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Risk

Management

Dr. Mohamed Abdel Ghany


FCIArb, PhD, MSc, REA
Project Management Director
About ACE
Resources

62
Years of Experience

38
Countries in the World

12 1700
Registered Branches Qualified
Professionals

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About ACE
Global Representation

Africa Gambia Morocco Swaziland GCC & Kuwait Saudi Arabia Asia Europe
Algeria Ghana Mozambique Tanzania Middle East Lebanon Syria Afghanistan Albania
Burkina Faso Kenya Rwanda Uganda Bahrain Oman UAE Bangladesh Kosovo
Chad Malawi Senegal Zambia Iraq Palestine Yemen Indonesia UK
Ethiopia Mauritania Sudan Jordan Qatar Kyrgyzstan

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About ACE
Project Disciplines

Commercial Treatment & Power Plants Industrial

Metro Lines & Tunnels Roads & Bridges Airports

Residential Hotels Sports Complexes

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About ACE
Professional Specialization

Project
Management
Quality Management

Cost Management & Control

Site
Supervision ACE Development
Management Planning & Time Management

Contracts & Claims Management

Risk Management
Design

Value Engineering

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What is a “Project” ?

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a “Project” is a temporary endeavor
undertaken (has a progressive
elaboration characteristics) to create a
unique product, service, or result.

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What is “Project Management” ?

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Project Management (PM) is
The application of knowledge, skills, tools, and techniques
to project activities to meet the project requirements.

Managing a Project includes:


• (Identifying) requirements
• (Establishing) clear and achievable objectives
• (Balancing) the competing demands for quality, scope,
time, and cost
• (Adapting) the specifications, plans, and approach to the
different concerns and expectations of the various
stakeholders

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What is a “Project Risk” ?

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WHAT IS PROJECT RISK ?

• Is an calculated uncertain event or condition .

• If it occurs, has a positive or a negative effect on at


least one project objective, such as time, cost,
scope, or quality.

• A Risk may have one or more causes and, if it


occurs, one or more impacts.

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• The word “RISK” is Quite Modern,
• It was appeared in the English Language in mid
17th century, coming from the French Word
“Risqué”.
• In the second quarter of 18th century it appeared in
the insurance transactions.
• In the late of 19th century it appeared in the
construction industry

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Risk and Project Management

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Risk and Project Management
• Managing risks an integral part of good management
and fundamental of achieving good business and
project outcomes and effective procurement of goods
and services ;

• Risk should be considered at the earliest stages of


project planning;

• It is important for the project sponsor, the main


contractor and the sub-contractors where relevant to
use an effective and consistent risk management
process
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Risk and Project Management (Cont’d)

• Process should promote transparency and


effective communication between the parties to
facilitate effective and expeditious management of
risks

• There are three keys to managing project and


procurement risks effectively.

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Risk and Project Management (Cont’d)

1. Identifying, analyzing and assessing risks early and


systematically and developing plans for handling
them ;

2. Allocating responsibilities to the party best placed


to manage risks;

3. Ensuring that the costs incurred in reducing risks


are commensurate with the importance of the
project and the risk involved.
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Risk and Project Management (Cont’d)

The scope of risk management for a project


includes risks associated with the overall
business, approach and concept, the design
and delivery of the project, transition into
services and the detailed operation and
processing activities of the delivered asset or
capability

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Risk and Project Management (Cont’d)
• Business risks include all those risks that might impact
on the viability of the enterprise, including market,
industry, technology, economic and financial factors,
governmental and political influences ;

• Project risks include all those risks that might impact


on the cost, schedule or quality of the project;

• Operation and processing risks include all those risks


that might impact on the design, procurement,
construction , commissioning, operation and
maintenance activities including major hazard and
catastrophic events.

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Risk Management

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Project Risk Management
• Is a process aims to have attitudes about risk to be made explicit
wherever possible.

• A consistent approach to risk to meet the organization’s


requirements should be developed for each project, and
communication about risk and its handling should be open and
honest.

• Risk responses reflect an organization’s perceived balance


between risk-taking and risk avoidance.

• To be successful, the organization should be committed to


addressing the management of risk proactively and consistently
throughout the project.

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Objective of Project Risk Management

Increase the Probability


and Impact of positive
events

Decrease the Probability


and Impact of negative
events

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Importance of Risk Management

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Importance of Risk Management

• For Managers, because it improves the basis for


making decision to meet operational requirements
and achieve project and program objectives;

• For Project Staff, because it helps to identify things


that can go wrong in the project process and offers
ways to address them effectively;

• For End Users, because it contributes to satisfying


needs and achieving the value of money in acquiring
major assets and capabilities;
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Importance of Risk Management (Cont’d)

• For Suppliers and Contractors, because a sensible


approach to risk in projects leads to better planning
and better outcomes for sellers as well buyers;

• For financiers, who must ensure they obtain a


financial reward commensurate with the risk
involved ; and

• For Insurers, who require comfort that risks are


being managed carefully within the project prior to
determining whether and how much to charge for
financing residual risks

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Benefit of Risk Management

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Benefit of Risk Management

1. Minimize the risks of not achieving the objectives of


the project and stakeholders and take advantage of
opportunities ;

2. Facilitate better business and project outcomes;

3. Provide insight, knowledge and confidence for


better decision making; and

4. Increase certainty and reduce overall risk exposure;

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Project Risk Management Process

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Project Risk Management Process

1. Risk Management Planning

2. Establishing the Context

3. Risk Identification

4. Qualitative Risk analysis

5. Quantitative Risk Analysis

6. Risk Response Planning

7. Risk Monitoring and Control


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Project Risk Management Process
1. Risk Management Planning.
• Deciding how to approach, plan, and execute the risk
management activities for a project

2. Establishing The Context.


• Concerned with developing a structure for the risk identification
and assessment tasks

3. Risk Identification.
• Determining which risks might affect the project and
documenting their characteristics.

4. Qualitative Risk Analysis.


• Prioritizing risks for subsequent further analysis or action

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Project Risk Management Process
5. Quantitative Risk Analysis.
Numerically analyzing the effect on overall project objectives of
identified risks.

6. Risk Response Planning


Developing options and actions to enhance opportunities, and to
reduce threats to project objectives.

7. Risk Monitoring and control


Tracking identified risks, monitoring residual risks, identifying new
risks, executing risks response plans, and evaluating their
effectiveness throughout the project life cycle

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In this session …

1. Risk Management Planning

2. Establishing the Context

3. Risk Identification

4. Qualitative Risk analysis

5. Quantitative Risk Analysis

6. Risk Response Planning

7. Risk Monitoring and Control


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In this session …

1. Risk Management Planning

2. Establishing the Context

3. Risk Identification

4. Qualitative Risk analysis

5. Quantitative Risk Analysis

6. Risk Response Planning

7. Risk Monitoring and Control


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Qualitative Risk Analysis

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What are the possible risks for the following
projects?

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What are the possible risks for the following
projects?

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What are the possible risks for the following
projects?

Akashi Kaikyo Bridge, Japan. The largest suspension bridge in the world
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Qualitative Risk Analysis

Definition:-
As soon as Risks are identified as explained
previously whether by stake holders (during
establishing the context phase) OR by Risk
identification techniques (during Risk
Identification Phase), and list of potential
project Risks is in hand

The next step is to analyze and prioritize them


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Qualitative Risk Analysis (Cont’d)

• Based on the carried out analysis; an


appropriate and adequate response plan(s)
is generated.

• At the end of the qualitative Risk analysis we


shall be able to identify the Risk magnitude
“subjectively” based on the two factors
• Probability (Likelihood)
• Impact (Consequence)

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WHEN QUALITATIVE RISK ANALYSIS IS
CARRIED OUT ?

AT PROJECT EARLY STAGES

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WHY WE HAVE TO RE-COURSE TO QUALITATIVE
RISK ANALYSIS ?

Because at the early stages of the project we may


face the problem of lack of information which will
prevent us from being able to identify “Risk
Magnitude” by numbers “Objectively”

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Tools for Qualitative Risk Analysis

1. Historical information.

2. Techniques previously used for Risk


identification (Brainstorming, Delphi,
Diagramming…etc).

3. Matrix Method (Setting Matrix) , also called


probability(likelihood)-impact
(Consequence) method
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Tools for Qualitative Risk Analysis

• Q1: HOW FREQUENTLY THIS TYPE OF RISK


OCCURRED DURING LAST PROJECTS
(Probability)?

&

• Q2: WHAT WAS ITS IMPACT ON PROJECT


WHEN OCCURRED (Impact) ?
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Tools for Qualitative Risk Analysis

• Risk’s Probability • Risk’s Impact


(Likelihood):- (Consequence):-
– Very High (Almost Certain) – Very High (Catastrophic)
– High (Likely) – High (Major)
– Moderate (Possible) – Moderate (Moderate)
– Low (Unlikely) – Low (Minor)
– Very Low (Rare) – Very Low (Insignificant)

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Probability (Likelihood Description)

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Impact (Consequence Description)

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Impact (Consequence Description) (Cont’d)

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Risk Priority Rating

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Probability-Impact Matrix

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Probability-Impact Matrix

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Probability-Impact Matrix (Cont’d)

• For example:
– Low probability
– High impact

• For example:
– High probability
– High impact

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Qualitative Risk Analysis (Cont’d)

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Qualitative Risk Analysis (Cont’d)
Five Regions Colored Matrix identifying Risk Zones

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Qualitative Risk Analysis (Cont’d)
Five Points Scale Matrix

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Semi Quantitative Risk Analysis

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Qualitative Risk Analysis (Cont’d)
Non Linear Point System

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Qualitative Risk Analysis (Cont’d)
Non Linear Scale

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Thank you
Dr. Eng. Mohamed Abdel Ghany
FCIArb, PhD, MSc, REA

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