1. Planning and organising Two Risk Management Introduction
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Presenter Tony Bosnich
July 2015
© Unitec New Zealand
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2. 2.An overview of the risk management process
Learning outcomes
1.An introduction to the concepts of Risk Management on building construction sites
2.An overview of the risk management process
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3. Risk is
The change of something happening that has an impact on the objective of an organisation or project. Risk can be either Positive or Negative Opportunity or Threat
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4. Fuller definition
Risk management may be described as “a systematic way of looking at areas of risk and consciously determining how each should be treated. It is a management tool that aims at identifying sources of risk and uncertainty, determining their impact, and developing appropriate management responces ” (Uher, 2003)
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5. How do we assess and quantify this Risk ?
Measured in terms of consequence and likelihood which quantifies the importance of the risk. There are standard documents available to quantify the likely hood of the risk effect. AS/NZS Now replaced by ISO 31000m mainly used on NZTA projects. Risk = Probability x Consequence TWO COMPONENTS Uncertainty or Probability Exposure or Consequence
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6. Importance of Risk Analysis
Owing to its increasing importance, risk management has been recognized as a necessity in most industries today, and a set of techniques have been developed to control the influences brought by potential risks (Schuyler,2001; Baker and Reid, 2005).
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7. Why is Risk consideration important in Building?
Compared with many other industries, the construction industry is subject to more risks due to the unique features of construction activities, such as long period, complicated processes, abominable environment, financial intensity and dynamic organization structures (Flanagan and Norman, 1993; Akintoye and MacLeod, 1997; Smith, 2003).
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8. Systematic process
A systematic process of risk management has been divided into risk classification, risk identification, risk analysis and risk response, Classify - see list of classification On next slide
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9. Risk Classification
Environmental Management Safety Financial Physical Resource Contractual Regulatory
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10. Process
Plan Risk management Identify Maybe current , future, visible risk , potential Analyse , After id the next step is to analyse consequence and threat and likely hood of happening. Perform Qualitative risk analysis Perform Quantitative risk analysis Plan risk response Monitor and control risks
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11. Further division
Risk response has been further divided into four actions, i.e. retention, reduction, Transfer and avoidance (Berkeley et al., 1991; Flanagan and Norman, 1993).
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12. Risk analysis techniques
Qualitative
Quantitative
Risk prioritization
Risk probability and consequence assessment
Brainstorming sessions
Sensitivity analysis
Risk likelihood and consequence assessment
Simulation (Monte Carlo simulation)
Risk likelihood and consequence matrix
Mean-variance criterion
Risk scoring
Mathematical/analytical techniques

13. Qualitative analysis
An indication based on size and magnitude is used to determine which risks are the most important
Based on subjective nominal or descriptive scorings for describing the likelihoods and consequences of various risks
Prioritizes risks according to its potential impact on the project (profit, cost, schedule and quality objectives)
Should be revised and update during the development period
Useful for an initial review or when a quick assessment is required

14. Likelihood and consequence matrix
Risk likelihood
Consequences
Insignificant 1
Minor 2
Moderate 3
Major 4
Catastrophic 5
A – Almost certain M H E
B – Likely
C – Possible L
D – Unlikely
E – Rare
Extreme, High, Moderate, Low risk

15. Qualitative measure of likelihood
Level
Descriptor
Detail A
Almost certain
Is expected to occur in most circumstances B
Likely
Will probably occur in most circumstances C
Possible
Might occur at some time D
Unlikely
Could occur at some time E
Rare
May only occur in exceptional circumstances

16. Risk likelihood and impact assessment
Risk likelihood – The likelihood that the risk will occur
Risk consequence – The effect on the project objectives if the risk occurs
The risk = risk likelihood x risk consequence
Example: Construction cost increases
Risk likelihood
Risk consequence class
Class
Description 5 4 3 2 1
Almost certain
Likely
Possible
Unlikely
Rare
Class
Corresponding cost increases ($) 5 4 3 2 1
More than 5m
From 2m to 5m
From 1m to 2m
From 0.5 m to 1m
Less than 0.5m

17. Example Description of risk Likelihood Consequence Risk Priority
More design modifications than planned 4 2 8 5
More land needed 10 3
Construction cost increases 15
Finance cost increases 1 6
Time delays 20
Changes in market value and capitalization rates 9

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20. If the Risk is still present ! It is a
Constraint
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21. Conclusion
Using effective risk management techniques to manage risks associated with variable construction activities has never been more important for the successful delivery of a project
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