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In recent year's intensive research and development has been done in the areas of project risk management .It is widely recognized as one of the most critical produces and capability areas in the field of project management.
Every non-profit organization faces a cretin amount of risk, whether it's ensuring the health and well being of their volunteers or protecting their premises. Risk management is a process of thinking systematically about all possible risk problem or disaster before they happen and setting up procedures that will avoid the risk, or minimize its impact.
Through my research I came across the following problems:
1. What is risk?
2. What is risk management?
3. Why should we bother with risk management?
4. Insuring Against Risk
Risk is virtually anything that threatens or limits the ability of a community or nonprofit Organization to achieve its mission.
It can be unexpected and unpredictable events such as destruction of a building, the
Wiping of all computer files, loss of funds through theft or an injury to a member or visitor who trips on a slippery floor and decides to sue.
What is risk management?
Risk management is a process of thinking systematically about all possible risks,
Problems or disasters before they happen and setting up procedures that will avoid
the risk, or minimize its impact, or cope with its impact. It is basically setting up a
Process where you can identify the risk and set up a strategy to control or deal with
It is also about making a realistic evaluation of the true level of risk. The chance of a
tidal wave taking out your annual beach picnic is fairly slim. The chance of your
group's bus being involved in a road accident is a bit more pressing.
Risk management begins with three basic questions:
What can go wrong?
What will we do to prevent it?
What will we do if it happens?
Why should we bother with risk management?
There are a number of reasons why a community or non-profit group should put
Some time into considering risk management and it does go beyond the recent issue of rising insurance premiums.
1. For own safety
For an atmosphere where everyone feels safe and secure and
Knows their safety and security is one of the paramount considerations in
Every activity undertakes.
2. For safety of others
The mission of most community groups is to help people, not harm them. If
you are providing services for outside clients/groups the aim is to enhance
their lives not do something that causes them pain, either physical or mental.
Insuring Against Risk
Insurance is not a substitute for risk management. Getting insurance only comes into the picture when you've done all you can to minimize risk. You can't foresee everything, though, and you can't avoid quite a lot of what you can foresee, and so you want to spread the risks across the sector; which means insurance is needed.
Aims and Objectives
To identify and priorities potential risk event
Isolate and minimize risk
Eliminate risk where possible and practical
Establish time and money reserves to cover risk cannot be mitigated
Find ways to identify and evaluate risk
2. Risk in Construction
Construction is undeniably a risk business for many reasons, this including:
Poor record of cost and time certainty for clients
Adversarial attitudes and high levels of disputes and litigation
The intense competition for work
Low margins and profit risk
The industry's poor safety and occupational heath record
Pressure from management and shareholders to produce a high return on funds invested
Pressure on construction teams, especially the site management and operatives, to save time and money
Pressure on health and safety provision
Risk falls into three Categories' they are as follows
Know risk-risk that are an everyday features of construction
Know unknown-risk which can be predicted or foreseen
Unknown -unknown-risk due to events whose cause and effect cannot be predicted.
3. Types of Risk in Construction
There many types of risk construction, these are
Act of God
Financial & Economic
Political & Environment
Act of God
This consist of the following
Damage to structure
Damage to equipment
Financial & Economic Type
Availability of funds
Exchange rate Fluctuations
Political &Environment Type
Changes in law and regulations
Requirement for permits
Law & order
Pollution and safety rules
Incomplete design scope
Errors & omissions
Lastly the Construction Related
Different site conditions
4. Project Risk Management
Risk management is one of the most critical project management practices
to ensure a project be successfully completed. Royer stated:
"Experience has shown that risk management must
be of critical concern to project managers, as
unmanaged or unmitigated risks are one of the primary causes of project failure."
Risk management is thus in direct relation to the successful project
completion. Project management literature describes a detailed and widely
accepted risk management process, which is constructed basically from
four iterative phases: risk identification, risk estimation, risk response
planning and execution, often managing the risk management process is included.
When dealing with risks, the potential for improvement should also be
taken into account, for example to undertake the project with fewer
resources or to take advantage of an unexpected window of opportunity.
Risks are at the very core of the business: risks and opportunities are
linked; there are no opportunities without risks related to them. Thus risks
actually raise the value of a project; usually higher risks bring higher opportunities.
Since opportunities and threats are seldom independent, they can also be
dealt with at the same time. For example, many researchers prefer to use
the word 'uncertainty' instead of 'risk', to stress the point that a risk has
two sides, both negative and positive. The purpose of the risk management process in a wider sense should not solely be to ensure a successful project
completion but also to increase the expectations of project goals and objectives. It means that project risk management should be turned into project uncertainty management.
Risk management is not limited to a few processes, but includes much
more in order to have a complete view of the suggested risk management
process. One of the most crucial decisions in a project relates to the
allocation of risks: who carries which risks. This is directly linked to this
study; as it will examine how risks are mitigated and handled in project.
Before a project starts, every actor's strategy, as well as the ability to bear and manage risks, has to be known before risks are assigned to them.
4.1Project Risk Management Process
Risk management should be its own process in project management, but at
the same time be closely tied in all project processes and phases. There
are several suggestions to improve the project risk management process,
three popular process models are compared in table.
Comparison of typical risk management processes
risk management planning
qualitative risk analysis
risk management control
risk monitoring and control
All of these processes basically have the same phases; only the level of
detail in describing processes varies. All of them are meant to be iterative
processes where risk management phases are kept ongoing during the
whole project life-cycle.
Risk management process should be implemented at the early project
phases, when there is still a possibility for fundamental changes49. The
project should be carefully analyzed as to which kind of methods to use at
which project phases and a process needs to be customized according to all
project characteristics. The underlying reason for risk management is to
ensure well-grounded and unbiased decision making.
It is quite obvious that if we are unaware of the risks, it's difficult to manage them,
though this view is limited to the event-type scope of risk management.
Risk management processes are applied the most in the execution phase, not in the conceptual phase. Still their study and usage of different risk management techniques showed that identification is the most frequently used risk management element.
The Methods generally include brainstorming, risk checklists, expert analysis/interviews, modeling and analyzing different scenarios and analyzing project plans.
4.2.1 Risk Estimation
After the risks have been identified, they must be evaluated in terms of the
probability of occurrence and impact. An understanding of the possible
an effect on project objectives is needed: since most projects have only a
limited amount of resources to use for risk management, concentration on
only the major risk is essential. Reliable estimates of likelihoods and
consequences are needed for prioritization.
Risks can be assessed either using a quantitative or qualitative analysis.
The most common ways are to estimate risk probability and impact in
simple scales for example, from 1 to 5 or from high to low.
Risks also need to be assessed in relation to other risks, since these relations may cause minor risks to become more relevant to the risk management process if they are significant sources for other risks.
4.2.2 Risk Response and Planning
Risk response planning is "..The process of developing options and
determining actions to enhance opportunities and reduce threats to the project objectives " Literature suggests there are generally four response types to cope with risk as follows
Avoid: change in project plans in a way that an identified risk is no longer relevant
Transfer: transfer risks to other parties by contracts or insurances
Mitigate: find ways to reduce the probability and/or impact of risk
Accept: take a conscious risk and deal with negative consequences as they occur, but take no action beforehand.
Planning of how to carry risks needs to have clear, shared principles in order to have a consistent attitude towards the risks.
Risk response planning needs an effective control process by its side to ensure that the risk management processes are iterative and ongoing, are not dismissed as project starts and it follows that decisions are implemented and have the expected results. Monitoring and controlling usually means writing and checking documents and conducting
Monitoring should also include evaluating the basis of earlier decisions, and assessing whether the assumptions made at the beginning are still relevant.
4.2.3 Risk Monitoring
Risk monitoring and control involves implementing the risk plan, which should be an integral part of the project plan. There are two keys challengers associated with monitoring and control. The first is putting the risk plans into action and ensuring that the plans are still valid.
The second is generating meaningful documentation to support the process.
Implementing the risk plans should be a function of putting the project plan into action. If the project plan is in place and the risk strategies have been integrated, then the risk plans should be self -fulfilling.
4.2.4 Client Risk
The most serious risk effects for client are follows
Failure to keep within the cost estimate
Failure to archive the required completion date
Failure to achieve the desired quantity and functional requirements
During the project level the client considered some risk management and this are
At the early stages of the project, the client must confirm the project case, identify options and solution. When scheme is sanctioned by client, major commitments are made in terms of design, procurement and construction.
Project decision are all about risk and reward, due to this the client must be sure how to control over the design of the project. The quality of design may be important fot the client.
The client sees to it that his quantity surveyor taking care not to expose him to the risk of the contractor insolvency by overvaluing interim payments.
The obligation to complete the project on time is the contractor responsibility and the client has redress in standard contracts through the liquidated and ascertained damages.
4.2.5 Contractor Risk
All contractors have some biggest risk during the tender stage, they are committing to a price and program me, and many companies now consider risk management to be an essential part of the tendering process.
The contractor needs to consider the following factors before submitting a bid, among this are
Previous experience (good /bad) working with the client team
The financial stability of the client
The market conditions and the level of completion for the contrct
Ground conditions and balance of risk in the contract and methods of measurement.
The contractor must assess the accuracy of the quantities in the bills at the tender stage
Because margins can be lost if the quantities of work is subsequently reduced on
Premeasured. Where quantities have been taken off by the contractor, failure to include
Associated labour items may add risk to the overall bid.
Tender documentation is important, bill of quantities containing extensive provisional quantities need careful pricing. Prices based on drawings, specifications, or schedules of work containing extensive spot items, may prove difficult to price accurately. The contractor needs to scrutinize the tender documentation very carefully in order to assess the implication of
Onerous contract terms
Clause deleted from standard contract
High level of liquidated damages
Unrealistic contract period
Contract bonds and guarantees required
5. Health and Safety Risk
On average two people die every week on construction sites, but studies have shown that 90% of these deaths could be avoided and 70% of these lives could have been saved by positive managements.
Construction health and safety risk is managed through legislation and in particular:
The health and safety at work act
The management of health and safety at work
The construction (Design and Management )
The construction(Health ,Safety and Welfare
6. Fire Risk
Fire is an ever-present risk on construction sites, especially with respect to:
Hot work such as welding,blowlamps,cutting and grinding
Heating appliance, especially gas bottle in welfare facilities
Litter, especially in rest rooms and drying areas
Burning of waste on site
Stored materials, including adhesives and solvents
Contractors are requiring to:
Take measures to prevent risk of injury from fire
Provide and maintain fire -fighting equipment ,fire detectors and alarm system
Provide access for fire -fighting equipment
Give instruction to people in the use of fire -fighting equipment
Give instruction to people where their work activities involve a fire risk
Indicate fire -fighting equipment with suitable signs
I would say that majority of risk could be avoided if proper actions are taken to improve business practices and to focus on developing a skilful workforce.
Finally, where there is hazard there is no risk, but in construction there are hazards every-where on site. The best way to eliminate hazards in the design of building and reduce the possible effects of residual risk throughout good management team.
Risk Management Concepts and Guidance (Carl L.Pritchard)
Construction Planning Programming &Control (Brain Cook& Peter Williams)
The our Community Team (www.ourcommunity.com.au)
9. References List
1. BCE (1995) Fire Prevention on Construction Site
2. Edward L.(1995)Practical's Risk Management in the Construction Industry
4. Skitmore,M Lyons (2004)
5. Chapman C,(1997)