Integrating Risk Management

1. INTEGRATINGINTEGRATING
RISK MANAGEMENTRISK MANAGEMENT
WITH COSTWITH COST
CONTROL&CONTROL&
COMMUNICATIONCOMMUNICATION
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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
effective communication;
information exchange;
open attitudes and good
relationship;
all have open discussion of
project risk and a strong
determinant for project success.

11. 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)

12. RISK MANAGEMENT

13. RISK MANAGEMENT
Predictive
Metrics
Diagnostic
Metrics
Retrospective
Metrics
RISK
IDENTIFY
ASSESS
TREATMENT
REVIEW
MONITOR
Etc.

14. RISK MANAGEMENT

15. RISK MANAGEMENT

16. COST CONTROL
 Cost control is a key factor and an
important determinant during
construction for achieving project’s KPIs.
Construction costs control includes:
 performing an adequate constructability
review to minimize unexpected costs;
 establishing a construction cost cash flow
plan;
 monitoring cost performance to detect and
understand variances from plan;

17. COST CONTROL
ensuring that all appropriate
changes are recorded;
preventing incorrect, inappropriate,
or unauthorized changes from being
included in the project;
Informing appropriate stakeholders
of authorized changes;
Acting to bring expected costs within
acceptable cost limits.

18. COST CONTROL
Cost control must be thoroughly
integrated with the other control
processes such as:
scope change control;
schedule control and quality
control.
Any inappropriate responses to
cost variations can cause quality
or schedule problems.

19. COST CONTROL
Removing gang members from
one job to another can increase
the contract duration.
Decreasing gang members can
also increase the cost.
It also can produce an
unacceptable level of risk later
in the project.

20. COST CONTROL
construction costs include:
contractor costs;
the client cost;
consultant costs;
Any other hidden cost such as in
case of any major dispute
between contractor and the
client.

21. COST CONTROL
RESPONSIBILITIES
Project Manager (PM): The PM is responsible
for overall project cost control, running of the
project.
 The PM should work closely with the
Construction Site Manager, Site Engineers to
ensure that changes are minimized.
 Make sure the project is completed within
budget.

22. COST CONTROL
Construction Manager (CM)-Project
manager (PM)-Site Manager (SM)
 Once the construction work starts on site,
the management team on site will be
responsible for day-to-day cost control as
well as other responsibilities.
 The CM,PM, must not only know the
project’s costs to date, but also be able to
project costs For any additional work.
 The CM, PM,.. is responsible for
controlling costs to ensure that
construction is completed within budget.

23. COST CONTROL
 If any changes are anticipated during
the construction process, immediate
steps must be taken and they are:
1. the CM must notify the senior
management as soon as possible;
2. an informed decision can be made on
whether or not to proceed with the
change;
3. Once the decision is made can the
necessary funding be obtained?

24. COST CONTROL

25. COST CONTROL

26. COST CONTROL

27. DATA MODEL-ESTIMATED COST
COMPARED TO ACTUAL COST

28. DATA MODEL FOR LABOUR,
MATERIAL AND MACHINERY
COST OVERRUN

29. COMMUNICATION
Every year defects in the UK
construction industry cost at least
£20 billion to repair or rebuild
Some of the defects are as the result
issues such as:
 Poor communication;
 Poorly detailed drawing;
 Incorrect instructions or technical
information not being available on time;

30. COMMUNICATION
Meeting types and frequencies;
Method's of drawing transfer;
Use and control of revised drawings,
or unconfirmed drawings;
Reporting and tracking of defects;
Lack of knowledge in detecting
defects on time.

31. COMMUNICATION
Single points of contact
Consideration should be given to
appointing defined, single points
of contact at suppliers, design
offices and contractors.
This should help to avoid delays,
confusion and duplication of
effort.

32. COMMUNICATION
Upwards feedback
 Establish means by which
information can be effectively fed
back up through the formal
management structure.
 Two key areas where this can be
particularly important are as
follows:

33. COMMUNICATION
1. operatives to site office (e.g.
reporting on an incorrect drawing);
2. Site office to head office (e.g. where
an incorrect detail is discovered;
3. this should be reported back to the
design office and the drawings
corrected).

34. COMMUNICATION
There are different communication instruments,
such
as:
 e-mail
 document
 telephone
 meeting
 contracts
 specifications
 reports
 manuals
 schedules
 calculations

35. COMMUNICATION
 drawings
 computer files
 Disks
 print-outs
 photographs
 agenda’s and minutes of meetings
 The management of documentation and
communication used in a project is used
by a number of subcontractors, the
storage and retrieval thereof for further
use.