Risk Management And

Decision Making
 Risk Management
• Risks

• Financial Risks

• Diversification and Investment Risks

• Risks Management in International Projects

• Risks Analysis & Mitigation

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 Decision Making
• Under Certainty

• Under Risk

• Under Uncertainty

• Under Partial Information

• Under Conflicts

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 Why Risk Management
• Systematic identification and management
• More realistic business and project planning
• Actions being implemented in time to be effective
• Greater certainty of achieving business goals and project objectives
• Appreciation of, and readiness to exploit, all beneficial opportunities
• Improved loss control
• Improved control of project and business costs
• Increased flexibility as a result of understanding all options and associated risks
• Greater control over innovation and business development
• Fewer costly surprises through effective and transparent contingency planning

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 RELEVANCE OF RISK MANAGEMENT
• number of different sites

• size that precludes any individual from knowing the details

of every threat

• business with overseas operations

• listed on a stock exchange

• range of processes

• many sub-contractors, suppliers or other business associates

who are not under the direct control of the business

• old Sites with buildings, equipment and practices with

undocumented/obsolete standards

• operates in a highly regulated industry

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 Why No To Risk Management?
• Not familiar

• Don’t like to be forced to recognise “I am under risk”

• Judging people that not good in management

• Cost involved in employing risk manager

• No time and capacity for company to employ risk manager

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 ADVANTAGES OF RISK MANAGEMENT
• Source:
• The complete Guide to
Business Risk Management
• KIT Sadgrove

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 Major Common definitions
• Source of Harm
• Chance of Harm
• Uncertainty about loss
• Measurable uncertainty
• Volatility of return
• Statistically expected loss
• Likelihood and severity of events
• Consequences and associated uncertainty
• Uncertain events affecting objectives
• Uncertainty of outcome
• Asset, threat and vulnerability
• Human interaction with uncertainty

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 Risks
• Definition

• Possibility of something bad happening

• Uncertainty about the effects/implications of activity with respect to something

that humans value (such as health, well-being, wealth, property or the
environment), often focusing on negative, undesirable consequences

• Health, business, economics, environment, finance, information,
Technology, , insurance, safety, security etc

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 Risks
• Definition (ISO Guide 73:2009)

• Effect of uncertainties on objectives

• Deviation from the expected

• Objectives has different aspects at different levels

• Potential events and consequences or its combination

• Consequences of an event and the associated likelihood of occurrence

• Uncertainty is the state, even partial, of deficiency of information related to, understanding or knowledge of,
an event, its consequence, or likelihood

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 Modern Risk Management
• Opportunities and Risks

• Positive and negative risks

• Method
• Identify the threats
• Assess the vulnerability
• Determine the likelihood and consequences
• Identify ways to reduce those risks
• Prioritize risk reduction measures

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 PROJECTS
• Organisation
• Single disciplined
• Single client & single contractor
• Multi-disciplined
• Multiple specialists, contractors, designers, consultants, etc.

• Government

• Private

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 Risk in Projects
• Risk event: What might happen to affect your project?

• Risk timeframe: When is it likely to happen?

• Probability: What are the chances of it happening?

• Impact: What’s the expected outcome?

• Factors: What events might forewarn or trigger the risk event?

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 Strategies
• Accept

• Transfer
• Retention
• Sharing

• Avoid

• Reduce

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 Risk Management
ISO 31000 (2018)
Identification, evaluation, and prioritization
of risks (effect of uncertainty on objectives)

Coordinated and economical application of

resources
Probability or impact of unfortunate events
Minimize
Monitor
Control
Or
Maximize the realization of opportunities
HOW MUCH RISK IS ACCEPTABLE
ATTITUDES AND IMPLICATION

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STRUCTURE OF RISK MANAGEMENT

• Identify risks and set policies

• Take action, and monitor

• Continuous process

• False sense of security.

• Evaluate its strengths and weaknesses

• Re-engineer itself

• Make it more competitive

 Major Knowledge Areas
• Plan Risk Management 

• Perform Qualitative Risk Analysis 

• Perform Quantitative Risk Analysis 

• Plan Risk Responses

• Implement Risk Responses

• Monitor Risks 

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 Risk Management
• Construction Risks
• Known
• Certain
• Less effect in productivity
• Material cost swings

• Known unknown
• Predictable
• Known probability and effect

• Unknown unknown

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 Risk Management Strategy
• Risk ownership
• Party owning risk
• Exposure
• Transfer

• Risk Financing
• Budget
• Risk Allowance
• Contingency

Control only for future events

Effective control needs predictions

• Effect
• Responsibilities of the parties
• Influence the control of design, construction, commissioning, change and risk
• Cost, time and quality

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 Risk Management
• Prioritisation
• Risk Vs Opportunity
• Probability
• Impact

• Intangible risks
• Productivity of knowledge workers
• Decrease cost-effectiveness
• Profitability
• Service quality
• Reputation
• Brand value
• Earnings quality

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 • Cost overrun
• Delay in completion
IDENTIFYING AND • Incompetent contractor
ASSESSING • Subcontractor default
• Environmental risks
• Design error
• Thefts
• Internal • Loss of paper works
• Change order
• Safety hazard
• External • Labour shortage
• Force majure
• Certain technical risks
• Socio-political unrest
• Lack of permits
• Unexpected hike in raw materials
• Unknown conditions
• Badly written contract
 Decision Making
• Under Certainty

• Under Risk

• Under Uncertainty

• Under Partial Information

• Under Conflicts

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 METHODS
• PRESTLE

• SWOT

• Hazard and Operability Study (HAZOP)

• Hazard Analysis and Critical Control Point (HACCP)

• Failure Mode and Effects Analysis (FMEA)

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 EXTERNAL RISK
PESTLE Analysis

• Political

• Economic

• Social

• Technological

• Leagal

• Ethical / Environmental
 INTERNAL RISK
SWOT Analysis
• Strengths and Weaknesses

• within the organization

• Opportunities and Threats

• Outside

• Considers opportunities (which bring risks), rather than

just threats

• (JV), this is an opportunity but is risky as well

• Organization’s internal strengths and weaknesses

• What are its best features

• What are its failings

 Six Broad Classification Of Risks

• Strategic
• Operational
• People
• Compliance
• Financial
• Technology

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 STRATEGIC RISKS
• Impact on the company’s costs, prices,
products and sales

• Minimise the exposure

• Government action

• Competitors

• Customers,

• New technology

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 STRATEGIC RISK
• Technology Risk
• IT Related

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 PEOPLE RISK
• Bad PR to the business by agreeing
unmerited pay rises or excessive
perks to directors
• Chief executive who lacks
leadership or common sense
• Weak finance director, or even a
non-existent
• Managers who base their decisions
on hunch rather than on fact
• An organization that is slow to
respond quickly to changes
• Lack of corporate structure
• Organizations that are demoralized
or demotivated

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 PEOPLE RISKS
• Change
• Bench marking
• Review other sectors
• Market research
• Consultants
• Gap analysis

• find fault with the detail

• develop an ‘us and them’ mentality
• fail to engage
• Sabotage
• be hostile to colleagues

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 COMPLIANCE RISK
• Tax authorities,

• Health and safety legislation

• Certification bodies

• Governance

• Ethics

• Risk Management System

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 COMPLIANCE RISK
• Environment Risk
• Changes
• Energy cost
• Waste Disposal
• Physical distribution
• Polluters pay
• Toxic or hazardous raw materials will be penalized
• Eco-labelling will become more prominent
• Pressure groups will get smarter
• More controls on carbon emissions
• The costs of compliance will rise
• Renewables will become ubiquitous
• Polluters will increasingly find it difficult to get finance and insurance
• The polluting firm will find it harder to attract and retain good staff

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 ENVIRONMENTAL RISKS
• Emissions to air;
• Discharges to water;
• Solid waste;
• Producing or using toxic or hazardous materials;
• Consuming fossil fuels or energy derived from them (that is, non-renewable
energy sources);
• Damage to nature (for example, by building projects), through destruction of
natural habitats or amenity space.
• Consuming scarce or non-renewable resources;
• Owning (or acquiring) environmental damaging assets, especially contaminated
land.

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ENVIRONMENTAL RISKS

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 ENVIRONMENTAL RISKS
• Weather pattern and Climate change
• Corporate assets
• Business operations
• Change in market
• Reduction in raw material supply
• Logistics

• Change in financial performance

• Added cost
• Operation disruption
• Work hour loss and loss in
productivity
• Reputation damage
• Contractual issues and litigations

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 PROJECT RISKS
• Failure to define the scope
• Scope creep
• Wishful thinking and budgeting failure
• Management and governance failure
• Project team staffing problems
• Underestimating the complexity of the task
• Optimism in timing
• Failure to engage stakeholders and users
• Partner delays and failings
• The end product under-performs
• Handover failure

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• Cost overrun
• Delay in completion • Weather
• Distance
• Incompetent contractor
• Finance
• Subcontractor default • Multi-contractor
• Environmental risks • Unexpected site conditions
• Design errors • Unexpected hike in price
• Poor project management
• Thefts • Badly written contract
• Loss of paper works
• Change order
• Safety hazard
• Labour shortages
• External risks

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 PROJECT RISK MANAGEMENT
• Risk Planning
• Obtain information
• Examine all options
• Carry out risk assessment
• Allocate experienced staff
• Create project plan
• Controlling Risk
• Invest one step at a time
• Flexibility in system
• Review
• Internal
• External
• Spread risk
• Manage identified Risks

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HI-HP

• Continuity management and survival plan

• Lack of contractor experience
• High cost fluctuations
• Delayed clearances

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