10. implementation (4) risk management

Project Management –
Implementation (4)
8/13/2017 1Arch. Dania Abdel-Aziz/ Lecture 11
University of Jordan
Year 2016/2017
Second Summer Semester
Arch. Dania Abdel-Aziz

Content
1. Steps / Phases
2. Partial techniques and tools per step
1. 1. PROJECT INITIATION
2. 2. PROJECT PLANNING & SCHEDULING
3. 3. PROJECT CONTROL
4. 4. PROJECT TERMINATION / EVALUATION
3. Related software

MANAGING RISK
8/13/2017 Arch. Dania Abdel-Aziz/ Lecture 11 3

Risk Management Process
Risk - An uncertain event that, if it
occurs, has a positive or negative effect
on project objectives
Unknown Unexpected
UndesirableUnpredictable

WHO IS AT RISK AND WHAT ARE
THE RISKS

Who is at Risk
1. Owner
2. Architect
3. Contractor

What are the Risks
• Owners Risks
– Damage to the project.
– Delay in start up.
– 3rd party Bodily Injury /
Property Damage.
– Error in design.
– Change orders.
– Environmental.

• Architects Risks
– Error in design
– 3rd Party Bodily Injury / Property
Damage
• Contractors Risks
– Damage to project
– 3rd party Bodily Injury / Property
Damage
– Delay by performance
– Environmental
What are the Risks

The Construction Process
1
2 2
3
2
4
5
6
7
8
Quality Control
Value Engineering
Construction SchedulingDesign Scheduling
Design Cost Control
Establish
Budget
Change Orders
Construction
Punch
List
Bid
Working
Drawings
Design
Develop-
ment
Schematic
Design
Archi-
tectural
Program
Budget Compatible
With Program
Advertisement
for Bid
Pre-Bid Conference
Notice of Award
Letter of Intent
Sign Contract
Notice to Proceed Substantial
Completion
Fina
Completion
Warranty

Common Construction Insurance Coverage
Builders’ Risk 
General Liability  
Business Automobile  
Workers’ Compensation  
Equipment Floater 
Professional Liability 
Basic Coverage Architect/Engineer Contractor

TYPICAL PROJECT DELIVERY
METHODS

Typical Project Delivery Methods
• Design - Bid - Build
• Construction Manager
– At risk
– Not at risk
• Design Build

Construction Management
Manager not at Risk
Owner
Construction
Manager
Trade
Contractor
Architect/
Engineer
Trade
Contractor
Trade
Contractor
Trade
Contractor
Project Delivery Methods

Construction Management
Manager at Risk
Owner
Construction
Manager
Trade
Contractor
Architect/
Engineer
Trade
Contractor
Trade
Contractor
Trade
Contractor

Design - Build
Owner
Design - Build
Team
General
Contractor
Architect/
Engineer
* Joint
Venture
Architect/
Engineer
General
Contractor
Subcontractors
Subconsultants
Design - Build Team Options:

TYPES OF RISKS IN CONSTRUCTION

Types of Risks in Construction
Physical
Risks
Financial
Economic
&
Acts
of
God
Political
Environ.
&
Design
Const.
Related

Physical
Risks
Financial
Economic
&
Acts
of
God
Political
Environ.
&
Design
Const.
Related
Acts of God
 Flood
 Earthquake
 Landslide
 Fire
 Wind damage

Physical
Risks
Financial
Economic
&
Acts
of
God
Political
Environ.
&
Design
Const.
Related
Acts of God
Construction Related
 Labor productivity
 Different site conditions
 Design changes
 Equipment failure

Physical
Risks
Financial
Economic
&
Acts
of
God
Political
Environ.
&
Design
Const.
Related
Design
 Incomplete design
scope
 Defective design
 Errors & omissions
 Inadequate
specifications

Physical
Risks
Financial
Economic
&
Acts
of
God
Political
Environ.
&
Design
Const.
Related
Physical
 Damage to structure
 Damage to equipment
 Labor injuries
 Fire
 Theft
Design

Physical
Risks
Financial
Economic
&
Acts
of
God
Political
Environ.
&
Design
Const.
Related
Political & Environmental
 Changes in laws and
regulations
 Requirement for
permits
 Law & order
 Pollution and safety
rules

Physical
Risks
Financial
Economic
&
Acts
of
God
Political
Environ.
&
Design
Const.
Related
Financial & Economic
 Inflation
 Availability of funds
 Exchange rate fluctuations
 Financial default
Political & Environmental

RISK MANAGEMENT

Risk Management
– A proactive attempt to recognize and
manage internal events and external threats
that affect the likelihood of a project’s
success

Risk Management
• What can go wrong (risk event)
• How to minimize the risk event’s impact
(consequences)
• What can be done before an event occurs
(anticipation)
• What to do when an event occurs
(contingency plans)

The Risk Event Graph

Risk Management’s Benefits
• A proactive rather than reactive
approach.
• Reduces surprises and negative
consequences.
• Provides better control over the future.
• Improves chances of reaching project
performance objectives within budget
and on time.

Risk Management Limitations
Lack of Expertise and Awareness.
Difficult to Apply.
Unable to Effectively Deal with Human Factors (Qualitative
Elements).

RISK MANAGEMENT PROCESS

The Risk Management Process

Managing Risk
Step 1: Risk Identification
– Generate a list of possible risks
through brainstorming, problem
identification and risk profiling.
• Macro risks first, then specific
events

Managing Risk
Step 2: Risk Assessment
– Scenario analysis
– Risk assessment matrix
– Failure Mode and Effects Analysis
(FMEA)
– Probability analysis
• Decision trees, NPV, and PERT
– Semi quantitative scenario analysis

Partial Risk Profile for Product Development Project

Risk Breakdown Structure

Risk Assessment Form

Impact Scales

Risk Severity Matrix

Step 3: Risk Response Development
– Mitigating Risk
• Reducing the likelihood an adverse
event will occur
– Transferring Risk
• Paying a premium to pass the risk to
another party
– Avoiding Risk
• Changing the project plan to
eliminate the risk or condition
– Sharing Risk
• Allocating risk to different parties
– Retaining Risk
• Making a conscious decision to
accept the risk
Managing Risk

CONTINGENCY PLANNING

Contingency Planning
Contingency Plan
– An alternative plan that will be used
if a possible foreseen risk event
actually occurs
– A plan of actions that will reduce or
mitigate the negative impact
(consequences) of a risk event
• Risks of Not Having a Contingency Plan
– Having no plan may slow managerial
response
– Decisions made under pressure can
be potentially dangerous and costly

Risk Response Matrix

Risk and Contingency Planning
1. Technical Risks
– Backup strategies if chosen
technology fails
– Assessing whether technical
uncertainties can be resolved
2. Schedule Risks
– Use of slack increases the risk of a
late project finish
– Imposed duration dates (absolute
project finish date)
– Compression of project schedules
due to a shortened project duration
date

3. Costs Risks
– Time/cost dependency links: costs
increase when problems take longer to
solve than expected.
– Deciding to use the schedule to solve
cash flow problems should be avoided.
– Price protection risks (a rise in input
costs) increase if the duration of a
project is increased.

4. Funding Risks
– Changes in the supply of funds for the
project can dramatically affect the
likelihood of implementation or
successful completion of a project.

• Contingency Funds
– Funds to cover project risks—identified and unknown
• Size of funds reflects overall risk of a project
– Budget reserves
• Are linked to the identified risks of specific work packages
– Management reserves
• Are large funds to be used to cover major unforeseen risks (e.g.,
change in project scope) of the total project
• Time Buffers
– Amounts of time used to compensate for unplanned delays in the
project schedule

Contingency Fund Estimate (000s)

Managing Risk
Step 4: Risk Response Control
– Risk control
• Execution of the risk response
strategy
• Initiating contingency plans
• Watching for new risks
– Establishing a Change Management
System
• Monitoring, tracking, and reporting
risk
• Repeating risk
identification/assessment exercises

Change Management Control
Sources of Change
– Project scope changes.
– Implementation of contingency plans.
– Improvement changes.
The Change Control Process

Change Request Form

Change Request Log

Homework
• Write your own CV

Thank you 

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