UP Copyrights 2012

Special Course in Construction Management

Faculty of Applied Engineering and Urban Planning

Civil Engineering Department

Special Course in Construction Management

(Lecture 9)

Dr. Nadine N. Abu-Shaaban

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 Example

• When classifying and estimating risks:

– Cost

– Time

– Safety

– Quality

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 Example

• Consider the following identified risks in a particular project:

– Error in survey data.

– Project cost overrun (client).
– Risk of injury (workers).
– Lack of expertise.
– Risk of explosion.
– Chemical reaction.
– Increase legislation control.
– Public opposing project.
– Risk of unnecessary spending.
– Environmental objections.
– Risk of delay in site operations.

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 Example
Risk Style
Error in Survey Data All (Cost, Time, Safety, Quality)
Project cost overrun Cost
Risk of injury (workers) Safety
Lack of expertise Cost, Time and Quality
Risk of explosion Safety
Risk of Chemical Reaction Safety
Increase legislation control Cost, Time and Quality
Risk of Public opposing project Cost and Time
Risk of unnecessary spending Cost
Environmental objections Cost and Time
Risk of delay in site operations Cost and Time

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 Example
Risk Probability
Error in survey data Medium
Project cost overrun Very high
Risk of injury Low/Medium
Lack of expertise Very low
Risk of explosion High
Risk of chemical reactions Medium
Increased legislation control Low
Public opposing project Medium
Risk of unnecessary spending Medium
Environmental Objections High
Risk of delay in site operations Very high.

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 Risk Evaluation

• In this stage, the identified risks are evaluated; by

comparing them to company acceptance criteria
(threshold), to find out whether the frequency of
occurrence of these risks are acceptable or not.

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 Risk Response
• There are four main ways in which a company can respond to the
identified risks:

– Risk avoidance: this technique results in causing a situation where

the risk simply does not exist.
• Contractor not placing a bid.
• Contractor tendering at a very high bid.
• Placing conditions on bid, a method employed during pre-
contract negotiation as to which party takes full responsibility for
certain risks

– Risk transfer: moving the responsibility of risk to other party. The

method used will depend on the type of risk. Risk transfer is used for
technical and financial risks; the methods used to transfer them are:

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• Transfer to a subcontractor: if the technical risk is too high
for the contractor, possibly because they have insufficient
experience of the process, it may be transferred to a
subcontractor.

• Transferring via Insurance: Financial risks can be insured;

that is what insurance is. In the same way we transfer the
financial loss of theft or damage of our own properties for a
pre-determined and manageable fee to an insurance
company, companies can do the same for any identified
risks.

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– Risk retention: if risks are identified, who better to manage
them than the company itself; this is a method of
responding to risks by the body who controls them. Risks
which are best retained are the ones which occur
frequently but have small losses.

– Risk reduction: this is the most usual method of risk

response; one reason could be that it is the simplest and
cheapest. If a risk is identified then re-design or re-
engineer the situation in order to either:
• Lessen the impact.
• Reduce the frequency, or both.

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 Risk Monitoring
• Risk monitoring: is the continuing process of reviewing the
risk once it has been identified, estimated, evaluated and
responded to. This stage is the last of the five, but can initiate
the entire five step process of risk management off again, if
the risk under observation requires re-managing.
• This could be for reasons, such as a change of procedure or
operation. These may re-define new risks to manage.

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