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Construction Risk Summit "benefit and pits of Construction Risk Management"

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Presentation on 2 April 2014 at Construction Risk Summit in Melbourne

Published in: Business, Economy & Finance
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Construction Risk Summit "benefit and pits of Construction Risk Management"

  1. 1. Conducting Risk Management on Major Projects Bronwyn Friday Group General Manager, Enterprise Risk Management 2 April14 Pitfalls and Benefits?
  2. 2. › Who we are › 6,5000+ people on 100+ projects › delivering contracting, engineering and services solutions › Revenue › $4.75 billion › Regions › Australia › New Zealand › South East Asia › Middle East Who is John Holland Work in hand Approx. $5.56bn
  3. 3. Why do Risk Management on Major Projects  Achieve objectives successfully  Protecting Balance Sheet  All stakeholders focus what is critical 3
  4. 4. Risk Management Changes
  5. 5. 5 What has changed in the Construction Industry › Physical work has not changed a great deal › New systems and process have been introduced › Risk Modelling › BIM – modelling of building information › Stakeholder expectations have changed › They expect more certainty!!!
  6. 6. 6 What has changed at John Holland › Some project objectives not fully achieved › Senior Management and Leighton Holding’s governance requirements › Clients requiring more advance risk management › Varying Delivery models › More complex risk sharing setups › New concepts like BIM
  7. 7. What is Risk Management at John Holland  Strategic & Business Planning  Prospect Analysis  Approval Processes  Contract Reviews  Safety, Quality & Environmental (SQE) Risk Management  Qualitative Risk Rating  Quantitative Risk Costing › Including Risk Modelling 7
  8. 8. Risk Management & Tools Benefits
  9. 9. 9 Benefits of Risk Management › Focus the team on the objectives of the projects › 80/20 rule, focus on top 20% to deliver 80% of your success › Early identification and understanding of Key Risks › Alignment on the Key Risks › Pro-active management of them › Resources focused on these risks › Finally, know the Residual Uncertainty related to a project for your business
  10. 10. Use of Probabilistic Cost Risk Modelling › Used in our large valued, complex tenders / projects › Models both › Discrete Risks › Uncertainty › Estimate Uncertainty › Design Development Scope Growth
  11. 11. What does the cost modelling give you? › Confidence level of delivering a project within a budgeted amount › What risk events to focus on to achieve success › Portfolio protection › Overall portfolio risk profile › Project’s impact on the business Mean $9,119,415 Std Dev $1,455,996 P5 $6,768,486 P10 $7,234,656 P25 $8,068,267 P50 $9,096,837 P75 $10,117,001 P90 $11,009,943 P95 $11,564,512 Percentiles
  12. 12. Use of Probabilistic Time Risk Modelling (SRA) › Schedule Risk Analysis › Used across are wider range of tenders and projects › Models both › Discrete Time Risks › Duration Uncertainty
  13. 13. What does the time modelling give you? › Confidence level of delivering a project within a specific timeframe › Stress tests the schedule › Drives better methodologies › Understand of the likely delays and resulting costs
  14. 14. Risk Modelling Pitfalls
  15. 15. 15 What are some of the pitfalls? › Time › In Tender there is so little time to get the core stuff complete › Risk Management is seen as a distraction When risk management is done the right way, it will drive the Tender Team to focus on the key issues and not get lost in the detail that has low impact. Do not let risk management become a compliance task!!!
  16. 16. 16 What are some of the pitfalls? › Data › The risk process gets lost in all the data › 80 / 20 is not used so everything is managed › Management never focuses on the key risks Do normal business practices already manage these risks? Always question whether the risk could stop you achieving your objectives?
  17. 17. What are some of the pitfalls? › Tool Selection › Using advanced resource rich risk modelling tools when they are not needed  If a simple risk tool can achieve the desired outcomes, then use it! 17
  18. 18. 18 What are some of the pitfalls › Decision Makers › Risk Management processes are not involved with Decision Making processes › Risk information not being used › Decision makers do not understand the outputs › Ignoring the information; or › Not questioning the logic to find out if it is sound Get the risk information to decision makers and make sure they understand it. Coach them if they do not.
  19. 19. Make the most of Risk Management
  20. 20. 20 John Holland has revised its Risk Management processes › Stronger approval processes › Stricter commercial / contract reviews › More detailed Risk Management › Risk Modelling › Peer Reviews
  21. 21. 21  Understand what the Decision Makers want  Match your risk tool to the profile of the project and output required  Remember it is about 80/20 and stay focus on the Key Risks  Do it early and get the benefits How do you make the most of Risk Management
  22. 22. Questions ? 22

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