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RISK MANAGEMENT
Vinod Nakra, MRICS
Professor Emeritus, RICS School of Built Environment
MBA
RD
3
COURSE OBJECTIVES
TO DISSEMINATE THE KNOWLEDGE AND PRACTICE OF
RISK MANAGEMENT IN CONSTRUCTION PROJECTS
THAT SHALL INCLUDE:
RISK MANAGEMENT PLANNING
IDENTIFICATION OF RISKS
QUALITATIVE AND QUANTITATIVE ANALYSIS OF RISKS
RISK MITIGATION AND RISK CONTROL.
TO DISCUSS TOOLS AND TECHNIQUES FOR
CONSTRUCTION RISK MANAGEMENT.
WHY?
THOSE WHO CANNOT REMEMBER THE
PAST ARE CONDEMNED TO REPEAT IT
----GEORGE SANTAYANA
1. AN UNCERTAINTY INHERENT IN
PLANS AND THE POSSIBILITY OF
SOMETHING HAPPENING
(CONTINGENCY), THAT CAN AFFECT THE
PROSPECT OF BUSINESS OR PROJECT
GOALS.(BS 6079-3:2000)
WHY DO PROJECTS FAIL?
3. AN UNCERTAIN EVENT OR
CONDITION THAT, IF IT OCCURS, HAS A
POSITIVE OR A NEGATIVE EFFECT ON A
PROJECTS OBJECTIVES [ PMB OK Guide
3rd Ed. 2004]
IN SHORT-RISK IS?
THREAT OR POSSIBILITY
UNCERTAIN
ACTION EVENT ADVERSELY
BENEFICIALLY AFFECT
ABILITY
ACHIEVE OBJECTIVES
THE
THAT AN
OR
WILL
OR
AN ORGANISATIONS
ITS
TO
RISK MANAGEMENT
RISK MANAGEMENT IS ..
SYSTEMATIC APPROACH UNDER UNCERTAINTY
BEST COURSE OF ACTION
IDENTIFYING-SOURCES?
ASSESSING-LIKELIHOOD/IMPACT?
UNDERSTANDING-EFFECT ON PROJ OBJECTIVES
COMMUNICATING RISK ISSUES
ACTING
A MANAGEMENT TOOL-AIMS AT
IT IS A MANAGEMENT TOOL THAT AIMS AT:
IDENTIFYING SOURCES OF RISK & UNCERTAINTY
ASSESSING THEIR LIKELIHOOD/PROBABILITY
DETERMINING THEIR IMPACT, AND
DEVELOPING APPROPRIATE MANAGEMENT
RESPONSES (UHER, 2003).
2. DIRECT ROLE
EMPLOYMENT OPPORTUNITIES-NUMEROUS.
ATTRACTS CONTRACTING FIRMS, SPECIALIST
FIRMS, CONSULTING ARCHITECTS, ENGINEERS,
QS, SUPPLIERS OF BUILDING MATERIALS AND
MANUFATURERS OF MATERIALS AND
EQUIPMENT
COMPETITIVE RIVALRY
WHAT ARE KEY DRIVING FORCES IN
CONSTRUCTION BUSINESS?
POTENTIAL ENTRANTS:THREAT OF NEW
ENTRANTS (MAINLY DOMESTIC COMPANIES)
INDUSTRY COMPETITORS-RIVALRY
SUBSTITUTES-PRODUCTS, SERVICES AND
DESIGN
BARGAINING POWER OF SUPPLIERS & BUYERS
PROBLEM STATEMENT
We have insufficient LABOUR AND
MATERIAL Resources to construct the
Building which will delay the project
by One Month and we will incur a loss
of Rs. 40 Lacs.
RISK STATEMENT ??
RISK STATEMENT
EXAMPLE II
A DEVELOPER ASSIGNED THE CONTRACT OF A HOTEL COMPLEX
TO A CONTRACTOR. THE TIME PERIOD SPECIFIED IN THE
CONTRACT WAS 3 YEARS AND SIX MONTHS. HE EXPECTED TO PAY
BACK THE LOAN AMOUNTS TO THE BANK FROM RECEIPTS FROM
OPERATIONS/HOTEL GUESTS. AFTER ONE YEAR AND SIX
MONTHS, THE DEVELOPER FINDS THAT ONE OF HIS PARTNERS
HAS LEFT HIM AND HE MAY NOT BE ABLE TO REPAY THE
LOAN/INTEREST AS EARLIER PLANNED, IF HE TAKES 3 YEARS AND
6 MONTHS TIME. HE MAY THEREFORE, REDUCE CONSTRUCTION
PERIOD BY ONE YEAR.
AS A PROJECT MANAGER OF CONTRACTOR, PREPARE A RISK
STATEMENT TO IDENTIFY THE RISK CLEARLY.
TITANIC
EXAMPLES
CUSTOMER FOCUS
SPECIFICATION QUALITY
SCOPE CHANGE
2. COMMERCIAL
3. FINANCIAL
EXAMPLES
GROUND/SOIL CONDITIONS
FLOOD PLAIN
CONTAMINATED GROUND
ARCHAEOLOGICAL FIND
PROTECTION OF ANIMALS, BIRDS,
FLORA/FAUNA
GEOGRAPHIC DISPERSION
SITE OWNERSHIP/ACCESS
EXAMPLES
ISSUES WITH DESIGN CRITERIA
COMPLEX DESIGN FEATURES
BREAKTHROUGH TECHNOLOGY OR
EXISTING AS BUILT CONDITION
DOCUMENTS
7. FUNDING/COST SHARING
PROJECT DURATION
INVILVEMENT/FUNDING OTHER
PARTIES & STABILITY OF MONETARY
INPUTS
EXAMPLES
ENVIRONMENTAL LAWS &
COMPLIANCES
LICENCES & PERMITS
9. REGULATORY INVOLVEMENT
INVOLVEMENT BY OTHER
REGULATORY AGENCY &
SAFETY EXECUIVE NATIONAL,
STATE AND LOCAL GOVTS
EXAMPLES
SIGNIFICANCE TO NATIONAL,
STATE OR LOCAL GOVTS
SPECIAL INTEREST GROUPS
CITIZEN INTEREST OR
INVOLVEMENT, RIGHT OF WAY
EXAMPLES
ADEQUACYSPECIALITY OF
RESOURCES
RAPID LABOUR FORCE BUILDUP
EXPOSURE TO
ENVIRONMENTAL EXTREMES
SYSTEM COMPLEXITY
INTERFACES
HUMANWARE, SOFTWARE
HARDWARE
EXAMPLES
MANUFACTURING/BUY
PLANNING
DESIGN
PRODN CAPACITY
NEW TOOLS/EQPT REQMNT
NEW MANUFACT/TEST
REQMNTS
15. TECHNOLOGY
TECHNOLOGY/TECH
APPROACH CHOSEN TO
ACHIEVE PROJ OBJECTIVE,
TECH TRANSFER
EXAMPLES
PLANNING
VENDOR APPRAISALS
CRITICAL LEAD TIMES
SINGLE SOURCE?
COMPONENT OBSOLESCENCE
MARKET VOLATALITY
ABILITY OF SUB
CONTRACTORS/OTHER
VENDORS TO PERFORM PROJ
OBJS, STRATEGY
EXAMPLES
FEASIBILITY
COMPLEXITY & DEPENDENCIES
RESOURCING
SPECIAL STANDARDS
PROCESS
DOCUMENTATION
FABRICATION/MANUFRING
19. INTERFACES
IN MULTI PROJECT/
ENVIRONMENT, INTERFACING
WITH EXISTING OP
ACTIVITIES/OTHERS