1. Risk Management KMc Mar 2013 RISK MANAGEMENT Practical Processes for Tunnelling and Underground Works Kevin McManus 21 March 2013

2. Risk Management KMc Mar 2013 Purpose of Risk Management Elimination of Risk or Reduction of risk to Acceptable level Kevin McManus 21 March 2013

3. Risk Management KMc Mar 2013 Elements of Risk Management Identify and Describe Evaluate and Assess Eliminate or Reduce Monitor and Manage Kevin McManus 21 March 2013

4. KMc Mar 2013 Kevin McManus 21 March 2013 Risk Management Agenda  Overview  Definitions  Acceptability  Constraints and Guidance  Hazard events  Insurance  Code of Practice  Elements of Risk Management  Contract Provisions  Cost Risk  Allocation of Risk

5. Risk Management KMc Mar 2013 Kevin McManus 21 March 2013

6. Risk Management KMc Mar 2013 Kevin McManus 21 March 2013

7. Risk Management KMc Mar 2013 Kevin McManus 21 March 2013

8. Risk Management KMc Mar 2013 Kevin McManus 21 March 2013

9. Risk Management KMc Mar 2013 Kevin McManus 21 March 2013

10. Risk Management KMc Mar 2013 Kevin McManus 21 March 2013

11. Risk Management KMc Mar 2013 Kevin McManus 21 March 2013

15. Risk Management Kevin McManus 21 March 2013 “..expect to be surprised but never astonished..”

16. Risk Management Key Definitions Danger: Danger arises when situations that could result in harm are not properly controlled Hazard: A thing or 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 21 March 2013

17. Risk Management Key Definitions Risk: Probability of a hazard occurring Severity or consequence hazard occurring Kevin McManus 21 March 2013

18. 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 21 March 2013

19. Risk Management Kevin McManus 21 March 2013 Acceptability of Risk Constraints and Guidance Subjectivity General Opinion; Third Party Requirements Statute Regulatory Guidance Standards Industry Guidance Joint Code of Practice : Risk Management

20. Risk Management Acceptability of Risk Kevin McManus 21 March 2013

21. Risk Management Acceptability of Risk Kevin McManus 21 March 2013

22. 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 21 March 2013

23. 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 21 March 2013

24. 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 risk 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 Kevin McManus 21 March 2013

25. 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 21 March 2013

26. 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 21 March 2013

27. 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 21 March 2013

28. 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 21 March 2013

29. 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 21 March 2013

30. Standards Kevin McManus 21 March 2013 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 within acceptable limits Contingency plan devised and used if monitoring shows behaviour outside limits Risk Management

31. 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 21 March 2013

32. Kevin McManus 21 March 2013 Risk Management

33. 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 21 March 2013

34. Risk Management Kevin McManus 21 March 2013 Munich Underground 27 September 1994

35. Kevin McManus 21 March 2013 DLR February 1998 Risk Management

36. Kevin McManus 21 March 2013 CTRL Lavender St 2003 Risk Management

37. Kevin McManus 21 March 2013 Risk Management

38. Kevin McManus 21 March 2013 Risk Management

39. Kevin McManus 21 March 2013 Risk Management

40. Kevin McManus 21 March 2013 Risk Management

41. Kevin McManus 21 March 2013 Risk Management

42. Kevin McManus 21 March 2013 Risk Management

43. Kevin McManus 21 March 2013 Risk Management

44. Kevin McManus 21 March 2013 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

45. Kevin McManus 21 March 2013 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:- it should be avoided by intentional planning not wishful thinking and reliance on the insurer Risk Management

46. Kevin McManus 21 March 2013 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 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

47. Kevin McManus 21 March 2013 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

48. Kevin McManus 21 March 2013 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

49. Kevin McManus 21 March 2013 Insurable 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 Foreseeable events Consequential losses or risks Political risks or international turmoil e.g. war Absence of cause and event connection Limitations of Insurance

50. Risk Management Kevin McManus 21 March 2013 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) expect to divulge all available knowledge about risks - not conceal Insurer relies on information to assess risk and set premium

51. Risk Management Kevin McManus 21 March 2013 Code of Practice for Risk Management of Tunnel Works Development Purpose and structure  2 nd Edition May 2012 International Tunnelling Insurance Group (ITIG)  Based on Joint CoP for Risk Management of Tunnel Works in UK (BTS/ABI 2003)  Promote and secure best practice for minimisation and management of 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

52. Kevin McManus 21 March 2013 Principles of Code Hazard identification and management to ensure reduction to ALARP Responsibility for risk management explicitly allocated to relevant contract 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

53. Kevin McManus 21 March 2013 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

54. Kevin McManus 21 March 2013 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 Register Risk Management

55. Kevin McManus 21 March 2013 Contract; procurement; prequalification & tender Form of contract (sub 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

56. Kevin McManus 21 March 2013 Risk Management

57. Kevin McManus 21 March 2013 Risk Management Code of Practice Deliverables

58. Risk Management Elements of Risk Management Identify and Describe Evaluate and Assess Eliminate or Reduce Monitor and Manage Kevin McManus 21 March 2013

59. Risk Management Identification of Hazards Kevin McManus 21 March 2013

60. Risk Management Identification of Hazards involve 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 and high risk cases may need specialist expertise and techniques Kevin McManus 21 March 2013

61. Risk Management Elements of Risk Management Identify and Describe Evaluate and Assess Eliminate or Reduce Monitor and Manage Kevin McManus 21 March 2013

62. Risk Management Kevin McManus 21 March 2013

63. Kevin McManus 21 March 2013 Evaluate and Asses Risk Management

64. Evaluation of Probability Kevin McManus 21 March 2013 Risk Management

65. Evaluation of Severity Kevin McManus 21 March 2013 Risk Management

66. Risk Rating Matrix Kevin McManus 21 March 2013 Risk Management

67. Elements of Risk Management Identify and Describe Evaluate and Assess Eliminate or Reduce Monitor and Manage Kevin McManus 21 March 2013

68. Risk Ranking Kevin McManus 21 March 2013 Risk Reduction Requirements Risk Management

69. Kevin McManus 21 March 2013 Severity Probability Low High Risk Management

70. Kevin McManus 21 March 2013 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

71. Avoid Substitute Engineer Out Administer controls Provide Protective Equipment Emergency and Recovery Measures Risk Management Kevin McManus 21 March 2013 Hierarchy of Mitigation

72. Risk Management Kevin McManus 21 March 2013 Emergency and Recovery Measures Provide Protective Equipment Administer Controls Engineer Out Substitute Avoid Hierarchy of Mitigation

73. Kevin McManus 21 March 2013 Eliminate or Reduce Risk Management

74. Elements of Risk Management Identify and Describe Evaluate and Assess Eliminate or Reduce Monitor and Manage Kevin McManus 21 March 2013

75. Risk Management Kevin McManus 21 March 2013 Expecting Uncertainty

76. Risk Management Kevin McManus 21 March 2013 Reducing Uncertainty

77. Kevin McManus 21 March 2013 Monitor and Manage Risk Management

78. Kevin McManus 21 March 2013 Risk Management GI Design Method Predict SI Construct Monitor Set Limits Monitor and Manage

79. Kevin McManus 21 March 2013 Risk Management Trigger Values

80. Kevin McManus 21 March 2013 Risk Management

81. Kevin McManus 21 March 2013 Risk Management

82. Kevin McManus 21 March 2013 Risk Management Face Loss Back Analysis

83. Kevin McManus 21 March 2013 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…

84. Kevin McManus 21 March 2013

85. Risk Management Kevin McManus 21 March 2013 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

86. Risk Management Kevin McManus 21 March 2013 Cost Evaluation

87. Kevin McManus 21 March 2013 Risk Management Quantitative Evaluation

88. Kevin McManus 21 March 2013 Risk Management Ability to respond to risk event Allocation of Responsibility Influence over cause and effect Ability to Pay Inability to accept a certain risk Designer or other Professional Owner Employer Society or Community Contractor Supplier Manufacturer

89. Kevin McManus 21 March 2013 Any Questions? Risk Management