Risk and uncertainty in construction projects

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Risk and uncertainty in construction projects

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Risk and uncertainty in construction projects

  1. 1. Risk And Uncertainty In Construction Projects Prepared By: Engr. Ahmad Sameer Nawab Kardan University Civil Engineering Department
  2. 2. Contents Definition DEFINITION OF UNCERTAINTY AND RISK Difference Between Risk And Uncertainty SOURCES OF UNCERTAINTY Top 10 ranked risks as per their significance in relation to project objectives The key risks that influence project objectives and their abbreviations Risk Management in Construction Projects
  3. 3. Definition • An uncertainty problem is the main that influence the project’s implementation parameters. • It can be predicted with some possibility level but it is better to foresee possible optimistic and pessimistic "what if" scenarios with detail solving solutions and "stop threat" means for effective construction project management. • Managing risks in construction projects has been recognized as a very important management process in order to achieve the project objectives in terms of time, cost, quality, safety and environmental sustainability. • Risk management may be described as “a systematic way of looking at areas of risk and consciously determining how each should be treated.
  4. 4. DEFINITION OF UNCERTAINTY AND RISK • In recent years scientists describe uncertainty as associated with uncertainty management , which is the process of integrating risk management and value management approaches of construction process. • Theoretically uncertainty can be defined as a lack of certainty involving variability and/or ambiguity. • Alike uncertainty management is concerned as managing perceived threats, opportunities • and their risk implications but also managing the various sources of uncertainty which give rise to and shape risk, threat and opportunity. • In uncertainty situations, parameters are uncertain, and furthermore, no information about probabilities is known. • Whereas in risk situations, there are uncertain parameters controlled by probability distributions are known by the decision maker.
  5. 5. DEFINITION OF UNCERTAINTY AND RISK • The uncertainty in undertaking a construction project comes from many sources and often involves many participants in the project. • Since each participant tries to minimize its own risk, the conflicts among various participants can be crucial to the project. • Failure to recognize this responsibility by the owner or manager often leads to undesirable results. • What is why risk management is the means by which uncertainty is systematically managed to increase the likelihood of meeting project objectives. • Most of scientist emphasize that the key word is systematic, because the more disciplined the approach, the more we are able to control and reduce the risks.
  6. 6. Difference Between Risk And Uncertainty • The difference between risk and uncertainty is usually expressed in terms of whether it is possible to quantify the inexactness with which future values of a particular quantity are known Mathematically stated differences between uncertainty and risk are important.
  7. 7. SOURCES OF UNCERTAINTY • Uncertainties and risk cause the range of problems during the implementation of construction project. • In this part of article five Parts are presented with description of uncertainty sources and • possible consequences.
  8. 8. SOURCES OF UNCERTAINTY • Table One:- • Sources of uncertainty and • consequences due to un-unified • communication and • undefined “Project language”.
  9. 9. SOURCES OF UNCERTAINTY • Table No 2:- • Sources of uncertainty and consequences • due to low qualification and professional • training of employees.
  10. 10. SOURCES OF UNCERTAINTY • Table no 3:- • Sources of uncertainty and consequences • Due to Un-estimated work amounts in • project's estimate and unacceptable • planning of works.
  11. 11. SOURCES OF UNCERTAINTY • Table no 4:- • Sources of uncertainty and • consequences due the • lack of management tools • and ineffective-irrational organization • of works on site.
  12. 12. SOURCES OF UNCERTAINTY • Table No 5:- • Sources of uncertainty and • consequences due • unclear responsibility limits • and no strict contractual obligations.
  13. 13. Top 10 ranked risks as per their significance in relation to project objectives • 1_Cost related risks:- • Tight project schedule. • Design variations. • Variations by the client • Unsuitable construction program planning • Occurrence of dispute • Price inflation of construction materials • Excessive approval procedures in administrative government departments • Incomplete approval and other documents • Incomplete or inaccurate cost estimate • Inadequate program scheduling
  14. 14. Top 10 ranked risks as per their significance in relation to project objectives • 2_Time related risks: • Tight project schedule • Design variations • Excessive approval procedures in administrative government departments • Variations by the client • Incomplete approval and other documents • Unsuitable construction program planning • Inadequate program scheduling • Bureaucracy of government • High performance or quality expectations • Variations of construction program s
  15. 15. Top 10 ranked risks as per their significance in relation to project objectives • 3_Quality related risks: • Tight project schedule • Inadequate program scheduling • Unsuitable construction program planning • Incomplete or inaccurate cost estimate • Low management competency of subcontractors • High performance or quality expectations • Variations of construction programs • Unavailability of sufficient amount of skilled labour • Design variations • Lack of coordination between project participants
  16. 16. Top 10 ranked risks as per their significance in relation to project objectives • 4_Environment related risks: • Tight project schedule • Variations of construction programs • Unavailability of sufficient professionals and managers • Excessive approval procedures in administrative government departments • Variations by the client • Inadequate or insufficient site information (soil test and survey report) • Low management competency of subcontractors • High performance or quality expectations • Inadequate program scheduling • Serious noise pollution caused by construction
  17. 17. Top 10 ranked risks as per their significance in relation to project objectives • 5_Safety related risks: • Tight project schedule • Low management competency of subcontractors • Unsuitable construction program planning • Variations of construction programs • General safety accident occurrence • High performance or quality expectations • Design variations • Lack of coordination between project participants • Excessive approval procedures in administrative government departments • Unavailability of sufficient amount of skilled labour • Unavailability of sufficient professionals and managers
  18. 18. The key risks that influence project objectives and their abbreviations
  19. 19. Risk Management in Construction Projects • In today’s post-crisis economy effective risk management is a critical component of any winning management strategy. • Nine knowledge areas typical of almost all projects. The nine knowledge areas are: • 1. Project integration management. • 2. Project scope management. • 3. Project time management. • 4. Project cost management. • 5. Project quality management. • 6. Project human resource management. • 7. Project communications management. • 8. Project risk management. • 9. Project procurement management.
  20. 20. Risk Management in Construction Projects • project risk management includes:  Risk management planning;  Risk identification;  Qualitative risk analysis;  Quantitative risk analysis;  Risk response planning;  Risk monitoring and control.
  21. 21. Risk Management in Construction Projects • The performance by the project management team highly influences the success of a construction project. • Some of the incidental risks associated with poor project management performance are: • Unclear or unattainable project objectives; • Poor scoping; • Poor estimation; • Budget based on incomplete data; • Contractual problems; • Insurance problems; • Delays; • Quality concerns; • Insufficient time for testing.
  22. 22. Risk Management in Construction Projects • Risk factors on construction projects can be split into two major groups: • 1. Internal risks, which fall within the control of clients, consultants and contractors. • 2. External risks, which include risk elements that are not in the control of key stakeholders.
  23. 23. Thanks

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