CONSTRUCTION RISK MANAGEMENT

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Questions and Answers

What is the primary focus of risk management in a project?

Avoiding collaboration with team members

Delaying project completion

Identifying potential risks (correct)

Increasing total project costs

Which of the following is NOT considered a benefit of risk management?

Reduced costs

Increased project delays (correct)

Increased safety

Increased productivity

What is the purpose of analyzing the impact of risk?

To enhance team dynamics

To allocate resources evenly

To determine project scope

To develop risk strategies (correct)

Which risk management approach focuses on mitigating impact?

Reduce or offset validated risks Signup and view all the answers

What should be arranged to implement risk mitigation effectively?

Clear communication of risk strategies Signup and view all the answers

Which step in risk management involves sorting and prioritizing risks?

Analysis Signup and view all the answers

The key principle of managing risk does NOT include which of the following?

Reducing personal accountability Signup and view all the answers

What is the desired outcome of risk mitigation strategies?

Minimize financial loss Signup and view all the answers

What is the primary goal of risk management in project management?

To reduce the potential for loss Signup and view all the answers

Who is primarily responsible for monitoring and managing risk in a project?

The entire project team Signup and view all the answers

What might be an unexpected impact on a project due to unforeseen incidents?

Scheduled project delays Signup and view all the answers

What phenomenon describes how small changes can lead to significant effects on a project?

Butterfly Effect Signup and view all the answers

What does effective risk management contribute to?

Ensuring project success Signup and view all the answers

Which of the following is NOT an aspect of risk management?

Avoiding all risks Signup and view all the answers

What does the term 'collective responsibility' imply in the context of risk management?

All team members share the responsibility for managing risks Signup and view all the answers

How can monitoring risks effectively impact a project?

It helps in making informed decisions Signup and view all the answers

What is one of the advantages of probabilistic methods in project management?

Increased confidence in decision-making Signup and view all the answers

Which of the following is NOT a form of risk mitigation?

Risk enhancement Signup and view all the answers

What does risk evaluation primarily allow project managers to do?

Evaluate risks and mitigation opportunities Signup and view all the answers

Why is risk management described as a team sport?

It requires collaboration and awareness from the entire team Signup and view all the answers

What is one action that should be taken throughout the project to aid in risk management?

Hold risk tracking workshops regularly Signup and view all the answers

Which of the following options refers to a method for concluding risks?

Risk closing Signup and view all the answers

What should be done with identified risks during a project?

Document them and close them out appropriately Signup and view all the answers

Which strategy involves bearing the consequences of a risk?

Risk acceptance Signup and view all the answers

What is the primary purpose of risk avoidance in project management?

To eliminate the risk entirely Signup and view all the answers

When is risk retention or acceptance typically used?

When risk is deemed too expensive to mitigate Signup and view all the answers

Which risk mitigation strategy involves sharing the risk with others?

Risk transfer Signup and view all the answers

What characterizes the risk control/reduction strategy?

It continually monitors and corrects issues as they arise Signup and view all the answers

What is the role of contingency in risk mitigation?

To serve as a last resort option for uncertainty Signup and view all the answers

In which situation is risk deflection most applicable?

When risks need to be continuously monitored instead of eliminated Signup and view all the answers

Which risk treatment is typically a conscious decision made by the project entity?

Risk retention/acceptance Signup and view all the answers

Which strategy should be used as a last resort option to manage project risk?

Contingency Signup and view all the answers

What is the primary purpose of a risk register in project management?

To assess and manage potential risks Signup and view all the answers

What common misconception do stakeholders have regarding documentation of risks?

Less formal documentation saves time and effort Signup and view all the answers

How do facilitated workshops help in risk assessment?

They reduce biases and avoid groupthink Signup and view all the answers

What aspect of risk management is critical according to the project team?

Discussing risks regularly regardless of their current impact Signup and view all the answers

Why might stakeholders be resistant to formal risk management processes?

They fear potential delays due to formal processes Signup and view all the answers

Which method is identified as a common approach for gathering input in risk management?

Brainstorming sessions Signup and view all the answers

What is the risk of not discussing risks regularly within a project?

Increased costs and delays Signup and view all the answers

What simulation technique is mentioned in the context of risk management?

Monte Carlo simulations Signup and view all the answers

What is a characteristic of contingency risk?

It involves risks that the team is aware of but cannot identify. Signup and view all the answers

What does risk avoidance typically involve?

Taking steps to eliminate the risk. Signup and view all the answers

Which of the following accurately describes risk retention?

It involves making a conscious decision to accept risks. Signup and view all the answers

What is a critical aspect of risk control/reduction?

Implementing measures to mitigate consequences. Signup and view all the answers

Why might cost and schedule mitigation strategies be unreliable?

Due to lack of risk clarity or definition. Signup and view all the answers

What is a possible outcome of a probabilistic evaluation related to risks?

It accounts for known risks and their probabilities. Signup and view all the answers

What does effective contingency planning involve?

A process for continuous monitoring and adjustments. Signup and view all the answers

What scenario might necessitate using risk acceptance?

When the consequences of a risk are deemed manageable. Signup and view all the answers

Study Notes

Construction Contract and Risk Management

This presentation covers construction contract and risk management.
The material is part of a Project Management Institute (PMI) course.
Copyright ©2024 Project Management Institute, Inc.

Avocet Island Project

The presentation uses a hypothetical project, Avocet Island Project.
The text highlights the importance of anticipating the unexpected and evaluating its impact on the project.

The Butterfly Effect

Monitoring and managing risk is a collective responsibility within a project.
Aim to ensure project success.
Aim to reduce potential for loss within projects

Objectives

Classify, prioritize, and mitigate risks.
Introduce a risk management process.
Review risk management tools and techniques.

Historical Context: Asipu People

The presentation shows historical context in the Asipu people with focus on:
- Risky business ventures
- Marriage arrangements
- Suitable building sites.

The Four Revolutions

Slides show the four revolutions (Steam, Electricity, Computer, Technology).
Key characteristics of each revolution, including the technologies of each are detailed.

Innovations in Risk Management

Formalization and standardization of risk management.
Analysis to understand and categorize risks.
Holistic risk management.

Risk Management Is the Process of ...

Risk management is a continuous and cyclical process.
- Identifying risks
- Classifying risks
- Analyzing risks
- Prioritizing risk
- Mitigating risk

Key Principles

Identify potential project risks.
Analyze and determine impact of risk
Reduce or offset proven risks
Plan how to implement risk mitigation strategies

Risk Management Benefits

Increased safety
Increased productivity
Increased quality
Reduced time
Reduced cost

Sorting Activity: Approaches to Risk

A sorting activity is available for the user to interact

Approaches to Risk

The slide outlines approaches to risk for Owners, Designers, and Contractors.

Real or Perceived Risk?

Lists of potential factors considered as real or perceived risks:
- Availability of information
- Experience of project participants
- Understanding risk factors
- Knowledge of local conditions
- Stability of risk factors
- Reliability of assumptions

Types of Risk

Strategic risk
Program risk
Subprogram risk
Project risk
Contractor risk
The slide shows a hierarchy of risk, with risk types becoming narrower.

Causes of Risk

The possible sources of risk within a project include:
- Project-related
- Competitiveness
- Contractual
- Financial
- Stakeholder-based
- Occupational
- Environmental

Identifying and Classifying Risk

Stay objective.
Introduce structured techniques for risk identification and classification.
Enables risk tracking and mitigation.

Risk Assessment

Time and/or cost impact
Occurrence of risk
Likelihood
Probability.

Generating Risk Estimates

Identify all potential risks
Determine necessary mitigation methods
Consider likelihood and frequency of risk occurrence.

Risk Prioritization

Define the value of risk.
Likelihood of risk occurrence
Relative impact
Availability of quantifiable evidence.
Identify and address gaps in information.

Consider Risk Assessment

The slides prompt consideration of whether an incident (Avo) is negligible or impactful, and the risks associated.

Risk Analysis

Probability of impact.
Probabilistic analysis models
Identifying possible outcomes (best and worst case scenarios).
Estimating cost and schedule contingency estimates.

Advantages of Probabilistic Methods

Management of project costs, schedules, and risks.
Improved confidence in decision-making
Improved collaboration within project.

Risk Mitigation

Risk avoidance (prevent the risk from occurring).
Risk acceptance (accept/embrace a risk).
Risk control (reduce likelihood/impact of a risk).
Risk transfer (transfer a risk to another party).
Contingency planning.

Risk Evaluation

Evaluate risks, mitigation, and opportunities (threats and benefits).
Determine which risks can be closed.
Enable contingencies to be executed
Allows for management of risk using resources and expertise

Risk Management Is a Team Sport

Risk mitigation and awareness.
Risk tracking and closing associated processes.
Conducting risk workshops.
Formal risk workshops help the team focus on risk management.

Risk Management Process Summarized

Risk identification
Risk mitigation
Team member responsibilities.

Avocet Island Project: Risk Management Process

Presents questions for project risk management:
- Which risk has the greatest impact?
- What ramifications might result from the risk?
- Which solutions might you consider?
- How will you evaluate your choices?

Capacity for Risk

Amount and type of risk stakeholders can support.
Access to financing.
Projected project returns.
Project type and expected outcomes are key elements to building risk capacity.

Understanding Risk Appetite

Strategy
Incentivization and performance management
Risk Management Approach
Funding structure and budget — critical factors to understanding and accepting levels of risk.

Prioritize and Compare Criteria

The criteria for prioritization and comparison of project elements:
- Budget
- Design
- Risk
- Schedule
- Owner expertise.

Project Delivery Methods and the Capacity for Risk

Select project delivery method (Design-bid-build, Design-build, Construction manager at risk, Integrated project delivery).
Articulate and consider project risks associated with the delivery method chosen.

Matching Activity: Project Delivery Methods

Activity for assessing project delivery methods

Discussion: Project Delivery Methods and Risk Appetite

Discuss the project delivery methods and their capacity for risk.
Which method offers the greatest capacity for risk?

Project Delivery Model Selection and Risk Mitigation

Increased profits and reduced costs.
On-time project completion
Reduction in loss to project due to mitigation strategies.

Risk Allocation and Mitigation

Risk allocation strategies
Risk mitigation strategies.

Risk Profile

Action taken to manage risk.
Unintended consequences.
Unforeseen events.

Risk Mitigation Factors

Type of risk.
Effort.
Contract terms.
Delivery model.

Risk Mitigation Treatments

Risk avoidance
Risk retention/acceptance
Risk control/reduction
Risk transfer/deflection
Contingency

Contingency Risk Scenarios

Lack of risk clarity or definition.
Cost and schedule mitigation cannot be reliably established.
Accounting for known risks.
Risks that the team is aware of, but cannot identify.

Matching Activity: Risk Mitigation Treatments

Matching activity for different risk mitigation treatments.

Risk Management Tools and Techniques

Tools for risk management include:
- Documentation reviews and experience interviews
- Risk registers
- Brainstorming and facilitation workshops
- Monte Carlo simulations
- The Delphi technique

Benefits of Standardized Techniques and Tools

Benefit of standardizing in risk management:
- Checklist of potential risks
- Standardized risk terminology
- Risk identification and assessment processes
- Progress monitoring
- Project alignment
- Improved communication
- Risk evaluation and reconciliation
- Training
- Benchmarking
- Capturing lessons learned

Documentation and Experience Interviews

Documentation helps in identifying risks (contracts, design documents, project plans, risk checklists).
Project management information systems (PMIS)
Experience-based interviews.

Risk Matrices

"Big picture" visualization of problems and opportunities in risk management.

Risk Registers

Description and cause of risk
Likelihood of occurrence
Relative impact
Mitigation actions
Responsible parties
Status of risks

Integrated Project Risk Assessment (IPRA) Tool

IPRA tool to evaluate risks in a project.

Consider Risk Registers

Stakeholders' differing viewpoints on recording and managing risks associated with a project event (Avo incident)

Brainstorming

Bringing together relevant parties
Creating a risk-free environment.

Facilitated Workshops

Common approach to gathering input.
Reduce biases and provide facilitated guidance.

Monte Carlo Simulations

Continuous distribution (Normal, Uniform, Triangular)
Discrete distribution methods
Probability of risk events and their outcomes.

The Delphi Technique

Questioning technique to get a consensus estimate on the duration or other aspects of a project—how long it will take, how confident are you?

The Delphi Technique in Action

Example of how the Delphi techniques work on a graph—maximum, expected, and minimum costs with various scenarios.

Tools and Techniques: Summary

Effective communication.
Regular risk reviews.
Sound business planning.
Pre-project planning and alignment.
Solid project execution — critical aspects of well-executed risk management.

Consider Tools and Techniques

The Delphi technique is suggested for risk assessment and outcome prediction, but this must be considered against the benefits and costs of the extra effort.

Adopting Risk Management

Key aspects in adopting risk management:
- Minimizing project risks
- Increasing predictability of project estimations
- Preventing project disasters

Embedding a Risk-Aware Culture

Breaches and near misses (incidents).
Communication effectiveness
Assessing lessons learned and necessary remedial actions

Implementation Challenges

Lack of process knowledge
Changes to project culture
Lack of policies or procedures
Lack of transparency
Lack of resources (people, equipment, finances)

Recommendations for Successful Adoption

Developing risk management process.
Implementing a governance structure
Implementing a process to categorize and assign ownership of risk levels (risk management workflow).
Documenting all risks.
Conducting regular risk reviews

Avocet Island Project: Risk Mitigation Treatments

Questions for risk mitigation/treatment and treatment selection strategy:
- Which risk mitigation strategy applies?
- Which risk assessment tools and techniques can support this choice?

Questions

Presentation concluded with a Questions section, as expected.

Thank You

Presentation concluded with a thank you slide.

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Description

Test your knowledge on the key principles and practices of risk management in project management. This quiz covers the essential concepts such as risk analysis, mitigation strategies, and the responsibilities involved in managing risks. Discover the unexpected impacts and the importance of effective risk management in projects.