1. Risk Management RISK MANAGEMENT Practical Processes for Tunnelling and Underground Works Kevin McManus 27 March 2014

2. KMc Mar 2013 Risk Management MSc 2014 Risk workshop Kevin McManus 27 March 2014

3. Risk Management Purpose of Risk Management Elimination of Risk or Reduction of risk to Acceptable level Kevin McManus 27 March 2014

4. Risk Management Elements of Risk Management Identify and Describe Evaluate and Assess Eliminate or Reduce Monitor and Manage Kevin McManus 27 March 2014

5. Risk Management Agenda  Overview  Definitions  Acceptability  Constraints and Guidance  Hazard Events  Code of Practise  Elements of Risk Management  Allocation of Responsibility  Insurance  Quantitative Methods Kevin McManus 27 March 2014

6. Risk Management Kevin McManus 27 March 2014

7. Risk Management Kevin McManus 27 March 2014

8. Risk Management Kevin McManus 27 March 2014

9. Risk Management Kevin McManus 27 March 2014

10. Risk Management Kevin McManus 27 March 2014

11. Risk Management Kevin McManus 27 March 2014

12. Risk Management Kevin McManus 27 March 2014

13. Risk Management Kevin McManus 27 March 2014

17. Risk Management “..expect to be surprised but never astonished..” but never astonished..” Kevin McManus 27 March 2014

18. Risk Management Key Definitions Danger: Kevin McManus 27 March 2014

19. Risk Management Key Definitions Danger: Danger arises when situations that could result in harm are not properly controlled. Kevin McManus 27 March 2014

20. Risk Management Key Definitions Danger: Danger arises when situations that could result in harm are not properly controlled Hazard: Kevin McManus 27 March 2014

21. Risk Management Key Definitions Danger: Danger arises when situations that could result in harm are not properly controlled Hazard: A situation with the potential to cause harm to people or adverse impacts on a project: Kevin McManus 27 March 2014

22. Risk Management Key Definitions Danger: Danger arises when situations that could result in harm are not properly controlled. Hazard: A situation with the potential to cause harm to people or adverse impacts on a project:  Health; Safety; Environment; Quality  Design; Construction; Cost; Programme  Third parties and existing facilities  Reputation; Viability of Enterprise Kevin McManus 27 March 2014

23. Risk Management Key Definitions Risk: Kevin McManus 27 March 2014

24. Risk Management Key Definitions Risk:  Probability of a hazard event occurring Kevin McManus 27 March 2014

25. Risk Management Key Definitions Risk:  Probability of a hazard event occurring  Severity or consequence hazard occurring Kevin McManus 27 March 2014

26. Risk Management Key Definitions Risk:  Probability of a hazard event occurring  Severity or consequence hazard occurring Kevin McManus 27 March 2014

27. Risk Management Acceptability of Risk Constraints and Guidance  Subjectivity  General Opinion; Third Party Requirements  Statute  Regulatory Guidance  Standards  Industry Guidance  Joint Code of Practice : Risk Management Kevin McManus 27 March 2014

28. Risk Management Acceptability of Risk Constraints and Guidance  Subjectivity  General Opinion; Third Party Requirements  Statute  Regulatory Guidance  Standards  Industry Guidance  Joint Code of Practice : Risk Management Kevin McManus 27 March 2014

29. Risk Management Acceptability of Risk Kevin McManus 27 March 2014

30. Risk Management Acceptability of Risk Kevin McManus 27 March 2014

31. Risk Management Acceptability of Risk Constraints and Guidance  Subjectivity  General Opinion; Third Party Requirements  Statute  Regulatory Guidance  Standards  Industry Guidance  Joint Code of Practice : Risk Management Kevin McManus 27 March 2014

32. Risk Management General Opinion Third Party Requirements Kevin McManus 27 March 2014

33. Risk Management Acceptability of Risk Constraints and Guidance  Subjectivity  General Opinion; Third Party Requirements  Statute  Regulatory Guidance  Standards  Industry Guidance  Joint Code of Practice : Risk Management Kevin McManus 27 March 2014

34. Risk Management Statute Health and Safety at Work Act 1976 Kevin McManus 27 March 2014

35. Risk Management Statute Health and Safety at Work Act 1976  General Duty on every employer  So Far As is Reasonably Practicable (SFAIRP)  Ensure that Employees and others are not exposed to Health & Safety risks Kevin McManus 27 March 2014

36. Risk Management Statute Management of Health and Safety at Work Regulations 1999 Health and Safety at Work Act 1976  General Duty on every employer  So Far As is Reasonably Practicable (SFAIRP)  Ensure that Employees and others are not exposed to Health & Safety risks Kevin McManus 27 March 2014

37. Risk Management Statute Management of Health and Safety at Work Regulations 1999 Every employer shall make a suitable and sufficient assessment of:  The risks to ……. his employees …....at work  Risks to persons not in his employment arising out of or in connection with the conduct by him of his undertaking Health and Safety at Work Act 1976  General Duty on every employer  So Far As is Reasonably Practicable (SFAIRP)  Ensure that Employees and others are not exposed to Health & Safety risks Kevin McManus 27 March 2014

38. Risk Management Statute Construction (Design and Management) Regulations 2007 Kevin McManus 27 March 2014

39. Risk Management Statute Construction (Design and Management) Regulations 2007 Clients should:  Allow sufficient time and resources for all stages  Appoint CDM Coordinator Kevin McManus 27 March 2014

40. Risk Management Statute Construction (Design and Management) Regulations 2007 Clients should:  Allow sufficient time and resources for all stages  Appoint CDM Coordinator Designers should:  Eliminate hazards and reduce risks during design  Provide information about remaining risk Kevin McManus 27 March 2014

41. Risk Management Statute Construction (Design and Management) Regulations 2007 Clients should:  Allow sufficient time and resources for all stages  Appoint CDM Coordinator Designers should:  Eliminate hazards and reduce risks during design  Provide information about remaining risk Contractors should:  Plan manage and monitor construction phase  Liaise with CDM coordinator with respect to ongoing design Kevin McManus 27 March 2014

42. Risk Management Acceptability of Risk Constraints and Guidance  Subjectivity  General Opinion; Third Party Requirements  Statute  Regulatory Guidance  Standards  Industry Guidance  Joint Code of Practice : Risk Management Kevin McManus 27 March 2014

43. Risk Management Acceptability Guidance from Regulatory Bodies  So Far As Is Reasonably Practicable SFAIRP  As Low As Reasonably Practicable ALARP reasonably practicable Kevin McManus 27 March 2014

44. Risk Management Acceptability Guidance from Regulatory Bodies  So Far As Is Reasonably Practicable SFAIRP  As Low As Reasonably Practicable ALARP reasonably practicable  A state of affairs where the effort and cost (sacrifice) of reducing risk remains proportionate to the risk Kevin McManus 27 March 2014

45. Risk Management Acceptability Guidance from Regulatory Bodies  So Far As Is Reasonably Practicable SFAIRP  As Low As Reasonably Practicable ALARP reasonably practicable  A state of affairs where the effort and cost (sacrifice) of reducing risk remains proportionate to the risk  If the effort and cost of further reduction measures become disproportionate to the risk: the duty holder is deemed to have fulfilled his risk reduction obligations Kevin McManus 27 March 2014

46. Risk Management Acceptability Guidance from Regulatory Bodies  As Low As Reasonably Practicable ALARP does NOT mean Standards have to be continually raised Exceptionally high standards set the ALARP level All possible control measures are required There will be no accidents or incidents Kevin McManus 27 March 2014

47. Risk Management Acceptability of Risk Constraints and Guidance  Subjectivity  General Opinion; Third Party Requirements  Statute  Regulatory Guidance  Standards  Industry Guidance  Joint Code of Practice : Risk Management Kevin McManus 27 March 2014

48. Standards BS EN 1997-1 : 2004 Eurocode 7: Geotechnical Design Elements of “observational method”  Acceptable limits of behaviour established  Range of possible behaviour assessed  Acceptable probability that actual behaviour will be within acceptable limits  Plan of monitoring devised  Monitor early & at short intervals to see if behaviour stays in acceptable limits  Contingency plan for use if monitoring shows behaviour outside limits Risk Management Kevin McManus 27 March 2014

49. Risk Management Acceptability of Risk Constraints and Guidance  Subjectivity  General Opinion; Third Party Requirements  Statute  Regulatory Guidance  Standards  Industry Guidance  Joint Code of Practice : Risk Management Kevin McManus 27 March 2014

50. Risk Management Kevin McManus 27 March 2014

51. Risk Management Kevin McManus 27 March 2014 CIRIA 125

52. Risk Management Acceptability of Risk Constraints and Guidance  Subjectivity  General Opinion; Third Party Requirements  Statute  Regulatory Guidance  Standards  Industry Guidance  Code of Practice for Risk Management Kevin McManus 27 March 2014

53. Risk Management Munich Underground 27 September 1994 Hazard Events Kevin McManus 27 March 2014

54. DLR February 1998 Risk Management Kevin McManus 27 March 2014

55. CTRL Lavender St 2003 Risk Management Kevin McManus 27 March 2014

56. Risk Management Kevin McManus 27 March 2014

57. Risk Management Kevin McManus 27 March 2014

58. Risk Management Kevin McManus 27 March 2014

59. Risk Management Kevin McManus 27 March 2014

60. Risk Management Kevin McManus 27 March 2014

61. Risk Management Hull 1999 Original Contract Value£60M Length of tunnel10km ~~ cost per metre£6k Collapse damage length150m Damaged length “value”£900k Insurance cost£42M Hazard Events Kevin McManus 27 March 2014

62. Risk Management Acceptability of Risk Kevin McManus 27 March 2014

63. Risk Management Code of Practice for Risk Management of Tunnel Works Development Purpose and structure  2 nd Edition May 2012 International Tunnelling Insurance Group (ITIG)  From Joint CoP for Risk Management of Tunnel Works in UK (BTS/ABI 2003)  Promote and secure best practice for minimising and managing risks  Operate in parallel and not derogate from national statute standards etc  Use of Risk assessment and Risk Registers at all project stages Project Development Procurement for Construction Design Construction Kevin McManus 27 March 2014

64. Principles of Code  Hazard identification and management to ensure reduction to ALARP  Responsibility for risk management explicitly allocated to relevant parties  Risks addressed adequately and appropriately in planning and management  Appropriate financial allowances made  Formalised Risk Management system to be used as means of documenting risk: Identification Evaluation Allocation Risk Management Code of Practice for Risk Management of Tunnel Works Kevin McManus 27 March 2014

65. Client Roles and Responsibilities  Client shall have demonstrable technical and contract management competence  Absence of appropriate experience; Client shall appoint a Client’s Representative Named competent key Personnel Capability in design management and related Risk Assessments & Registers Capability to indentify risks that will impact on Third Parties  Ensure competence and adequacy of site and ground investigations  Indentify arrangements for design checks, construction supervision- monitoring  Develop and Maintain Overall Management Organization Chart Risk Management Code of Practice for Risk Management of Tunnel Works Kevin McManus 27 March 2014

66. Assessment and evaluation of Project Options  Geology, hydro geology and hydrology  Appropriate tunnelling methodologies  Temporary and permanent ground support measures  Ground movements and settlements and impact on third parties  Hazardous materials and utilities  All other particular local factors  Associated safety, health and programme implications  Associated costs  Appropriate forms of contract  Risk Register Risk Management Kevin McManus 27 March 2014

67. Contract; procurement; prequalification & tender  Form of contract & detailed terms - allocation of risks and liabilities  Sufficient and adequate time for preparation and assessment of tenders  Full Disclosure of hazards identified in project development risk register  Ground Reference Conditions either by Client or Tenderer  Key Method Statements  Tenderer’s Risk Register  Tenderer’s experience; key staff; focused technical submission Risk Management Kevin McManus 27 March 2014

68. Risk Management Kevin McManus 27 March 2014

69. Risk Management Code of Practice Deliverables Kevin McManus 27 March 2014

70. Risk Management Elements of Risk Management Identify and Describe Evaluate and Assess Eliminate or Reduce Monitor and Manage Kevin McManus 27 March 2014

71. Risk Management Identification of Hazards Kevin McManus 27 March 2014

72. Risk Management Identification of Hazards  use a combination of knowledge, skills and experience  previously assessed hazards that didn’t occur should not be discounted  include mechanisms by which hazards can occur  complex high risk cases may need specialist expertise and techniques Kevin McManus 27 March 2014

73. Risk Management Identification of Hazards Kevin McManus 27 March 2014

74. Risk Management Elements of Risk Management Identify and Describe Evaluate and Assess Eliminate or Reduce Monitor and Manage Kevin McManus 27 March 2014

75. Risk Management Kevin McManus 27 March 2014

76. Evaluate and Asses Risk Management Kevin McManus 27 March 2014

77. Evaluation of Probability Risk Management Kevin McManus 27 March 2014

78. Evaluation of Severity Risk Management Kevin McManus 27 March 2014

79. Risk Rating Matrix Risk Management Kevin McManus 27 March 2014

80. Evaluate and Asses Risk Management Kevin McManus 27 March 2014

81. Risk Management Elements of Risk Management Identify and Describe Evaluate and Assess Eliminate or Reduce Monitor and Manage Kevin McManus 27 March 2014

82. Risk Ranking Risk Reduction Requirements Risk Management Kevin McManus 27 March 2014

83. Severity Low High Risk Management Kevin McManus 27 March 2014

84. Risk Management Emergency and Recovery Measures Provide Protective Equipment Administer Controls Engineer Out Substitute Avoid Hierarchy of Mitigation Kevin McManus 27 March 2014

85. Avoid Substitute Engineer Out Administer controls Provide Protective Equipment Emergency and Recovery Measures Risk Management Hierarchy of Mitigation Kevin McManus 27 March 2014

86. Risk Management Principles of Prevention a)Avoiding risks b)Evaluating risks which cannot be avoided c)Combating risks at source d)Adapting work to the individual e)Adapting to technical progress f)Replace potential danger by non or less dangerous g)Developing a consistent overall prevention policy h)Priority of collective protection over individual protection i)Giving appropriate instructions to employees Kevin McManus 27 March 2014

87. Eliminate or Reduce Risk Management Kevin McManus 27 March 2014

88. Eliminate or Reduce Risk Management Kevin McManus 27 March 2014

89. Risk Management Kevin McManus 27 March 2014

90. Risk Management Elements of Risk Management Identify and Describe Evaluate and Assess Eliminate or Reduce Monitor and Manage Kevin McManus 27 March 2014

91. Risk Management Expecting Uncertainty Kevin McManus 27 March 2014

92. Risk Management Reducing Uncertainty Kevin McManus 27 March 2014

93. Monitor and Manage Risk Management Kevin McManus 27 March 2014

94. Monitor and Manage Risk Management Kevin McManus 27 March 2014

95. Monitor and Manage Risk Management Kevin McManus 27 March 2014

96. Risk Management Monitor and Manage Kevin McManus 27 March 2014

97. Risk Management Kevin McManus 27 March 2014

98. Risk Management Kevin McManus 27 March 2014

99. Risk Management Face Loss Back Analysis Kevin McManus 27 March 2014

100. Risk Management Trigger Values Kevin McManus 27 March 2014

101. Risk Management Low Probability High Consequence Events..where a high severity risk has been mitigated by construction methods to an acceptable level…..the contractor shall provide an outline Emergency and Contingency Plan for dealing with the risk in the event that it is realised… Kevin McManus 27 March 2014

102. Kevin McManus 27 March 2014

103. Risk Management Inability to accept a certain risk Ability to pay Ability to respond to risk event Influence over cause and effect Designer or other Professional Contractor Supplier Manufacturer Owner Employer Society or Community Insurer Allocation of Responsibility Kevin McManus 27 March 2014

104. Risk Management Risk and Insurance NEC 3 Employer’s Risks  Unavoidable result of works  Negligence by employer ‘s staff  Fault in Employer’s design  War, riot, general strikes etc  Prior damage to free issues  Any others in Contract Data Kevin McManus 27 March 2014

105. Risk Management Risk and Insurance NEC 3 Employer’s Risks  Unavoidable result of works  Negligence by employer ‘s staff  Fault in Employer’s design  War, riot, general strikes etc  Prior damage to free issues  Any others in Contract Data Contractor’s Risks  Anything not the Employer’s Risk Kevin McManus 27 March 2014

106. Risk Management Risk and Insurance NEC 3 Employer’s Risks  Unavoidable result of works  Negligence by employer ‘s staff  Fault in Employer’s design  War, riot, general strikes etc  Prior damage to free issues  Any others in Contract Data Contractor’s Risks  Anything not the Employer’s Risk Contractor’s Insurance Obligations  Contractor insures for contracted risks to the minimum amount of cover stated in the contract……  Except where the Employer provides the insurance and charges the Contractor Kevin McManus 27 March 2014

107. Insurance Contract for the transfer of liability for the outcome of risk Insurer sells insurance for agreed risks in exchange for a premium Insured expects compensation for loss or damage suffered Risk Management Kevin McManus 27 March 2014

108. Insurance Contract for the transfer of liability for the outcome of risk Insurer sells insurance for agreed risks in exchange for a premium Insured expects compensation for loss or damage suffered Conditions apply Loss or damage has to be accidental / fortuitous If loss or damage can be foreseen and is expected:- should be avoided by intentional planning not wishful thinking and reliance on the insurer Risk Management Kevin McManus 27 March 2014

109. Structure of insurance market Broker  Experts – normally act for Insured  Not a party to insurance contract  Does not accept the risks insured.  Expected to: Assess of risks and needs Recommend insurer and policy Advise on sums to be insured Advise on level of premium Assist with claims settlement Risk Management Kevin McManus 27 March 2014

110. Structure of insurance market Risk Management Insurer Sells insurance (indemnity for risk events) in exchange for a premium. Broker  Experts – normally act for Insured  Not a party to insurance contract  Does not accept the risks insured.  Expected to: Assess of risks and needs Recommend insurer and policy Advise on sums to be insured Advise on level of premium Assist with claims settlement Kevin McManus 27 March 2014

111. Structure of insurance market Risk Management Insurer Sells insurance (indemnity for risk events) in exchange for a premium. Reinsurer Second tier insurers who sell insurance for part o the main risk. Used to spread risk and free up reserves of lead insurer Broker  Experts – normally act for Insured  Not a party to insurance contract  Does not accept the risks insured.  Expected to: Assess of risks and needs Recommend insurer and policy Advise on sums to be insured Advise on level of premium Assist with claims settlement Kevin McManus 27 March 2014

112. Types of Insurer Mutual Companies owned by insurance policy holders Unlimited liability e.g. Lloyds of London Limited Liability Guaranteed Capital forms limit of liability Beyond this the Insurer becomes insolvent Risk Management Kevin McManus 27 March 2014

113. Types of insurance required for construction Property Material, equipment & machinery Contractor’s All Risk Excludes stated risks Risk Management Kevin McManus 27 March 2014

114. Types of insurance required for construction Property Material, equipment & machinery Contractor’s All Risk Excludes stated risks Liability Covers Specific Legal Liabilities Employer's Liability Public Liability Professional Indemnity Generally hinges on negligence Risk Management Kevin McManus 27 March 2014

115. Types of insurance required for construction Property Material, equipment & machinery Contractor’s All Risk Excludes stated risks Liability Covers Specific Legal Liabilities Employer's Liability Public Liability Professional Indemnity Generally hinges on negligence Non Negligence Cover for liabilities under circumstances where Client may face liabilities even though the Contractor has not been negligent Risk Management Kevin McManus 27 March 2014

116. Risk Management Insurable Risks Needs to be a degree of uncertainty Risk should be quantifiable Should be acceptable to insurance market Damage should be capable of being assessed Limitations of Insurance Kevin McManus 27 March 2014

117. Risk Management Insurable Risks Needs to be a degree of uncertainty Risk should be quantifiable Should be acceptable to insurance market Damage should be capable of being assessed Uninsurable Risks Foreseeable events Consequential losses or risks Political risks or international turmoil e.g. war Absence of cause and event connection Limitations of Insurance Kevin McManus 27 March 2014

118. Risk Management Terms of Insurance Indemnity Place the insured in same position as before the risk event Compensation for actual loss or damage Loss of profit not considered Kevin McManus 27 March 2014

119. Risk Management Terms of Insurance Indemnity Place the insured in same position as before the risk event Compensation for actual loss or damage Loss of profit not considered Utmost Good Faith Proposer (Insured) expected to divulge all available knowledge about risks - not conceal Insurer relies on information to assess risk and set premium Kevin McManus 27 March 2014

120. Risk Management Quantitative Evaluation Kevin McManus 27 March 2014

121. Risk Management Monte Carlo Simulation Kevin McManus 27 March 2014

122. Risk Management Most Likely Evaluation Kevin McManus 27 March 2014

123. Risk Management “No construction project is risk free. Risk can be managed, minimised, shared, transferred or accepted. It cannot be ignored.” Kevin McManus 27 March 2014

124. Any Questions? Risk Management Kevin McManus 27 March 2014