Project Management
Project Risk Management
Jiwei Ma
Content
Concepts
Risk Identification
Risk Assessment
Risk Control
Concept
Risk
The possibility of loss, damage, or any other undesirable event
Project Risk
Any loss, damage, or undesirable event that may impact the project to be accomplished on time, under budget, and to required quality standard
Project Risk Management
Effort in project management to reduce the occurrence possibility, minimize the impact of project risks, and assure the success of the project
Risk Identification
To locate and identify the potential risks existing within the system or in the environment
Methods
Previous statistical data
Previous experience
Survey
Brainstorm
…
Project Risk Identification
Methods
Survey or brainstorm
Applicable for small project
Systematic approach
Component analysis
Process analysis
Participant analysis
Project objective analysis
Project environment
Risk Assessment
Concept
A scientifically based process of evaluating risks and the likelihood of exposure to those risks, and then estimating the resulting impact
Methodologies
Qualitative
To distinguish risks as high, medium and low level
Semi-quantitative
To prioritize risks in relation to one another
Quantitative
To measure, calculate and analyze the value of risks and the impact
Risk Assessment
Basic procedure
To clarify the risks which have significant or measurable impacts on project
To analyze the consequences of the risk’s occurrence
To evaluate the severity of the impact caused by the risk
To prioritize risks by calculating risk impact, and then formulate possible improvements or preventive measures
Risk Assessment Techniques
Fault tree analysis
Used to identify the causal relationships leading to the undesirable event
Based on deductive logic
Can be qualitative or quantitative
Risk Assessment Techniques
Event tree analysis
Used to illustrate the sequence of the outcome after the occurrence of a selected initial event
Based on inductive logic
Mainly used in consequence analysis
Risk Assessment Techniques
Cause-consequence analysis
A blend of fault tree and event tree analysis
Based on both deductive and inductive logic
The risk level of the system can be established by calculating probabilities of various consequences with the probabilities of various events
Risk Assessment Techniques
Frequency/severity diagram
Used to evaluate the impact of risks and prioritize the preventive measures
Based on consequence evaluation and probability calculation
Can be semi-quantitative or quantitative
Risk value = Severity x Frequency
Medium
Severity
Frequency
Low
High
Low
Medium
High
Risk Control
To identify, select, and implement measures that can be applied to reduce the risk identified and evaluated during the previous phases
Measures
To avoid risk
To remove/reallocate risk
To share risk
To reduce risk
To mitigate damage caused by risk
Construction Project Risks
List of risks
Planning and selection risks
Contract formation risks
Entity formation risks
Entity management risks
Site risks
Resource risks
Environmental risks
Technology risks
Communication risks
Expectation risks
Construction Project Risks
List of risks
Financial risks
Completion risks (cost)
Completion risks (time)
Completion risks (quality)
Payment risks
Project administration risks
Force majeure risks
Political risks
Currency risks
Construction Project Risk Control
Major measures
Improved procurement method to minimize implementation risks
Safety programs to reduce on-site accidents
Strict construction measurements to confine environmental hazards
Various insurance to reallocate risks
Bond company involved to share risks with owner and contractor
Construction Project Risk Control
Improved procurement method
Performance based procurement
Construction management / management contracting
Contractor prequalification in competitive bid
Contract negotiation after bid opening
Partnering or building long-term relationship
Construction Project Risk Control
Safety programs
On-site safety management program including owner, contractor, sub contractor, etc.
Regulatory safety control by government bodies
Safety control and education by professional organizations, . OSHA, BG, HSC, etc.
Construction Project Risk Control
Insurance
Contractor’s liability insurance
Workers’ compensation
Employers’ liability
Commercial general liability
Automobile liability
Owner’s liability insurance
Usually general liability insurance
Management protective liability insurance
Professional liability insurance
Property insurance
Project owner’s obligation
Construction Project Risk Control
Bond
Types of bond
Bid bond
Performance bond
Payment bond
…
Impact of bond
Contractor classification and prequalification
Review of contractor’s financial sustainability
Assurance of contractor’s performance and behavior
Thank You
Jiwei Ma
jiweima@
