Arowwai Industries

RISK MANAGEMENT

T H E R I S K M A N A G E M E N T P R O C E S S I N P R O J E C T M A N A G E M E N T

PRESENTED BY GROUP B
 What Is Risk Management on Projects?

Project risk management is the

process of recognizing, analyzing, and
responding to any risk that develops
during the course of a project's life
cycle in order to keep the project on
track and on target. Risk management
should not be a reactive process; it
should be part of the planning
process to determine the risks that
may exist in the project and how to
control those risks if they do occur.

A risk is anything that may have an impact on the timeline,

performance, or budget of your project. Risks are potentialities,
and if they become realities in a project management setting,
they are labeled as "issues" that must be dealt with a risk
response strategy. As a result, risk management is the act of
recognizing, categorizing, prioritizing, and planning for risks
before they become problems.
 Sources of Construction Risks
Risk management is the process of identifying and evaluating the hazards in the business in order to reduce
their impact. Planning, monitoring, and controlling occurrences of risk are all part of the construction
process. Your risk management plan, a document that defines the risks and your strategies for dealing with
them, serves as the process's focal point.
To create a risk plan, you must first identify the elements that are most likely to damage your initiatives. The
following are the most typical sources of building risks:

01 02 03 04 05

SAFETY RISKS FINANCIAL RISKS LEGAL RISKS PROJECT RISKS ENVIRONMENTAL RISKS

Any construction site risks or
hazards that can lead to
worker accidents.
Factors that impact your
financial flow, including lack of
sales, problems with the
economy, unexpected cost
increases, and competition
with other firms.
Potential disputes in the
fulfillment of contracts with
clients
Project hazards such as poor
management of resources,
miscalculation of time, lack of
proper policies, or
misunderstanding of project
deliverables
Floods, earthquakes, and
other natural phenomena that
damage construction sites and
make work inaccessible
Managing project risk and opportunities
Construction projects are exposed to risks at the timeof their coming into existence. In the various
stages,it must first of all be considered what risks theprincipal would like to counter with measures
and howcostly these measures are. For this, risks, possible riskcosts, measures and costs of the
measures must beidentified and suitable measures must be found inorder to avoid errors in the
future. Risk management in construction projects is of greatimportance, as shown in the figure
below.

Although at the startof a project, through the introduction of risk mana-gement, a increased
expense is incurred, this iscompensated for, in particular through the advantagesof risk
management. In the planning phase possiblerisks for the subsequent project success can
beidentified and reduced through their incorporation intothe planning.

RISK RISK RISK

IDENTIFICATION ANALYSIS ASSESMENT

GOAL RISK RISK

CONTROL SURVEILANCE IDENDIFICATION
 STEP 1. IDENTIFYING RISKS

Risks that are not recognized cannot be analyzed or managed. However,

comprehensive covering of the risks is unachievable. Therefore, the objective of risk
management is to cover the main hazards as completely as feasible. Risk identification
must therefore be carried out in a forward-thinking and project-progressive manner,
because not all risks are completely recognizable before the start of the project, and
additional risks may emerge during project implementation.
In principle, creative and guided methods are differentiated. The first type allows for
the discovery of new types of risk. Guided methods, such as checklists, are used to
identify risks, with the help of which the various types of risk are checked.
 STEP 1. IDENTIFYING RISKS

The following risks occur in particular in projects, and are classified according to risk category.

RISK OF STRATEGIC DECISIONS QUALITY RISKS

-Defect in interim results
-Failure to recognize chances
-Lacking application of project methods
-Lack of ability to consistently use chances
-Too few controls / tests EXRTERNAL RISKS

-Natural occurrences
-Political changes
COST RISKS PERSONNEL RISKS -Changes in society
-Planning changes -A shift in the market / new markets
-Complicated project conditions -Lack of skills
-Disagreements in the team -Legal developments
-Customer fails to pay -Shifts in sectoral trends
-Technological changes

DEADLINE RISKS
-No handover in good time
-The project end is delayedRisks
 STEP 1. IDENTIFYING RISKS

Five basic ways through which risk identification is done operations

Brainstorming
All relevant project participants gather and thoroughly discuss all areas of the project,
raising their opinions and thoughts and anticipating hazards in their perceptions.
There is a facilitator who takes notes and distinguishes between the important and
unneeded ones.
 STEP 1. IDENTIFYING RISKS

Five basic ways through which risk identification is done operations

Delphi technique
Questionnaires are answered anonymously by a group of expert panelists in rounds, with the
goal of converging towards one shared response through enhanced judgment after each round.
The process is terminated when a predetermined stop criterion is met. (no. of rounds, stability)
 STEP 1. IDENTIFYING RISKS
Five basic ways through which risk identification is done operations

Interview/Expert Opinion

Experienced personnel and relevant people are consulted for their opinions and advice to avoid
factors affecting risk.
 STEP 1. IDENTIFYING RISKS

Five basic ways through which risk identification is done operations

Past Experience

Similar projects are brought up and thoroughly reviewed in order to determine the aspects that may have
an impact on the project.
 STEP 1. IDENTIFYING RISKS

Five basic ways through which risk identification is done operations

Checklists

A preset list of all the hazards that could jeopardize the project is explored,
drawn, and contrasted with previously accomplished projects with analogous
criteria.
 STEP 2. ANALYSING RISKS

The goal is to characterize the risk scenario as completely and

exactly as possible, as well as to prioritize the risks. The identified
risks are analyzed in terms of their likelihood of occurrence and
impact on the project. First and foremost, a portfolio and a risk
costs evaluation are used for classification purposes.
Individual risks must be analyzed and compared using
criteria. A risk must always be characterized as a harm or loss-
causing event to which a specific value may be assigned. Damage
or loss can be appraised in terms of costs and probability of
occurrence, and a risk value can be derived as a result.
STEP 2. ANALYSING RISKS

After identifying every possible risk, they are valued using qualitative and quantitative approaches. In risk management, the risk assessment
approach uses available information to determine the frequency of occurrence and the level of consequences.

Quantitative method

Quantitative methods are utilized for major projects to analyze the effect of risks
by crunching facts and numbers.
Quantitative analysis necessitates more work because it necessitates a large
amount of data in order to produce a precise and accurate analysis.
STEP 2. ANALYSING RISKS

Qualitative method
It is typically used for small and medium-sized projects, and it entails
listing and compiling risks, as well as prioritizing and deprioritizing them
based on the opinions of relevant persons.
The risks are also assessed as high, medium, or low based on the
organization's collective perspectives and risk tolerance boundaries.
When there is little data or a strict time constraint tied to the project, the
qualitative method is also applied.
 STEP 3. ASSESSING RISKS

The risk assessment includes the qualitative assessment and

quantitative measurement of individual risks, as well as the
interrelationship of their effects.

The following methods of risk assessment and risk comparison

can also be used in construction projects:
 STEP 3. ASSESSING RISKS

METHOD OF RISKS ARE THE EXAMPLES GIVEN

Risk map

The risk map depicts an enterprise's risk profile. It's also known as a risk landscape, riskmap, or risk matrix. A risk
map can show which risks should be addressed first. This prioritizes the risks that cannot be tolerated and could
jeopardize the enterprise's continued existence. Thus, risk classification in a risk matrix allows for a
differentiated assessment of two classification criteria: the probability of occurrence and expected value.
 STEP 3. ASSESSING RISKS

METHOD OF RISKS ARE THE EXAMPLES GIVEN

Probable maximum loss

The quantitative risk determination process is designed to estimate the probability of dangerous occurrences
within a risk scenario. In determining the risk of major damage or loss.
 STEP 3. ASSESSING RISKS

METHOD OF RISKS ARE THE EXAMPLES GIVEN

Qualitative assessment

Even in the absence of objective data, risks must be quantified and estimable. One way is qualitative evaluation
and weighting, in which risks are subjectively rated based on the probability of their occurrence and the amount
of damage or loss.
 STEP 3. ASSESSING RISKS

METHOD OF RISKS ARE THE EXAMPLES GIVEN

ABC analysis

The ABC analysis is based on the notion that a small number of components typically account for
the majority of a whole. The purpose of the analysis is to determine which components account
for the majority of the project value and, as a result, which factors justify larger planning and
control expense.
 STEP 3. ASSESSING RISKS

METHOD OF RISKS ARE THE EXAMPLES GIVEN

Key performance indicator

Key performance indicators cover quantitatively measurable variables, providing a foundation for
comparison. If a significant quantity of data and figures must be compared, they should be
examined for risk assessment. For the key performance indicators, threshold values from which
a risk warning exists are determined.
 STEP 4. CONTROLLING RISKS

Controlling risk is the active influencing of the risks determined in

the context of the risk analysis. Risk management measures can be
divided into two categories: cause-related and effect-related measures.
 STEP 4. CONTROLLING RISKS

Remove the threat of the risk from the project.

AVOIDING RISK
Example: Turning down projects changing scopes or schedules

Pass the risk ownership to a third party to assume.

TRANSFERING RISK
Example: creating mitigation plan documents.
 STEP 4. CONTROLLING RISKS

Take action to reduce the probability of the risk.

MITIGATING RISK
Example: Changing suppliers, training workers

Recognize the risk’s impact and deal with it as it occur.

ACCEPTING RISK
Exmaple: Buying insurance, issuing performance books
 STEP 5. MONITORING RISKS

Risk monitoring is the continual operational control of the effectiveness of risk

control strategies. The purpose of risk management is not to eliminate all hazards
from the project. The risk monitoring ensures that the project's risk position matches
to the risk conditions sought after.
 STEP 5. CONTROLLING GOALS

Following the identification, analysis, and assessment of

risks, goals-controlling measures must be implemented. The
control process can be divided into several steps:
determining the goal value, determining the actual value,
target/actual comparison and analyzing variances. As a
continuous process, risk identification, analysis, and control
are checked in the context of monitoring to determine
whether risk control is done properly.

If there are differences between the actual risk situation and

the risk scenario desired, actions must be taken to identify
the causes. The risk strategy must then be altered or revised
based on these recognitions. As a result, by monitoring the
risk, it is ensured that risk management requirements are
followed.
BE N E F ITS O F RI S K MANAG E M E NT I N CO N STRU CTI O N

Streamlined operations

Once a risk management plan is in place, it makes future projects easier to evaluate. Team members have
the knowledge and tools they need to make decisions and prevent risk, increasing the company’s efficiency.
BE N E F ITS O F RI S K MANAG E M E NT I N CO N STRU CTI O N

Enhanced safety

Risk management plans also assist teams in adhering to all safety and security rules on building sites. The
possibility of a safety hazard is reduced, allowing projects to go more quickly.
BE N E F ITS O F RI S K MANAG E M E NT I N CO N STRU CTI O N

Increased profits

Taking unmanaged risks might have a negative impact on the company's profits. A well-
crafted and executable risk plan, on the other hand, can help to mitigate these risks.
Streamlined operations, improved safety, cheaper costs, and increased project confidence
all contribute to increasing earnings over time.
BE N E F ITS O F RI S K MANAG E M E NT I N CO N STRU CTI O N

Higher confidence in projects

Having a solid plan in place allows teams to acquire confidence in their initiatives over time as they
balance risks. Teams can save time and resources in their projects since they can plan for and correct
any faults.
PROJECT DISPUTES

Conflictsts an Disputes in Construction Projects

There are different elements such as the owner, consultant, third-party linked, and so on that affect the effectiveness and
productivity of work, as well as the continuous completion of the project.

Thus, managing such aspects is critical for the smooth running or operation of a construction project without any occurrences of
conflicts and disagreements for greater profit, rate of return, on-time completion of project, and so on.
PROJECT DISPUTES

Owner Related
With the increased complexity of any building project, it is extremely difficult to avoid even minor errors that lead to claims by
the owner, which end in conflicts. Similarly, unrealistic expectations and delays in payments from the owner's side, among other
things, are the primary causes of disputes in any building project. Several experts have concluded that payment delays are one of
the primary reasons of tensions and disputes.

Contractor Related
The contractor is one of the aspects that have a significant effect in the success or failure of any construction project. If the
contractor’s management and administrative processes are good, there should be little chance of dispute and conflict in the
construction project. A contractor’s poor decision might lead to a huge problem, such as underpricing the tender; most
contractors think, “How much can we get out of these people in extras?” They underpriced the job without fully understanding
the design and specifications, and at the time of project execution, they may not be able to match the requirements, resulting in
future disagreements and disputes.
PROJECT DISPUTES

Consultant Related

Design, drawing, specification, and so on falls under the category of consultant related thus, if there are any minor errors in
drawing and design then as a result of it the whole project gets affected by introducing delay in the project which leads to
conflicts and dispute. There are various reasons for the error in design are lack of knowledge of consultant and excessive
quantity of work which leads to such faults.

Third Party & Human Behavior Related

It consists of two key factors: controllable and uncontrollable. Controllable factors are those that can be changed in any manner, including human
factors such as a lack of team spirit among participants, a lack of communication, misunderstandings among players, and so on. As a result, these
factors contribute to conflicts and disagreements in any project.

Uncontrollable elements are those relating to a third party, such as unforeseen/unpredictability, people protesting, and so on are elements that are
completely autonomous, and while they can be prevented, full control is not attainable. As a result, conflicts and disagreements about it are
unavoidable.
PROJECT DISPUTES

Design & Contract Related

Various terminology are used in contracts, including the use of confusing terms in the contract document and the usage of double meaning terms in
these papers. The fundamental motivation for utilizing bespoken phrases is that by employing these terms, participants might profit at the time of
transaction.Following the conclusion of the project, these bespoken terms were provided with their second meaning in order to maximize profit. This
profit-making process causes tensions and disagreements in the construction business. Lack of available knowledge includes design-related factors,
which might lead to conflicts in an ongoing construction project.
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 REFERENCES

https://www.tandfonline.com/doi/epdf/10.1080/16111699.2006.9636126?needAccess=true&role=button

https://www.projectmanager.com/blog/risk-management-process-steps

https://www.tandfonline.com/doi/epdf/10.1080/16111699.2006.9636126?needAccess=true&role=button

https://www.bigrentz.com/blog/construction-risk-management

https://theconstructor.org/construction/risk-management-construction-projects/24873/

Soni, S., Pandey, M., & Agrawal, S. (2017). Conflicts and disputes in construction projects: An overview. International
Journal of Engineering Research and Application, 7(6), 40-42.
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