Question

Why should a project manager in charge of a medium rise building project make a comparison of the costs associated with the risk, both to mitigate the risk and the cost if the risk presents itself

Answer 1

Project managers are responsible for managing all the stages of a building project without any risk to the base estimate that is prepared at the initial planning stage of the project.It is his responsibility to manage the risk without making unnecessary expenditure to the owner and without making much delay in the project completion.For this to happen the project mangers have to compare the cost associated with the risk,both to mitigate the risk and the cost. During the planning of every building project additional time ,money or personnel is allowed for the succesfull completion of the project even if there is risk occurs.it is called Risk reserve or Risk allowance. Risk reserve and allowance help the project manager to mange the risks more effectively.

• When a risk occurs during the progress of a project,the project manager analyze it and compare the cost associated with the risk.This estimation is risk based cost estimation.
• Project manger has the right to utilize up to half of the risk reserve or risk allowance to manage the risk without any prior approval of the project management cheif.
• if the risk still remaining even after spending half the risk allowance then project manager has to discuss how the remaining risk can be mitigated with the project management cheif.
• Then after the manger hast to estimate the amount needed to mitigate the remaining risk.
• If the 3/4 th of the risk allowance is spended then the project manger has to get the approvalnof the project management cheif before additional amount of risk allowance can be used.
• if the risk allowance is fully used still there is risk remaining then thorough study of the risk and cost related to the risk have to be carried out to take a decision that either adjust the scope of the project or to increase the budget. For all these, project manager have to make a comparison of the cost associated with the risk , both to mitigate the risk and the cost if the risk present itself.