Question

1. The Dias project site is located at 42232 Mission Boulevard near the Interstate 680 in Fremont, California. Twenty homes were constructed on the hillside property, per the approved general land plan designation of Low-Density Residential. Upon completion of site preparation and grading, the installation of the right of ways and utilities and the construction of the residences was completed over approximately an 18-month period. The Dias project was approved by the City of Fremont in 2012; however, due to the economic downturn, the project did not gain momentum until early 2015. Robson Homes picked up the design and moved forward with the civil, landscape, architect, and joint trench designs. In developing the grading and improvement plans for the future homes, five agencies were involved in the submittal reviews. Agencies included and the respective jurisdictions are as follows:
   • Caltrans – Mission Boulevard right of way (Route 238)
   • Alameda County Water District – public water main connection & service laterals
   • Union Sanitary District – public sanitary sewer main connection & service laterals
   • City of Fremont: Building & Engineering Departments– public right of way and homes
   • PG&E – existing utility easement (two gas lines with a 50’ easement)

Construction on the site was initiated in February 2016. The Dias project gained approval from all five agencies in April 2016. However, unforeseen circumstances necessitated further changes to the engineering design. Despite this setback, the developer decided to move forward with the construction, accepting the risk of agency comments regarding the new engineering design. The constructed homes feature multi-car garages or detached garages with an upstairs studio. Homes are be two-story and have a minimum of four bedrooms and 3.5 baths. Because homes are located on a hillside, extensive grading studies for retaining walls are required. Lots have customized landscaping per Robson’s request and feature multiple trees along the new right of way and in each lot.

For this specific project, perform the following exercise:

• Identify and describe at least four project risks
• Estimate the likelihood of occurrence of the identified risk and rank the risk types by the least likely to most likely to occur.
• For the four identified risk, determine the risk significance (insignificant, minor, moderate, major)
• For the four identified risks, determine proposed mitigation efforts.

Answer 1

INTRODUCTION: First of all, we need to understnad the term Project risk as mentioned in the question.

“Risk” is defined as “an uncertain event or set of circumstances that, should it occur, will have an effect on achievement of one or more of the project's objectives.” “Project Risk” is defined as “the exposure of stakeholders to the consequences of variations in outcome.”

Different types of Risks

The 2 broad types of risk are systematic and unsystematic.

• Systematic risk is risk within the entire system. This is the kind of risk that applies to an entire market, or market segment. All investments are affected by this risk, for example risk of a government collapse, risk of war or inflation, or risk such as that of the 2008 credit crisis. It is virtually impossible to protect your portfolio against this risk. It cannot be completely diversified away. It is also known as un-diversifiable risk or market risk.

• Unsystematic risk is also known as residual risk, specific risk or diversifiable risk. It is unique to a company or a particular industry. For example strikes, lawsuits and such events that are specific to a company, and can to an extent be diversified away by other investments in your portfolio are unsystematic risk.

Also there are certain specific types of risk, which every investor must know. They are as follows:

1. Credit Risk
2. Country Risk
3. Political Risk
4. Reinvestment Risk
5. Interest rate Risk
6. Foreign Exchange Risk
7. Inflationary Risk
8. Market Risk

All projects include risk. As a minimum, the project has a risk that it does not accomplish its stated objective. But as we will see, there are a multitude of secondary risks that, if not carefully considered, create a high probability of cost and schedule overruns, or other negative outcomes.

(1.) According to this question, there are 4 types of project risk that can be identified which are as follows:

• Budget Risk: Budget risk is the potential​ for the estimates or assumptions built into a budget to turn out to be inaccurate. All budgets are based on future looking forecasts that typically involve some degree of uncertainty. This uncertainty can be managed as risk.​​​​​
• Design Risk: Design risk is the potential for a design to fail to satisfy the requirements for a project. This includes designs that are fundamentally flawed, infeasible, inefficient, inefficient, unstable or below client standards. A poor design may manifest itself as functional defects or hurdles to development that impede project progress.
• External hazards Risk: External risks are outside the control of theproject team and its host organization. Because of this, external risks are generally more difficult to predict and control. Factors such as a key vendor going bankrupt, landscape, economic upheaval, wars, crime and many other events may directly impact the project's effectiveness.
• Infrastructure Risk: Infrastructure technical risks include riskevents towards infrastructure activities executed on site.

(2.) The least likely risk in this case is External hazard risk. Then comes to a little more riskier risk is Infrastructure technical risk. After this Design risk comes and lastly, the most likely risk is Budget Risk.

(3.) Risk Significance:

• Insignificant: External Hazard Risks
• Minor: Infrastructural Risk
• Moderate: Design Risk
• Major: Budget Risk

(4.) Risk Mitigation is a strategy to prepare for and lessen the effects of threats faced by a data center. Rather than planning to avoid a risk, mitigation deals with the aftermath of a disaster and the steps that can be taken prior to the event occurring to reduce adverse, and potentially long-term, effects.Project risk mitigation plans should be

• Characterize the root causes of risks that have been identified and quantified in earlier phases of the risk management process.

• Evaluate risk interactions and common causes.

• Identify alternative mitigation strategies, methods, and tools for each major risk.

• Assess and prioritize mitigation alternatives.

• Select and commit the resources required for specific risk mitigation alternatives.

• Communicate planning results to all project participants for implementation.

For Budget Risk, these steps can be considered:

1. Identify the major line items of your budget and the personnel who contributed to them

2. Ask key personnel to provide insight on major line items

3. Engage subject matter experts to adjust low confidence line items

4. Mitigate the risks in your budgeting

5. Continuously monitor risks and efficacy of controls

Once risks have been identified and assessed, all techniques to manage the risk fall into one or more of these four major categories:

• Avoidance
• Reduction
• Sharing
• Retention