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Perspective

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LET'S PUT IT INTO PERSPECTIVE.

Clip brige collapse during construction due to hit by vessel

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Courtesy of Youtube

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LET'S PUT IT INTO PERSPECTIVE.

Clip worker

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Courtesy of Youtube

LET'S PUT IT INTO PERSPECTIVE.

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communities.ca.com

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LET'S PUT IT INTO PERSPECTIVE.

Clip K3

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LET'S PUT IT INTO PERSPECTIVE.

Clip collapse building

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Courtesy of Youtube

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LET'S PUT IT INTO PERSPECTIVE.

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LET'S PUT IT INTO PERSPECTIVE.

T 30
17000 m2 HOTEL
1.

9 Magnitude Earthquake Resistant

Diagonal Steel Bracing System
Its Tested 5 times more earthquake resistant than
conventional buildings

2.

5 times more energy efficient

15cm glass curtain wall insulation
External solar shading
Internal window insulation
Heat recovery fresh air

3.

20 times purer air

3 stages air filtration indoor 20 times cleaner than outdoor
Air quality monitoring in every room
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LET'S PUT IT INTO PERSPECTIVE.

Clip T30 build 30 storey building in 360 hours

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Courtesy of www.BSB.com

Emphasize

Construction Industry Challenge

Uncertainty,
Complexity and
Divers in terms of:
activities,
resources,
participants and
site characteristics

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Putting Risk
into perspective.(again)

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http://www.qualitydigest.com/inside/quality-insider-article/work-breakdown-structure-quality-strategies-complex-eto-environments.html

Putting Risk into perspective.

Man

Methods

Money

Machines

Materials
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Putting Risk into perspective.

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http://cnx.org/content/m31209/latest/

Basic Principles

REVISIT
FOR PERSPECTIVE EFFECTIVITY
EFFICIENCY
COST

ENVIRONMENT

SAFETY

QUALITY

TIME

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http://cnx.org/content/m31209/latest/

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Emphasize

As consequences
During project implementation, the PM
always facing uncertain condition. He/She
must identify and control potential problems
and mitigate the effects of any occurrence
that could affect project success.
Due to factors involved, PM must make
decisions in a timely and intuitive manner
relying on limited information, which is
sometimes highly subjective.
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Emphasize

Today Construction Industry

Shortened project durations,
Increasingly complex projects,
Multiple stakeholders with controlling
interests,
New Materials, Equipments, and
Technologies,
Sustainable Construction Lean
Construction, etc
Its near parallel condition with today business environment!!!

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Rapid Change
Complexity
Global Economy
Hyper Competition
Customer Focus

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FACTORS & THEIR RELATIONS

Factor 1

Factor n

Factor 2

Factor 6

Factor 3

Factor 5

Factor 4

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Putting Risk into perspective.

Stakeholder; Design;
Activities; Resources;
Schedule; Nature
(Chapman & Ward)

What the future may

hold?

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Putting Risk into perspective.

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DUCTH CONSTRUCTION EXAMPLE

Staveren, M.V., Uncertainty and Ground Conditions: Aroy_2014

Risk Management Approach, Elsevier, 2006

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DUCTH CONSTRUCTION EXAMPLE

Staveren, M.V., Uncertainty and Ground Conditions: Aroy_2014

Risk Management Approach, Elsevier, 2006

REFERENCES
1.
2.
3.

4.

5.

6.

7.

8.

9.

10.
11.

Smith, N. J., Appraisal, Risk, and Uncertainty, Thomas Telford Publishing, 2003
A Guide to the Project Management Body of Knowledge, Fourth Edition, 2008
Garvey, P.R., Analytical Methods for Risk Management, CRC Press - Taylor &
Francis Group, 2009
Dallas, M., Value and risk management: a guide to best practice, Blackwell
Publishing Ltd, 2006
Chong, Y.Y., Brown, E.M., Managing Project Risk Business Risk
Management for Project Leader, Prentice Hall, 2000
Kendrick, T., Identifying and managing project risk: essential tools for failureproofing your project, American Management Association, 2003.
Flanagan, R., Norman, G., Risk Management and Construction, WileyBlackwell Science, 1993
Chapman, C and Ward, S., Project Risk Management: Processes, Techniques
and Insights, John Wiley and Sons, 1999
Evans, J.R., Olson, D.L., Introduction to Simulation and Risk Analysis, 2 ed,
Prentice Hall, 2002
Royer, P. S., Project Risk Management A Proactive Approach, 2002
Papers and abundant sources on the
Web
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DEFINITIONS
Risk: a situation involving exposure to danger
(http://oxforddictionaries.com/definition/risk).

Risk: A potential event that may have a detrimental affect

on time, cost, quality and deliverables

(http://www.risk-management-

basics.com/risk_management_001_What_is_risk.shtml).

Risk: The combination of the probability of an uncertain

event and its consequences. A positive consequence
presents an opportunity;
a negative consequence poses a threat (Project Risk Management Guidance for
WSDOT Projects - Washington State Department of Transportation).

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DEFINITIONS
Risk is the potential that a chosen action or activity (including
the choice of inaction) will lead to a loss (an undesirable
outcome) (http://en.wikipedia.org/wiki/Risk#Risk_versus_uncertainty)
Risk is effect of uncertainty on objectives

(ISO 3100)

Risk: are events that, if they occur, will cause unwanted

change in the cost, schedule, or technical performance of an
engineering system (Garvey, 2009)
Project risk is an uncertain event or condition that, if it occurs,
has a positive or a negative effect on at least one project
objective, such as time, cost, scope, or quality (i.e., where the
project time objective is to deliver in accordance with the
agreed-upon schedule; where the project cost objective is to
deliver within the agreed-upon cost; etc.) (PMBOK, 2004)
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RISK AND UNCERTAINTY

RISK represents UNCERTAINTY.
UNCERTAINTY.
Certainty
exist only when one can specify exactly what will happen during the period of
time covered by the decision
where each action is known to lead invariably to a specific outcome

Uncertainty:
is the indefiniteness about the outcome of a situation
is situation in which there no previous history that can be considered
where actions may lead to a set of consequences, but where the
probabilities of these outcomes are completely unknown

Decision made under risk is when decision-maker can assess,

intuitively or rationally the probability of particular event occurring. Or
also can say, where each action leads to one of a set of possible
specific outcomes, each outcome occurring with a known probability
RISK is a PROBABILISTIC event.

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RISK = f (Probability, Impact)

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INVESTMENT CONTEXT

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INVESTMENT CONTEXT
Economic Uncertainty

Case of allocation of resources/capital across

different investments

Expected of returns / profits: ROI or

IRR
Need other indicator

Possible deviations from expected

return

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INVESTMENT CONTEXT
Agent

Principals
(commission construction)

(various experts that produce the

building)

ROI or IRR

Financial
Market

Saving

Building
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INVESTMENT CONTEXT
Agent
(various experts that produce the building)

Committing Resources
Labor

Capital
Income

GAP
Expenditure

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INVESTMENT CONTEXT
Agent
(various experts that produce the building)

Own Money
Project X
Potential
Profit

Financial
Market

Borrow

Saving

Others
Projects

Project X
Potential
Profit

Cost of
Borrow

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FOUR COMMON WAY TO TACKLE RISK

IN CONSTRUCTION INDUSTRY
Pundits argued:

Umbrella Approach: allow for every possible eventually

by adding a large risk premium to the price
Ostrich Approach: bury your head and assume
everything will be alright
Intuitive Approach: dont trust all the fancy analysis,
trust intuition and gut feel
The brute force Approach: focuses on the
uncontrollable risk and force things to be controlled
Few companies can survive on above
approaches
Leave from AGAP attitude be aware of WHIP analysis
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CONSERVATIVE ATTITUDE ON RISK

Insulate from RISK
UNLOAD the UNEXPECTED COST
Raising the
Price

Hide from RISK

RISK AVERSE
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ATTITUDE ON RISK

Risk tolerance is the degree, amount or

volume of risk that an organization or
individual will withstand (PMBOK Guide)

Risk Averse:
people/organization
that not comfortable
with risks; they are
willing to avoid the
risks, once identified,
rather than taking them
Risk-neutral: people
manage risks based
on their expected
value, that is,
probability times impact
Risk-seeking : people
see risks as challenges
and feel exciting
dealing with them

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ATTITUDE ON RISK
Risk-neutral
Risk-aware (Chong and Brown, 2000); projectplayer and investors are those who try to see the
uncertainties of life for what they are and take
appropriate action. These people adopt a consistent risk
analytical and risk management procedure to select the
best course of action.

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PEOPLE AND RISK

Flanagan, R., Norman, G.,, 1993

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PEOPLE AND RISK

Flanagan, R., Norman, G.,, 1993

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BASIC RISKS CLASSIFICATIONS

Pure risk (Static risk) is a risk in which there is only a
possibility of loss or no loss (harmful)there is no possibility
of gain. Pure risk is insurable
risk aversion attitude.
Small chance of occurrence The probability associated
with risk occurrence is small.
Grave results In case of risk occurrence the results are
significant.
Instant impact The impact of risk occurrence is instant.

Speculative risk (dynamic risk) differs from pure risk

because there is the possibility of profit (gain) or loss, such
as investing in financial markets.
maximizing
opportunities.
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EXAMPLE OF BASIC CLASSIFICATION

The various type of risk relating to the construction industry

(Flanagan, R., Norman, G., 1993)

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