Risk Management

Project Management
November 5, 2009

Submitted To: Prof. Pradeep Owalekar

Submitted By: Ankur Agrawal Roll No: 205

Risk Management Elements and Process

Case: The Sydney Opera House
The Sydney Opera House (SOH) is a top tourist attraction and landmark for Sydney and all of Australia. It has become a major arts centre (although, owing to the design, it is not necessarily the best place to hear opera). The SOH is visually spectacular and a magnificent structure but designing and building it was somewhat nightmarish. The original concept for the SOH was a sketch submitted by Danish architect, Jorn Utzon. Judges selected it from an open competition that ended with 233 entries from 11 countries. Though happy to win the competition, Utzon was mildly shocked. Although his concept had caught the attention of the judges, it consisted only of simple sketches with no plans or even perspective drawings. Utzon faced the task of converting the concept into a design from which a structure could be built, but he had not prior experience in the design and construction of such a large building. Because plans, detailed design drawings, and estimates of needed materials were lacking, little existed from which the cost could be determined. No one knew how it would be built, and some experts questioned that it could be built at all. Despite all the uncertainty, the initial project cost estimate was put at $7 million, which the government would pay through profits raised from a series of state-run lotteries. Engineers who reviewed the concept noted that the roof shells were much larges and wider than any shells seen so far. Further, because they stuck so high, they would act like sails in the strong winds blowing up the harbour. Thus, the roof would have to be carefully designed and constructed to prevent the building from blowing away. The government was worried that people scrutinizing the design might raise questions about potential problems that would stall the project. They thus quickly moved ahead and divided the work into three main contracts: the foundation and building except the roof, the roof, and the interior and equipment. As many experts had feared, the SOH project became an engineering and financial debacle, lasting 15 years and costing $107 million ($100 million over the initial estimate) Hindsight is 20/20, yet from the beginning this should have been viewed as a risky project. Nonetheless,

risks were either downplayed or ignored, and not much was done to mitigate or keep them under control.

Risk Analysis of the SOH Project 1. Risks Identification
The risks that are obvious from the very nature of the project are as mentioned below: 1. Poor Cost Estimate. 2. Incomplete design. 3. Failure to keep within the cost estimate 4. Failure to achieve the required completion date. 5. Changes in project scope and requirements. 6. Design changes. 7. Pressure to deliver project on an accelerated schedule. 8. Inaccurate contract time estimate 9. Lack of communication between project participants. 10. Inadequately defined roles and responsibilities. 11. Insufficient skilled staff. 12. Political risks. 2. Risk Assessment The matrix showing the likelihood, impact and hence the consequence of the above mentioned risks is shown below. A scale of 1-4 has been used for likelihood and impact whereby 4 indicate high and 1 indicates low. The consequence is given in qualitative format. No. 1 2 3 4 Risk Poor Cost Estimate Incomplete Design Failure to keep within the cost estimate Failure to achieve the required completion date 5 Changes in project scope and 1 3 High Likelihood 3 1 3 4 Impact 3 3 4 3 Consequence Critical High Critical Critical

requirements 6 7 Design Changes Pressure to deliver project on an accelerated schedule 8 9 Inaccurate contract time estimate Lack of communication between project participants 10 Inadequately defined roles and responsibilities 11 12 Insufficient skilled staff Political Risk 1 4 2 2 Low Medium 1 4 High 3 3 4 4 Critical Critical 2 2 2 2 Low Low

3. Risk Response 3.1 Risk Avoidance Most of the risk could have been avoided by only • Using a Completed design. • Estimating at a very detailed level. • Not selecting untested design. • Using local Architecture office 3.2 Risk transfer • Using a fixed price contract will transfer construction risk to the contactor. • Obtaining Insurance to cover costly risks. 3.3 Mitigate the risk Risk analysis shows no clear management process for controlling the project however using an experienced project manager would have effectively reduced the probability or impact of risks to an acceptable level. It is clear from the Risk Analysis that SOH was definitely a high risk project and the government downplayed the risk for its own vested interests.

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