Risk

Question 1

Risk

Answer 1

quantifiable = insurable

Question 2

Uncertainty

Answer 2

unquantifiable = not insurable

Question 3

Risk=

Answer 3

probability of event x magnitude of loss/gain

Question 4

Risk theory

Answer 4

• theory of decision making under probabilistic uncertainty

Question 5

Contracts and Risk

Answer 5

Lump sum, Measure and Value, Cost reimbursement

Question 6

Lump sum

Answer 6

• work is fully defined and capable of quantification
• contractor can assess risk and provide lump sum in advance
• standard form of building contract is an example of lump sum contract

Question 7

Measure and Value

Answer 7

• work fully defined but not capable of quantification
• contractor can assess risk but not quote in advance as quantity may change
• contractor can provide a list of works to be defined, can be used to measure amd value the work when completed

Question 8

Cost Reimbursement

Answer 8

• work is incapable of definition or quantification in advance
• no contractor can assess the risk
• one solution to complete the work and pay for work on cost reimbursement
• some arrangements made to pay direct cost plus a fee
• cost plus may be fixed or it may be a % of cost
• eg. repair work that is particularlt innovative