• A risk is any happening or event that its impact normally has an adversely positive or negative impact.
  • it is an act of uncertainty occurring in a project affecting its continuity in achieving the objectives eventually affecting cost, time and quality basically individuals prefers maximizes those that are positively consequential.

Concept of Risk Management

  • Risk management is the act is of developing a response mechanism to suppress mitigating the existence of a given risk after occurrence.
  • The greatest degree of uncertainty about the future is encountered early in the life of a new project.
  • Decisions taken during the appraisal stage have a larger impact on final cost, duration and benefits. The conclusion drawn from research is that parties involved in construction project would benefit greatly from reduction in certainty prior to financial commitment.

Risk management has a well planned set of activities going through the following set of stages.

  • Risk identification
  • Risk quantification
  • Risk response
  • Risk monitoring and control

Risk Analysis

  • At the appraisal stage, PM inputs will concentrate on providing:-
  • Realistic estimate of capital and running cost
  • Realistic time scales and programs for project implementation
  • Appropriate specification for performance standards

Performing risk analysis

  • When performing risk analysis then efforts should be concentrated on:-
  • Seeking sins that will avoid or reduce risks
  • Considering whether the extent or nature of the major risks are such that the normal transfer may be unavailable or expensive
  • Any special treatment that may be considered for risk transfers e.g insurance or unconventional contractual arrangement
  • Setting realistic contingencies and estimating tolerances consistence with the objective of preparing the best estimate of anticipated total project cost.
  • Identifying comparative differences in the risk ness of alternative project schemes.

Risks and Uncertainties

In general risks may be reduced in the following ways:-

  1. Obtaining additional information
  2. Performing additional tests or simulations
  3. Allocation additional resources
  4. Improving communication and managing organizational interfaces.
  5. Market risks may be frequently reduced by staging the development of the project. All the above will incur additional in early stages of development.


Types of Risks

  • Technical risks

These are risks that accrue from unproven technology that is relevant skills of operations are unavailable.

  • Management risks

They come as a result of poor appropriation of resources (time and cost) or poor administration

  • Organization risks

They come when departments conflict in terms of performance, financial appropriation, job allocation etc

  • External risks

They come when external changes that are likely to affect the project objective occur e.g government regulations i.e. taxation, inflation.


Performing Risk Management

  • Risks are specific to a project and they all affect cost and benefit. While performing risk management.

The following should be looked into:-

  • Environmental risks – these frequently occurs in compromise following comparison of cost with benefit. They are likely to have a significant influence on the conceptual design and the response should therefore be agreed prior to sanction.
  • Risk to health and safety – it is normally considered as an hazard during design and it embraces issues i.e. Reliability and efficiency in addition to safety.
  • Innovation – thorough testing but in appropriate time may reduce the consequential risks of inadequate performance and cost provision must be included.
  • Risk to activity – it is related mainly to the implementation phase of the project these risks arise mainly from uncertainty and they are the responsibility of the project manager.

Performing a Risk Response

  • Risk response may be done through many ways. Not all risks may be mitigated but those with high probability and high impact are likely to meet immediate action.
  • Effectiveness in planning for mitigation determines the risk decrease or increase of project objectives. However, several strategies may be employed as you respond to risk.
  • Risk avoidance – this is changing the overall project plan to eliminate the mess prior to its manifestation. It aims at protecting the objectives of the risk impacts.
  • Transference – this involves shifting the management and consequences of the risk to a 3rd It involves payment of a subscription rate using a fixed value to a contractor or a consultant.
  • Mitigation – involves reducing the probability and consequences of adverse events to a more or an acceptable through shorthand taking early action is more effective than a “repair” of the consequences e.g by seeking more project partners to increase capacity.
  • Risk acceptance – this is deciding not to change because the project plan in dealing with risk. Possible acceptance requires no action e.g there could be a last minute replacement of a staff.


Implementing risk management

The logic process of risk management may be defined as:-

  1. Identification of risks and uncertainties
  2. Analysis of the implication (individual and collective)
  3. Response to minimize risks
  4. Allocation of appropriate contingencies
  • Risk management is an essential part in project management cycle therefore risk management
  • Requires that you accept that uncertainty exist
  • Risk management generates a structured response to risk in terms of alternative plans, solutions and contingencies
  • It generates a realistic and stimes different attitude in project staff by preparing them for the risk event.


If uncertainty is managed realistically the process will

  • Improve project planning by prompting what if questions
  • Generate imaginative response
  • Gives greater confidence in estimate
  • Encourage provision of an appropriate contingencies and consideration on how they could be managed.


Implementing a risk management plan

  • Risk identification – this refers to naming the risk by nature and origin e.g the causative agent and the overall impact.
  • Risk quantification – here the risk is measured in the extent at which risks have caused loss and expected mitigation (response) in financial cost and human resource
  • Response stage – here the strategy to minimize or mitigate a risk are put in place.
  • Risk monitoring and control – having a foresight on the response will include better appropriation and contingencies.

Ethics in Risk Management

  1. Accept that the risk exist
  2. Generate a structured response to risk in terms of alternative plans, solutions and contingencies
  3. It generates a realistic attitude in project staff by preparing them for risk rather than taking them by surprise at impact.

Types of Contingencies

  • Time (the float)
  • Money – allowance in the budget
  • Quality – performance of the workers (people)
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