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role of risk management in overall project management
role of risk management in overall project management
role of risk management in overall project management
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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.
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.
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 the majority of all project activity, it entails some kind of risk of which may overall impact the successful project completion. Upon the completion of the project with its scope, tasks, budget and timeline, it is imperative to make an overall risk assessment to access any risk that may be considered impactful in the project (Lock, 2007). Any associated risk assessment is well-thought-out
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.
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.
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.
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.
Financial or technical, commercial or legal, the risk can affect an organization at any given time. Operations and compliance along with laws and regulations input by an organization have an important role in controlling the factor of risk within a project. As Pinto (2013) well noticed, projects tend to operate in an environment composed of uncertainty. There are projects that succeed and others that fail. The difference between these two types of project is given by the plan developed as well as the level of risk. More so, in the event in which the critical path for a project has a high level of risk, the way the resources are used once the risk factor was identified becomes crucial for the success of the project.
Risk management has been one of the major concerns of executives and professionals involved with projects today, especially after the financial crisis that shook the world in 2008.The results of ex-post assessments of project or even verification of lost business opportunities for companies are clear signals that this evidence has become more intense (Junior, 2013).
This paper will focus on the concepts of assessing procurement risk and the impacts it has on the overall success of a project. In addition, the paper contains topics, which focus on risk and issues that individually or jointly negatively influences the success of procurement. The key topics discussed in the paper are procurement risk types, which examine some common risk that are observed with procurements and on projects. Lastly, the paper examines how risk management is defined, how to identify risk, and how to determine a plan for closing risk.
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.
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.
Risk management is among the most important practices in the field of project management. A successful project completion and risk management often go side by side. An interesting aspect of project management is that a project can sti...
In the construction industry a Project Manager is highly needed, like in any industry the Project Manager has many responsibilities, passion for multitasking, communication and technical skills are some of the more important things a Project Manager should have. In their daily job they are expected to be involved in different tasks for example to pull together meetings between the team members of any project with the objective to share ideas and making important decision before any work actually starts, on this meetings it is important to be very organized, have an agenda for the meetings and set clear goals and objectives. (Griffin, 2010)