Risk management

1. RISK MANAGEMENT
PRESENTATION
BY:
Engr. MAWIA ABDEL RAHMAN

2. Contents Slide No.
1. Introduction 3
2. Project Risk – Planning Phase (Initiation) 4
A. Risk Management Plan 4
B. Risk Identification 5
C. Risk Categories 5
I. Internal Risk 5
II. External Risk 6
III. Opportunities 6
D. Risk Assessment & Prioritization 7
E. Risk Register (Strategic Stage) 10
F. Risk Control Strategy 14
G. Risk Response 15
H. Risk Mitigation 16
I. Contingency for Risk 16
3. Tactical Project Risk - Implementation Phase 17
A. Value Engineering 17
B. Major construction activities 17
C. Risk Register 18
D. Party’s Involvement 21
E. Contingency Reassessing 25
4. Conclusion 26
5. References 28

3. Risk management plays an essential role on project’s success, generally
projects construction is found more risky due the nature of complexity in
managing several activities. The aim of this presentation is how to manage
the risk during strategic and implementation phases of the community
project, by defining the major type of risks that surround and influence the
project’s successes, these risks should be identified, categorized, and
assessed, Knowing who is the main risk owners, creating a risk management
plan to minimize the negative impact of risk which will lead to a successful
end results.
1. INTRODUCTION

5. The risk management plan is the process of defining and guiding on how the risk
management will be structured and implemented (PMI, 2008), it should include,
Identifying the risks, Define the risk owner, Prioritize the risk, Analyze of the implication
whether individual and/or collective, Monitoring & control of risk during the project life
cycle, Minimize the risk through plan the risk response and Propose appropriate
contingency.
If the risk is managed in a realistic way it will lead to improve the project planning,
provide a confidence in the estimate and help to propose proper contingency to manage
the project effectively
Asses Risk at All Phases
Project
Identify Risk
Analyze Risk
Risk Response
Risk Register
Communicate&
Consult
Monitor&Review
Risk Management
Plan
Taken as a combination from (Smith et al., 2006) and (Ahmed et al., 2007)
2. Project Risk – Planning Phase (Initiation)
A. Risk Management Plan

6. B. Risk Identification
Risk identification method is dealing with the resources of risk but not with its effects.
There are three different procedures proposed, brainstorming meetings, lessons
learnt from similar projects and use of business checklists (Smith et al., 2006).
The risks Identified factors for the any project fall under internal and external risks
expressed in a category wise as per the following table:
C. Risk Categories
I. Internal Risk:
Financial Schedule Technical Legal
In accurate cost estimate
Delaying consultant’s and
contractor’s nomination
Poor management of
project
Severe noise pollution
created during
construction
High Quality work Tight project schedule
Non availability of sufficient
skilled labors
Worker’s strike
Variations and scope
creeping
Delay in material
procurement and delivery
Poor communication Occur of disputes
Lack of funding Language barrier Selection of poor contractor
Delay on payment progress Shortage in fuel / energy
Absence of historical data
of similar projects
Corruption Insufficient utilities Lack of safety
Delay in approval by Gov.
authorities
Design complexity
Shortage of resources Insufficient site information
Delay in mobilization Over specified items

7. II. External Risk:
Unpredictable Predictable (but uncertain)
Economic recession (Financial) Bad weather (Schedule)
Lack of sufficient user involvement (Financial)
Inflation in costs of labors and material (Financial)
III. Opportunities:
Financial Schedule Technical
Stakeholder participate in the
investment
Flexibility in project duration Sustainability implementation
Material cost less than expected Good weather
Purchasing software application for
efficiency of team members
free facilities (offices, transport ,
housing, utility services)
Highly spirt team working
(ESI International, 2009)

8. D. Risk Assessment & Prioritization
The priority of risks was grounded on their likelihood of happening, their impact when
happening and the objectives affected when they are happening.
(ESI International, 2009)

9. The level of each risk is calculated as: (Cervone, 2006).
R = P*I Where R indicating the risk rating per each risk, P the probability and I is impact
degree.
The scale of risk based on their impact, likelihood and discrimination
Impact:
5 marks for critical risk lead to failure of the program, 4 marks for serious risk affect
significantly on the cost or time, 3 marks for medium risk cause moderate increase on cost
and time, 2 marks for minor risk cause low additional cost or time one mark for negligible
risk on time or cost.
Likelihood:
5 marks for high Likelihood occurrence more than 50%, 3 marks for medium Likelihood
occurrence between 10 to 49% and one mark for a low likelihood below 10%.
Discrimination:
Discrimination highlights the impact of the overall risk in the project rather than evaluating
each risk independently.

10. Three levels of discrimination the first one having one mark of high impact will keep
objectives of the project at high risk lead to variation, second one having 3 marks of
moderate impact will not affect attaining the project objectives and require re-planning and
last one having 5 marks of very low impact any risk can be handle without affecting the
project planning, therefore with each risk appraised a mark value can be given to each risk by
using the formula:
The Overall Risk Factor = (P*I)/D where D is the discrimination.
The project Risk factors are then ranked by the risk severities which show the overall impact
on the project.

11. E. Risk Register – Planning Stage
T=Technical S=Schedule F=Financial L=Legal
High Risk: > 12 – Red
Medium Risk. >5, < 12 – Yellow
Low Risk: < 5 - Green
REFER TO THE TABLE ON THE NEXT SLIDE

12. ID Description of Risk Category
Likelihood
Rating
Impact
Rating
Priority
Rating
Mitigation Plan
Action
Resources
(Risk Owner)
1
Inflation in costs of labors and
material
F 4 5 20
Provide contingency% on
estimated cost
Sponsor
2 Shortage of resources S 4 5 20
MOU with Recruiters & Prepare
procurement plan
Contractor
3 Tight project schedule S 4 5 20
Apply fast tracking or
crashing
Sponsor/
Consultant
4 High Quality work F 4 4 16 Prepare QA/QC plan
Consultant/Contrac
tor
5
Severe noise pollution created
during construction
L 4 4 16
Reduce by use of low noise
equipment
Contractor
6
Delaying consultant’s &
contractor’s nomination
S 3 5 15
Early procurement
arrangement
Sponsor
7
Delay in approval by Gov.
authorities
S 3 5 15
Assign dedicated consultant
staff
Sponsor/
Consultant
8 Variations and scope creeping F 3 5 15 Comprehensive scope study
Sponsor/
Consultant
9
Non availability of sufficient
skilled labors
T 3 5 15
Identify skills required and
communicate with recruiters
Contractor
10 Poor communication T 3 5 15 Establish communication plan Consultant
11 Lack of funding F 3 5 15 Seek additional investors Sponsor
12
Delay in material procurement
and delivery
S 3 5 15
Early procurement plan &
agree with suppliers
Contractor
13 Selection of poor contractor T 3 5 15 Prepare Prequalification plan
Sponsor /
Consultant
14 Economic recession F 3 5 15
Look for stable and strong
financial investors
Sponsor
15 Poor management of project T 3 5 15
Assign competent project
manager
Consultant/Contrac
tor
16 Lack of safety T 3 4 12 Provide HSE plan
Consultant/Contrac
tor
17 Delay in payment Progress F 3 4 12
Establish controlled time wise
payment process cycle
Sponsor/
Consultant

13. ID Description of Risk Category
Likelihood
Rating
Impact
Rating
Priority
Rating
Mitigation Plan
Action
Resources
(Risk Owner)
18 Design complexity T 3 4 12 Ensure design buildability
Consultant/Contrac
tor
19 Delay in mobilization S 3 4 12
Prepare for timely
mobilization
Contractor
20 In accurate cost estimate F 2 5 10 Assign experience QS Consultant
21 Worker’s strike L 2 5 10
Leadership to control conflicts
and ensure timely payment
Contractor
22 Occur of disputes L 3 3 9 Disputes resolution plan All Parties
23 Corruption F 2 4 8 Cost control procedure All Parties
24 Bad weather S 2 4 8 Get weather forcast Sponsor
25
Lack of sufficient user
involvement
F 2 4 8 Interface agreement Sponsor
26 Insufficient site information T 2 4 8 Site investigation
Sponsor/
Consultant
27 Over specified items T 2 4 8 Review the specification Consultant
28
Absence of historical data of
similar projects
T 1 4 4 Hold brain storming sessions Consultant
29 Language barrier S 1 4 4
Communication awareness
sessions
Contractor
30 Insufficient utilities S 1 4 4
Determine requirement and
seek alternatives
Sponsor
31 Shortage in fuel/energy S 1 3 3 Ditto Sponsor

14. ID Description of Risk Category
Likelihood
Rating
Impact
Rating
Priority Rating Benefits
Action Resources
(Risk Owner)
1
Stakeholders participate
in the investment
F 4 5 20 Ensure availability of funding Stakeholders
2
Highly spirit team
working
S 4 4 16 High productivity rate All Parties
3
Sustainability
implementation
F 4 4 16
Reduce cost and increase
asset life time
Consultant
4
Purchasing software
application for efficiency
of team members
T 5 3 15
Saving time and
sophisticated planning and
control
Consultant /Contractor
5
Material cost less than
expected
F 3 5 15 Saving in project cost Suppliers
6 Good weather S 3 4 12 Increase working hours Sponsor
7
free facilities (offices,
transport , housing,
utility services)
F 1 4 4 Staff stability Sponsor
Opportunities: Positive Impact
(ESI International, 2009)

15. F. Risk Control Strategy:
It is very important to know that getting a plan for dealing with all risks covering all
tasks step by step in the project is very difficult, therefore in many projects the project
team exerted their effort to resolve risk on looking to the top 20% of the risk
identified using rule of thumb but still risk resolution require a widespread and
extensive elaboration.
The most efficient way to avoid risk is to ensure proper planning for communication
within all teams working in the project to keep all team members aware of the project
through a good tracking system for the work program with major milestones that
have passed, cost and cash flow diagram with any implication arises, documents of
previous lesson learnt of similar projects, documentation system, monitoring and
controlling of project’s tasks and continuous risk assessment, this will assist the team
in identifying the high risk at each moment and therefore increasing the opportunities
for the project to succeed.

16. G. Risk Response:
Looking to the stages of risks management mentioned above, it is clearly shown that
these stages are not really removing the risk from the community project rather than
structuring an organized route to recognize the risk surrounding the project. The last
stage of risk management is the risk response which seem to be the most important
stage, The risk response can be achieve through three ways, first way by the contract,
second way by insurance ( these two ways are approaches used when transferring the
risks to the outer bodies) , the third way of responding to the risk is through
management of retention which lead to reduce or eliminate the risk internally,
allocation of risk by contract is normally a common practice in construction industry
however some risks may owed to owner/consultant/suppliers or sub-contractors
(Smith et al., 2006).

17. H. Risk Mitigation:
Risk mitigation plan is describe the proactive methodology or action to be taken due
to possibility of risk events occurrence, this can be found in origination of contingency
plan e.g. the insurance which was provided to eliminate, reduce and/ or transfer the
risk, administration of the standby reserve must composed of provision for specified
and unspecified risk (PMI, 2008).
I. Contingency for Risk:
Contingency allowance is an amount of cost reserve from the budget to cover the
project’s risks where on the other hand potential savings of cost can be occur due
opportunities which result in reducing the amount of budget, we therefore need to
carry proper planning for contingency and have a road map to mitigate the risks in the
project but we will never be able to plan contingency for all risks that may expected to
arises. To determine the contingency allowance for the project four common methods
to be illustrated such as, the parametric modeling, simulation analysis, predetermines
guideline and expert judgment. The widely used techniques is to use an arbitrary
percentage of the estimated project cost this estimation depend on the experience
and awareness (expert judgment) e.g. a project with low to medium risk may got 5%
and of high risk 10%, in fact evaluated these efforts as an “educated guess at best”.
Based on the high risk shown at planning stage I propose 10% of the budget
equivalent to AED…., we should take into account similar previous projects success.

18. This stage is a purely VE that lies at the heart part of risk and value management, VE
dealing with reducing the cost, its techniques is to measure, analyze, quantify,
compare, investigate and select best value from different options.
3. Tactical Project Risk – Execution Stage
A. Value Engineering:
B. Major Construction Activities:
In order to identify all the risk surrounding this stage we need to define the
construction activities during the execution stage listed as:
1. Kick‐off meeting
2. Site hand over
3. Nomination of consultant’s and contractor’s teams
4. Mobilization
5. Submission of work program
6. Authorities approval for services-routes-NOC’s
8. Shop Drawings Submittals and Approval
9. Quality & HSE Plans
10. Supply and Delivery of materials
11. Excavation-execution-installation, Supervision
monitoring & controlling
12. Inspections-testing- commissioning and
hand over
13. Final As-Built drawings
14. PAC (Provisional Acceptance Certificate)
15. Submittal of O & M manuals & training
16. PAC snag clearance
17. Reconciliation
18. Documentation and lesson learnt submittal
19. Close-Out report
20. Warranty Period
21. Issuance of FAC(Final Acceptance
Certificate)
7. Material Submittal and Approval

19. C. Risk Register – Execution Stage
T=Technical S=Schedule F=Financial L=Legal
High Risk: > 12 – Red
Medium Risk. >5, < 12 – Yellow
Low Risk: < 5 - Green
REFER TO THE TABLE ON THE NEXT SLIDE

20. ID Description of Risk Category
Likelihood
Rating
Impact
Rating
Priority
Rating
Mitigation Plan
(Contingency Action)
Action
Resources (Risk
Owner)
1
Inflation in costs of labors and
material
F 4 5 20
Provide contingency% on
estimated cost
Sponsor
2 Variations and scope creeping F 3 5 15 Change management
Sponsor/
Consultant
3 Tight project schedule S 3 5 15 Monitor & control progress
Sponsor/
Consultant
4 Lack of funding F 3 5 15 Ensure availability of funding Sponsor
5 Economic recession F 3 5 15
Maintain agreement and
good relation with investors
Sponsor
6 Injury at Site L 3 5 15
To implement HSE Plan
Properly
Contractor
7
Severe noise pollution created during
construction
L 3 4 12
Monitor equipment
performance
Contractor
8 High Quality work T 3 4 12 Implement QA/QC plan
Sponsor/
Consultant
9 Shortage of resources F 2 5 10
Follow with Recruiters &
Implement procurement
Contractor
10
Non availability of sufficient skilled
labors
T 2 5 10 Staff motivation Contractor
11
Delay in material procurement and
delivery
S 2 5 10 Implement procurement Contractor
12 Lack of safety T 2 5 10 Implement HSE Plan
Consultant/Contra
ctor
13 Delay in NOCs approval L 2 5 10 Obtain NOC’s
Consultant /
Contractor
14 Poor communication T 2 5 10
Implement communication
plan
Consultant
15 Delay in payment Progress F 2 4 8
Timely processing of
payment
Sponsor/
Consultant
C. Risk Register – Execution Stage

21. ID Description of Risk Category
Likelihood
Rating
Impact
Rating
Priority
Rating
Mitigation Plan
(Contingency Action)
Action
Resources (Risk
Owner)
16 Occur of disputes L 2 4 8
Assess disputes procedure &
manage disputes. Assess &
manage effectiveness of
dispute process.
All Parties
17 Corruption F 2 4 8 Monitor & Control All Parties
18 Bad weather S 2 4 8 Update weather forecast Sponsor
19 Lack of sufficient user involvement F 2 4 8
Implement interface
agreement
Sponsor
20 Poor management of project T 1 5 5 Motivate Project Manager
Consultant/Contra
ctor
21 Inaccurate cost estimate F 1 5 5 Cost control Consultant
22 Worker’s strike L 1 5 5
Leadership to control
conflicts and ensure timely
payment
Contractor
23 Delay in mobilization T 1 4 4 Ensure timely mobilization Contractor
24 Language barrier S 1 4 4
Communication awareness
sessions
Contractor
25 Insufficient utilities S 1 4 4
Determine requirement and
seek alternatives
Sponsor
26 Shortage in fuel/energy S 1 3 3 Ditto Sponsor
C. Risk Register – Execution Stage

22. D. Party’s Involvement:
With reference to RIBA POW stage 5 the following parties are the key project teams
involve in the community project:
1. Client Project team leader:
His role is vital during the implementation stage, including secure finance/funds
through the whole duration of the construction, approval to the consultant and
contractor key personnel, approve nominated subcontractors, review and
approved project schedule, review and endorse consultant’s and contractor’s
payments, oversee project submittals, review and approve variation for changes,
report to board of directors, attend progress meeting, approve PAC & FAC
certificates, participate in project hand over, evaluate consultant and contractor
performances, oversee project closeout and endorse final payment and
retentions.

23. 2. Consultant Team composed of:
Resident Engineer his role to ensure that the contractor comply with the design
requirement, review the quality of work as per contract specification, review risk
management plan, ensure that all NOCs are in place in a timely manner, ensure
the smooth progress of site activities, supervise, monitor and control work
progress, review schedule, review contractor’s daily, weekly and monthly reports,
review safety and quality plans, prepare and submit monthly progress report to
the client, run progress meetings and prepare the minutes, review, endorse &
submit contractor’s payments to client, review/approve project schedule.
Assistant Resident Engineer, review shop drawings, method statement of work,
inspection of material, QA/QC work, undertake all HSE measure to avoid incident
occurrence, attend site meetings, attend all tests performed.
Quantity Surveyor: Review contractor payment, measurements sheet & material
reconciliation.
Inspectors: check the daily work, safety checklists, and drawings, endorse
contractor’s inspection request, report to ARE.

24. 2. Contractor key Team composed of:
Project Manager
The P.M. of the contractor must have technical, managerial and financial skills,
since his role and responsibility is to deliver the project as per contract
requirement, liaising/communicating with consultant, client & Gov. authorities,
attending project progress meeting, obtaining NOCs, securing manpower-
equipment and subcontractors, undertaking all safety and quality measures in
coordination with his team, secure material procurement and delivery (local or
overseas), assure that the approved project schedule is being implemented,
submit the progress payments to consultant, testing, commissioning and hand
over the project.
Construction Manager
C.M. role is to assist the P.M. in his duties, supervising and managing all
construction daily activities, enforcing safety policy, ensure the approved quality
plan is being implemented, inspect the material upon arrival and managing &
supervising subcontractors work.

25. 2. Contractor key Team composed of:
HSE Manager: prepare, submit and implement HSE plan.
QS: Review B.O.Q. prepares progress payment and material reconciliation in
coordination with P.M.
Planning Engineer: Prepare and monitor work program in coordination with all
contractor’s team members.
QA/QC Engineer: Prepare and implement quality control plan.
Site Engineers: implement projects activities as per contract specification.
Facility Manager: his role covers the participation in the handover of the project
including testing, commissioning and training.
External Auditor: is not part of the organizational chart but his involvement is vital
to evaluate the whole implementation process of the project; however this should
be applied to all the phases of the project.

26. E. Contingency Reassessing:
Contingency reassessing philosophy is based on avoid, reduce or transfer of risk, with
adjustment of opportunities which have positive impact to reduce the risks and
increase the contingency reserve, during the early strategic phases there is no enough
details helping to implement proper risk management plan, however from past
experience and expert judgment the risk was identified, prioritized, assessed and risk
register implemented i.e. risk management plan was in place. This will result in
reducing probability of risk occurrence in implementation phase as seen in risk
register (4.3), where most of high risks in the initiation phase were reduced to
medium and low risks or eliminated after been properly plan, thus the contingency
reserve may cover only the accepted residual risk and unknown risk arises.
In managing contingency we need to calculate the amount reserve during critical path
of project implementation phase this apply to but not limited to the following: KPIs
like SV, SPI, BAC, CV, CPI,ETC, EAC and EVM., which will be used to review the
calculation of contingency for the rest of risks(PMI, 2008).

27. 4. Conclusion
Risk management techniques, when applied properly on projects management it will lead to
achieving an outstanding result, if we look to construction industry today in UAE we will
find different projects managers and professionals using same techniques of risk
management but they are not aware about it.
The presentation highlights the risks influence to the success of the project at strategic
which was reduced during implementation stage due action plan undertaken for maximizing
the opportunities and minimizing the impact of threat through project life cycle,
methodology used in identifying, categorizing, prioritizing and assessing them, using a
mitigation plan to accept, mitigate, transfer or avoid them by assignment of an appropriate
flat percentage of allocated budget as contingency in strategic phase, and reassess it at
implementation stage in a way to cover the higher residual or unknown risks and thus
prevent the trade-off that may increase the time, decrease scope or result in project cost
overrun. Risk management techniques when applied during strategic phase will lead to
increase the cost of contingency due to lack in details available rather than implementation
stage where most of the risk are known and managed with less contingency. (Gajewska and
Ropel, 2011).

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50.
PMI, (2008) ‘Project Management Body of Knowledge PMBOK GUIDE’, Pennsylvania. USA, 41- 46.
RIBA (2013) ‘Plan of Work Overview’ Available at
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Smith N., Merna T., Jobling P., (2006) ‘Managing Risk in Construction Projects’ ,Blackwell Publishing, (2) p 16-
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D.Hagir Al Hakim notes on “risk management course” and assignments in MSC for CPM, Heriot watt
University