Project Risk Management

Prepared by

Ajay Kumar Singhal

______________________________________________________________________
AKS/TRG-NR/PRM/Rev-0 Dated 18-Jan-2009 Prepared by : Ajay Kumar Singhal Page 1 of 7

Project Risk Management

Construction projects, from inception to closure, encounter unlimited risks. The risks vary from project to project. Project risk management aims at planning and controlling of risks, which might affect the performance of the project. It involves identifying, analyzing, planning and controlling risks at project site.

Project Constraints :
Time Quantity Cost

What Is A Risk
Unknown

Unexpected Risk endeavor action Undesirable

Unpredictable

Risk Management
Risk is the degree of probability of an external event threatening the success of the Project.

Risk Management is the process of identifying, analyzing and drawing up plans to minimize their effect on a Project.

Project risks affect schedule or resources. Product risks affect the quality or performance. Business risks affect the organization.
Prepared by : Ajay Kumar Singhal Page 2 of 7

______________________________________________________________________
AKS/TRG-NR/PRM/Rev-0 Dated 18-Jan-2009

Project Risk Management

A systematic approach to control the level of risk to mitigate its effects

Risk Identification Risk Monitoring

Risk Analysis

Risk Analysis Risk Response Risk Planning

Controlled Risk Environment

Risk Identification
1) Acts of God : Flood, Earthquake, Landslide, Wind damage, Epidemic etc.

2) Financial & Economic : Investment risk, Inflation, Availability of funds, Fluctuations in currency exchange rates, Change in tax structures, Change in royalty structure of stone and sand, Effect of time & cost overruns.

3) Political and Legal : Site area is politically motivated, Presence and participation of union labour, Local personnel are to be engaged, Shifts in political leadership, Change in laws and regulations, Import-export restrictions and procedures, Requirement for licenses and permits, Pollution & safety rules. ______________________________________________________________________
AKS/TRG-NR/PRM/Rev-0 Dated 18-Jan-2009 Prepared by : Ajay Kumar Singhal Page 3 of 7

Project Risk Management

4) Project Scope: Ill-defined project scope, Frequent change in work scope, No extra work control.

5) Design : Design responsibility, No proper soil investigation, Frequent changes in design during construction, Unrealistic specifications / constructability of design, Poor design and shop drawings.

6) Physical : Inadequate or low quality procurement of resources, Constraints on the availability of labour, Non-availability of the material quality as well as quantity, Long hauling distance material problem, Non-availability of special equipments, spares parts etc, Non-availability of construction water, power, accommodations for labour and staff, Weather conditions; like high temperature / heavy rainfall, Low load carrying capacity of existing culverts / bridges on the route, Unsafe working conditions, Fire, wastage and theft.

7) Contractual : Insufficient time to prepare bid tenders, Unrealistic time schedule, Project schedules anticipate weather that may occur during the execution period, Conflicting conditions of contract, Delay in possession of site, Differing site conditions, Payment problems, Extra works / variations, Claims and disputes, Inability to take timely corrective action.

8) Leadership : No project vision, no team building, Poor motivation, Lack of senior management support, Limited authority / control for Project In-charge, Lack of co-ordination, Insufficient liaison with public services, ______________________________________________________________________
AKS/TRG-NR/PRM/Rev-0 Dated 18-Jan-2009 Prepared by : Ajay Kumar Singhal Page 4 of 7

Project Risk Management

 Barriers in communication / poor communications. 9) Organizational : Lack of competent / experience persons in the project team, Wrong selection of project team, No project manual / documented procedures / processes, Project being too complex for the available resources, Inadequate communications infrastructure, Poor quality control, Unsatisfactory conduct of status review meetings, Inability to take timely corrective action.

Risk Analysis
Asses the probability and seriousness of each risk. Asses the impact if it happens.

Risk Planning
Consider each risk and develop a strategy to manage that risk. Avoidance strategies o The probability that the risk will arise is reduced. Minimization strategies o The impact of the risk on the project or product will be reduced. Contingency plans o If the risk arises, contingency plans are planned to deal with that risk.

Risk Monitoring
Assess each identified risks regularly to decide whether or not it is becoming less or more probable. Also asses whether the effects of the risk have changed. Each key risk should be discussed at management progress review meetings.

Risk Response Method

Elimination o Tendering a very high bid. o Placing conditions on the bid. o Pre-contract negotiations as to which party takes certain risks. ______________________________________________________________________
AKS/TRG-NR/PRM/Rev-0 Dated 18-Jan-2009 Prepared by : Ajay Kumar Singhal Page 5 of 7

Project Risk Management

o Not biding on the high risk portion of the contract. Transfer o The activity responsible for the risk may be transferred To a contractor or designer by the Client. To a Sub-contractor by the Contractor.

o The activity may be retained, but the financial risk transferred, i.e. methods such as insurance.

Deferred o Activities can be moved to a later date in the Project when the adverse effects of events may be minimized or reduced.

Retention o Handling risks by the company who is undertaking the project. o Two retention methods, active and passive. Active retention is a deliberate management strategy after a conscious evaluation of the possible losses and costs of alternative ways of handling risks. Passive retention occurs through negligence, ignorance or absence of decision.

Reduction o Continuous effort. o Well-defined specifications. o Detailed site survey. o Detailed design. o Completing design before execution. o Early involvement of trained / expert project group. o Related with improvements of a companys physical, procedural, educational, and training devices. o Improving housekeeping, maintenance, first aid procedures and security. o Education and training within every department.

______________________________________________________________________
AKS/TRG-NR/PRM/Rev-0 Dated 18-Jan-2009 Prepared by : Ajay Kumar Singhal Page 6 of 7

Project Risk Management

To contact, e-mail at : ajaysinghal68@yahoo.com

______________________________________________________________________
AKS/TRG-NR/PRM/Rev-0 Dated 18-Jan-2009 Prepared by : Ajay Kumar Singhal Page 7 of 7

Project Risk Management