Question

Your task is to develop quantified Risk models of two Risks of interest to you. This is an academic
exercise and its purpose is to make you familiar with the process of quantified Risk modelling and
to show me you understand the theory and the practice.
a) Write up each Risk as a case study that explains the Risk in detail and describes the proposed
control measures.

Answer 1

The Study investigated to acquire an overall idea about risk and its consequences in construction field and the process required for its management. The effect of risk on assessment of a project is discussed along with the tools and methods adopted to manage risk in construction industry. The objective of the research topic “Risk Management in Construction Industry” is to explore the effective way for implementation of risk management in construction industry, to consider the different types of risk management techniques applied to alleviate risk, to identify the use of implementation of the risk management, to determine the factors that can influence the applications of risk management in the project life cycle, wherein to categorize the principles adopted in Risk Management. I have conducted a survey on the following aspects of it, a) Identify, characterize, and assess threats involved in the construction industry b) Assess the vulnerability of critical assets to specific threats. c) Determine the risk (i.e. the expected consequences of specific types of attacks on specific assets). d) identifies ways to reduce those risks. e) Prioritize risk reduction measures based on a strategy.

Internal risks comprises of the uncertainties which exists within the project. Some specific definition of risk is asfollows:

Economic Risk: Economic risks are associated with supply of labor and materials, availability of equipments, priceincrement of the construction materials, various fiscal policies, exchange rates and inflation rates. Financial Risk: Financial risks are associated with the cash flows, capital supply, interest rates, credit ratings, rentals,etc. Due to the involvement of various local partners, for example, customers, suppliers, contractors, etc, risk of localentities‟ reliability arises. The project‟s success rests on the reliability and creditworthiness of the local partners.

Legal Risk: These are associated with the contractual clauses, codes and regulations, issuing and approval drawings are done by contractual grounds of building procurement. Managerial Risk: Managerial risks are associated with the human resource management, productivity, cost and quality control. Safety risks, quality of work, faults, productiveness and competency are considered as the major risks in a

construction project.

Technical Risk: Technical risks are associated with various technical factors related with the construction process, such as technology failure, design failure, equipment breakdown, error in estimation, health and safety aspects. Location of site, site accessibility, etc is some of the risks coming under this category. There may be differences in work procedures in cases of joint ventures, such as local-foreign joint ventures.

Political Risk : Political risks include interference of foreign government in the business activity, change in the law, etc Public unrest, industrial relations activities affecting project progress, project approval delays are included in this category of risk.

Environmental risks: Environmental risks deals with the soil conditions, weather condition and environmental impactrisks. The effect of the project on flora and fauna, geological aspects, people comes under environmental risk. The main reason of risk management is to cut down the possible loses and to compound the possible gains. Practical goals are needed to make risk management operable for any company. For construction companies, risk management has a significant role in decision making process. Even because of risks and uncertainties, projects can undergo many harmful consequences. The performance, quality, productiveness and the budget of the project can be affected by risks. Though primarily it‟s not possible to eliminate the risks, they can be reduced, transferred or held back. Thus it can be said that the main reasons for which companies and organizations should adopt risk management are : loss minimization, to take hold of the opportunities, to cut down or limit uncertainty and for legal acceptance.

An example of pre-emptive risk management

To understand the challenge in erecting a huge roof (that spreads across more than 150 meters), the designers, suppliers, fabricators and the T5 roof team pre-erected the roof abutment structure off-site in Yorkshire. The pilot pinpointed 140 significant lessons. Each had a risk mitigation plan enables in smoother workflow and faster construction on site. Overall, this pre-emptive risk management technique was pivotal in saving atleast three months as studied by the project team. In this particular case, the time saved enabled the project team to cover-up for the delays that had previously arisen during the wet winter of 2001-02, which helped to keep the project on schedule.

Key Lessons

1. The risk is always borne by the client.

2. Project management is a tool for risk and opportunity management and not vice versa.

3. Those who are best able to manage the risk should be handed over the management activity, and take over

forms of contract that supports a risk management approach.

4. All parties reap substantial benefits from collaborative, integrated working arrangement with suppliers.

5. Board level leadership and sponsorship is utmost important.

6. Safer construction and fewer defects can be attained by off-site prefabrication and assembly of elements.

7. Major projects should be done under excellent and highly experienced people. This minimizes

confrontation and establishes trust and openness in working relationships.