RISK IDENTIFICATION

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 OUTLINE
• Definition
• Several Risk Identification
Framework / Concept
• Example of Risk Identification

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 Risk Identification Definition
• This is the first stage of the risk management process.

• This is an important phase because if a risk is not identified,

it might not be analysed and managed in the next steps.

• Risk identification is aimed at identifying the important types

and causes of risk and uncertainty that may have a significant
effect on the project goals (ICE and FIA, 1998).

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 Several Risk Identification
Frameworks / Concepts
• Al-Bahar (1988)
• AS/NZS (2004)
• PMBoK (2004)

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CRMS (Al-Bahar) Risk Identification

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Risk Identification Phase
According to CRMS

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Flowchart of Risk Identification Phase

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Risk Events/Consequence Scenario

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 Risk Mapping
It is a preliminary assessment of significant risks have been identified

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Example of Risk Mapping

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Example of Risk Mapping (Cont’d)

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Example of Significant Risk after Risk Mapping

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Logical Classification Scheme

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Risk Category Summary Sheet

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PMBoK (2004) Risk Identification
“Determining which risks might affect the project and
documenting their characteristics”

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Risk Identification Input

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 Several Risk Identification Tools
and Techniques
1. Documentation Reviews
2. Information Gathering Technique:
a. Brainstorming
b. Delphi Technique
c. Interviewing
3. Checklist Analysis
4. Diagramming Technique

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 1. Documentation review
According to survey, It is found that most of the respondents
used document review from many different sources for
identifying risks (Bajaj et al.,1997), .
This is usually the first action taken by the project teams to
establish a structured review of project plans.
It may involve review of previous project files and/or
published information.
It is better to identify risk from historical project information
and previous experiences.
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 2. a. Brainstorming
This is a process by which every participant in a panel generates ideas
about project risk.

It aims to elicit a specific list of risks that may have an effect on project
performance (PMI, 2000).

Brainstorming is a problem-solving technique that includes redefining

problems, generating ideas and finding possible solutions, which will
produce several ideas quickly (Chapman,1998)

Brainstorming is an effective method for identifying risks, however to

maintain and encourage each participant to develop more ideas, a skilled
and experienced facilitator is required (Edwards,1995)

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 2. b. Delphi Technique
• This is a method of using experts to reach a consensus on identifying project risk (PMI,
2000).

• The technique uses two different groups, namely a group of experts and a group of
people who are participants in the project (Chapman, 1998).

• A set of systematic questionnaires is distributed to the group of participants and the

responses received are summarised by the group of experts.

• After discussing within the experts, finally, a consensus is gained by the group of
experts.

• Unlike brainstorming, the participants may make less contribution to the process.
However, because of using project risk experts, it can help reduce bias on the
consensus.

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 2.c. Interviewing
This method has been successfully used for identifying potential risks (Carter
and Centre,1996)
Discussion material should be prepared in advance to ensure that the expert
focuses on the area concerned and does not stray to his pet themes.
By interviewing experienced project managers and experts, risks can be
identified (PMI, 2000).
The risks may be obtained from their experiences, from published
information or from any other sources that they consider helpful.
This technique might give some advantages over brainstorming, however, it
is costly and time-consuming.

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 3. Checklists
These are ways of identifying risk that can be obtained from
previous similar project files, published information and other
related resources.
They are a simple and quick method to identify the risks, but the
risks identified may not be exhaustive (PMI, 2000; Carter and
Centre, 1996).
Should be reviewed during project closure to improve it for use on
future project.

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4. Diagramming Technique
a. Cause and Effect Diagram
b. System or Process Flowcharts
c. Influence Diagram

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 4.a. Cause and Effect Diagram
(Fishbone Diagram)
It may help to identify causes of risks by using a fishbone diagram which
illustrates the roots of potential risks (PMI, 2000).
Several steps are required to develop a fishbone diagram (Pike and
Barnes, 1994).
First of all, a problem being investigated is placed at the head of the
fishbone.
Then, suitable generic major factors causing the problem are determined
using brainstorming and are placed at bones of the fish.
Next, each acceptable cause idea is listed under the major factors. All of
them should be carefully and clearly recorded.
Finally, a lot of information about factors causing the problem can be
placed in the bones based on their sources.

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Cause and Effect Diagram (Cont’d)

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Another Example of Fishbone Diagram

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4.b. System or Process Flowchart
• Help to analyze how problem occur.
• Show activities, decision points, and the order of processing

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 4.c. Influence Diagram
Graphical representations of situations showing causal influences,
time ordering of events, and other relationships among variables
and outcomes.

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Influence Diagram (Con’t)

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 Risk Identification Output
The output of the risk identification process is
Risk register, which consist of:
a. List of identified risks → including root causes and
uncertain project assumption.
b. List of potential responses → may be identified
during risk identification process.
c. Root causes of risks → fundamental condition or
event that may give rise to the identified risk
d. Updated risk categories → amendment based on
the risk identification process.
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AS/NZS (2004) Risk Identification

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AS/NZS Risk Identification

• Information for Identifying Risk

• Approaches/Techniques Used
• Document Output

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 Information for Identifying Risk
1. Local or overseas experience
2. Expert judgment
3. Structured interviews
4. SWOT Analysis
5. Insurance claim reports
6. Post event reports
7. Result and report from audits, inspections and site visits.
8. Surveys and questionnaires
9. Checklists
10. Historical records, incident databases (or previous risk register if they
exist).

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Approaches/Techniques used for
Risk Identification
• Checklist
• Judgment
• Flowcharts
• Brainstorming
• System Analysis

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 Document Output of Risk
Identification
• The approached or method used
• The scope covered by the identification
• The participants in the risk identification
and the information sources consulted
• A Risk register (see example)

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A Risk Register Example

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 A Risk Register Example
IDENTIFIKASI RISIKO

Penyebab Kejadian (√)

Kode Kegiatan/
Jenis Kejadian Faktor Eksternal
Kesalahan
Pekerjaan Faktor Internal
Manusia
Bencana Alam Non Alam

1
1.1
1.2
….
….
2

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 The six classification risk
(Al-Bahar and Crandall, 1990; Mustafa and Al-Bahar, 1991)

Risk category Typical risks

Act of God Flood, earthquake, storm, landslide, and fire
Physical Damage to structure, damage to equipment or
material, and labour injuries
Financial and economic Inflation, exchange rate fluctuation, and financial
default
Political and environmental Changes in laws and regulations, war and civil
disorder, pollution and safety rules, expropriation,
and embargoes
Design Incomplete design scope, error and omissions,
defective design, and inadequate specification,
Construction-related Labour disputes and strikes, labour productivity,
defective work, design changes, and different site
conditions
Hierarchy Risk Breakdown structure
(Tah and Carr,(2000)
Classification of International construction risk
(Hastak and Shaked, 2000)
International Construction Risk

Macro Level Market Level Project Level

* Operational risk * Technology * Transferring technology
* Political risk * Contractual and legal * Legal issue
* Financial risk * Resources * Local resources
* Financing * Design
Business cultural
* differences * Quality
* Market potential * Financial
* Construction
* Force majeure