Risk Response Actions

Muhammad Hussain
 Content:
• Introduction
• Types of Risks
• Problems Definition
• Case Study
• Strategies to cope with risk
• Conclusion and Recommendations
 Introduction:
• Project risk is uncertain 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.
• It is the chance that an undesirable event will occur and the consequences of all its
possible outcomes.
• Particularly, in project scheduling, the Project Managers(PM) have little
knowledge of the risks that are involved in the project which can delay the
activities and the project duration, scope quality, duration and cost is compromised.
 Types of Risks:
There are two types of risks that are involved
in the Project:

• Primary Risks
• Secondary Risks
 Primary Risks:

• The risks which are present at the start of the project are called primary risks.
• These risks arise from the uncertainty of the project activity or the defect of the project plan.
• The primary risks should be identified and analysed properly so as to be handled properly
and to avoid the damage to the project in future.
• After he identification and analysis of primary risks, appropriate primary Relative Risk
Aversion (RRA) should be determined by different approaches.
• It has been seen that a primary may be well controlled by implementing an appropriate RRA.
 Secondary Risks:
• The risks in the project which arises due to direct result of implementing a
primary RRA are called secondary risks.
• Similar to primary risks after the identification and analysis, secondary risk
should be responded and controlled by secondary RRA.
• If one primary RRA is not justifying and we go for the secondary RRA and the
loss is higher, then we should apply another primary RRA and mitigate this risk
to avoid higher losses in the future.
 Secondary Risks:
Example:
• In a metro construction project, the expected loss of the primary risk “severe deformation of
retaining wall” is $16 million. In order to mitigate this primary risk, several experts suggest PM to
demolish the deformed wall and reconstruct the retaining wall with better high quality cement. As
a result, the expected risk loss will be reduced from $16 million to $10 million. However, if the
proposed primary RRA is implemented, the secondary risk of landslide may be induced, causing an
estimated $30 million loss. In order to mitigate this secondary risk, increasing the steel structure
support is required. If this secondary RRA is adopted, the residual risk will still cost $20 million
loss is higher than that of the primary RRA. In this case, PM should abandon the primary RRA or
switch to other RRAs so that a higher loss caused by the secondary risk of landslide can be
avoided.
 Problem Definitions:
• A Problem Definition is usually set up at the end of the problem analysis phase.
• A problem always has to do with dissatisfaction about a certain situation.
• For defining a problem this implies that it is not sufficient to describe the current
state.
 Problem Definitions:
• All risks are considered to be independent of each other. The total impact of risks
on an activity can be represented by adding together the loss of all risks
occurring in that activity.
• All actions for mitigating secondary risks, once taken, will produce the expected
effects on both time and costs.
• The cost of crashing increases linearly with the days of crashing.
Problem Definitions
 Case Study:
i- Introduction of case study
• Capability, accuracy, usefulness and economics of proposed project is checked.
• According to guidelines of Risk management, complete assessment should be
done from initial stage to final stage for acceptance of project.
• Risk identification and quantitative analysis on risk impacts is conducted
• Primary Risk Response Action(RRA) should be analysed.
 Case Study:
• Secondary risks and secondary RRAs including the secondary risk impact, the
implementation cost and the implementation effect of secondary RRA should be
developed.
 Case Study:
ii- Data Collection
• The activity data are determined based on the analysis of related standards and
the comprehensive assessment of the construction conditions.
• Risk evaluation is done and then risk impact in terms of money and time is
calculated.
• Project network is drawn as shown in figure.
 Case Study:
iii- Computational Result
• Risk is computed using LINGO, which is a tool designed to build and solve
linear programming and quadratic programming.
• Compare total cost with primary and secondary risk losses.
 Case Study:
iv- Time-cost trade-off analysis
• Risk cost, the crash cost and the total cost are computed.
• All their results are recorded with their corresponding time-varying trends
• See the overall trends of the three costs and their relationships
• Compared with the crash cost, the risk cost does not decrease much.
 Strategies to cope with risk:
i. Risk avoidance
• Refers to the elimination of the threats brought by risks
ii. Risk transference
• Refers to the shifting of the burden of loss for a risk to another party through legislation, contract, insurance
or other means.
iii. Risk mitigation
• Aims to reduce risk probability or impact to an acceptable level
iv. Risk acceptance
• Occurs when a business or individual acknowledges that the potential loss from a risk is not great enough to
warrant spending money to avoid it. 
 Conclusion And Recommendations:
• It is important to select the suitable RRAs to cope with primary risks and
secondary risks.
• To prepare adequate budget for mitigating the consequences of secondary risks.
• We assume that project risks are not dependent of each other.
• Both primary risks and secondary risks depends on each other, shall be taken
into consideration
• Expected loss and the expected delay of secondary risks can be also calculated.
 Conclusion And Recommendations:
• Future research should use advance technologies to gather the data/information
of risk probability or risk impact.
• Future study should use dynamic programming to evaluate the dynamic process.