Risking an opportunity for project success

Samer Mahdi, project manager, Jones Sweett International, discusses how risks can also mean opportunities.

Samer Mahdi addresses project risk.
Samer Mahdi addresses project risk.

Samer Mahdi, project manager, Jones Sweett International, discusses how risks can also mean opportunities.

In the construction industry, unforeseen events and uncertainty equal risks.

Listed below are three examples of headlines that originated from unforeseen events:

1. "...the fire at Fortune Tower in which two construction workers were killed last Thursday was due to human error ..."; 2. "... cement shortage causing construction projects delays..."; 3. "... customs lowered taxes on steel imports, causing market prices to go low...."

Now here's the theory: risk is an event or occurrence that may or may not happen. Although if the event happens, then the result might impact the project negatively or positively. Risks shouldn't only be considered as threats but also as opportunities. The third headline example is an unforeseen situation that led to a million-dirhams savings, i.e. extra profit.

The purpose of managing risk is to minimise the negative impact an unfortunate occurrence has on a project, and maximise the probability of a positive event.

Risks arise from uncertainty about an event which causes any decision based on given or collected data to lack the necessary confidence, and consequently hesitation to have it actioned. By investigating the uncertainties, hidden risks will be unmasked.

The control

The term 'project risk management' is somewhat misleading. It relays a message that the risk manager is in control, while actually he isn't at all. The result is a mere advanced preparation for possible adverse future events rather than responding as they happen.

The risk management process should be looked at as a proactive approach to a possible situation where a reactive approach might worsen the condition. RM Wideman mentioned an amusing example on risk decision and avoidance in his PMI publication Project and Program Risk Management.

An armed man is angry at you and you are at the risk of being shot. A reactive approach is to wait to be shot at, and then:

1. Move to avoid the bullet;

2. Deflect the bullet as it is shot;

3. Repair any damage done by the bullet.

A proactive approach is to take steps to avoid being confronted with the armed man from the start. In my opinion this is half of what risk management is about; to avoid getting into a risky situation rather than waiting for something to happen and act reactively.

The other half is to react positively, as to have a backup plan. So if the situation that you are going to be shot at comes, then you would have prepared for it and worn an anti-bullet vest.

The process

Different project managers with different backgrounds might manage risk differently. The PMBOK sequenced the process as such:

1. Risk management planning;

2. Risk identification;

3. Qualitative risk analysis;

4. Quantitative risk analysis;

5. Risk response planning;

6. Risk monitoring and control.

A risk management plan is a specific project management plan relating to risk. The resemblance is asking questions such as WHY do the plan? WHO does the planning? WHEN should it be done? And HOW much will it cost?

There are many different types of risks revolving around the construction industry which can be classified by source or by impact. The most serious risks identified are those affecting the triple PM constraints : scope, time and cost. Risk planning is not a simple process.

It needs time and doesn't come cheap. There isn't enough time or money to plan or counter-attack all identified risks; therefore, qualitative analysis is a must.

It is a subjective process where risks are categorised by importance, assessed by urgency and shortlisted by probability. The outputs of this exercise are: a risk register consisting of risk ranking, categorisation, watch lists and trends to be analysed.

For left brain thinkers, having a cost against each identified risk makes the analysis more understandable. This is done by calculating the expected monetary value for each risk by multiplying the probability of occurrence by the cost impact; hence, quantifying risks.

Planning risk responses involves finding a way to minimise the risk impact or even eliminate it before it happens. This is done through putting together contingency plans and risk mitigation strategies.

The above process is not just a one-time stop where the planning and identification of risks is done, reported and filed; it is rather a continuous procedure which needs to be updated in timely intervals.

A 90% probable event during excavation is a 10% probable event during construction of the first floor.

The risk register should be effectively monitored and updated qualitatively and quantitatively during the project.

Risk management is an important process which MUST be integrated within the project management process. Workshops involving all project stakeholders should always be scheduled to produce a comprehensive approach to identify and mitigate risks and complete a quality product with less misfortunes.

If you would like to write for Construction Week in this column, please email angela.giuffrida@itp.com

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