49006 — Risk management in Engineering Assignment I - Risk Management Plan The Azerbaijan Tower Construction Project Fanny Yang Zhen-Fan 11632938Table of Contents Executive Summary .. Over W of project and the scope of the construction project... ‘The purpose of the Azerbaijan Tower constuction project, Risk management method applied. Establishing the Context, Internal Context... Extemal Context. Risk Management Context. Stakcholder Analysis.. Communication end Consultation, Internal communications. Bxtemal Communications snuessnasse Risk eriters Risk Identification . Risk Analysis and Evaluation... Example of risk analysis and evaluation. Risk Treatmen Risk Monitoring and Review. Risk Management Team.. Referenc Appendix — FMEA Analysis.‘Assignment |- Risk Management in Engineering (49006) Fanny Yang Zhen-Fan (11632938) Executive Summary In this risk management plan, we applied AS/NZS ISO 31000 framework to identify, assess ‘and treat risks in the future Azerbaijan Tower ~ the highest building ever in human history construction project, ‘The plan first of all looks at the background information and the context of the project, among which stakeholders are focused, Comimnication and consultation plan are also set up accordingly in this pat. Inthe second part ofthe plan, risks are identified, analyzed andl evaluated. Risk treatment is, ckesigned according to the features of cach of the risks and there art suggested alternatives for ‘eating the risks. Finally, monitoring and review methods and schedule is set up to ensure risks ave treated according to planned actions and the risk management teain responsible for this is also discussed, oe Highlights of this risk treatment plan © Detectability, which is usually considered in treating risks in manufuetuting industry, {s also adapted in this construction project and the risk assessment process is updated accordingly. ‘© Varios sources are taken into consideration in the risk assessment process and their status and expertise are considered. + Insurance is dscussed as an option to transfer rsks as many ofthe risks identified in the project cannot be avoided. ¢ The roles and responsibilities of the ri tisk management process is free from interference of other parties and guarantee risk -management team are set up to ensure the management is effectively carried out, fase f hualLods tik?‘Assignment | Risk Management in Engineering (49006) Fanny Yang Zhen-Fan (11632938) Over Azerbaijan Tovtcr a skyscraper of T050 meters height proposed by the Azerbaijan's Avesta Group, is the fo-be tallest bi Sa a ‘The tower willbe the centexpioce ofthe $100) billion ertfcial Khszar-Islends located in Caspian Sea, ‘The construction ofthe tower will be started (2016 and finished by 20182019 with the total invest E92 bl biliod. tts also reported that foreign investors show strong intrest in the construction project because of the ew of project and the seape of the construction project ‘good prospect of the project. Figure 1 — Rendering of the Azerbaijan Tower! ‘The Scope of the Azerbaijan Tower construction project includes © Construction of the artificial island where the Azerbaijan Tower stands on © Construction of the tower's structure © Installation of the facilities (electricity, piping, equipment, ete.) of the tower © Inspection and acceptance of the construction work, as well as the operation of the tower ‘Phe purpose of the Averhaijan Tower construction project ‘There are 2 types of purpose of the Azerbaijan Tower construction: direct purpose and indirect purpose. Direct purpose of the Azerbaijan Tower inchucles: © Providing basic functionalities of a building including housing, office, commercial usage, ote,Assignment | - Risk Management in Engineering (49006) Fanny Yang Zhen-Fan (11632938) © As the centerpiece of the Khazar Islands, the Azerbaijan Tower sets up the keynote of the building style of the whole island ‘The indirect purpose includes: © As anew member of the rich petroleum countries, Azerbaijan wants to show the its, strong economic power through the construction project © The construction of the super tall manned skyscraper is the milestone of the construction industry history and will be of great value of future projects © The construction project will be a good chance for foreign investors to learn more about the investing environment of Azerbaijen for future cooperation projects, especially taking into consideration of the fact that Azerbaijan was not a hotspot of international investments Risk mau Built on an artificial island aud targeted to be the tallest building in the world, there’s no jan Tower faces higher degree of uncertainty than other wgentent method applied doubt that the construction of Azerbs skysoraper building projects. As we all know, risk is defined as pn event that has a probability cfoccurring, and could have either a positive or negative impact to a preject.* In other words, the construction of the Azerbaijan Tower is facing many risks. There's no so-called risk-free projects because uncertainty is everywhere in the world we live. As long as the risks are noticed and taken care of, we can still be confident ofthe final success of the project. To censure the effectiveness of risk management, standatd method should be applied end in this, risk mauagement plan, AS/NZS ISO 31000:2009 is adapted for its clear step-by-step guide on the whole risk management process, And the risk management process will be followed,Assignment |- Risk Management in Engineering (29005) Fanny Yang Zhen-Fan (11632938) tal the Content sk entiation |conmeria Monitoring nen) {—— Riana andevew censutaton Fisk ratvaton Fk eatment Figure 2 ~ Risk management process in AS/NZS ISO 31000:2009* Establishing the Context Per AS/NZS ISO 31000:2009, before we talk about risk, we need to carefully identify the context of the risk management plan to ensure the effectiveness, This includes establishing the intemal, external and risk management context of the plan. Among all the contexts, stakeholders will be discussed in detail because they ate more critical and more likely to act beyond the plan, Internal Context ‘The Avesta group consists of 6 very young construction companies, with the oldest member ished in 1991, ‘The 6 companies have been engaged in several major construction estab projects in Azerbaijan and developed a well-experienced tonn.* But for'a huge project like this, joint effort must be made to guarantee the success of the project. Departinents of the ‘group engaged in the project inclu © Designing and planning department © Construction engineering department © Operations department © Finance departinent © Technology support departmentAssignment |- Risk Management in Engineering (49006) Fanny Yang Zhen-Fan (11632938) © Human resources service and development department © Safety department © Internal audit team © Communication department All these departments will strike to finish the project and achieve the organizational objectives including © Past and healthy growth of the profitability of the group Improved domestic influence in the construction industry ‘© Improved international fame of the group as one of the major players © Transformation from a constructional group into an advanced technique provider External Context ‘The Azerbaijan Tower most suitably belongs to the extemal environment of the Azerbaijan construction industry though it might be joint effort of international companies. Since huge oil reserves are found in Azerbaijan, it has attracted a lot of enthusiastic investors and the __. requirement for commercial and residential buildings is expected to grow rapidly, And the ‘Azerbaijan government also wants to have the fume of the county built up and known as @ rich country. A super high skyscraper like Azerbaijan Tower can perfectly meet these two requirements, Another advantage of the project is that it’s built on nctficial islands in the Caspian Sea instead of building on the ground, Considering the comparative small area of Azerbaijan, it will be difficult to have this huge piece of land for the whole new city project. The artificial island concept perfectly saves the precious land of the country and points out a new way of — development in the country Of course, there are challenges of this project. One of the first is the Avesta Group’s lacking ‘of experience in huge projects. Though they have run several successful projects before, none of their size can be comparable or even close to the Azerbaijan Tower. From extertal — perspective, the group will be less dependable. Asa result, the Avesta group will need to take higher proportion of the risks than normal ‘Another challenge from the extemal context is the limited number of consttuctional suppliers in the country. This challenge will make the project has litle choice but to use foreign suppliers, which increases risks from logistic and quality perspective. Ifthe project chooses to {g0 ahead with domestic suppliers, it’s foreseeable thatthe price and the quality of the project _— will be exposed to higher risks,‘Assignment | - Risk Management in Engineering (49006) Fanny Yang Zhen-Fan (11632938) ‘There is one more aspect bringing the challenges to the project from the extemal context — the conservative culture of the Islam country — with so many project participants come from al around the world, they may know less about the Islamic culture and therefore act offensively to without being aware of. And this might lead to more then just risks in the project. Also, the | _Z___ hish context communication may be a hinder for participants ftom lower context tion will then lead to communication environment to adapt to, Ineffective communi numerous risks of the project. Risk Management Context ‘The purpose of this risk management plan is fo ensure as much risks in the Azerbaijan Tower ied, treated and monitored after treatment as possible, which guarantees the project ae ide project completed on tine, within budget, and fulfilling all the requirements. The plan will be | focusing onthe problem of project budget oversun. Andis leading to this willbe : discussed, ee Stakeholder Analysis The Azerbaijan Tower project consists of large nunnber of stakeholdk s given the fied as following: comparatively large project scale. And the stakeholders can be iden Tnternal Stakeholders nN ‘© Gepiied wittie i = loalesiee © Geinaianlas ea i 7 Sipelina — * cag uc Eo deleted crgrsrenlices (ue ues Peeee epi mes) eral ies ‘e Reseeruiets of cotiesponiiay The ‘pectiveclaey civil eegenerng, EF Repeiet prapeay Riser ‘Table 1 ~ Internal and external stakeholders of the Azerbaijan Tower construction project After the ide ‘one is the major interest of different stakeholders, and the other is the prioritization of dealing _/ ith these stakeholders, From the perspective of risk management, the prioritization is of higher importance because this closely relates to the risk assessment, The higher priority a stakeholder has, the higher priority the risks related to it will be treated, The powerfinterests ication of project stakeholders, we will move into other two items. The first arid is applied here for the priortAssignment |- Risk Management in Engineering (49006) Fanny Yang Zhen-Fan (11632938) Aaa Profitability of the project Reputation of the organization Future project opportunity. On-time delivery of the project Engineering reputation ‘Safety of the working environment - On-time payoff of salaries and wages ity of promotion through excellent performance in the Profitability of the project Public function of the project Impact towards their current residence. Convenience of the new community on the artificial islands Environinental impact to the Caspian Sea Environmental friendliness of the artificial islands: Hot news topics ‘On-time payment ‘Chance of trying out new methodology Fukure cooperation opportimity. Interests on the loan of the project ‘Ensure the corresponding group’s interest considered and assured Public reputation of the organization Experience of adapting existing knowledge/technology in this, unprecedented project New knowledge/technology gained from the project The prospect of the project ‘Table 2 ~ Stakeholders of the project and their major interests‘Assignment |- Risk Management in Engineering (49006) Fanny Yang Zhen-Fan (11632938) 10 ower/Interests Grid | Avesta © spc Management © Financing Source | © Avesta Engineers Investors ® pvesta Workers Local Residents buyer Interest @ [oreien Project oven rR Canronmentats fal Public Relat la ® Gendral Public © onganieaton’ nae Corresponding] Flelds er ° 5 10 Figure 3 ~ Power/interests grid analysis for internal and external stakeholders Communication and Consultation Considering the size of the construction project of the Azerbaijan Tower, there will be a larger number of parties involved then other regular construction projects. Risk management is a joint effort of al the related parties and effective communication is required s0 that roles ‘and responsibilities are cleared defined, understood, and executed. Anternol communications In this part of risk management plan, I would like to introduce the strategy applied to communicate with 4 different fevels of internal praject patticipants, designed. communication : package | Monthly Monthly front-line @ Past month's safety performance safety update ‘wrap-up for the frontlines to give meeting them direct understanding of haw ‘their effort turns out to be © Front-lines' risk feedback session for unidentified risks to ensure all theAssignment | - Risk Management in Engineering (49006) Fanny Yang Zhen-Fan (11632938) knowin risks are recorded and taken care of “Biweekly Regularfeview (© Review the Whether the registered - session tisks are solved or being solved by following the agreed approach -/@ Risk management case sharing to popularize successful experience end generate further ideas © Latest identified risks sharing ond : registration < : © Preparation of risk management update report for stekelolders When Contingency risk @ Assess, execute and monitor necessary treatment meeting approach towards unforeseen risks ‘occur during the project © Design communication package for the new risk Risk consultative [@ Review whether all slakeholders! team meeting —___inleresis_are_cateully considered from the _perspe of risk management © Intoduce new perspective and "expertise, especially from extemal of ‘the organization in risk management for new ideas © Review the communication packages | to ensure effective exchange of information Monthly Executive briefing @ Updates of the isk management session process from the whole praject’s and the organization's view © Giving diteetions of treating the risks according to the risk management culture of the organization ‘Table 3 Communication schedule and contents of communication External Compiunications ‘Communication with extemal parties fices more uncertainty than the internal communication, re very However, several possible approaches for gathering the necessary informati effective, One ofthe most commonly adapted methods is sampling ike rao questonaace survey aud teleplone survey. This method helps the risk management feu geiting as much voices out worrying about the information are from external parties about the project as possible 9Assignment | - Risk Management in Engineering (49008) Fanny Yang Zhen-Fan (11632938) biased or controlled. And this type of comm practice even if the project initialization process hes ended to keep the project is built on the ation process should be kept as a routi updated external stakeholders’ interest, Fore large scale project like this, voices of every impacted parties count. And forums for ‘external patties can be held for rising up eoneems of particular parties on particular risks, Open and fiiendly forum atmosphere provides further assurance of hearing from all the d be notified parties, Of course, to enstre the effectiveness of the forum, all the parties shon about it and no obstacles should be set for related panties to participate the forum. = Of course, the general pal Table 4 ~ Likelihood classification and standards [Rare 0-530 XS | Almost Defect is not detectable impossible Remote Controls have little chance in detecting the defect, and defects can only be found incidentally even wit thorough inspeetion Moderate | Controls are able to detect the defect High Risks are easily identified as ong as control is in use Very high | Even with common sense the risks can be identified ‘easily ‘Table 5 ~Detectability _ ification and standards 2st su. go edi tuaraysip Aq sprepusis pur uoyZoy|ssE|o aouanbasuo,) — 9 214%], soofead sup ON puEMOMMONAN — a4098 10 KSTROTS 2x1 co nopdian ‘enna onde 9 ‘suis edi" Aq.ayoud pauper popron rebey stones a0 Msomy winsnmasn) —jepupisaey do noo pT Teomom ox muooyLudisuy | a sous aypads farmed, sous aos ring ox ns Su01> me sersseopue amiss 0 sancti - epsungze gonaouaes- mmo amo aogesenoeTesIs eu put pour peep a, cpl toasts) edmond peony ‘a yeasen << REMIT mebomeN — mogammim —— pteneMON — emmpRNN jes, (eeszeort) uey-uoyz Sue, Auues —_(9006r) SuyooU!BU9 U! uoWOBeUEWY ysIy - | UEWUTISSYLy Assignment | - Risk Management in Engineering (49006) Fanny Yang Zhen-Fan (11632938) Risk Identification Risk identification is critical in the risk assessment process because unless risk is identified and listed as risk o be treated, the following steps of risk analysis, risk evaluation, and visk treatment will never take place, Therefore, thorough and completed risk identification is of top priority to the risk management team and to do so, the following steps are recommended. © Completely identify common and known risks through the common risk list as well as the work breakdown structure of the project and prepare the FMEA study on these risks © Kdentify as much unique risks the Azerbaijan Tower project particularly have as possible by going through the knowledge structure of the corresponding area and register these risks with the tisk register tool whenever found cea cana: infieied Unie oe falls: 4 gate of elie, aenpiaes Ge Geer jones ae Lacing ining. ‘Mineredeouend focal cutters ‘Hiesuig nekueded ca feote feat evasion: ee ee a eoeeey: Teak lak A cotadeuion of Goweilenes Ge, oa, alee ibty fer Ries srenins ce Sten etTE elec dion ‘ThE ee ler te dee covariar gid de anal sp nibed ies: ‘eral epejeseed ia me! dor tee andiqeme project fires ‘Ling load lites fo the eet eguagineet alent Tag sigs et be appt a eplet dapatedly Sietoties eqns! ard ciatecls ee ee ersten, ealbgrite, gs. ‘Vatbaen regaondais of noscanary gerasiis ur stations ‘geve aidfereaco in mgulatiotn cateay itdaremt courtry Slyighgdimalperate price fame tenn Sepmgr delemein of people ind es abe Feo pubes goad lenosiun lorile covepilinn Bad, Jere onreniatin ala reed teed aeelienases 4Assignment l- Risk Management in Engineering (49006) Fanny Yang Zhen-Fan (11632938) ‘© Unrealistic requitement from strong stakeholders # Schedles ambiguous aid no significant fete se up ascheck point - Sehedule is unrealistic in terms of resources allocated “Technology is unstable or immature ‘Technology has unique precondition for application ‘The benefits from the technology is much lower than the cost ‘The technology was a transition instead of final produet Table 7 — Common risks in a construction project Identified on Last update on ‘Table & — Risk register for unique risks in the Azerbaijan Tower project Risk Analysis and Evaluation Generally speaking, the risk analysis and evaluation process includes the identifiation ofthe causes of the risks, the consequences of the risks ifno treatment is applied, cutent control rethod, and putting te risks into the 3-D tisk assessment matrix to identify the risk level and prioritize the treatment sequence, eee 15Assignment |- isk Management in Engineering (49006) Fanny Yang Zhen-Fan (11632938) In this process, the most difficult but essential part isto determine the level in the three dimensions because there are always ambiguots areas in these definition of levels. And different people will have different ideas inthe application of these standards based on theit background, knowledge, social status, interest, ef, Asa result, different ways of the evaluation will be used in this Azerbaijan Tower project and the result will be summarized with different weights, For example, risk level gathered in an expert forum should be weighted higher than risk level gathered from random questionnaire survey in the field. Inst like in the risk identification process where we separate common risks with unique risks, different approaches should be applied. For common risks, the first stage analysis and evatuation ‘can use experience from past projects first and then keep monitoring and updating the risks asthe project goes on. For unique risks, not only thorough study is needed, tolerability of changing the analysis and evaluation results should also be st and enough time and resources shoulA be spared due to onr ignorance of these new risks. By paying differentiated level of focus on the two types. of risks, we ensure the treasurable resources are not abused. Example of risk analysis and evatuatio Risk: Sudden price rise in raw materials ‘Analysis & valuation: The sudden rise in raw materials/tabor, even if we planned well, could lead to budget overran, There ate several reasons for this, firstly the building needs more materials than other normal buildings and a slight rise in price unit can lead to considerable rise in __ ot pres. Secondly, the super high kysoraper needs stronger matrals which equte special technology in cteating them and the capeeity is bound to be uustable, Last but not least, ‘expected events like war and natural disasters can also lead to the rise, Though this risk is not likely to happen considering the comparatively stable environment in Azerbaijan and the sufficient buffer set in the plan, its stil risky if variable contracts ate used for special materials and high quantity materials, Further review on the contracts is equited, As for the detectability of the risk, it’s comparatively difficult as we won't know until we calculate the payment, | Bxpert forum Unlikely considering the Somewhere between unlikely stable matket environment ~ and impossible ~ level 1.5 level 2 16Assignment | Risk Management in Engineering (49006) Fanny Yang Zher-Fan (11632938) Major “evel 4 As the rise is (0 be around 30%-50% ere between inajor level 45 ‘Identifying the risk in number Somewhere around high terms isnot difficult, level 2 however, it’s hard to predict such sudden chonges even with careful market trend analysis, remote — level 4 (2TO%ELSS0N=T.RS 34*70%4.5°30%4,15 [A*70%42"30%=3.4 ‘Yes — but not enough to prevent certain cases, additional actions including contract review is required 2#5#3 =30 ~ Medium risk "Table 9 — Sample risk analysis pee Risk Treatment After carefully~study on the tisks identified, we have already had a cleat picture of the risk a then efforts on treating the risks should be made. According to AS/NZS ISO 31000:2009, the risk treatment process is a cyclical process starting fiom the generation ofa risk treatment, and then to the pre-implementation assessment and finally, ifthe treatment is adapted, post-implementation assessment, Therefore, the risk treatment plan should not only consider what should be done towards the risks in a static point of view, but should have dynamic assessiment process closely Jioked with the monitoring and review process of isk management, v7