Risk Management PDF

INTRODUCTION TO
RISK MANAGEMENT
FOR
CONSTRUCTION PROJECTS
Prof. Reda Abdulaal

Vice Presidency for Projects
December 2009
Objectives & Outcomes of this Presentation
Objectives
Enrich the participants with:
1- Some definitions related to risk management
2- The project risk management cycle
3- The techniques of project risk identification
December 2009 Introduction to Risk Managment for Construction Projects 2

Objectives & Outcomes of this Seminar
Outcomes
1- We will agree that identifying & managing project

risks are so important
2- We will identify a preliminary list of risks in the

construction projects at KAU

Stages of Project Risk Management
Start here
Define types of risks Define probability &

Project frequency of risks
Risk
Management
Develope risk
management policies Rank risks to
management priority

First of all
What
do we
? mean? ?
Risk
Management
?
What do we mean?

If you did……You will get !
When you see the following caution signs;

Give your comments in
one word or one statement

What is Risk?
 The likelihood (probability) of occurrence of an

undesirable event that will have an impact (positive or
negative) on objectives
 A possibility of loss – not the loss itself!

FACT
There is no human activity which does not have risks

What we know so far?
Some
definitions
? 
Risk
Management
?
What do we mean?
Risk
Management

What is Risk Management?
 Is a systematic method of identifying, analyzing,

treating, and monitoring the risks involved in any
activity or process.
 Is to a methodology that minimize the risks of not

achieving the objectives.

Who is involved in Risk Management?
 Customer ….. Students

 End-User ….. KAU
 Project Team ….. ….. …..
 Manager ….. ….. ..…
 Contractor ….. ….. …..
 Subcontractor….. ….. …..
 Consultants ….. ZFP
 Suppliers ….. ….. …..
 Workers ….. ….. …..

FACT
Risk management is communication!
  
Some
definitions
? 
Risk
Management

What do we mean?

What is Project Risk?
 It is an event or condition that, if it occurs, has a

positive or negative effect on at least one project
objective, such as time, cost, scope, or quality.
What is Project Risk Management?
 A process that assists project managers in setting

priorities, allocating resources and implementing
actions that reduce the risk of the project not
achieving its objectives.
Is it important to managing project risks?
 Research highlights that only one in eight information

technology projects can be considered truly successful
 failure being described as those projects that do not
meet the original time, cost and (quality) requirements
criteria
 the cost of project failure across the European Union
was €142 billion in 2004.
http://www.bcs.org/server.php?show=ConWebDoc.19584

FACT
If you act, manage and report regularly on risks and
issues, you will have substantially improved your
chances of project success!

Some
definitions
 
Risk
Management

Cycle of Project Risk Management
Start here
Define types of risks Define probability &

Project frequency of risks
Risk
Management
Develop risk
management policies Rank risks to
management priority

Project Risk Management – STAGE #1
• Internal ~ External
• Project Life Cycle
Risk Classification • Project Requirements
• Project participants
STAGE #1
Risk Identification ----------
----------
----------
----------
----------
----------
Let us take some examples

Example 1
Project Risks
Internal Risks External Risks
Owner Designer Contractor Economic Political Natural
Delayed Defective Construction Inflation rate War Unexpected

payment to design accidents threats inclement
contractor weather
Unreasonably Deficiency in Poor quality Currency Labor Unforeseen

imposed tight drawings fluctuation sticks site
in schedule conditions

Example 2
Project Risks
Owner Contractor Shared
• Delayed payment on contract • Labor and equipment availability •War threats

• Changes in work • Productivity of labor & equipment •Acts of God
• Lack of scope of work • Accidents & Safety •Financial failure
• Improper intervention •Accuracy of work •Changes in laws
• Delays in obtaining site access • Contractors’ incompetence •Culture differences

What is after Risk Identification?

Risk Assessment (data collection on Probability & Impact)
Probability of occurance Magnitude of impact
Risk Identification
Low Medium High Low Medium High
1 Owner's delayed payment to contractor
2 Owner's unresonably imposed tight schedule
3 Change of design required by owner
4 Lack of work definition by owner
5 Low productivity of labor & equipment
6 Delay of material supply by suppliers
7 Changes in laws and regulation

Risk Evaluation (data analysis)
Risk Control (actions to be taken)

So, What is the next step?
Fill out the two risk forms given to you and
return them back within two days to the
project manager

Risk Form – Section #1

Risk Form – Section #2

THANK YOU
Q&A

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INTRODUCTION TO

Prof. Reda Abdulaal

1- Some definitions related to risk management

2- The project risk management cycle

3- The techniques of project risk identification

December 2009 Introduction to Risk Managment for Construction Projects 2

1- We will agree that identifying & managing project

2- We will identify a preliminary list of risks in the

December 2009 Introduction to Risk Managment for Construction Projects 3

Define types of risks Define probability &

December 2009 Introduction to Risk Managment for Construction Projects 4

December 2009 Introduction to Risk Managment for Construction Projects 6

When you see the following caution signs;

December 2009 Introduction to Risk Managment for Construction Projects 7

 The likelihood (probability) of occurrence of an

 A possibility of loss – not the loss itself!

December 2009 Introduction to Risk Managment for Construction Projects 8

There is no human activity which does not have risks

December 2009 Introduction to Risk Managment for Construction Projects 9

December 2009 Introduction to Risk Managment for Construction Projects 11

 Is a systematic method of identifying, analyzing,

 Is to a methodology that minimize the risks of not

December 2009 Introduction to Risk Managment for Construction Projects 13

 Customer ….. Students

December 2009 Introduction to Risk Managment for Construction Projects 14

Risk management is communication!

December 2009 Introduction to Risk Managment for Construction Projects 17

 It is an event or condition that, if it occurs, has a

What is Project Risk Management?

 A process that assists project managers in setting

 Research highlights that only one in eight information

December 2009 Introduction to Risk Managment for Construction Projects 19

December 2009 Introduction to Risk Managment for Construction Projects 20

Define types of risks Define probability &

December 2009 Introduction to Risk Managment for Construction Projects 22

Let us take some examples

Internal Risks External Risks

Owner Designer Contractor Economic Political Natural

Delayed Defective Construction Inflation rate War Unexpected

Unreasonably Deficiency in Poor quality Currency Labor Unforeseen

December 2009 Introduction to Risk Managment for Construction Projects 24

Owner Contractor Shared

• Delayed payment on contract • Labor and equipment availability •War threats

December 2009 Introduction to Risk Managment for Construction Projects 25

December 2009 Introduction to Risk Managment for Construction Projects 26

December 2009 Introduction to Risk Managment for Construction Projects 27

Risk Control (actions to be taken)

December 2009 Introduction to Risk Managment for Construction Projects 28

December 2009 Introduction to Risk Managment for Construction Projects 30

December 2009 Introduction to Risk Managment for Construction Projects 31

December 2009 Introduction to Risk Managment for Construction Projects 32

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