Dr F.Dejahang, BSc CEng, BSc (Hons) Construction Mgmt, MSc, ex MCIOB, ex MCMI,ex.... PhD

1. RISK MANAGEMENT
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2. RISK MANAGEMENT
 Risks have a significant impact on a construction
project’s performance in terms of:
 cost
 Time
 quality
 Size and complexity of the projects have
increased over the past 30 years.
 The ability to manage risks throughout the
construction process has become a major factor
for preventing risk.

3. RISK MANAGEMENT
 Supply chain must share the risk.
 Risk to a large extent is governed by the
procurement option and the content of the
related contract documents.
 Selecting an appropriate project
procurement option is a key issue for risk
reduction.

4. RISK MANAGEMENT
A systematic process of:
 identifying
 assessing and responding to project risk
 The aims and objectives of the risk
management process is to maximize the
opportunities and minimize the
consequences of a risk event.
 A variety of risk management models with
different numbers of stages can be
obtained.

5. RISK MANAGEMENT
 The international standard “Project risk
management – Application guidelines”
(IEC 2001) is a good source for risk
management.
IEC suggest a model with 5 steps:
1. risk identification
2. risk assessment
3. risk treatment
4. risk review
5. monitoring

6. RISK MANAGEMENT
 PMBOK’s model (PMI 2000) is similar
but divides risk assessment into two
processes. They are:
1. qualitative risk analysis
2. quantitative risk analysis
 Baloi and Price (2003) include an
additional step of risk management
process it is:
 communication.

7. RISK MANAGEMENT
Risk Transfer & Indemnification
Two most problematic areas for
construction management teams
are:
1.contractual risks
2.the insurability of projects.

8. RISK MANAGEMENT
 Risk management can reduce risk in the
different procurement options.
 Design and build contracts and collaborative
form of partnering.
 Better understanding is expected to contribute to
a more effective risk management.
 Therefore, a better project output and better
value for both clients and contractors.

9. RISK MANAGEMENT
 A clear link between the procurement
option and risk management
 Design-build projects offer better
cooperative work by the architects and
contractors in early phases
 Therefore, more thorough risk
management.

10. RISK MANAGEMENT
Partnering
 helps to establish good supply chain
relationships
 partners work together throughout the
project
 each partner participates in joint risk
management
 share information to reduce risk

11. RISK MANAGEMENT
effective communication;
information exchange;
open attitudes and good
relationship;
all have open discussion of
project risk and a strong
determinant for project success.

12. RISK MANAGEMENT
RISK ASSESSMENT-SUPPLY CHAIN
1. identify risks
2. evaluated risks
3. ranked risks
4. use both qualitative and quantitative methods
for assessment
5. based on fuzzy estimates of risk components
or a better option
6. Identify risk to cover all KPI’s (TIME-COST-
QUALITY-CUSTOMER SATIFACTION-
SAFTEY)

13. RISK MANAGEMENT
Risk Response Process
 There are four main risk response
strategies. They are:
1. risk avoidance;
2. risk reduction;
3. risk transfer;
4. risk retention (IEC 2001, PMI 2000,
Smith et al. 2006).

14. RISK MANAGEMENT
Risk avoidance
by changing the project plan
by finding methods to eliminate all
risks.
Risk reduction
by reducing the probability and/or
consequences of a risk event

15. RISK MANAGEMENT
After risk avoidance and
reduction
Any other risk may be shared
amongst supply chain
Risk retention or acceptance
 it is an indication that the risk
remains present in the project

16. RISK MANAGEMENT
Two options are available when retaining the risk:
1. To develop a contingency plan in case a risk
occurs
2. To make no actions until the risk is triggered
Risk reduction as the most common
Method usaed.
Baker et al. 1999,
Lyons and Skitmore 2004,
Tanget al. 2007

17. RISK MANAGEMENT
Construction Risks-Technical Risks
Incomplete design
Inadequate site investigation
Uncertainty over the source and
availability of materials
Appropriateness of specifications

18. RISK MANAGEMENT
Logistical Risks
Availability of resources
1. construction equipments
2. spare parts
3. fuel and labour
4. Transportation facilities
5. Etc.

19. RISK MANAGEMENT
Construction Risks
Uncertain productivity of
resources
Adverse Weather
Industrial relations problems

20. RISK MANAGEMENT
Financial Risks
 Inflation.
 Availability and fluctuation in foreign
exchange
 Delay in Payment
 Repatriation of funds
 Local taxes

21. RISK MANAGEMENT
Political Risks
 Constraints on the availability and
employment of expatriate staff
 Customs and import restrictions and
procedures
 Difficulties in disposing of plant and
equipment
 Insistence on use of local firms and
agents

22. RISK MANAGEMENT
So far:
 A risk management should cover the
entire project life cycle.
 Uncertainty and risk can be experienced
at any stage from inception to completion.
 Understanding of risk by everyone
involved in the delivery of the project.

23. RISK MANAGEMENT
 This will lead to a more controllable risk
management.
 Poor risk management increases the
project total cost by 8-20%.
 Risk happens when there are changes to
original plan.

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25. RISK MANAGEMENT

26. RISK MANAGEMENT

27. RISK MANAGEMENT
Risk Response Process-RRP
Predictive
Metrics
Diagnostic
Metrics
Retrospective
Metrics
RISK
IDENTIFY
ASSESS
TREATMENT
REVIEW
MONITOR
Etc.

28. Risk sharing-a practical method
Partnering

29. Cited- Professor A.A Akintola
1. Allocation of risk
2. There must be significant transfer of risk
to the private sector
3. Risk with procurement
4. Risk transfer
5. Cost reduction
6. sustainability