Environmental Factors
Quantity
Social Factors

Architect
Survey

Engineer Project
Manager

Inspector`

Political Factors
Types of Risks in Construction
Physical
Acts Financia
&l
of
God Economi
c

Risks

Political
Const.
&
Related
Environ.
Design
 Types of Risks in Construction

Physical
Acts Financia
&l Acts of God
of
God Economi
c  Flood
 Earthquake

Risks  Landslide
 Fire
 Wind damage
Political
Const.
&
Related
Environ.
Design
 Types of Risks in Construction

Physical
Acts Financia
&l Physical
of
God Economi
c  Damage to
structure
 Damage to
Risks equipment
 Labor injuries
 Fire
Political
Const.
&  Theft
Related
Environ.
Design
 Types of Risks in Construction

Physical
Acts Financia
&l Financial & Economic
of
God Economi
c

 Inflation
 Availability of
Risks funds
 Exchange rate
fluctuations
Political
Const.
&  Financial default
Related
Environ.
Design
 Types of Risks in Construction

Physical
Acts Financia
&l Political &
of
God Economi Environmental
c

 Changes in laws
and regulations
Risks  Requirement for
permits
 Law & order
Political
Const.
&  Pollution and
Related
Environ. safety rules
Design
 Types of Risks in Construction

Physical
Acts Financia
&l Design
of
God Economi
c
 Incomplete
design scope
 Defective design
Risks
 Errors &
omissions
Political  Inadequate
Const.
&
Related
specifications
Environ.
Design
 Types of Risks in Construction

Physical
Acts Financia
&l Construction
of
God Economi Related
c
 Labor disputes
 Labor
Risks productivity
 Different site
conditions
Political
&
Const.  Design changes
Related
Environ.
 Equipment
Design
failure
 Risk Management
A systematic approach to control the level of risk to mitigate
its effects.

Risk
RiskIdentification
Identification
Risk
RiskMonitoring
Monitoring

Risk Controlled
Analysis Risk
RiskEstimation
Estimation Risk
Environment

Risk
RiskResponse
Response
Risk
RiskEvaluation
Evaluation

Risk Management Life Cycle

 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

 Risk Response

Risk Response Methods

Elimination Transfer Retention Reduction

 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
 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.
 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.
 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 .
Risk Monitoring and Control
◦ Risks can be monitored on a continuous basis to check if any change is
made. New risks can be identified through the constant monitoring and
assessing mechanisms.
Risk Management Process
◦Each person involved in the process of planning needs to
identify and understand the risks pertaining to the project.
◦Once the team members have given their list of risks, the risks
should be consolidated to a single list in order to remove the
duplications.
◦Assessing the probability and impact of the risks involved with
a help of a matrix.
In deciding how serious a risk is we tend to look at two parameters:
◦ Probability – the likelihood of the risk occurring
◦ Impact – the consequences if the risk does occur.
Impact can be assessed in terms of its effect on:
◦ Time
◦ Cost
◦ Quality.
There is also a third parameter that needs to be considered:
◦ Risk proximity – when will the risk occur?
Scale Probability Impact
Very low Unlikely to occur Negligible impact
Minor impact on
May occur
Low time, cost, or
occasionally
quality
Substantial impact
Is as likely as not to
Medium on time, cost or
occur
quality
Substantial impact
High Is likely to occur on time, cost or
quality
Threatens the
Is almost certain to
Very high success of the
occur
project
 RISK ANALYSIS
The analysis is based on the risk level of investment risk factor equation where the
magnitudes of the risk factors are overview of the level of investment risk that happening.

RF = L + I – (L x I) (1)

Where: RF = Risk Factor (scale 0 – 1)

L = Risk Probability (scale 0 – 100%)
I = Risk Impact
 Risk Category & Quadrant Risk Mapping
RF Value Category Step Handling
>0.7 High Risk Should be done a decreased risk of lower level
0.4 – 0.7 Moderate Required corrective measures within a specified period
Risk
< 0.4 Low Risk Corrective measures if needed
Risk category based on Quadrants Risk Mapping, they are:
◦ Low risk, where the risk is usually overlooked because of the relatively low
probability of occurrence, and if it happens, then the impact is relatively small.
◦ Moderate Risk, where one of the probability and the impact is relatively low, so it
is necessary for action to manage it.
◦ High Risk, where the probability of occurrence and impact is relatively high, so it
needs to be made and a decreased risk management plans that may occur
continue
◦Split the team into subgroups where each group will identify
the triggers that lead to project risks.
◦The teams need to come up with a contingency plan whereby
to strategically eliminate the risks involved or identified.
◦Plan the risk management process. Each person involved in
the project is assigned a risk in which he/she looks out for any
triggers and then finds a suitable solution for it.
conclusion
◦ An organization will not be able to fully eliminate or eradicate risks. Every project
engagement will have its own set of risks to be dealt with. A certain degree of risk
will be involved when undertaking a project.
◦ The risk management process should not be compromised at any point, if ignored
can lead to detrimental effects. The entire management team of the organization
should be aware of the project risk management methodologies and techniques.
◦ Enhanced education and frequent risk assessments are the best way to minimize
the damage from risks.
Assessment 1
1. Chose 1 project
2. Identification the risks
3. Identification potentials impact
4. Risk response
5. Risk Monitoring and Control