7/25/2019 Risk management presentation 2

1/24

7/25/2019 Risk management presentation 2

2/24

RISK MANAGEMENT IN

CONSTRUCTION

MBA 3 SEMESTER

LECTURES 24 AUG 15 & 25 AUG 15

7/25/2019 Risk management presentation 2

3/24

APPROACHES TO RISK IDENTIFICATIO

TOP DOWN

BOTTOM UP

7/25/2019 Risk management presentation 2

4/24

RISK MANAGEMENT-STEPS?

7/25/2019 Risk management presentation 2

5/24

WHAT DOES RISK MANAGEME

INVOLVE?

IDENTIFICATIONANALYSIS/ASSESSMENT-

PRIORITIZATION OF RISKS

ACTION PLANMONITORING &

CONTROL

7/25/2019 Risk management presentation 2

6/24

WHAT DOES RISK IDENTIFICATION INVOL

1. PROCESS (??) OF DETERMINING:

WHICH RISKS MAY AFFECT PROJECTOBJECTIVES?

WHAT THEIR CHARACTERISTICS COULD

2. KEY BENEFIT:?DOCUMENTATION OF EXISTING RISKS PROVIDES KNOWLEDGE AND ABILITY TO ANT

EVENTS/FUTURE RISKS.

7/25/2019 Risk management presentation 2

7/24

ITERATIVE PROCESS ??

NEW RISKS MAY EVOLVE DURINGPROJECT LIFE CYCLE.

FREQUENCY & DURATION VARWITH SITUATION.

7/25/2019 Risk management presentation 2

8/24

7/25/2019 Risk management presentation 2

9/24

KEY PARTICIPANTS-RISK IDENTIFICATION ACTIVITI

PROJECT MANAGER

PROJECT TEAM MEMBERS

RISK MANAGEMENT STAFF (IF ASSIGNED)

CUSTOMERS

SUBJECT MATTER EXPERTS (EXTERNAL & INTERN

END USERS

OTHER PROJECT MANAGERS

OTHER STAKEHOLDERS

RISK MANAGEMENT EXPERTS

7/25/2019 Risk management presentation 2

10/24

1. TOP DOWN APPROACH-Con

OUTPUT OF OTHER PROCESSESBE REVIEWED TO IDENTIFYPOSSIBLE RISKS ACROSS THE

PROJECT PROVIDES RAPID START TO THASSESSMENT.

7/25/2019 Risk management presentation 2

11/24

1. TOP DOWN APPROACH

STARTS WITH AN OVERALL VIEOF PROGRAMME.

REQUIRES UNDERSTANDING OPROJECTS MISSION, SCOPE ANOBJECTIVES OF OWNER, SPONAND/OR STAKEHOLDERS.

7/25/2019 Risk management presentation 2

12/24

IMPLICATIONS-TOP DOWN APPROACH

ALL DIRECTIONS COME FROM THE TOP & PROJECT OBJECTIESTABLISHED BY THE TOP MANAGEMENT.

TOP MANAGERS PROVIDE RISK GUIDELINES, INFORMATIONAND FUND PROCESSES.

ALL OF THE PROJECT MANAGERS EXPECTATIONS ARE CLEACOMMUNICATED TO EACH PROJECT PARTICIPANT.

FOLLOWING THIS APPROACH, AMBIGUITY OPENS THE DOO

POTENTIAL FAILURE-OFTEN RESULTS IN REDUCEDPRODUCTIVITY AND CAUSES BOTTLENECKS.

THERE WAS NO EFFECTIVE COLLABORATION BETWEEN THEMEMBERS. THEY WERE NOT MORALLY MOTIVATED TO DO JOBS

7/25/2019 Risk management presentation 2

13/24

2. BOTTOM UP APPROACH

SYSTEMATIC AND COMPREHENSIVE

CONSIDERATION OF PROJECT MANAGEMAND TECHNICAL DELIVERABLES.

EXAMINES THE PROJECT REQUIREMENTSPLANS, SPECIFICATIONS, RESOURCES,

CONTRACTS, CONTRACTOR, SUB CONTRACHARACTERISTICS AND PROJECT INTERFAAND INTERACTIONS TO IDENTIFY RISKS.

7/25/2019 Risk management presentation 2

14/24

IMPLICATIONS OF BOTTOM UP APPROACH

TEAM MEMBERS INVITED TO PARTICIPATE IN EVERY

OF RISK IDENTIFICATION PROCESS.

THE DECISION ON A COURSE OF ACTION IS TAKEN BWHOLE TEAM.

IT ALLOWS MANAGERS TO COMMUNICATE GOALS AVALUE, E.G. THROUGH MILESTONE PLANNING.

TEAM MEMBERS ENCOURAGED TO DEVELOP PERSODO LISTS WITH STEPS NECESSARY TO REACH MILESTON THEIR OWN.

7/25/2019 Risk management presentation 2

15/24

IMPLICATIONS OF BOTTOM UP APPROAC

THECHOICE OF METHODS

& WAYS TO PERFORM THEIR TAS

TO THE TEAM.

ADVANTAGE OF THIS APPROACH- EMPOWERS TEAM MEMB

THINK MORE CREATIVELY.

THE TEAM MEMBERS MOTIVATION TO WORK AND MAKE

MANAGEMENT OF PROJECT A SUCCESS IS DOUBLED. THE PLANNING PROCESS IS FACILITATED BY A NUMBER OF

WHICH MAKES IT FLOW SIGNIFICANTLY FASTER

7/25/2019 Risk management presentation 2

16/24

7/25/2019 Risk management presentation 2

17/24

THE BEST WAY IS TO FIND

A BALANCE BETWEEN THE TWOOPPOSITE APPROACHES AND TATHE BEST PRACTICES FROM BOT

THEM

7/25/2019 Risk management presentation 2

18/24

COMMON FORM OF RISKS

ABSENCE OF LABOUR/STAFF

SUDDEN RESIGNATION OF KEY STAFF

STAFF DIVERTED BY ORGANISATION

ADDITIONAL STAFF/SKILLS NOT AVAILABLE

TRAINING NOT EFFECTIVE

INITIAL SPECS OR DRAWINGS INCOMPLETE/POORLY DRAFT

WORK ON CHANGE ORDERS MULTIPLY DUE TO PROBLEMS

ENHANCEMENT OF WORK TAKES LONGER THAN EXPECTED

7/25/2019 Risk management presentation 2

19/24

CLASSIFICATION OF RISKS FINTECO EX

FINANCIAL

TECHNICAL

COMMERCIAL

EXECUTION

CONTRACTUAL OR LEGAL

7/25/2019 Risk management presentation 2

20/24

FINANCIAL RISK

FINANCIAL EXPOSURE-EG. LARGE CAPITAINVESTMENT REQUIRED TO DEVELOPPROJECT

WITHOUT CONTRACTED BUYER PRIOR TO

CONSTRUCTION-MAJOR FINANCIAL RISKHOPE OF SELLING OFFICE SPACE OR BUILDAFTER IT IS COMPLETED

7/25/2019 Risk management presentation 2

21/24

TECHNICAL RISK

MAXIMUM RISK-UNIQUE TECHNICAL

ELEMENTS OR UNPROVEN TECHNILOGYMINIMUM RISK- IF ONLY MODIFICATION

ALREADY DEVELOPED DESIGN

LEVEL OF TECHNICAL RISK DIRECTLYPROPORTIONAL TO UNDERPERFORMANCMEETING SPECIFIED REQUIREMENTS

7/25/2019 Risk management presentation 2

22/24

COMMERCIAL RISKS

PROJECTS DEVELOPED FOR COMMERCIAL

PURPOSE-EG. RECEIVING REVENUES-DEGCOMMERCIAL SUCCESS IS UNKNOWN ONINTRODUCED IN MARKET

UNCERTAINTY, COMPANIES WILLINGLY AC

AS IT IS VIRTUALLY IMPOSSIBLE TO PREDICUSTOMER ACCEPTANCE/DEMAND OF NSERVICE/PRODUCT

7/25/2019 Risk management presentation 2

23/24

EXECUTION RISK

GEOGRAPHICAL OR PHYSICAL CONDITIONS/UNKNOWNS

POORLY TRAINED OR INSUFFICIENT PROJECT TEAM PERSO

UNCERTAINTY OF SUFFICIENT LOCAL MATERIALS OR OPPO(ABUNDANCE OF )-AN OPPORTUNITY!!

UNCERTAINTY ABOUT AVAILABILITY/BREAKDOWN OF CRIT

PLANT OR EQUIPMENT UNCERTAIN WEATHER/ADVERSE CLIMATE OR ENVIRONME

ADVERSE TRAFFIC CONDITIONS/LAW & ORDER

7/25/2019 Risk management presentation 2

24/24

CONTRACTUAL/LEGAL RISKS

SUCH RISKS CONSISTENT WITH STRICT TEAND CONDITIONS DRAWN UP IN ADVAN

LIQUIDATED DAMAGES/FIXED COST TYPECONTRACTUAL CONDITIONS/STRUCTURE

SIGNIFICANT RISKS FOR CONTRACTORSUNCERTAINTY OF HANDING OVER

LAND/ENVIRONMENTAL CLEARANCES