RISK MANAGEMENT YULVI

Introduction Time Quality Cost Project Constraints Success Introduction

Delays Poor Quality Cost overrun Project Constraints Risks

Risk Unknown Unexpected Undesirable Unpredictable endeavor action What is the risk

Risks in Construction Contractor Supplier Project Manager Engineer Architect Client Quantity Survey Inspector` Social Factors Political Factors Economic Factors Environmental Factors

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

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

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

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

Types of Risks in Construction 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

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

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

Risk Management A systematic approach to control the level of risk to mitigate its effects. Risk Identification Risk Estimation Risk Evaluation Risk Response Risk Monitoring Controlled Risk Environment Risk Identification Risk Estimation Risk Evaluation Risk Response Risk Monitoring Controlled Risk Environment Risk Analysis Risk Management Life Cycle

Risk Analysis Estimating the potential impacts of risk to decide what risks to retain and what risks to transfer to other parties Ranking options Comparing options Descriptive analysis Qualitative Risk Analysis Techniques Probability analysis Sensitivity analysis Simulation techniques Quantitative

Risk Response Risk Response Methods EliminationTransferReductionRetention

Risk Response Risk Response Methods EliminationTransferReductionRetention Risk Elimination Practices Tendering a very high bid Placing conditions on the bid Pre-contract negotiations as to which party takes certain risks Not biding on the high risk portion of the contract

Risk Response Risk Response Methods EliminationTransferReductionRetention Risk Transfer Two basic forms. (a) The activity responsible for the risk may be transferred, i.e. hire a subcontractor to work on a hazardous process (b) The activity may be retained, but the financial risk transferred, i.e. methods such as insurance.

Risk Response Risk Response Methods EliminationTransferReductionRetention Risk Retention Handling risks by the company who is undertaking the project. Two retention methods, active and passive. Active retention is a deliberate management strategy after a conscious evaluation of the possible losses and costs of alternative ways of handling risks. Passive retention occurs through negligence, ignorance or absence of decision.

Risk Response Risk Response Methods EliminationTransferReductionRetention Risk Reduction Continuous effort. Related with improvements of a company’s physical, procedural, educational, and training devices. Improving housekeeping, maintenance, first aid procedures and security. Education and training within every department.

Risk Monitoring and Control ◦ Risks can be monitored on a continuous basis to check if any change is made. New risks can be identified through the constant monitoring and assessing mechanisms.

Risk Management Process ◦ Each person involved in the process of planning needs to identify and understand the risks pertaining to the project. ◦ Once the team members have given their list of risks, the risks should be consolidated to a single list in order to remove the duplications. ◦ Assessing the probability and impact of the risks involved with a help of a matrix.

In deciding how serious a risk is we tend to look at two parameters: ◦ Probability – the likelihood of the risk occurring ◦ Impact – the consequences if the risk does occur. Impact can be assessed in terms of its effect on: ◦ Time ◦ Cost ◦ Quality. There is also a third parameter that needs to be considered: ◦ Risk proximity – when will the risk occur?

ScaleProbabilityImpact Very lowUnlikely to occurNegligible impact Low May occur occasionally Minor impact on time, cost, or quality Medium Is as likely as not to occur Substantial impact on time, cost or quality HighIs likely to occur Substantial impact on time, cost or quality Very high Is almost certain to occur Threatens the success of the project

The analysis is based on the risk level of investment risk factor equation where the magnitudes of the risk factors are overview of the level of investment risk that happening. RF = L + I – (L x I) (1) Where: RF= Risk Factor (scale 0 – 1) L= Risk Probability (scale 0 – 100%) I= Risk Impact RISK ANALYSIS

Risk Category & Quadrant Risk Mapping

Risk category based on Quadrants Risk Mapping, they are: ◦ Low risk, where the risk is usually overlooked because of the relatively low probability of occurrence, and if it happens, then the impact is relatively small. ◦ Moderate Risk, where one of the probability and the impact is relatively low, so it is necessary for action to manage it. ◦ High Risk, where the probability of occurrence and impact is relatively high, so it needs to be made and a decreased risk management plans that may occur

continue ◦ Split the team into subgroups where each group will identify the triggers that lead to project risks. ◦ The teams need to come up with a contingency plan whereby to strategically eliminate the risks involved or identified. ◦ Plan the risk management process. Each person involved in the project is assigned a risk in which he/she looks out for any triggers and then finds a suitable solution for it.

conclusion ◦ An organization will not be able to fully eliminate or eradicate risks. Every project engagement will have its own set of risks to be dealt with. A certain degree of risk will be involved when undertaking a project. ◦ The risk management process should not be compromised at any point, if ignored can lead to detrimental effects. The entire management team of the organization should be aware of the project risk management methodologies and techniques. ◦ Enhanced education and frequent risk assessments are the best way to minimize the damage from risks.

Assessment 1 1.Chose 1 project 2.Identification the risks 3.Identification potentials impact 4.Risk response 5.Risk Monitoring and Control