MSCM SEC 1

CM659 – CONSTRUCTION RISK

MANAGEMENT

LECTURE SERIES 01
•Accidents are the direct result of
unsafe activities and conditions
•Both can be controlled by
Management
•Management is responsible for the
creation and maintenance of the
working environment and tasks
What is the difference between Accident,
Incident and Near miss?
Accident

§An unplanned and

unfortunate event that
result in Damage, Injury,
or Upset of some kind.
Incident

§ Any disruption in the normal or smooth

flow of work that involves an injury,
damaged equipment, work stoppage or
near miss
Near miss
§Other term for “near hit” or “close call”.
§A dangerous or unpleasant situation from
which someone just manage to escape.
This includes a potentially hazardous
condition.
§ Potential for loss
resulting from a given
action, activity and/or
in-action.
§ The consequence of a
hazard becoming
active.
A Formal Definition of Risk
Why Do We Manage Risk?
Project problems can be reduced as much
as 90% by using risk analysis
Negatives:
n Belief that all risks are accounted for

n Project cut due to risk level

Positives:
n More info available during planning

n Improved probability of
success/optimum project
Can you find the risk(s) or hazard(s)?
4

2
3

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 Categories of Risk
Many organizations develop their own risk
questionnaires. Some of the categories of risk
might include:
• Market risk – Will the new service or product
be useful to the organization or marketable to
others? Will the users accept it? Will someone
else create a better product?
• Financial risk – can the organization afford to
undertake the project? Will the project meet
NPV, ROI and payback estimates?

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 Broad Categories of Risk
• Technology risk – is the project technically
feasible? Is it leading edge or bleeding edge
technology?
• People risk – Are people with appropriate skills
available to help complete the project? Does
senior management support the project?
• Structure/process risk – What is the degree of
change the new project will introduce into user
areas and business procedures? With how many
other systems does a new project/system need
to interact?
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Risk Chart
Project Plan vs Risk Plan
Project Plan:
n Outlines what the project team intend
to do
n Supports the Project Management
process
Risk Plan:
n Covers how the project team might
have to change the plan
n Supports the Risk Management Process
What is in the Risk Plan?
n Risk Register
• Risk Identification Sheet

• Risk Summary

n Risk Log

• Risk Exposure

• Risk Contingent Fund

n History of Mitigation Strategy

n Contingency Plan
Risk Assessment &
Risk Management
Sample of Risk
Assessment Matrix
Risk Management
“Is the identification,
assessment, and prioritization
of risks followed by
coordinated and economical
application of resources to
minimize, monitor, and
control the probability or
impact of unfortunate
events or to maximize the
realization of opportunities.”
Risk Management
“The process involved with
identifying, analyzing, and
responding to risk. It
includes maximizing the
results of positive risks and
minimizing the
consequences of negative
events”
Objectives Risk Management
üIncrease the likelihood
and impact of positive
events
üDecrease the likelihood
and impact of negative
events
 Negative Risk
• A dictionary definition of risk is “the
possibility of loss or injury”
• Negative risk involves understanding
potential problems that might occur in the
project and how they might impede
project success
• Negative risk management is like a form of
insurance; it is an investment
• If projects are so risky, why do companies
pursue them?
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 Potential Negative Risk Conditions
Associated With Each Knowledge Area

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 Risk Can Also Be Positive
• Positive risks are risks that result in good
things happening; sometimes called
opportunities
• A general definition of project risk is an
uncertainty that can have a negative or
positive effect on meeting project
objectives
• The goal of project risk management is to
minimize potential negative risks while
maximizing potential positive risks
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Relationship Between Risk Management
Principles, Frameworks & Process

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Relationship Between Risk Management
Principles, Frameworks & Process
PRINCIPLES
• Creates values
• Integral part of organizational processes
• Part of decision making
• Explicitly addresses uncertainty
• Systematic, structured and timely
• Based on the best available information
• Tailored
• Transparent and inclusive
• Dynamic, iterative and responsive to change
• Facilitates continual improvement and
enhancement of the organization
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Relationship Between Risk Management
Principles, Frameworks & Process
FRAMEWORK
PRINCIPLES

PROCESS

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Relationship Between Risk Management
Principles, Frameworks & Process
PROCESS

FRAMEWORK

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 How Do We Manage Risk?
Use the six risk management processes
n Plan Risk Management

n Identify Risks

n Perform Qualitative Risk Analysis

n Perform Quantitative Risk Analysis

n Plan Risk Responses

n Monitor and Control Risks

Plan Risk Identify Perform Perform Plan Risk Monitor and

Management Risks Qualitative Quantitative Responses Control Risk s
Risk Analysis Risk Analysis
Project Risk Management Processes
• Plan risk management: deciding how to
approach and plan the risk management
activities for the project
• Risk identification: determining which risks are
likely to affect a project and documenting the
characteristics of each

• Qualitative risk analysis: prioritizing risks

based on their probability and impact of
occurrence

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Project Risk Management Processes
• Quantitative risk analysis: numerically
estimating the effects of risks on project
objectives
• Risk response planning: taking steps to
enhance opportunities and reduce threats to
meeting project objectives
• Risk monitoring and control: monitoring
identified and residual risks, identifying new
risks, carrying out risk response plans, and
evaluating the effectiveness of risk strategies
throughout the life of the project
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Project Risk Management Summary

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REMINDERS:
1. ALWAYS CHECK YOUR PUP-OU
WEBSITE
(https://emabini.pup.edu.ph)
FOR OTHER ANNOUNCEMENTS
AND CLASS ACTIVITIES.
2. GROUP 1&2 REPORT (01/21/18)
3. GROUP 3 REPORT (02/11/18)
4. GROUP 4 REPORT (03/04/18)