Risk Management & Liability Informa Brownfield Hospital Development Summit June 2009

What is Risk? The chance of something happening that will have an impact on objectives. Risk = Consequence X Likelihood Probability or Frequency of an event (qualitatively or quantitatively) Outcome or impact of an event

Risk Management What is Risk Management? The culture, the processes, and the structures that are directed towards realizing potential opportunities whilst managing adverse effects. What is Risk Management Process: Establish Context Identify Risks Analyse Risks Evaluate Risks Treat Risks, and Always Communicate, Consult, Monitor and Control

Context in Brownfield Hospital Developments For a Disused Site: Contamination Human Health Ecological Impact Change of Use Requirements Legal (seller and buyer) Economical – Not just cost but also finance (willingness to fund) Technical Regulatory (changes in standards and exclusions from standards) Liability (long term responsibility)

Context in Brownfield Hospital Developments For an Existing Hospital Site: Everything as for disused sites, plus…. Access Staging Location of existing services Capacity of existing infrastructure Interruptions to the existing services (impact on provision of health care) Disruption to the new works (impact on contracts) Integration of health services Integration of infrastructure

Context in Brownfield Hospital Developments For All Sites: As usual, for any project involving real estate, the goals of the key players are not always aligned. The Competing goals include: Maximising benefits Limiting liabilities Timely achievement of objectives Safety to humans and the environment Costs

Risk Management in Overall Context The Overall Development Process Includes (typically): Land Acquisition Site Assessment Risk Assessment Remediation Plan Remediation Action New Activity

Risk Management Process COMMUNICATE AND CONSULT MONITOR AND REVIEW Establish the Context Analyse Risks Evaluate Risks Treat Risks Identify Risks RISK ASSESSMENT

Proactive vs Reactive? Plan Proactively But Stay Flexible The tools are not a final fix

The Tools Due Diligence: Conduct all appropriate enquiry Understand pre-existing conditions Understand risk and potential impacts (including impacts on existing services operational and infrastructure) However …… May later prove to be incomplete

The Tools Contractual Protection: Indemnities Transfer of risk However …… May limit parties willingness to enter into an Agreement

The Tools Financial Tools: Cost planning Cost adjustments Finance / Allocations However …… Funds do not always cover full costs (that should have been known) – typically at the initiation of Health Projects, not enough effort is put into identifying all the risks, options available and likely costs. Cost overruns occur

The Tools Regulatory Protections: Federal & State statutory requirements However …… Standards change Standards have exclusions

The Tools Insurances: By the Owner By the Designer By the Contractor However …… Have set limits Have exclusions

Analyse Risks What is Risk Analysis? A systematic process to understand the nature of and to deduce the level of risk. Risk analysis may be: Qualitative Semi-Quantitative Quantitative

Analyse Risks (Qualitative) Qualitative methods for generating information for risk analysis include: Evaluation using multi- disciplinary groups; Specialist and expert judgment; and Structured interviews and questionnaires. Likelihood Probable Medium Risk High Risk Improbable Low Risk Medium Risk MinorMajor Consequence Cell values = Risk units for ranking only Qualitative Representation

Analyse Risks (Semi-Quantitative) In Semi-Quantitative methods, qualitative scales such as those described are given values. Semi-Quantitative Representation Frequency (Events/yr) V.Low 100 Low 300 Medium 1000 High 3000 Consequence ($ x 1000) Cell values = Risk units for ranking only

Analyse Risks (Quantitative) Quantitative analysis uses numerical values for both consequences and likelihood using data from a variety of sources. These may include: statistical analysis of historical data influence diagrams life cycle cost analysis simulation and computer modelling statistical and numerical analysis probability analysis

Evaluate Risks Risk evaluation compares the level of risk against the criteria. It is the basis of decision making which may include, but not be limited to: Whether a risk needs treatment Priorities for treatment

Treat Risks What is Risk Treatment? process of selection and implementation of measures to modify risk Options for treating risks with negative outcomes: Avoiding the risk Changing the likelihood of the risk Changing the consequences Sharing the risk Retaining the risk Action Plan defines: RESPONSIBILITY, RESOURCES, BUDGET, TIMETABLE, REVIEW, COMMUNICATION, and Cost-Benefit Analysis.

Monitor, Control & Communicate Monitor and control risks: Manage risks in accordance with established risk management plans to ensure a common approach to the achievement of objectives; Monitor progress against plans to identify variances; and Implement agreed risk responses and modify plans to reflect changing objectives in an environment of uncertainty.

Questions Questions ?