Risk Management in the Built Environment Qualitative and Quantitative Risk Management By Professor Simon Burtonshaw-Gunn – licensed under the Creative Commons Attribution – Non- Commercial – Share Alike License

Risk Management in the Built Environment School of the Built Environment MSc Construction Management Risk Management in the Built Environment Presentation 1: Risk Identification Professor Simon Burtonshaw-Gunn

Risk Management in the Built Environment Risks are usually spoken about using a Condition- Cause- Consequence approach, for example: There is a risk that lack of support will cause the project to stall resulting in team being deployed on other work. There is a risk that our customer will be unable to specify the internal fit-out requirements in a timely fashion caused by their lack of experience in procuring this type of equipment resulting in delayed payment, project overrun, and delayed initiation of support contracts. There is a risk that the client will wish to bring forward the completion date for the project and cause us to execute the work by additional shift working or more resources resulting in an overall cost increase from that contractually agreed.

Risk Management in the Built Environment Risk = Probability x Consequence Probability =Likelihood of… …an incident/accident occurring …loss of control …the hazard being released (Inevitable through to impossible) Consequence =The outcome of the incident/accident following release of the hazard (Death through to no injury) (Environmental catastrophe through to no effect) In order words... the chance (big or small) of harm actually being done

Risk Management in the Built Environment Probability Very LowLowMediumHighVery High ImpactVery High High Medium Low13579

Risk Management in the Built Environment Cost Impact Very High… jeopardise the business budget due to a substantial provision for consequential damages. High… endanger the project financial viability ie pose a significant margin threat so that substantial re-planning requires the re-assignment of business’s resources sufficient to harm other projects or cause considerable consequential delay costs. Medium… require significant re-work or the selection of alternative subcontractors or cause significant consequential delay costs and adjustment of the risk- margin balance. Low… require additional or higher rated resources or a change to alternative suppliers or cause some consequential delay costs. Very Low:… require adjustment of resource profiles, resulting in non-optimum efficiency.

Risk Management in the Built Environment Schedule Impact Very High… cause significant programme completion non-compliance, unrecoverable by re-planning. High… cause unavoidable programme milestone non-compliance for which re-planning is required. Medium… cause overrun and certain work for which re-planning is required. Low… require probable re-work. Very Low:… require some re-scheduling of tasks.

Risk Management in the Built Environment Performance Impact Very High… result is a serious non-compliance or degradation in performance sufficient to terminate the project. High… cause a problem or degradation in performance so significant that a substantial non-compliance is unavoidable. Medium… cause partial compliance that requires concessions or difficult negotiations. Low… cause a problem that requires trade-off studies or negotiations to resolve. Very Low:… require some adjustment in the solution.

Risk Management in the Built Environment Impact Definitions Project Objective Very LowLowMediumHighVery High CostInsignificant cost increase <5% cost increase 5-10% cost increase % cost increase > 20% cost increase ScheduleInsignificant Schedule slippage Schedule slippage <5% Overall project slippage % Overall project slippage % Overall project slippage >20 % ScopeScope decreases, barely noticeable Minor Areas of Scope are affected Major Areas of Scope are affected Scope reduction unacceptable to client Project End. Item is effectively useless. QualityQuality degradation barely noticeable Only very demanding applications are affected Quality reduction requires client approval Quality reduction is unacceptable to client Project End. Item is effectively unusable.

Risk Management in the Built Environment Customer Project management Procurement Commercial Financial Engineering Manufacturing System design and integration Technology Subcontractor capabilities Interfaces Regulatory involvement Environmental Political visibility Number of key project participants Complexity Labour skills availability and productivity Funding/ cost sharing Magnitude / type of contamination Quality requirements Site Public involvement Number of locations/ site access/ site ownership Using this list as a starting point give examples of these types of project risk....

Risk Management in the Built Environment Make/ buy planning, design, production capacity, new tools/ equipment requirements, test requirements, new manufacturing or test processes, incorporating change during manufacture Manufacturing Feasibility, technology transfer, complexity, dependencies, resourcing, special standards/ documentation requirements, prototypes, maturity, manufacture, process Engineering Profit margin, accurate cost forecasts, payment plan, penalty charges Financial Subcontractor agreement, interpretation of Terms and conditions Commercial Planning, vendor appraisals, critical lead-times, reliance on single source, component obsolescence, market volatility Procurement Planning, resourcing, resource capabilities, dependencies, stakeholders, organization / interfaces, communication, constraints, process, transition and services Project management Customer focus, specification quality, changing requirements.Customer Typical Examples...Project Management Risk

Risk Management in the Built Environment Tools and Techniques for Risk Identification There are a number of tools and techniques available for use in risk identification, these could be: Document review Assumptions analysis Diagramming techniques Checklists – See also supporting information of “Checklist for Risk Identification” Information gathering techniques – brainstorming, interviewing etc Learning from experience / previous project close out reviews

Risk Management in the Built Environment School of the Built Environment MSc Construction Management Risk Management in the Built Environment Presentation 1: Risk Planning and Identification Professor Simon Burtonshaw-Gunn