Operational Risk – An Enterprise Risk Management Presentation
Risk management presentation 2
Transcript of Risk management presentation 2
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RISK MANAGEMENT IN
CONSTRUCTION
MBA 3 SEMESTER
LECTURES 24 AUG 15 & 25 AUG 15
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APPROACHES TO RISK IDENTIFICATIO
TOP DOWN
BOTTOM UP
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RISK MANAGEMENT-STEPS?
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WHAT DOES RISK MANAGEME
INVOLVE?
IDENTIFICATIONANALYSIS/ASSESSMENT-
PRIORITIZATION OF RISKS
ACTION PLANMONITORING &
CONTROL
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WHAT DOES RISK IDENTIFICATION INVOL
1. PROCESS (??) OF DETERMINING:
WHICH RISKS MAY AFFECT PROJECTOBJECTIVES?
WHAT THEIR CHARACTERISTICS COULD
2. KEY BENEFIT:?DOCUMENTATION OF EXISTING RISKS PROVIDES KNOWLEDGE AND ABILITY TO ANT
EVENTS/FUTURE RISKS.
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ITERATIVE PROCESS ??
NEW RISKS MAY EVOLVE DURINGPROJECT LIFE CYCLE.
FREQUENCY & DURATION VARWITH SITUATION.
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KEY PARTICIPANTS-RISK IDENTIFICATION ACTIVITI
PROJECT MANAGER
PROJECT TEAM MEMBERS
RISK MANAGEMENT STAFF (IF ASSIGNED)
CUSTOMERS
SUBJECT MATTER EXPERTS (EXTERNAL & INTERN
END USERS
OTHER PROJECT MANAGERS
OTHER STAKEHOLDERS
RISK MANAGEMENT EXPERTS
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1. TOP DOWN APPROACH-Con
OUTPUT OF OTHER PROCESSESBE REVIEWED TO IDENTIFYPOSSIBLE RISKS ACROSS THE
PROJECT PROVIDES RAPID START TO THASSESSMENT.
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1. TOP DOWN APPROACH
STARTS WITH AN OVERALL VIEOF PROGRAMME.
REQUIRES UNDERSTANDING OPROJECTS MISSION, SCOPE ANOBJECTIVES OF OWNER, SPONAND/OR STAKEHOLDERS.
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IMPLICATIONS-TOP DOWN APPROACH
ALL DIRECTIONS COME FROM THE TOP & PROJECT OBJECTIESTABLISHED BY THE TOP MANAGEMENT.
TOP MANAGERS PROVIDE RISK GUIDELINES, INFORMATIONAND FUND PROCESSES.
ALL OF THE PROJECT MANAGERS EXPECTATIONS ARE CLEACOMMUNICATED TO EACH PROJECT PARTICIPANT.
FOLLOWING THIS APPROACH, AMBIGUITY OPENS THE DOO
POTENTIAL FAILURE-OFTEN RESULTS IN REDUCEDPRODUCTIVITY AND CAUSES BOTTLENECKS.
THERE WAS NO EFFECTIVE COLLABORATION BETWEEN THEMEMBERS. THEY WERE NOT MORALLY MOTIVATED TO DO JOBS
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2. BOTTOM UP APPROACH
SYSTEMATIC AND COMPREHENSIVE
CONSIDERATION OF PROJECT MANAGEMAND TECHNICAL DELIVERABLES.
EXAMINES THE PROJECT REQUIREMENTSPLANS, SPECIFICATIONS, RESOURCES,
CONTRACTS, CONTRACTOR, SUB CONTRACHARACTERISTICS AND PROJECT INTERFAAND INTERACTIONS TO IDENTIFY RISKS.
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IMPLICATIONS OF BOTTOM UP APPROACH
TEAM MEMBERS INVITED TO PARTICIPATE IN EVERY
OF RISK IDENTIFICATION PROCESS.
THE DECISION ON A COURSE OF ACTION IS TAKEN BWHOLE TEAM.
IT ALLOWS MANAGERS TO COMMUNICATE GOALS AVALUE, E.G. THROUGH MILESTONE PLANNING.
TEAM MEMBERS ENCOURAGED TO DEVELOP PERSODO LISTS WITH STEPS NECESSARY TO REACH MILESTON THEIR OWN.
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IMPLICATIONS OF BOTTOM UP APPROAC
THECHOICE OF METHODS
& WAYS TO PERFORM THEIR TAS
TO THE TEAM.
ADVANTAGE OF THIS APPROACH- EMPOWERS TEAM MEMB
THINK MORE CREATIVELY.
THE TEAM MEMBERS MOTIVATION TO WORK AND MAKE
MANAGEMENT OF PROJECT A SUCCESS IS DOUBLED. THE PLANNING PROCESS IS FACILITATED BY A NUMBER OF
WHICH MAKES IT FLOW SIGNIFICANTLY FASTER
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THE BEST WAY IS TO FIND
A BALANCE BETWEEN THE TWOOPPOSITE APPROACHES AND TATHE BEST PRACTICES FROM BOT
THEM
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COMMON FORM OF RISKS
ABSENCE OF LABOUR/STAFF
SUDDEN RESIGNATION OF KEY STAFF
STAFF DIVERTED BY ORGANISATION
ADDITIONAL STAFF/SKILLS NOT AVAILABLE
TRAINING NOT EFFECTIVE
INITIAL SPECS OR DRAWINGS INCOMPLETE/POORLY DRAFT
WORK ON CHANGE ORDERS MULTIPLY DUE TO PROBLEMS
ENHANCEMENT OF WORK TAKES LONGER THAN EXPECTED
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CLASSIFICATION OF RISKS FINTECO EX
FINANCIAL
TECHNICAL
COMMERCIAL
EXECUTION
CONTRACTUAL OR LEGAL
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FINANCIAL RISK
FINANCIAL EXPOSURE-EG. LARGE CAPITAINVESTMENT REQUIRED TO DEVELOPPROJECT
WITHOUT CONTRACTED BUYER PRIOR TO
CONSTRUCTION-MAJOR FINANCIAL RISKHOPE OF SELLING OFFICE SPACE OR BUILDAFTER IT IS COMPLETED
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TECHNICAL RISK
MAXIMUM RISK-UNIQUE TECHNICAL
ELEMENTS OR UNPROVEN TECHNILOGYMINIMUM RISK- IF ONLY MODIFICATION
ALREADY DEVELOPED DESIGN
LEVEL OF TECHNICAL RISK DIRECTLYPROPORTIONAL TO UNDERPERFORMANCMEETING SPECIFIED REQUIREMENTS
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COMMERCIAL RISKS
PROJECTS DEVELOPED FOR COMMERCIAL
PURPOSE-EG. RECEIVING REVENUES-DEGCOMMERCIAL SUCCESS IS UNKNOWN ONINTRODUCED IN MARKET
UNCERTAINTY, COMPANIES WILLINGLY AC
AS IT IS VIRTUALLY IMPOSSIBLE TO PREDICUSTOMER ACCEPTANCE/DEMAND OF NSERVICE/PRODUCT
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EXECUTION RISK
GEOGRAPHICAL OR PHYSICAL CONDITIONS/UNKNOWNS
POORLY TRAINED OR INSUFFICIENT PROJECT TEAM PERSO
UNCERTAINTY OF SUFFICIENT LOCAL MATERIALS OR OPPO(ABUNDANCE OF )-AN OPPORTUNITY!!
UNCERTAINTY ABOUT AVAILABILITY/BREAKDOWN OF CRIT
PLANT OR EQUIPMENT UNCERTAIN WEATHER/ADVERSE CLIMATE OR ENVIRONME
ADVERSE TRAFFIC CONDITIONS/LAW & ORDER
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CONTRACTUAL/LEGAL RISKS
SUCH RISKS CONSISTENT WITH STRICT TEAND CONDITIONS DRAWN UP IN ADVAN
LIQUIDATED DAMAGES/FIXED COST TYPECONTRACTUAL CONDITIONS/STRUCTURE
SIGNIFICANT RISKS FOR CONTRACTORSUNCERTAINTY OF HANDING OVER
LAND/ENVIRONMENTAL CLEARANCES