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CE 233CE 233Construction ManagementConstruction Management

Construction Risk ManagementConstruction Risk Management

Prepared by:Prepared by:Saransh ShahSaransh Shah

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OverviewOverview

Construction projects are shared efforts of Construction projects are shared efforts of multiple partiesmultiple parties

Project outcome is delivered from complex Project outcome is delivered from complex network of activitiesnetwork of activities

But the implementation of risk management is But the implementation of risk management is very scarcevery scarce

Up till now research is going on how to Up till now research is going on how to implement and manage itimplement and manage it

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What is risk management?What is risk management?

It is an approach or dealing with hazardsIt is an approach or dealing with hazards In areas of commerce and industryIn areas of commerce and industry Critical and sensitive procedureCritical and sensitive procedure Each and every construction project has risk in Each and every construction project has risk in

more or less amountmore or less amount So clause of risk management must be So clause of risk management must be

included included

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Role of Risk ManagementRole of Risk Management

There are two stages:There are two stages:

(i) Proposal submitted for the client’s approval(i) Proposal submitted for the client’s approval

(ii) Receipt of tenders(ii) Receipt of tenders

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Risk management frameworkRisk management framework

Three tired systemThree tired system Risk detectionRisk detection

It is ongoing process in many projects though not documented. It is ongoing process in many projects though not documented. They are part of different meetings to identify and handling.They are part of different meetings to identify and handling. Identified before bidding through project manager.Identified before bidding through project manager.

E.g. technical risks, environment risks etc.E.g. technical risks, environment risks etc.

Risk analysisRisk analysis Qualitative and quantitative assessment of identified risksQualitative and quantitative assessment of identified risks Probability of occurrence and potential impactProbability of occurrence and potential impact Updating of risk management database Updating of risk management database

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Risk management framework (cont.)Risk management framework (cont.)

Risk responseRisk response Alternative approach to avoid riskAlternative approach to avoid risk Actions for reducing probability of riskActions for reducing probability of risk Switching to different activitiesSwitching to different activities Increase work forceIncrease work force Risk insuranceRisk insurance

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Preventive measuresPreventive measures

Effective communicationEffective communication Daily meetingsDaily meetings Monitoring progress of the projectMonitoring progress of the project Updating dataUpdating data Abundant financeAbundant finance Experienced engineers and skilled laborsExperienced engineers and skilled labors Experienced project managersExperienced project managers

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Co-operative risk management modelCo-operative risk management model

Actor specificActor specific

Knowledge, experience, main contractor: guidance and Knowledge, experience, main contractor: guidance and managementmanagement

Dyadic relational Dyadic relational

Reduced need for contracts, good personal relationships, Reduced need for contracts, good personal relationships, partneringpartnering

Network groupsNetwork groups

Meetings, standards, partnering, trust, self -guidance; macro Meetings, standards, partnering, trust, self -guidance; macro culture, reputation, Collective Sanctions, careful risk allocation, culture, reputation, Collective Sanctions, careful risk allocation, risk& reward systemsrisk& reward systems

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Benefits of modelBenefits of model

Environment becomes flexible, trustful and Environment becomes flexible, trustful and professionalprofessional

Lowers transaction costLowers transaction cost Better allocation of risks to partiesBetter allocation of risks to parties Stronger bonding of relationshipStronger bonding of relationship

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ConclusionConclusion

Risks are not absoluteRisks are not absolute They must be defined for particular situation They must be defined for particular situation

in advancein advance to minimize impact of riskto minimize impact of risk Depends upon experiences, background Depends upon experiences, background

knowledge and education of an individualknowledge and education of an individual

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Thank youThank you