Syed M. Ahmed, Ph.D. Department of Construction Management Risk Management in Construction Syed M. Ahmed, Ph.D. Department of Construction Management Florida International University, Miami, Florida Syed M. Ahmed, Ph.D. Department of Construction Management Florida International University, Miami, Florida

Syed M. Ahmed, Ph.D. Department of Construction ManagementIntroduction Time Quality Cost Project Constraints Success

Syed M. Ahmed, Ph.D. Department of Construction ManagementIntroduction Delays Poor Quality Cost overrun Project Constraints Risks

Syed M. Ahmed, Ph.D. Department of Construction Management What is a Risk? Risk Unknown Unexpected Undesirable Unpredictable endeavor action

Syed M. Ahmed, Ph.D. Department of Construction Management Risks in Construction Contractor Supplier Project Manager Engineer Architect Client Quantity Survey Inspector` Social Factors Political Factors Economic Factors Environmental Factors

Syed M. Ahmed, Ph.D. Department of Construction Management Types of Risks in Construction Physical Risks Financial Economic & Acts of God Political Environ. & Design Const. Related

Syed M. Ahmed, Ph.D. Department of Construction Management Types of Risks in Construction Physical Risks Financial Economic & Acts of God Political Environ. & Design Const. Related Acts of God Flood Earthquake Landslide Fire Wind damage

Syed M. Ahmed, Ph.D. Department of Construction Management Types of Risks in Construction Physical Risks Financial Economic & Acts of God Political Environ. & Design Const. Related Physical Damage to structure Damage to equipment Labor injuries Fire Theft

Syed M. Ahmed, Ph.D. Department of Construction Management Types of Risks in Construction Physical Risks Financial Economic & Acts of God Political Environ. & Design Const. Related Financial & Economic Inflation Availability of funds Exchange rate fluctuations Financial default

Syed M. Ahmed, Ph.D. Department of Construction Management Types of Risks in Construction Physical Risks Financial Economic & Acts of God Political Environ. & Design Const. Related Political & Environmental Changes in laws and regulations Requirement for permits Law & order Pollution and safety rules

Syed M. Ahmed, Ph.D. Department of Construction Management Types of Risks in Construction Physical Risks Financial Economic & Acts of God Political Environ. & Design Const. Related Design Incomplete design scope Defective design Errors & omissions Inadequate specifications

Syed M. Ahmed, Ph.D. Department of Construction Management Types of Risks in Construction Physical Risks Financial Economic & Acts of God Political Environ. & Design Const. Related Construction Related Labor disputes Labor productivity Different site conditions Design changes Equipment failure

Syed M. Ahmed, Ph.D. Department of Construction Management Risk Management A systematic approach to control the level of risk to mitigate its effects. Risk Identification Risk Estimation Risk Evaluation Risk Response Risk Monitoring Controlled Risk Environment Risk Identification Risk Estimation Risk Evaluation Risk Response Risk Monitoring Controlled Risk Environment Risk Analysis Risk Management Life Cycle

Syed M. Ahmed, Ph.D. Department of Construction Management Risk Analysis Estimating the potential impacts of risk to decide what risks to retain and what risks to transfer to other parties Ranking options Comparing options Descriptive analysis Qualitative Risk Analysis Techniques Probability analysis Sensitivity analysis Simulation techniques Quantitative

Syed M. Ahmed, Ph.D. Department of Construction Management Risk Response Risk Response Methods EliminationTransferReductionRetention

Syed M. Ahmed, Ph.D. Department of Construction Management Risk Response Risk Response Methods EliminationTransferReductionRetention Risk Elimination Practices Tendering a very high bid Placing conditions on the bid Pre-contract negotiations as to which party takes certain risks Not biding on the high risk portion of the contract

Syed M. Ahmed, Ph.D. Department of Construction Management Risk Response Risk Response Methods EliminationTransferReductionRetention Risk Transfer Two basic forms. (a) The activity responsible for the risk may be transferred, i.e. hire a subcontractor to work on a hazardous process (b) The activity may be retained, but the financial risk transferred, i.e. methods such as insurance.

Syed M. Ahmed, Ph.D. Department of Construction Management Risk Response Risk Response Methods EliminationTransferReductionRetention Risk Retention Handling risks by the company who is undertaking the project. Two retention methods, active and passive. Active retention is a deliberate management strategy after a conscious evaluation of the possible losses and costs of alternative ways of handling risks. Passive retention occurs through negligence, ignorance or absence of decision.

Syed M. Ahmed, Ph.D. Department of Construction Management Risk Response Risk Response Methods EliminationTransferReductionRetention Risk Reduction Continuous effort. Related with improvements of a company’s physical, procedural, educational, and training devices. Improving housekeeping, maintenance, first aid procedures and security. Education and training within every department.

Syed M. Ahmed, Ph.D. Department of Construction Management Thank You