Risk Management

Question 1

What is a risk in the context of a construction project?

Answer 1

An uncertain event or set of circumstances that, should it occur, have a negative impact on the projects objectives

Question 2

What is a risk assessment?

Answer 2

An assessment to identify the likelihood and severity a potential risk or hazard may have on a project

Question 3

What is the difference between quantified and qualitative risk assessments?

Answer 3

• Quantified = assess the risk based on monetary impact
• Qualitative = provides dialogue for the potential impact and likelihood of a risk

Question 4

What is the Monte Carlo simulation?

Answer 4

Uses computer software to predict the risk

Will run the project numerous times and each project will have a different outcome for each risk

This can then inform the risk register / allowances in order to manage risks more efficiently

Question 5

What is a risk register?

Answer 5

A document listing all the risks identified on a project, explaining the nature of each risk in respect of quantitative and qualitative analysis

Question 6

How do you go about creating a risk register for a new project?

Answer 6

• All members come together to brainstorm as many risks for the project as possible
• These will then be collated into a document which will be continuously updated to reflect the projects current risks

Question 7

How do you use the risk register?

Answer 7

• continually monitor and review the risks to ensure it is always current and up to date with the projects evolving risks
• assign the ‘likelihood’ and ‘impact’ scores to each risk, and monitor whether these scores change when updating

Question 8

What is risk allocation?

Answer 8

• Allocating risks to the best party who can manage that risk
• The allocation of each risk should be identified on the risk register

Question 9

Can you name some risk management strategies and what they are?

Answer 9

• Avoidance: Remove the risk or come up with an alternative solution (eg - Oak House ballistic board omission)
• Reduction: If a risk does occur, how can the impact be reduced to a minimum
• Transfer: Move the risk to another party (eg Design Risk to Contractor, Insolvency risk through a bond)
• Share: Sharing the risk with another party (eg Fluctuations clause to share inflation risk)
• Retention: Understand there is a risk and control it by keeping it (eg - Client retained risk for basement wall)

Question 10

What are the benefits of Risk Management?

Answer 10

• Increased confidence for client and contractor
• Reduced cost and time implications
• Enables informed decision making as client understands risks and their contingency funds
• Can enhance collaboration and early indication of risks arising

Question 11

Why is risk management needed in construction?

Answer 11

• Risks are present in all projects, big or small, and must be acknowledged to avoid cost overruns or programme delays
• It helps clients understand their project’s positions at all times so they can budget correctly, facilitate any other moves eg if an existing tenant is due to move it, they can ensure the dates align

Question 12

What is a risk allowance?

Answer 12

A sum of money in the estimate to cover unknown expenses, should they materialise

Question 13

What are the NRM categories of risk?

Answer 13

• Design development
• Construction risk
• Employer change risk
• Employer other risk

Question 14

How can the project team reduce design risk?

Answer 14

• Use a trusted, experienced design team
• Transfer the risk in procurement (eg design risk)
• Effectively manage the risk register and ensure it is regularly monitored & updated
• Early Contractor Involvement to reduce construction risks & provide buildability input

Question 15

How would you calculate your risk allowance?

Answer 15

• At the early stages this is likely to be a percentage of the construction estimate, which could be based on previous projects or experience
• Throughout cost planning stages, a risk register should be developed which can inform the risk allowances to include

Question 16

What are the problems associated with controlling the piling risk? Whose risk is the piling?

Answer 16

• It would depend who has this risk in the risk register
• Could be transferred through D&B route

Question 17

How is the risk register used in the post contract phase of a project?

Answer 17

-As the project progresses, some risks may have not materialised and the opportunity for them has passed.
-As the risk register is updated at intervals, as specified in the contract data, the risks that didn’t materialise will be omitted, and new risks may be added.
-This can then continuously update the contingency funds so the client understands their available funds, to enable them to make informed decisions

Question 18

How do you quantify risk?

Answer 18

• Generally it will be given a “worst case scenario” cost, which will be multiplied by an impact and likelihood factor to determine how much needs to be included in the risk register.

-For example, in my experience, one of the risks I identified was locating Asbestos in the building. Worst case scenario is Asbestos throughout the building, so let’s say £500 to remove the asbestos for the whole building of 2000m2 GIA gives £1,000,000 as a potential cost. But, I would then assign it a likelihood and impact factor. So, if it was discovered, it would be impactful to programme and cost, so it would be high (let’s say a 5). However, the likelihood would be high as the building was constructed post 2000 (lets say a 5 too). However, its unlikely the whole building will have asbestos throughout, so an assumption could be 50% coverage, so £500k would be included in the risk register

Question 19

How do different procurement routes deal with risk? Can you give me some examples?

Answer 19

• Construction management would expose the client to a high level of risk as they would have the direct contractual relationship with trade contractors
• Design and Build would minimise the Clients risk in relation to cost and design
• Traditional may reduce the clients risk of changes post contract and control the cost risk of the scheme, but they would retain the design risk

Question 20

How is risk managed under an NEC contract?

Answer 20

-NEC utilise a collaborative, early warning system approach towards risks, which ensures either party makes the other aware of potential risks that could arise
- The use of early warnings and NCE’s give the client and contractor enough time to collaborate to reduce the impact of a risk, mitigate altogether, or agree to share etc.

Question 21

In your submission you mention you were involved with identifying risks for CiNER Glass, one being for planning consent delays. Why did you identify this as a risk? What method of risk management did you propose for this, and how can you reduce the impact of planning consent delays?

Answer 21

• I identified this as a risk because it formed part of the critical path on the programme. Without planning consent achieved, we could not proceed onto the next stage of design.
• I proposed a risk reduction by clarifying all design information should be thorough, clear ad compliant to ensure there are no delays through planning

Question 22

For CiNER Glass, how did you suggest the discovery of an archaeological artefact is dealt with?

Answer 22

• Client retained risk; many contractors would not take that sort of risk on projects
• Mitigation strategy was to conduct intrusive surveys to reduce the likelihood of the risk occurring

Question 23

For the Kingsway, can you give an example of an Early Warning Notice and how the risk was controlled

Answer 23

• Nearby site was due to start development works and needed to block the site entrance of the Kingsway for 2 weeks to demolish existing building
• At this point, the kingsway was doing groundworks in the basement, so the ramp needed to be accessed which was going to be blocked
• EWN was issued to say potential 2 week delay to programme due to no access to site
• Contractor and Client team came together to brainstorm methods of reducing the impact of the nearby development
• The impact of this was reduced by hiring a mobile crane to park adjacent to the side, and lift machinery and equipment into the basement box so works could continue

Question 25

How much design development risk would you anticipate at RIBA 4?

Answer 25

• generally all design development risk should be mitigated by RIBA 4, but I would refer to the risk register for further guidance