UP Copyrights 2017

Special Course in Construction Management

Faculty of Applied Engineering and Urban Planning

Civil Engineering Department

Special Course in Construction Management

(Lecture 8)

Dr. Nadine N. Abu-Shaaban

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 Risk Management Life Cycle
• Risk management life cycle consists of five stages as shown in
the following Figure:

Risk Risk
Identification Estimation

Risk Risk
Monitoring Evaluation

Risk
Response

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 Risk Identification
• Risk identification: a process of developing an understanding
of the nature and impact of risk on the current and potential
future activities of an organisation.

– Possible Risks in construction:

• Financial risks.
• Technical risks.
• Operational risks.
• Time risk.
• Environmental risks.
• Political.

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 A Checklist of Risks
• The following is a generic checklist of risks that may affect any
construction project. It gives an indication of the range and
sources of risks that can affect construction projects.
• Client risks:
Risks with most serious effects for the client are:
– Failure to keep within the cost estimate.
– Failure to achieve the required completion time.
– Change in project scope: size or usage.
– Delays: late decision making, delayed programme.
– Failure to achieve the desired quality and functional
requirements.

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 A Checklist of Risks
• Design team risks:
– Errors in design, contract documents, drawings.
– Failure to meet time scale.

• Contractor risks:
– Tender risk:
• Previous experience (good/bad) working with the client team.
• The financial stability of the client.
• Market conditions and the level of competition for the contract.
• Inflation.
• Ground conditions and the balance of risk in the contract.
• The profit rate can expose the contractor to risk once the
contract is awarded.

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 A Checklist of Risks
• Subcontractor Risk:
On many contracts, the contractor may simply be responsible for
managing subcontractors. The ultimate success of the project may lie
in the performance and organisation of the subcontract operations.
The contractor takes all the tendering risk and especially vulnerable
to subcontractors who are unwilling to stand by their quotes at
tender stage.
• The following check procedures may be implemented and when
undertaken in conjunction with a well-managed workload
should reduce the risk to the company:
– The correct selection of subcontractors and suppliers to ensure suitability
for the work must be considered.
– Check with the surveying and buying department to ensure that the best
subcontract packages have been selected.
– Subcontract price comparisons should highlight potential high/low rates
so that assessment may be made in tender settlement meetings.

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 A Checklist of Risks
– Health and Safety risk (in relation with site work):
People at risk from construction work include:
» Persons at work.
» Visitors to site (including client representatives).
» General public.
» Children.

– Site specific risks:

• Ground Conditions: soil types and variability.
• Climate and weather conditions.
• Access restrictions and limitations.
• Existing occupiers/users: Alternative provision, working hours
restrictions and maintenance of access roads.
• Existing buildings: need for protection and need for demolition.
• Security.

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 A Checklist of Risks

– Fire risk:
Fire is an ever-present risk on construction sites, especially with
respect to:
• Hot work such as welding.
• Smoking.
• Burning of waste on site.

• Third part risks:

– Approvals: planning approval, conservation areas consent.
– Pressure groups.
– Changes in regulations.

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 Risk Identification

• There are three main techniques of risk identification:

– Individual consultation.

– Group discussion.

– HAZOP. (Hazard and Operability Method)

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 Individual Consultation
• Individual Consultation:

– these one-on-one meetings are arranged as a preliminary exercise to

initially identify the risks.

– Involves key participants in the project in question to identify the main

risks attached to either, the project as a whole, or as individual stages
of the project or both.

– Participants are from different disciplines. Therefore, their view points

about the project are influenced by the specialised nature of their
field.

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 Individual Consultation
• Advantages of Individual Consultation:
– Almost all risks attached to a specific project can be identified
due to the conducted consultations with varied cross section of
participants.

• Disadvantages of Individual Consultation:

– The main disadvantage of this technique is time. As interviewing
all the necessary persons for this technique to be successful
would consume much time.

• This process (individual consultation) forms the origination of

the group discussion.

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 Group Discussion

• Group discussion:
– Formal group discussion is a process by which potential sources
of risks are tested out.
– This method should have a clear set of rules and a timetable.
– This technique should be carried out with the project team. One
person should be the co-ordinator and must be able to:
• Chair meetings and
• Have a good sense of humour.
– This process should take the form of two distinct stages:
• Creative session.
• Assessment stage.

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 Group Discussion

• Creative session:
– Permits any one member of the team, one at a time, to ‘throw’
in potential risks or sources of risk.
– Individual team members are not restricted to their own
knowledge and can share and explore varies fields.
– The coordinator writes down all suggestions made and no
criticism of ideas or people are allowed. The outcome of this
session is a team based list.
• Assessment stage:
– All the ideas on the creative session list are evaluated at this
stage. A final list is produced and is the direct product of the
team.

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 Group Discussion

• Two points to mention about the Group Discussion Technique:

– Group discussions are a positive experience as long as the team

members are committed to the project and motivated to
achieve a successful outcome.

– If a negative approach is being taken, then a realistic assessment

of the problems associated with the project may not result.

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 Hazard and Operability Studies (HAZOP)

• HAZOP Study:
– Is based on the generation of questions that ensure
comprehensive and systematic coverage of all the relevant areas
in the design of a process.

– Design and operations personnel with technical experience and

expert knowledge of the particular process design ask these
questions in an ordered and creative manner.

– The aim of the questions is to identify any design faults or

process deviations that might exist which could lead to safety or
operability problems.

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 Hazard and Operability Studies (HAZOP)

– The ideal HAZOP study team consists of six to eight members

having expertise in design, operations, and maintenance.

– Two key members in the team: team leader who is experienced

in the methodology of HAZOP, and the secretary who records
the session.

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 Risk Estimation

• Risk estimation: to know the potential of the identified risks

occurring and their effects. (i.e. an assessment of the
likelihood of each risk occurrence (probability) and effect on
the project objectives (impact) if it were to occur.

– Risk Estimation/Analysis Techniques:

• Qualitative Techniques

• Quantitative Techniques

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 Risk Estimation (Qualitative Techniques)

• Qualitative Techniques:
– Describes risks in a linguistic manner, for example ‘low risk’.
– It is subjective and is dependent upon the experience of the
analyst, depending on engineering judgements, and thus
inclined to be subjective.
– Therefore, these techniques can be prone to errors, it should
not be used without further analysis.
– Qualitative techniques are usually employed at the beginning to
identify to identify and rank. Those risks with a high or
intermediate rank may be further analysed through quantitative
techniques.

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 Risk Estimation (Quantitative Techniques)

• Quantitative analysis is used once the qualitative analysis has been

completed.

• Quantitative Techniques: mathematical or computationally based and will

provide numerical probabilities or frequencies of occurrence; the likelihood.
These results can then be compared with set criteria for the level of risk.

• A probability is a number between zero and one which represents a

judgement about the likelihood of an event. When a probability is equal to
one, this represents a certain event, when equal to zero, this represents
event will never happen.

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 Risk Estimation (Quantitative Techniques)

• An analyst can express the probability associated with a risk in

a number of ways:
– The absolute value, i.e. 0.2,
– The percentage value, i.e. 20%
– The fractional value, i.e. One in five.

• There are many quantitative techniques available:

• Expected Monetary Values (EMV).
• Expected Net Present Values (ENPV).
• Sensitivity Analysis.
• Simulation.

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