Polytechnic University of the Philippines

Open University System

Master of Science in Construction Management

DEM 609
Risk and Crisis Management

Introduction to Engineering
and Managing Risk

Dr. J. Berlin P. Juanzon, CE, MSCM

Course Specialist
 Managing Risks and uncertainties

The complexity of Risks and

Uncertainties

Learning Hazards and Risk Mapping

Objectives
Risk Perception and Risk Attitude

Engineering Risk Management

 The likelihood
(probability) of
occurrence of an
undesirable event that will
have an impact (positive or
negative) on objectives
 ISO Definition:
“The effect of
uncertainties on (achieving)
objectives”
Managing risk and uncertainties
The ISO definition implies that risks are two-sided:
 Negative risks if the outcome is negative
 Positive risks if the outcome is positive

Value
+ Opportunity Creation

RISK
Value
- Threats
Destruction
Managing risk and uncertainties
The best available “classic viewpoint” of risk management
is one of thinking purely organization risk management and
taking different domains, integrating them to take decisions
for maximizing the positive side of risks and minimizing the
negative side.

Risk are characterized by internal and external

uncertainties. Therefore, all these uncertainties and the
possible outcomes should be anticipated, identified and
mapped by different types of experts and stakeholders.
Managing risk and uncertainties
To manage uncertainties efficiently, a composite of three
building blocks can be conceptualized.
Additional principle,
operation, tactical,
and strategic thinking

Mindset
Involvement should be
Cognition should considered from
be present in the Knowledge and Stakeholders and different
organization about know-how expertise organizations,
past, present and authorities and
future data and academia and from
information different types of
Uncertainty disciplines
Management
The complexity of Risk and uncertainty

“Risk” means different things to different people

at different times. In the real world, the future of
events, handlings, circumstances, cannot be
perfectly predicted. Unexpected things happen
and cause unexpected events.
An “uncertainty sandglass” concept, identifies the
strengths, weaknesses, opportunities, and threats
(SWOT).
The complexity of Risk and uncertainty
The “uncertainty sandglass”

(Threats) Negative (Weaknesses)

uncertainties Not achieving objectives

Negative
uncertainty
Triangle

Exposure to uncertainties on the path

toward achieving objectives

Positive
uncertainty
Triangle

(Opportunities) Positive
Achieving objectives
uncertainties (Strength)
The complexity of Risk and uncertainty

Using the principles of a SWOT analysis (identifies

positive and negative uncertainties) allows risk
managers to close the gap between line
management and top management regarding taking
decisions on existing uncertainties in the
organization.
The complexity of Risk and uncertainty

Focusing on the top triangle o the uncertainty glass:

Negative uncertainties – exposure to uncertainties – not
achieving objectives, which we call the “Risk Trias”.

The engineering aspect of risk management, focus on how to

diminish, decrease or soften one of the three elements of
the “Risk Trias”: hazards, exposure or losses.
The complexity of Risk and uncertainty

Three types of uncertainties are:

Type I: uncertainties where a lot of historical data is

available
Type II: uncertainties, where little or very little historical
data is available
Type III: uncertainties where no historical data is available
The complexity of Risk and uncertainty
Differentiating between knowns and unknowns.

Knowledge Lack of Knowledge

Open mind

Known known Known unknown

Closed mind

Unknown known Unknown unknown

Hazards and risk mapping

A “hazard” can be defined as:

“The potential of a human, machine, equipment,
process, material, or physical factor to lead to an
unwanted event possibly causing harm to people,
environment, assets or production”
 Hazards and risk mapping

To link the “Risk Trias” the following definition of

“Negative Risk” can be coined:
“The possibility of loss created by exposure to one
or more hazards. The significance of risk is a function
of the likelihood of an unwanted event and the
severity of its consequences.”

Negative Risk = (likelihood of unwanted event) x (severity of consequences of

unwanted event)
Hazards and risk mapping

Example of Risk Trias

Hazards and risk mapping

Risk Matrix

A –Low probability – Low damage = LOW RISK

B – High probability – Low damage = MEDIUM RISK

C –Low probability – High damage = LOW RISK

B D
D – High probability – High damage = HIGH RISK

A
C
Hazards and risk mapping

Hazard mapping
A hazard map highlights areas that are
affected by or vulnerable to a particular hazard.
The objective of hazard maps is to provide
people with the information on the range of
possible damage and the accident prevention
activities.
Hazards and risk mapping

Hazard mapping
Hazard mapping provides input to:
- educational programs to illustrates local
hazards;
- scientists studying hazard phenomena
- land-use planners seeking to base settlement
location to reduce hazard risk
Hazards and risk mapping

Hazard mapping of a lab sector for flammable solvents and acute and chronic toxics

0- Low hazard 1-Moderate hazard 2-Medium hazard 3-Severe hazard

Hazards and risk mapping
Hazards and risk mapping
Risk perception and risk attitude

The perception people have of risks is steered

by a variety of factors that determine what risk is
considered acceptable and what risk is deemed
unacceptable.
Perception is very important, as if we have the
mere perception that a risk is high, we will
consciously or unconciously take actions to reduce
the risk.
Risk perception and risk attitude
Perception is strongly related with attitude.
Risk attitude can be regarded as the chosen state
of mind, mental view or disposition with regard to
those uncertainties that could have positive or a
negative effect on achieving objectives.

”A person’s risk attitude is his or her

chosen response to perception of significant
uncertainty.”
Risk perception and risk attitude
Perception – Attitude risk cycle model

Knowledge Perception

Consequences Attitude

Behavior
Engineering Risk Management - ERM
In engineering, there are many risk factors one must
take into consideration when planning or working on a
project, such as:
● Surpassing cost budgets
● Not meeting deadlines on planned schedule
● Funding is decreased or removed
● Regulations Change
● Outsourced parties do not perform up to expectations
● Parts do not show up on time
● Loss of project staff
● Chance of accidents and injuries
Engineering Risk Management-ERM

Engineering Risk Management Process

Engineering Risk Management - ERM
ERM encompasses different well-known
management disciplines such as change
management, project management, crisis
management, innovation management, etc.

The types of risk that can be handled by ERM,

and by the methods includes accident risks, natural
disasters, fire risks, technical risks, social risks,
labor risk, etc.
Engineering Risk Management - ERM

Simplified ERM Process

Summary and Conclusion

Managing Risk and uncertainties

Uncertainties and risks cannot be excluded from our
lives. Therefore, we should always be able to deal with them
in the best possible way.
To this end, a risk should be viewed as a two-sided coin:
one side is positive, and the other side negative. Bearing this
in mind, we need the right mind-set, enough information and
the right people to deal with risks and uncertainties.
Summary and Conclusion

Complexity of risk and uncertainties

Three types of negative risk exist: Type I encompasses all
risks where a lot of information is available, type II
encompasses all risks where only very scarce information is
available and type III encompasses all risks where no
information is available.
Summary and Conclusion

Hazards and risks

To exist, risk need three factors: hazards, losses and
exposure. Decreasing (or even avoiding or taking away) one
of these parameters, or the characteristics of these
parameters, in one way or another leads to lower risks (or
even no risks)
Summary and Conclusion

Risk perception and attitude

The way in which perceive reality is very important:
increasing the accuracy of our perception of reality leads to
increasing our adequate ability to understand, to interpret
and to efficiently and effectively deal with risk
Summary and Conclusion

Engineering Risk Management (ERM)

A variety of risk management schemes and frameworks
are available to be used in industrial practice. A framework
should always have a feedback loop built into it, where one
is certain that risk management efforts never stop.
Risk policy, assessment, communication and monitoring
should also always be part of the scheme.
End of Module-1

Thank you very much!