Topic 1

BSR 65
RISK
4
MANAGEMENT

NOREHAN MOHD NOOR

 TOPIC 1: IntroDUCTION to
risk management

Definition Principle Process

Concept Type

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This module focuses on:

Definition
Terminolog
y

ALL ABOUT
RISK MANAGEMENT
RISK
Understanding

Concept etc

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This module focuses on:

6. the risk management

concept impact on
1. the concept of risk
organisational business
management;
2. risk identification 7. making right strategic
procedures, decisions on how to deal
with the results of risk
RISK 3. analysis and
responses to assessment.
MANAGEMENT ensure operational
continuity, 8. mitigation of risk in
4. disaster recovery, operation of facilities
and business maintenance
continuity management and
Building Surveying
profession.

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 What is RISK??
1.Risk is part of all our lives.
•As a society, we need to take risks to grow and
develop. From energy to infrastructure, supply
chains to airport security, hospitals to housing,
effectively managed risks help societies
achievement.
•In modern life style, everything 'in hurry', there are
a certain risk evolve quickly and need to manage.
These risks should be taken seriously to minimize
their threats and maximize their potential.
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 Sources of RISK
The Primary Sources Of Risk For Most Projects Include:
1) Characteristics of the client / stakeholders;
Including whether the client is a public entity or a private firm or individual;
the client’s track record on the ongoing project or other types of projects;
the availability and adequacy of funding for the project; and the client’s general attitude toward
professional services, including the methods of compensation, litigation, and claims history.

2) Nature of the project:

including the relationships among program, site, schedule, and budget; the political profile of
the project in the community; the laws and regulations applicable to the project; and the
project type.

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 Sources of RISK
3) Use of consultants for professional
services:
including the availability of qualified
consultants; past experience with a
particular consultant; the consultant’s
reputation; whether or not the consultant
has adequate insurance; and client-
selected and client-controlled consultants.
4) Contractor and method of project delivery:
including whether construction contracts will be bid (by
open bidding or invitation to a select list of bidders);
whether there will be one general contractor or a
construction manager (CM) with multiple prime
contractors; the familiarity of the available contractors
with projects of similar size, scope, and complexity;
whether the construction documents will be completed
before the start of construction or will be completed
in stages while construction proceeds (fast track); and
whether the project is completed via design-build or
integrated design.
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 Sources of RISK
5) Other parties: 6) Design professional’s fee:

including whether there will be a PM; whether the including whether the fee is adequate
PM/CM’s role has been adequately defined; whether for the required services; whether the fee
the CM is sufficiently qualified to undertake this role; covers costs and provides a profit; and
whether there are any special (e.g., geotechnical or whether there are fee provisions for
abatement) consultants required; whether the additional services.
design professional is accepting vicarious liability for
these consultants; and if so, whether the
design professional will be appropriately
compensated and protected.

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 Sources of RISK
7) Design professional’s capabilities
and experience:
Including business and professional
licensing; and whether the firm is
experienced with the project type and
has the staff and consultants available to
perform the services in line with the
project schedule.
8) Type of contracts for design and for construction:
including whether the design professional’s contract
with the client is prepared on a standard industry form
(such as those published by the PWD / PAM / LA / etc.);
whether the client will hire multiple prime design
professionals for the various disciplines of service; the
method of compensating the design professionals;
the form of construction contract and general conditions
(whether standard or customized form); and whether the
contractor will be compensated on a lump sum or cost
reimbursable basis.
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 DEFINITION
1. Risk 4 Risk identification
The 11th edition of Webster’s Collegiate Dictionary The process of determining what can happen,
why & how
defines risk as “possibility of loss or injury.” or
The change of something happening that will have an
5 Risk mitigation
impact upon objectives. It is measured in terms of
A systematic reduction in the extent of exposure
consequences and likelihood to a risk and/or the likelihood of its occurrence.
Also called risk reduction.
2. Likelihood
Used as a qualitative description of probability
6. Risk analysis
/ frequency
A systematic use of available information to
3. Residual Risk determine how often specified events may occur
The remaining level of risk after risk treatment and the magnitude of their consequences
measures have been taken.

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 DEFINITION
7. Risk assessment
The overall process of risk analysis &
risk evaluation
8. Risk evaluation
The process used to determine risk
management priorities by comparing
the level of risk against predetermined
standards, target risk levels or other
criteria.
9. Risk treatment
Selection and implementation of
appropriate option for dealing with risk
10. Risk management
Risk management is the process of identifying,
assessing and controlling threats to an
organization's capital and earnings. These threats,
or risks, could stem from a wide variety of
sources, including financial uncertainty, legal
liabilities, strategic management errors, accidents
and natural disasters
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 Understanding RISK

 Exposure to adversity
 Chance/probability to loss
 An exposure to possible loss exist
 Possibility of an adverse deviation
 The chance of hazard, bad consequences, loss
 The potential for unwanted or negative consequences of an event or activity
Yhe

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 RISK environment Example of RISK
• Delay/schedule risk
• Cost over-run
certainty
• Under price /lack in estimating
• Bad weather
RISK
• No labour / material shortage
• Economy bad – high interest rates
• Poor management – client /
uncertainty
contractor / consultant incompetent
• Project team
• Construction technology / method
poor
• Complex job / ultra-modern /
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 RISK MANAGEMENT
Risk management is:-
MANAGING the FUTURE
MANAGING the UNCERTAINTIES

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 RISK MANAGEMENT
•Risk management involves understanding, analysing and addressing risk to make sure
organisations achieve their objectives.
•So, it must be proportionate to the complexity and type of organisation involved.
•Because risk is inherent in everything we do, the type of roles undertaken by risk
professionals are incredibly diverse. They include roles in insurance, business continuity,
health and safety, corporate governance, engineering, planning and financial services.
•As defined, Risk Management is the process of identifying, assessing and controlling threats
to an organization's capital and earnings.
•Threats??
These threats, or risks, could stem from a wide variety of sources, including financial uncertainty,
legal liabilities, strategic management errors, accidents and natural disasters.

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 RISK MANAGEMENT
1.0 IN GENERAL;
• risk management is the effective handling of risks.
• risk management is about managing risk - about managing people, processes, data,
and projects.
• it is the everyday work of actually managing an organization and the risks it faces.
• Managing risk requires making the tactical and strategic decisions to control those risks
that should be controlled and to exploit those opportunities that should be exploited.
• Managing profits cannot be separated from managing losses or the prospect of losses.
• Modern portfolio theory tells us that investment decisions are the result of trading off
return versus risk; managing risk is just part of managing returns and profits.
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 RISK MANAGEMENT
2.0RISK MANAGEMENT
OBJECTIVES
“Provide effective management
system through its formal and
structural process”.
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3.0RISK MANAGEMENT
FUNCTION
• to mitigating the effect of risk &
minimizing cost (William &
Heinz, 1964).
• The minimization of the adverse
effect of risk at minimum cost
through its identification,
measurements & control.
4.0 RISK MANAGEMENT CYCLE / ITERATIVE
PROCESS
ACT Continuously Improve
RM capabilities

CHECK

Monitor RM RM Planning
Performance
PLAN

Risk Identification &

Assessment
DO
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 4.0 RISK MANAGEMENT CYCLE

NOTES:-

 RISK cannot be totally be eliminated, and it may

result;

(i) Secondary Risks – risks that are generated by a

response to another risk.

(ii) Residual Risks - risks that remain after risk

response planning

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 5.0 RISK MANAGEMENT process

Identifying

Analysing
Evaluating

Responding
Treating / / Control
Monitor Mitigating
Risk
Registered /
Communicating
Lesson learned

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To Recap:

• As this module focuses on the risk management concept impact

on organisational business, and making right strategic decisions
on how to deal with the results of risk assessment.
• So, in considering the application of this Module, in operation of
facilities maintenance management and Building Surveying
profession environment; two key concept can be recognized;-

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To Recap:
• First, what is considered unfavorable is relative to what is expected.
(apa yang dianggap tidak menguntungkan adalah relatif terhadap apa yang
diharapkan)
• Typically, stakeholder expectations - client, designer, contractor, lender - are
formed at an early point in each stakeholder’s participation in the project and
are often based on limited information or unfounded optimism.
Unless the project delivery process incorporates mechanisms to specifically
affect and refine stakeholder expectations throughout the course of the project,
the gap between expectation and outcome will likely increase with the
duration and complexity of the project.

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To Recap: :
• Second, what is considered favorable to one stakeholder, such as
lower cost, may be considered unfavorable to another, such as lower
profit or a loss. Unless there is a reasonable integration of stakeholder
objectives, reflected in contracts that fairly allocate risk and reward,
the project delivery team may be a team in name only.

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To Recap: :
The narrative discussion reflects the complexity involved in managing risk
in the project environment and points to the need for design professionals
and other project stakeholders to define and implement a rational process for
risk taking.

Fortunately, the conceptual framework for such a process exists, and a

number of tools have been developed to support the rational allocation and
management of risk in project delivery.

Among the more important tools are the consensus-based contract forms
developed by PWD/JKR [The American Institute of Architects (AIA) and
the Engineers Joint Contract Documents Committee (EJCDC)].
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To Recap: :
As is the case with risk, there is no single, correct definition for risk
management. We choose to define risk management as the process
of minimizing the probability and severity of an unfavorable
outcome at the lowest long-term cost to the organization.

This process involves three overlapping and often iterative steps: 1)

risk identification; (2) risk analysis; and (3) risk responses

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THANK YOU!