Construction Risk Summit "benefit and pits of Construction Risk Management"
1. Conducting Risk Management
on Major Projects
Bronwyn Friday
Group General Manager, Enterprise Risk Management
2 April14
Pitfalls and Benefits?
2. › Who we are
› 6,5000+ people on 100+ projects
› delivering contracting, engineering and services
solutions
› Revenue
› $4.75 billion
› Regions
› Australia
› New Zealand
› South East Asia
› Middle East
Who is John Holland
Work in hand
Approx. $5.56bn
3. Why do Risk Management on Major Projects
Achieve objectives successfully
Protecting Balance Sheet
All stakeholders focus what is critical
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5. 5
What has changed in the Construction Industry
› Physical work has not changed a great
deal
› New systems and process have been
introduced
› Risk Modelling
› BIM – modelling of building information
› Stakeholder expectations have changed
› They expect more certainty!!!
6. 6
What has changed at John Holland
› Some project objectives not fully achieved
› Senior Management and Leighton Holding’s governance
requirements
› Clients requiring more advance risk management
› Varying Delivery models
› More complex risk sharing setups
› New concepts like BIM
7. What is Risk Management at John Holland
Strategic & Business Planning
Prospect Analysis
Approval Processes
Contract Reviews
Safety, Quality & Environmental (SQE)
Risk Management
Qualitative Risk Rating
Quantitative Risk Costing
› Including Risk Modelling
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9. 9
Benefits of Risk Management
› Focus the team on the objectives of the projects
› 80/20 rule, focus on top 20% to deliver 80% of your success
› Early identification and understanding of Key Risks
› Alignment on the Key Risks
› Pro-active management of them
› Resources focused on these risks
› Finally, know the Residual Uncertainty related to a project
for your business
10. Use of Probabilistic Cost Risk Modelling
› Used in our large valued,
complex tenders / projects
› Models both
› Discrete Risks
› Uncertainty
› Estimate Uncertainty
› Design Development Scope
Growth
11. What does the cost modelling give you?
› Confidence level of
delivering a project within
a budgeted amount
› What risk events to focus
on to achieve success
› Portfolio protection
› Overall portfolio risk profile
› Project’s impact on the
business
Mean $9,119,415
Std Dev $1,455,996
P5 $6,768,486
P10 $7,234,656
P25 $8,068,267
P50 $9,096,837
P75 $10,117,001
P90 $11,009,943
P95 $11,564,512
Percentiles
12. Use of Probabilistic Time Risk Modelling
(SRA)
› Schedule Risk Analysis
› Used across are wider
range of tenders and
projects
› Models both
› Discrete Time Risks
› Duration Uncertainty
13. What does the time modelling give you?
› Confidence level of delivering a project within a specific
timeframe
› Stress tests the schedule
› Drives better methodologies
› Understand of the likely delays and resulting costs
15. 15
What are some of the pitfalls?
› Time
› In Tender there is so little time to get the core stuff
complete
› Risk Management is seen as a distraction
When risk management is done the right way, it will drive the
Tender Team to focus on the key issues and not get lost in
the detail that has low impact.
Do not let risk management become a compliance task!!!
16. 16
What are some of the pitfalls?
› Data
› The risk process gets lost in all the data
› 80 / 20 is not used so everything is managed
› Management never focuses on the key risks
Do normal business practices already manage these risks?
Always question whether the risk could stop you achieving
your objectives?
17. What are some of the pitfalls?
› Tool Selection
› Using advanced resource rich
risk modelling tools when they
are not needed
If a simple risk tool can achieve the
desired outcomes, then use it!
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18. 18
What are some of the pitfalls
› Decision Makers
› Risk Management processes are not involved with
Decision Making processes
› Risk information not being used
› Decision makers do not understand the outputs
› Ignoring the information; or
› Not questioning the logic to find out if it is sound
Get the risk information to decision makers and make
sure they understand it. Coach them if they do not.
20. 20
John Holland has revised its Risk Management
processes
› Stronger approval processes
› Stricter commercial / contract reviews
› More detailed Risk Management
› Risk Modelling
› Peer Reviews
21. 21
Understand what the Decision
Makers want
Match your risk tool to the profile of
the project and output required
Remember it is about 80/20 and stay
focus on the Key Risks
Do it early and get the benefits
How do you make the most of Risk Management
You can use Risk Management to achieve objectives more successfullyYou can stop using Risk Management as compliance step but to use it to protect your companies’ Balance SheetsYou can make sure that all stakeholders are focused on what is criticalYour company can be leaner and hunger because your company’s risk attitude is clearly understood and you know what risks can be acceptRisk Management can give you comfort that you can handle the critical events
Risk Management in the construction industry has taken on more robust risk management process that look at all types of risks against each other plus the modelling of cost and time for some of our largest and most complex projects. The requirement to conduct the different risk management processes is influenced by many stakeholders such as clients, client consultants, Leighton Group requirements, plus JHG management selecting specific assessment tools.
The benefits of good risk management in construction projects:• Focusing the team on the key objectives of the projects and the related risks and opportunities• Early identification of those risks and opportunities to allow pro-active management of them• Confirming the management team is aligned on the key risks and opportunities, as everyone comes with their own ideas on what is most important• Focusing on the top risks and opportunities. Risk Management is about using the 80 / 20 rule, focusing resources and energy on the key item to get the best value for effort.• Having clear understanding the residual uncertainty related to the delivery of a project to confirm the overall business is not at risk
For all the benefits of using risk management there are pitfalls:The risk managers and project teams getting lost in the detail. Not using the 80 / 20 rule, resulting in all risks and opportunities being focused on, when only the key items should get the resources and management’s time
For all the benefits of using risk management there are pitfalls:The selection of risk tools to be used do not match the risk profile of the project. A simple road construction project under 12 months is unlikely to benefit from a time risk analysis (SRA) being conducted on it but a multiple billion dollar, technical complex, PPP tender would lack the level of rigour needed if only Traditional (Cost Point) R&O assessment was done on it.
