INTRODUCTION TO
RISK MANAGEMENT
FOR
CONSTRUCTION PROJECTS
Prof. Reda Abdulaal
Vice Presidency for Projects
December 2009
Objectives & Outcomes of this Presentation
Objectives
Enrich the participants with:
1- Some definitions related to risk management
2- The project risk management cycle
3- The techniques of project risk identification
December 2009 Introduction to Risk Managment for Construction Projects 2
Objectives & Outcomes of this Seminar
Outcomes
1- We will agree that identifying & managing project
risks are so important
2- We will identify a preliminary list of risks in the
construction projects at KAU
December 2009 Introduction to Risk Managment for Construction Projects 3
Stages of Project Risk Management
Start here
Define types of risks Define probability &
Project frequency of risks
Risk
Management
Develope risk
management policies Rank risks to
management priority
December 2009 Introduction to Risk Managment for Construction Projects 4
First of all
What
do we
? mean? ?
Risk
Management
?
December 2009 Introduction to Risk Managment for Construction Projects 5
What do we mean?
December 2009 Introduction to Risk Managment for Construction Projects 6
If you didYou will get !
When you see the following caution signs;
Give your comments in
one word or one statement
December 2009 Introduction to Risk Managment for Construction Projects 7
What is Risk?
The likelihood (probability) of occurrence of an
undesirable event that will have an impact (positive or
negative) on objectives
A possibility of loss not the loss itself!
December 2009 Introduction to Risk Managment for Construction Projects 8
FACT
There is no human activity which does not have risks
December 2009 Introduction to Risk Managment for Construction Projects 9
What we know so far?
Some
definitions
?
Risk
Management
?
December 2009 Introduction to Risk Managment for Construction Projects 10
What do we mean?
Risk
Management
December 2009 Introduction to Risk Managment for Construction Projects 11
December 2009 Introduction to Risk Managment for Construction Projects 12
What is Risk Management?
Is a systematic method of identifying, analyzing,
treating, and monitoring the risks involved in any
activity or process.
Is to a methodology that minimize the risks of not
achieving the objectives.
December 2009 Introduction to Risk Managment for Construction Projects 13
Who is involved in Risk Management?
Customer .. Students
End-User .. KAU
Project Team .. .. ..
Manager .. .. ..
Contractor .. .. ..
Subcontractor.. .. ..
Consultants .. ZFP
Suppliers .. .. ..
Workers .. .. ..
December 2009 Introduction to Risk Managment for Construction Projects 14
FACT
Risk management is communication!
December 2009 Introduction to Risk Managment for Construction Projects 15
What we know so far?
Some
definitions
?
Risk
Management
December 2009 Introduction to Risk Managment for Construction Projects 16
What do we mean?
December 2009 Introduction to Risk Managment for Construction Projects 17
What is Project Risk?
It is an event or condition that, if it occurs, has a
positive or negative effect on at least one project
objective, such as time, cost, scope, or quality.
What is Project Risk Management?
A process that assists project managers in setting
priorities, allocating resources and implementing
actions that reduce the risk of the project not
achieving its objectives.
December 2009 Introduction to Risk Managment for Construction Projects 18
Is it important to managing project risks?
Research highlights that only one in eight information
technology projects can be considered truly successful
failure being described as those projects that do not
meet the original time, cost and (quality) requirements
criteria
the cost of project failure across the European Union
was 142 billion in 2004.
http://www.bcs.org/server.php?show=ConWebDoc.19584
December 2009 Introduction to Risk Managment for Construction Projects 19
FACT
If you act, manage and report regularly on risks and
issues, you will have substantially improved your
chances of project success!
December 2009 Introduction to Risk Managment for Construction Projects 20
What we know so far?
Some
definitions
Risk
Management
December 2009 Introduction to Risk Managment for Construction Projects 21
Cycle of Project Risk Management
Start here
Define types of risks Define probability &
Project frequency of risks
Risk
Management
Develop risk
management policies Rank risks to
management priority
December 2009 Introduction to Risk Managment for Construction Projects 22
Project Risk Management STAGE #1
Internal ~ External
Project Life Cycle
Risk Classification Project Requirements
Project participants
STAGE #1
Risk Identification ----------
----------
----------
----------
----------
----------
Let us take some examples
December 2009 Introduction to Risk Managment for Construction Projects 23
Example 1
Project Risks
Internal Risks External Risks
Owner Designer Contractor Economic Political Natural
Delayed Defective Construction Inflation rate War Unexpected
payment to design accidents threats inclement
contractor weather
Unreasonably Deficiency in Poor quality Currency Labor Unforeseen
imposed tight drawings fluctuation sticks site
in schedule conditions
December 2009 Introduction to Risk Managment for Construction Projects 24
Example 2
Project Risks
Owner Contractor Shared
Delayed payment on contract Labor and equipment availability War threats
Changes in work Productivity of labor & equipment Acts of God
Lack of scope of work Accidents & Safety Financial failure
Improper intervention Accuracy of work Changes in laws
Delays in obtaining site access Contractors incompetence Culture differences
December 2009 Introduction to Risk Managment for Construction Projects 25
What is after Risk Identification?
December 2009 Introduction to Risk Managment for Construction Projects 26
Risk Assessment (data collection on Probability & Impact)
Probability of occurance Magnitude of impact
Risk Identification
Low Medium High Low Medium High
1 Owner's delayed payment to contractor
2 Owner's unresonably imposed tight schedule
3 Change of design required by owner
4 Lack of work definition by owner
5 Low productivity of labor & equipment
6 Delay of material supply by suppliers
7 Changes in laws and regulation
December 2009 Introduction to Risk Managment for Construction Projects 27
Risk Evaluation (data analysis)
Risk Control (actions to be taken)
December 2009 Introduction to Risk Managment for Construction Projects 28
So, What is the next step?
December 2009 Introduction to Risk Managment for Construction Projects 29
Fill out the two risk forms given to you and
return them back within two days to the
project manager
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Risk Form Section #1
December 2009 Introduction to Risk Managment for Construction Projects 31
Risk Form Section #2
December 2009 Introduction to Risk Managment for Construction Projects 32
THANK YOU
Q&A
