Risk management is a process used in all industries to reduce the risk. The Risk management tool usage changes from sector to sector and hence each sector has developed their own risk management tools and methodologies to mitigate the risk. But the concept remains the same behind all the tools (Ropel, 2011). The main steps for risk management irrespective of the sector are: 1. Risk Identification 2. Risk Assessment 3. Evaluation of the risk 4. Steps to mitigating the risks 5. Regular monitoring and review of the risks Here we will discuss risk management in the construction sector and in execution of construction project, project risk management is one of the most critical phase for successful completion of the construction project. Risk can be both negative and positive for the project. Negative risks are considered as threats and positive risks are taken as opportunities. Risk management also applies to operational functions of an organization. Risk management covers all types of listed risks like: 1. Financial risk 2. Quality risk 3. Reputation risk 4. Business impact 5. Long term impact on overall operations 6. Risk on organization structure 7. Business risk 8. Product risk 9. Process risk Risk is combination of consequence and likelihood of the event Risk of an event = Consequence * frequency (likelihood) of an event Risk can be mitigated based on Risk priority number (RPN). RPN is the combination of severity, occurrence and detection of an event. RPN = severity * occurrence * detection This rating criteria for all three elements of RPN mentioned above will be defined by the project management team based on the impact it has on ... ... middle of paper ... ...logy, Laboratory of Industrial Management. 5. Scott Jardine, 2007, “Managing risk in construction projects – how to achieve a successful outcome – an article”, PricewaterhouseCoopers. 6. Berkeley, D., Humphreys, P.C. and Thomas, R.D, 1991, “Project Risk Action Management”, Construction Management and Economics. 7. Chapman R.J, 2001, “The Controlling Influences on Effective Risk Identification and Assessment for Construction Design Management”, International Journal of Project Management. 8. Shen, L.Y, 1997, “Project Risk Management in Hong Kong”, International Journal of Project Management. 9. Shen, L.Y., Wu, G.W.C. and Ng, C.S.K, 2001, “Risk Assessment for Construction Joint Ventures in China”, Journal of Construction Engineering and Management. 10. Wang, J.Y. and Liu, C.L, 2004, “Risk Management for Construction Projects”, Beijing: China Water Publication.
Commonly, the level of control retained by the owner links with the level of risk, and those levels typically have an transposed relationship to the risk and control levels of the contractor (CMAA, 2012). Not all of these delivery methods is suited for every project. For each situation, there will be advantages and disadvantages in the use of any specific method. One needs to carefully assess the specific project requirements, goals, and potential challenges in order to establish the delivery method that offers the best opportunity for success (CMAA, 2012).
In all aspects, risk assessments should measure the risks and foretell the impact of the project. Project management utilize risk assessments in order to
In today’s uncertain economical business environment there is an understandable pressure to improve the quality of decision making at all stages of the project. A number of techniques have been developed to address this concern, two of the leading approaches used in the construction industry are Earned Value Management and Risk Management (Hillson, 2004), those two approaches share a common aim of providing decision makers with the best information available when setting objectives and considering management strategies. However, they take differing approaches, Earned Value Management establishes project performance status and extrapolates that information to gain an understanding of future trends and the allocation of resources needed to successfully
Project success is critical to business performance and still many projects suffer from overruns, delays and failure. Each project is different and consists of risks. According to Morris and Hough (1987), project failure rate are high when one fail to consider and analyze project risks. As per Jiang & Klein (2001), the way project risks are managed has a direct effect on the project deliverables. Tzvi et al. (2002) suggested that there is no risk free project. Project risk management aims to maximize opportunities and minimize threats. This ensures achievements of project objectives. Hence, it is unlikely that a project will be successful without effective project risk management.
What is risk as it is related to this project? Microsoft defines project management risk as “A risk is the possibility of an event or condition that would have a negative impact on a project. Risk management is the process of identifying, mitigating, and controlling the known risks in order to increase the probability of meeting your project objectives” (Microsoft, 2013). This definition of risk will stand as a point of clarification between JSA and TCP to establish a basic understanding of project management risk.
As project activities are directed and finished, risks components and events will be observed to figure out whether in certainty trigger occasions have happened that would show the risk is currently a reality. In view of trigger occasions that have been reported amid the risk investigation and moderation forms, the project group or project administrators will have the power to order emergency courses of action as esteemed suitable. Everyday risk relief exercises will be instituted and coordinated by the project managers.
All projects involve risk and the ones that succeed generally do so because their leaders do two things well. (Kendrick, 2009). They realize much of the work is not new and they plan project work accordingly. Effective project risk management involves these concepts – looking backwards to avoid past mistakes and looking forward many problems can be eliminated.
... private construction projects. Every project in construction needs to take in consideration the existing property owners that surrounds the area where the construction project will be execute, every business, institutions, and residences owner that are located adjacent to the constructed facility need to be take in consideration while analyzing the stakeholders requirements as they become persons of interest in the project. (Bob Muir, 2009)
Project procurement risks are a subset of the project’s overall risk and they should cover internal and external procurements. Some common risk observed during procurements are, confidential data being released, which limits negotiating power; lack of early procurement engagement ...
Zou, P. X. W., Redman, S., & Windon, S., 2008. Case Studies on Risk and Opportunity at Design Stage of Building Projects in Australia: Focus on Safety. Architectural Engineering and Design Management, 4, 221-238.
Some include risks at the enterprise level, managing risks in complex projects and dealing with turnarounds and large capital projects. Liu, Zou, & Gong (2013) explore how enterprise risk management (ERM) may influence the ability and performance of project management risk (PRM) by considering the features of the construction industry, its businesses and projects. Managing risks within projects such as these has become an important process to achieve project objectives in terms of the scope, time and cost. The results show that enterprise risk management can positively influence the implementation of project risk management. This can be achieved through implementing a risk focused culture, setting up risk management departments and setting up risk procedures. This will help control the project risk and improve the performance of project risk management. Communicating the concerns with other team members can help identify the risks earlier on rather than later in the development of the project. If the Stakeholders and managers involved are satisfied then the project outline becomes a
Risk Management is the science that identifies analyzes and responds to the risk factors throughout the life of a project (Pinto, 2013). Before a project is put in place and a plan that goes along created, the Team Management for the project needs to make sure that is identifying and controlling the risk associated with the project. The team needs to consider any unexpected situations that might appear and try to come out with a strategy of mitigation in the event in which the factor of risk is happening throughout the life of the project. At the same time, the management needs to be able to analyze the probability of the risk to happen and the consequences that are taking place once the event took place. Once the factors of risk are identified, the manager needs to make sure if and at which extent the factor of risk is going to impact the critical path of the project.
This make project management very significant because it ensures risks are identified and properly managed by preventing them so that they do not become a big issue that threaten the success of the project within the organization. Good project management practice requires project managers to carefully analyze all potential risks to the projects, and develop a prevention plan against them. Risk should be prioritized according to the strength of them occurring and allocate appropriate responses. How to deal with risk and adapt change of any kind is the key to successfully delivering the projects.
XIANG, P. et al., 2012. Construction Project Risk Management Based on the View of Asymmetric Information. Journal of Construction Engineering and Management, 138(11), pp.1303–1311.
Risk Management allows us to identify the problems which are unknown during the start of the project but may occurs later. Implementing an efficient risk management plan will ensure the better outcome of the project in terms of cost and time.