Developing A Risk Management Plan For A Construction Project

Risk Management Plan

Discuss about the Risk Management Plan for Development of Research Building and Modernization.

The effective and successful completion of the project is completely dependent upon how robust and accurate risk management plan has been developed by the company that has undertaken the given project. The main purpose of the risk management plan is to identify, analyse, manage and mitigate the risk that are pertinent to any project that are expose of various types of risks. Risk management leads to successful completion of the project through applying various risk management techniques. Risk management plan can be described as a series of steps undertaken for examining the inherent risks, assessment of identified risks, scrutiny of the identified risks, development of mitigation plan and post implementation plan. All the steps are undertaken in the risk management plan in order to achieve the project requirements and goals of the taken project.

In this report the risk management plan has been developed for the Turner Construction Company that has taken the construction project in one of Australian University. The construction project is undertaken to develop the research building and to carry out the modernization work in the University campus. The risk management plan is developed to identify associated risks in the construction projects and what are main assets that need to be secured using the risk management plan. The management team of the construction company believes that there are many inherent risks that are associated with all the construction activities. In order to make the project successful it is essential to continuously monitor the risks and manage it in order to minimize the consequences that can arise due to happening of any adverse event (Andresen, 2007). The main motive to develop the risk management plan by the construction company is to increase the probability of the success of the project and to reduce the cost in future arises due to any rework. The construction company operates at the global level and has an experience to undertake the complex construction projects through use of innovative construction techniques. The below risk management plan will address all the material risks that are associated with the technology, management and financial level. The identification and management of risks in timely manner helps to reduce the risks and make the project successful one. The current risk management plan will identify and quantify the risk in the project, determine the impact of each and their probabilities and development of the mitigation strategies.

Risk Identification

Risk can be defined as an event that has potential to cause unwanted damage to the project and can increase the cost and time required for completion of the project. So every risk has three main characteristics like definable event, probability of occurrence and consequences if risk event is occurred. The severity of every risk can be measured through multiplying the probability by the impact of every risk identified. The mitigation plan is developed to either reduce the impact of risk or probability of occurrence of the event of risk so that failure of the project can be avoided. Risk management process is the bigger task and it is main process that has to be undertaken in the project management process.

The risk management process has been divided into multiple stages and it can be summarized in the following series of steps:

• Risk management planning: At the initial stage of the risk management planning, some prior activities need to carry out in order make for the risk management. Information about the scope, cost and schedule of the project taken need to be undertaken in order to determine the potential of these on the overall risk. The evaluation or risk screening of all the activities undertaken in the construction project helps to assess all these activities against the set of screening categories such as interface control, safety, regulations, environment, design, resources, and other important categories that has adverse impact on the construction project (Cretu, Stewart & Berends, 2011).
• Risk Identification: In this step all the risk that can hamper the construction project are identified through use of proper techniques and impact of different activities on the construction. All the identified risks are for the entire life of the project. Risks that are associated with the construction project scope, cost, and schedule are identified through systematically challenging the assumptions, scope, logic and scope and through identifying the uncertainties associated with each stage of the project.
• Risk Assessment: Risk assessment is the complex process as it determines the likelihood and impact of various risks on the project scope, schedule, and project cost. In risk assessment procedure both qualitative and quantitative assessment are done in order to identify the impact of each risk and probability of their occurrence (Edwards & Bowen, 2013).
• Risk Handling: In this step of the risk management plan various handling strategies are determined that either helps to eliminate, transfer, mitigate, accept and prevent the risk identified in the project taken (Hillson, 2017).
• Risk Management process for impact and control actions: In this step there will be assessment of risk impact on the project and the effect that each risk handling strategies will generate on the identified risk. In this process the risk handling strategies are reflected in the project baseline and residual risk are provided in the project contingency.
• Risk tracking and reporting: It is the final step of the risk management plan that requires continuous monitoring of the risks and their impact and it also required to produce the documents for the risk management process.

Risk identification is the multistage process that requires a methodical technique to identify all the associated risks in the project in detailed manner. Risk identification is the complex process and it involves various persons such as risk project manager, integrated project manager, project engineer, individual experts and other managers in the respective fields.  All these persons are required to review their respective fields in order to find any scope of risk and how much impact that particular risk can do to the project. On the basis of complete review of each stage of construction process, following are the risk associated with the project undertaken:

Priorities in the risks on the basis of impact and cost	Major risk Areas found in the construction Project	Specific risks that are identified in each category of risk
Very High Risk	Risk related to project cost	·         It has been seen that there are very high fluctuations in the cost of raw material ·         On analysis there is very high certainty that project cost will rise in future
Very High Risk	Impact on the time schedule of the given project	·         Time can be increased due to unplanned funding to the project ·         There can arise the problem of resource acquisition ·         The time schedule is not based on the realistic report (Kendrick, 2015)
High Risk	Risk that are associated with the testing and other associated testing work	·         As testing plan is made at initial stage so there are chances that it can be changed to met the requirements ·         Operating environment has not been included in the testing phase ·         Time given for testing work is very less ·         Tools used to carry out the testing work is very old
Moderate risk	Risks that are associated with the change in policies by suppliers and vendors	·         It has been noticed that suppliers are very less in the feasible area and cost of transport from acquiring long distance is very high (Lambeck & Eschemuller, 2008)
Moderate risk	Risk that arises due to change in facility arrangement and failure to acquire fixed assets (Equipment)	·         Acquiring of feasible fixed assets requires very high time and can lead to delay in project
Low risk	Risks associated with the design of building	·         Design of building is based on poor technology and has some major lacks in design ·         It is not the cost effective design
Low risk	Risks when project fails to meet the requirements
No such risk involved but if any of listed risk quantify can lead to some increase in cost and duration	Risk linked with the technology	·         No major technical risks
No or very negligible risk	Risk due to management failure	·         Management people are not assigned the project on the basis of the experience, skills and stability (Hillson, 2017)

 

The assessment of risk is the most important stage in the risk management plan and in this stage there is identification of probability of occurrence of each risk, cost applied and time schedule impact when above risk get materialized in future period. So impact of each risk can be measured through analyzing the cumulative impact of risk on cost, schedule and scope of the project. Looking the severity of project and underline risks associated with in the project, following are three main risk assessment levels that have been decided for this project:

• Technical Consequence level
• Schedule Consequence level
• Cost Consequence level

On the basis of three main risk assessment level, risk assessment matrix has been designed as follows:

The matrix of risk assessment is provided below:

Level   Area	Risk Level 0 (Zero or no risk)	Risk Level 1(Low or minimum risk)	Risk Level 2 (Moderate or considerable Risk)	Risk Level 3 (High and significant Risk)
Technical	No or Negligible risk	Lower level of degradation	Degradation at significant level	At this level technical performance is of no use in attaining the project objectives
Schedule	No potential even for Negligible risk	It can delay the project duration up to 1month	It can delay the project duration up to 3 month	It can delay the project duration by more than 3 months
Cost	If cost impacted is under or up to 5000 US dollars	If cost impacted is under or up to 50000 US dollars	If cost impacted is under or up to 250000 US dollars	If cost impacted is more than 250000 UD dollars (Loosemore, 2012)

On the basis of above risk assessment process it has been decided to divide risk into four major levels (Namely Level 0 to Level 3) and these risks level are truly based on the probability of risks that it will quantify in future. So below is the table that shows probability percentage of each level of risks with the selected project:

Risk Levels	Probability percentage that risk will quantify
Level 0	Probability of less than 1 % that risk quantify in the given percentage
Level 1	Probability of less than 10 % that risk quantify in the given percentage
Level 2	Probability of less than 25 % that risk quantify in the given percentage
Level 3	Probability of more than 25 % that risk quantify in the given percentage

Risk Assessment

On the probability and risk level, the risk severity matrix has been prepared and it is placed below:

Risk Matrix	Risk Consequence Level
Probability Level			1	2	3
P0	0	0	0	0
P1	0	1	2	3
P2	0	2	2	3
P3	0	3	3	3

 

There are mainly four risk management methods that are used to that are applied to manage the identified risks and these methods are provided below:

• Risk Avoidance: Through use of this risk management technique risk can be eliminated or avoided through modifying the different parameters of the project. Through using this risk management method risk can be avoided through changing the project plan like changing the applied technology, working conditions, modifications in the agreements etc (Molenaar, 2010).
• Risk Transfer: Through using this risk management method risk can be transferred to another project or department. In this risk management method risk can be transferred either fully or partially. It is best to transfer the cost related risk using this method.
• Risk Mitigation: This risk management method reduces impact of the risk that cannot be mitigated or eliminated. Various risk control measures and techniques are used to control the risk.
• Risk Assumption: In this method risk cannot be controlled, eliminated, mitigated are recognised and accepted as there is no feasible solution is there to control the risk.

Determining the Impact of the Risks

• Project Cost and Duration: There is large impact of the risks on the timely completion of the project and the overall cost incurred in development of its each phase. The project selected can get extended and also there will be associated increase in the overall budget in the case of occurrence of any unpredicted situations. Therefore, the risk management strategy plan developed will incorporate the measures of project cost and schedule against which specific risk mitigations strategies need to be developed for minimizing the uncertainties.
• Residual Factors: There is some residual risk in the project even after the successful development and implementation of the risk management strategies due to some residual factors that are not addressed in the risk management plan. As such, there is an inclusion of estimated variances in the cost and schedule for mitigating the occurrence of such uncertain conditions (Raydugin, 2013).

The risk management team holds the responsibility of developing the risk mitigation strategies against the risk identified in the project selected. The risk manager needs to develop a detailed action plan providing the risk mitigation strategies that will be implemented against each type of risk that can occur during carrying out the project. In this context, the risk mitigation strategies developed for overcoming the identified risks can be summarized in the table below:

Common risk abatement strategies
Risk Level   Area of impact	High	Moderate	Low
Project Cost	·         This requires adoption of adequate methods and techniques to continually monitor the cost of the project ·         The technique selected should provide an accurate estimation of the cost of the resources required from the vendors ·         The cost estimated should be compared against the expenditure incurred for identifying the variances and obtaining the sources of funds to meet the operational expenses	·         This involves the use of techniques that can provide a rough estimate of the cost involved in project development ·         Comparison of the cost estimates with that of expenditure incurred for identification of variances	·         It involves only making a continuous check of the project cost and the expenditure incurred
Project Duration	·         Regular monitoring of time required in completion of each project phase ·         Increasing the lead time as maximum through gaining an estimate of time required for completion of each project phase	·         Making the arrangement for enhancing the project time completion by 2 to 4 weeks	·         Monitoring the project time completion and reporting the fluctuations to the project manager
Project Performance	·         Testing the project performance at each stage through the use of appropriate IT tools and devices ·         Redesigning the project phases on identification of loopholes in performance ·         Communicating the changes implemented to all the project stakeholders	·         Redesigning the project phases only of major deviations in performance are found ·         Small fluctuations in performance are reported to project manager	·         Waiting for the completion of the overall project for testing and implementing small changes in the case of identification of any variances (Simon & Gunn, 2017)

The successful implementation of a project depends on the development and establishment of effective procedures and systems for identification, control and mitigation of the risks. In this context, the risk monitoring and control plans developed for reducing the chances of risk occurrence can be divided into two parts as follows:

The effective monitoring of the risk during the complete project depends on continual review of its each phase to ensure that it is being successfully carried out. This includes checking the probability of occurrence of risk at each step and identifying its impact on the successful completion of the project. The project manager should develop appropriate actions for risk measurement at each phase of the project for the effective risk mitigation and control. The effectiveness of the control measures to assess the risk should be reviewed on the basis of a determined schedule. The risk identified at each phase should be documented properly through the development of a risk registry. The control pan should be developed against each risk identified for reducing its chances of occurrence. This ensures the proper adoption of their risks management framework to ensure the successful completion of project by minimizing the chances of occurrence of any contingency conditions.

The project manager need to develop a risk management team established particularly for assessing and reviewing the project risks at each step. The review of the risk involved in each phase of the project will be taken on monthly basis so that proper actions can be taken for mitigation of the risks. This will not impact the final outcome of the research process as effective steps for risk mitigation will be taken in advance on monthly basis. The maintenance of the risk registry will also help the risk manager to review the methods taken for mitigating the specific type of risk. Thus, if such type of risk occurs in future then risk manager can appropriately asses what action strategies would be implemented to mitigate such risks.

The risk identified at each step through the use of risk monitoring plan can be controlled by the risk manager through the use of variance and trend analysis. This involves identifying the variances between the schedule and cost and thus predicting the results on its basis. The increase in the variances is an indication of the chances of potential risk and thus requires the action plans to overcome it (Smith, Merna & Jobling, 2013).

Conclusion

The above risk management plan has been developed for the construction project and it is designed through using the best management approach. The complete risk management plan is divided into series of steps that need to be followed to successfully mitigate the risks.

References

Andresen, M. 2007. The process of risk management for projects. GRIN Verlag.

Cretu, O, Stewart, R.B. & Berends, T. 2011. Risk Management for Design and Construction. John Wiley & Sons.

Edwards, P. & Bowen, P. 2013. Risk Management in Project Organisations. Routledge.

Hillson, D. 2017. Managing Risk in Projects. Routledge.

Kendrick, T. 2015. Identifying and Managing Project Risk: Essential Tools for Failure-Proofing Your Project. AMACOM Div American Mgmt Assn.

Lambeck, R. & Eschemuller, J. 2008. Urban Construction Project Management (McGraw-Hill Construction Series). McGraw Hill Professional.

Loosemore, M. et al. 2012. Risk Management in Projects. Routledge.

Molenaar, R. 2010. Guidebook on Risk Analysis Tools and Management Practices to Control Transportation Project Costs. Transportation Research Board.

Raydugin, Y. 2013. Project Risk Management: Essential Methods for Project Teams and Decision Makers. John Wiley & Sons.

Simon, A. & Gunn, B. 2017. Risk and Financial Management in Construction. Routledge.

Smith, N.J., Merna, T. & Jobling, P. 2013. Managing Risk in Construction Projects. John Wiley & Sons.