Risk Management

Question 1

What is risk management?

Answer 1

It is a tool for measuring, analysing and mitigating unexpected events that may or may not occur.

Question 2

What is a risk?

Answer 2

An event, that if it occurs, could cause the project to fail to meet one or more of its objectives.

Question 3

What are the aspects of risks?

Answer 3

There two aspects:
- The expected likelihood of it occurring (probability).
- The expected impact if it does occur.

Question 4

What is an issue?

Answer 4

A risk which has materialised.

Question 5

What is the purpose of risk management?

Answer 5

To identify potential problems as early as possible so that the opportunity for taking effective action is maximised.

Question 6

Why is risk management needed in construction?

Answer 6

• Construction projects are usually complex and have targets which need to be met and risks can prevent those targets from being achieved.
• All projects involve risks and project team members are routinely involved in making decisions that have an impact on risk.
• Lastly, whilst not all risks can be avoided, the impact of the risk can be reduced.

Question 7

What are the stages of risk management?

Answer 7

• Identification.
• Analysis.
• Response.
• Monitor and control.

Question 8

What is a risk register?

Answer 8

It is a document that schedules the risks associated with a project.

Question 9

What are some of the most common risks associated with a project?

Answer 9

• External risks such as economic uncertainty, legislation changes and changes in government policy.
• Site risks such as restricted access, planning difficulties and environmental issues.
• Client risks such as lack of experience, post-contract changes and etc.
• Design risks such as incomplete design or lack of design co-ordination.
• Construction risks such as delay in delivery of materials, lack of supply chain management, H&S and availability of resources.

Question 10

What is a risk register comprised of?

Answer 10

• Risk reference number.
• Description.
• Probability.
• Impact.
• Risk factor/Weighted risk score.
• Response - course of action.
• Risk owner.
• Status - open/closed.
• Comments.

Question 11

What is the role of the QS in risk management?

Answer 11

• Assist in setting and managing suitable contingency funds.
• Undertake risk analysis to ensure accuracy of funds available & manage their release when no longer required.
• Assist in decision making process by providing estimates with a degree of certainty.
• Provide advice when bidding for work on the level of risk and financial exposure to the company with understanding market conditions and impact on project and rates.

Question 12

What forms of risk response are available?

Answer 12

• Retention.
• Avoidance.
• Reduction.
• Transfer.
• Share.

Question 13

What is a monte carlo simulation?

Answer 13

It is a computational risk analysis tool used to predict the possible outcomes of an uncertain event based on historical data and analysing the impact of each.
In doing so, it plots a distribution graph which can either be normal, uniform or triangular.

Question 14

What are the limitations of using monte carlo simulation?

Answer 14

There are two common challenges with monte carlo simulations:
- It is highly dependent on the information input into the model as it could lead to inaccurate results.
- It may take excessive power to perform the simulation and in doing so, it could take either hours or in some cases days.

Question 15

What is a risk workshop?

Answer 15

• It is a meeting involving various individuals such as the client, PM, QS, design team, contractor, stakeholders and etc. to share their experience and knowledge in developing a risk plan.
• Considered to be one of the most effective ways of establishing risks on a project as it helps identify what the project is doing and the factors that may affect the success of the project.

Question 16

What was the value of the risk and percentage of risk on the 2PWR project and how did you calculate the risk?

Answer 16

The value of the risk was approximately £89k which equated to approx. 3% of the scheme. The value of risk was calculated through risk workshops and preparing a risk register where all the risks were scheduled and assigned it’s cost impact.

Question 17

What were some of the risks associated with the project 2PWR?

Answer 17

• Financial risk - Costs exceeding the budget:
  
  • As means to address this the design team were not to over specify and the client should not exceed the original feasibility scope/standard.
• Design risk - Unknown services within the existing building causing delay and increase in costs:
  
  • Undertake visual surveys or services and further surveys from specialists. - £10k.
• Programme risk - Unknown site conditions - as per above. - £25k.
• Asbestos risk - additional asbestos found above and beyond what had already been removed - £15k.
• Client changes to scope of works - £30k
• Programme risk - Terrorism - this was seen as too extreme and advised the PM for being too pessimistic.
• Legal risk - Contract disputes due to ambiguities and unclear obligations - Ensure contract documents are clear and robust. - £5k

Question 18

What guidance note does the RICS produce on risk?

Answer 18

RICS professional guidance, UK - Management of risk,
1st edition

Effective 25 September 2015