Understanding the Importance of Risk
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Transcript of Understanding the Importance of Risk
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CONTRACTING IN ROMANIA NOWADAYS RISKS, ADVANTAGES, CONSTRAINTS, CONTRACT MANAGEMENT, CONSTRUCTION LAW AND
GUIDANCE BEST PRACTICE
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Understanding the
Importance of RiskPresented by James Wood
Claims Manager & Head of Quantity Surveying & Quantum
Techno Engineering & Associates
Workshop ASEMER – 29 November 2016
Understanding the Importance of Riskwww.technoeng.com
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What is
Risk?
A potential event, either internal or external to a project, that, if it
occurs, may cause the project to fail to meet one or more of its
objectives.
Workshop ASEMER – 29 November 2016
Understanding the Importance of Riskwww.technoeng.com
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The Financial Implications
of Risk ?
Risks and uncertainties, involved in construction projects, cause
cost overrun, delay and lack of quality during the progression of
the projects.
Workshop ASEMER – 29 November 2016
Understanding the Importance of Riskwww.technoeng.com
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Concept many construction companies give too
little thought to
Economic downturn = increased competition and
pressure
Construction projects are unpredictable
Workshop ASEMER – 29 November 2016
Understanding the Importance of Riskwww.technoeng.com
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Managing Risk
Recognised as being very important process
Try to eliminate the unexpected, by thinking about all
the things that might happen to deflect a project from
its objectives
Achievement of project objectives:
Time
Cost
Quality
Safety
Workshop ASEMER – 29 November 2016
Understanding the Importance of Riskwww.technoeng.com
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The main aims of risk management are to:
• Identify potential risks
• Assess the probability and impact of each risk
• Identify alternative actions that may prevent the risk from happening
(avoidance), or if it does happen ameliorate the impact (reduction), or
provide a strategy for dealing with the accepted consequences
(acceptance)
• Implement and monitor those actions that are cost effective and
necessary to the successful delivery of the project objectives
Workshop ASEMER – 29 November 2016
Understanding the Importance of Riskwww.technoeng.com
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The proper management of risks requires that they
be identified and allocated in a well-defined
manner.
This can only be achieved if contracting parties
comprehend their risk responsibilities, risk event
conditions, and risk handling capabilities.
Workshop ASEMER – 29 November 2016
Understanding the Importance of Riskwww.technoeng.com
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Which method
technique to
choose?
How to measure
a risk?
How to identify
risk in construction
projects?
Workshop ASEMER – 29 November 2016
Understanding the Importance of Riskwww.technoeng.com
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Qualitative
Assessment
Identification of risk
Evaluation process
Assess the impact and
likelihood
Workshop ASEMER – 29 November 2016
Understanding the Importance of Riskwww.technoeng.com
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Quantitative Assessment
Magnitude of consequences
Monte Carlo Simulation
Modelling
Quantifies probability of
occurrence
Estimate frequency of risks
Workshop ASEMER – 29 November 2016
Understanding the Importance of Riskwww.technoeng.com
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QUALITATIVE QUANTITATIVE
risk-level project-level
subjective evaluation of
probability and impact
probabilistic estimates of
time and cost
quick and easy to perform time consuming
no special software or tools
required
may require specialized tools
Workshop ASEMER – 29 November 2016
Understanding the Importance of Riskwww.technoeng.com
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Ten potential delay
factors
Contractors’ financial difficulties
Client cash flow problems
Engineer’s incomplete drawings
Subcontractors’ slow mobilisation
Late delivery of ordered materials
Incomplete structural drawings
Contractors’ planning and scheduling problems
Price escalation
Subcontractors’ financial difficulties
Expropriation issues
Workshop ASEMER – 29 November 2016
Understanding the Importance of Riskwww.technoeng.com
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Summary
Workshop ASEMER – 29 November 2016
Understanding the Importance of Riskwww.technoeng.com
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Effective risk management process encourages the
construction company to identify and quantify risks and
to consider risk containment and risk reduction policies.
Construction companies that manage risk effectively and
efficiently enjoy
financial savings, and
greater productivity,
improved success rates of new projects and better
decision making.
Workshop ASEMER – 29 November 2016
Understanding the Importance of Riskwww.technoeng.com
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Risk Management in the construction project
management context is a comprehensive and
systematic way of identifying, analysing and
responding to risks to achieve the project
objectives.
Workshop ASEMER – 29 November 2016
Understanding the Importance of Riskwww.technoeng.com
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Thank you for your time!
Workshop ASEMER – 29 November 2016
Understanding the Importance of Riskwww.technoeng.com