DTU ProjectLab - User contributions [en-gb]

A Guide to Risk Management in Construction Projects

2019-03-03T18:56:39Z

S182573:

''Developed by Jokin Brito''

==Abstract==
Throughout history, construction has been one of the most revenue generating industries in the world and like many other businesses, is being transformed to meet the highest demands of the twenty-first century. Only in the United States, more than 11.1 million people were employed by the construction industry in 2018<ref name=''labor''> ''Bls.gov. (2019). Employed persons by detailed industry, sex, race, and Hispanic or Latino ethnicity. [online] Available at: https://www.bls.gov/cps/cpsaat18.htm [Accessed 17 Feb. 2019].'' </ref>, the industry spending topped $1.23 trillion in 2017<ref name=''spending''> ''Construction spending in the United States from 1996 to 2017, s. (2019). U.S. construction spending: public and private sectors 2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/226355/us-public-and-private-sector-construction/ [Accessed 17 Feb. 2019].'' </ref> and it accounted for between 7% of total U.S. GDP.<ref name=''GDP''> ''2018 FMI Overview, Featuring FMI’s Fourth Quarter 2017 Construction Outlook. (2018). [online] Available at: https://www.fminet.com/wp-content/uploads/2018/01/Overview2018_FINAL-1.pdf [Accessed 17 Feb. 2019].'' </ref> Furthermore, today's construction industry involves more dynamic and uncertain planning than ever before. Decision-makers and project managers require better knowledge and systematic tools, not only in project management, but also in risk management, a discipline that has a special complexity in construction projects.
This article has the goal of giving project managers and decision-makers within construction industry a more detailed guide to fulfill the needs of any project they manage, where they can identify and reduce cost and time over-runs and security risks, in order to optimize the chances of project success. The guide follows the Project Management Institute (PMI) standards in the PMBOK® Guide.

Four phases can be found in project management, where the executing order is really important: scope, schedule, cost and risk. With the first three constraints defined, risk is the last but not least constraint remaining, and it is certainly the one that has no exact answer and the most abstract one. This guide could help project managers to define risks within their projects but it is a discipline that is highly dependent on the manager criteria.

==Background==

====Structure of this article====
The article structure is aligned with the standards in the PMBOK® Guide, following the same processes. First the key and basic concepts of risk management are given, where the types of risks that a project can suffer are explained. Then, the processes are analyzed giving examples and customizing them to the needs of construction industry. The goal is to give a clear guidance through the process to project managers in construction projects.

Finally, the limitations of risk management in construction projects are explained.

====Construction Industry====
The size of construction projects has outgrowed the industry's capacity to manage complex problems under conditions of uncertainty. Risk management in large scale projects becomes a more important part of overall construction management. Each project is very different from each other and they can't be managed in a systematic way, such as in other industries, thus risk management has always been a more trial-and-error method, which requires symbolic reasoning. Empirical knowledge plays a major role for decision-makers and project managers in every stage under uncertainty and many problems in the industry are not very well defined so the risks that this problems entail are much more difficult to define.

In this article the focus is giving a more systematic way of evaluating and defining risks on any construction project, helping project managers to base their decisions on the standars in the PMBOK® Guide and in the experience of previous projects.

[[File:PRMoverview.PNG|thumb|right|250px|Figure 1: Project Risk Management Overview <ref name="PRMO"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.396'' </ref>.]]
====Project Risk Management====
Project Risk management includes the processes of conducting risk management planning, identification, analysis,
response planning, response implementation, and monitoring risk on a project. The objectives of project risk management
are to increase the probability and/or impact of positive risks and to decrease the probability and/or impact of negative
risks, in order to optimize the chances of project success.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

The Project Risk Management processes according to the PMBOK® Guide are:

<ol>
<li> Plan Risk Management
<li> Identify Risks
<li> Perform Qualitative Risk Analysis
<li> Perform Quantitative Risk Analysis
<li> Plan Risk Responses
<li> Implement Risk Responses
<li> Monitor Risks
</ol>

The goal of this article is to provide guidance on each one of this processes, applied to any construcion project.

====Key Concepts====
All projects have a difficulty degree and a risky level that aim to deliver benefits and achieve certain goals. Even though this barely happens in the construction industry, organizations should always choose to make decisions in a controlled manner, balancing cost and benefit.
When risks of any project are not well managed, they have the potential to deviate the project from the original plan and fail to achieve the defined objectives.

In every project, risks exist at two levels:
*'''Individual project risk''' Uncertain event or condition that, if occurs, has an effect on one or more project objectives. When these risks are unmanaged, it may result in problems such as delay, cost overruns, performance shortfall or loss of reputation. Opportunities that are captured can lead to benefits in the same categories.
*'''Overall project risk''' Uncertainty of the project as a whole, representing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative. A good management of these risks, aims to keep project risk exposure within an acceptable range, maximizing the probability of achieving overall project objectives.

The aim of project risk management is to ensure that all types of risk are considered and that projects risks are understood in a wider context. Trends and ememerging practices for Project Risk Management include but are not limited to:

* '''Non-event risk:''' The two types of non-event risks are ''variability risk'', where uncertainty exists about some key characteristics of a planned event or activity or decision. And ''ambiguity risks'', where uncertainty exists about what might happen in the future.

* '''Project resilience:''' These emergent risks are better known as unknowable-unknowns and they can be tackled through developing project resilience. This requires each project to have an specific ''risk budget'' for known risks, ''flexible project'' processes that can cope while maintaining overall direction of the project, ''empowered project team'' that is trusted to get the job done with agreed-upon limits, ''frequent review'' of early warning signs and ''clear input from stakeholders'' to clarify areas where the project scope or strategy can be adjusted in response to emergent risks.

* '''Integrated risk management:''' Projects may be part of a program or portfolio, where risks also exist and should be owned and managed at the appropiate level. Some risks can be managed by the project team or manager but some risks may escalate to a higher level. A coordinated approach to enterprise-wide risk management ensures alignment and coherence in the way risk is managed across all levels.

Each project is unique and it is necessary to tailor the way Project Risk Management processes are applied. These considerations include project size, project complexity, project importance and development approach.

==Application==
====Plan Risk Management====
[[File:PlanRiskManagement.PNG|thumb|right|400px|Figure 2: Plan Risk Management: Inputs, Tools & Techniques, and Outputs <ref name="PRM"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.401'' </ref>.]]
This is the process where the risk management activities are defined, ensuring that the degree, type and visibility of risk management are propotionate to both risks and the importance of the project to the organization and other stakeholders. The process is defined once or at predefined points in the project. It may be necessary to revisit this process in a major phase change or if the project scope changes significantly.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Inputs, tools and techniques and outputs are predefined in this process as shown in figure 2 and they should be aligned with the project integration management process of the PMBOK® Guide. It should result on strategies and methodologies that should be followed to manage the risks, roles and responsabilities of each team member, the funding needed to perform these activities and defined risk categories. The definition of risk probability and impacts, which is usually arranged in a scale of five levels is very important, in order to understand and classify the impact that the identified risks can make on the project. The scale should include the probability of occurence, the cost of each level of probability in case of any event and the description of the impact on the project.

This task should be done mainly by the project risk manager, who will plan the strategy to follow during the next processes of the guide. The goal is to have a clear plan of what to do in the complete risk management process.

Reporting formats and tracking documents should also be elaborated to simplify how risks will be communicated.
[[File:IdentifyRisks.PNG|thumb|left|300px|Figure 3: Identify Risks: Inputs, Tools & Techniques, and Outputs <ref name="IR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.409'' </ref>.]]

====Identify Risks====
[[File:TotalRisk.PNG|thumb|left|300px|Figure 4: Risk identification, inspired from: "Construction Risk Management" <ref name="RIC"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.116.'' </ref>.]]
This is the process where the team should identify probable risks that could have both positive and negative impact on the project and gather them according to the risk plan previously done. This process is performed throughout the project. The inputs, tools & techniques and outputs that the team should follow are shown in Figure 3.

In this process is very important to involve the project team so they can develop and maintain a sense of ownership and responsibility for identified individual project risks, the level of overall project risk, and associated risk response actions. In construction projects, the previous experience of each member of the team is specially important in risk identification, a brainstorming meeting could be very helpful to create a list of possible threats or opportunities. Identify Risks is an iterative process, since new individual project risks may emerge as the project progresses through its life cycle and the level of overall project risk will also change.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Even though, every project is different and specially construction projects have a high level of uncertainty, external resources could also be taken into account, such as academic studies, industry studies and records from the same organization. The target is to have a list of every possible risk or uncertainty factors that affect productivity, cost, time, quality and performance, so the project management could categorize them according to the risk plan. This list includes the principal risks of all major parties (contractors, designers and owners) involved in a construction project.

It is also important that if any risk happens, the team has a prepared document regarding lessons learned, so this could help in future projects and identifying potential threats and opportunities. It can also be updated with information on techniques that were effective in identifying risks to improve performance in later phases or other projects.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref>.

====Perform Qualitative Risk Analysis====
[[File:PerformQualitativeRiskAnalysis.PNG|thumb|right|300px|Figure 5: Perform Qualitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.419'' </ref>.]]
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. The key benefit of this process is that it focuses efforts on high-priority risks. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 5.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

As previously said, construction projects have a high level of uncertainty and the expertise of the team could be very useful to develop a hierarchical chart, categorizing the previously identified risks by the probability of occurence and its impact on project objectives. Risks
can be prioritized for further analysis and planning of risk responses based on their probability and impacts. Industry studies of similar projects and published material could also be used, even though it could be hard to compare external projects with an specific projects.

It is very important to include representatives from all areas influencing the project scope, schedule and cost: sponsor, development, engineering, procurement, construction, operations, legal, etc.

====Perform Quantitative Risk Analysis====
[[File:PerformQuantitativeRiskAnalysis.PNG|thumb|right|300px|Figure 6: Perform Quantitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQNRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.428'' </ref>.]]
Is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. The key benefit of this process is that it quantifies overall project risk exposure, and it can also provide additional quantitative risk information to support risk response planning. This process is not required for every project, but where it is used, it is performed throughout the project. The inputs and outputs of this process are depicted in Figure 6.

Perform Quantitative Risk Analysis is not required for all projects. Undertaking a robust analysis depends on the availability of high-quality data about individual project risks and other sources of uncertainty, as well as a sound underlying project baseline for scope, schedule, and cost. Quantitative risk analysis usually requires specialized risk software and expertise in the development and interpretation of risk models.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>. Moreover, this methods are not very reliable in construction projects because of the uncertainty levels of the risks and the difficulty of quantifying the economical impact of this events.

Even though it's hard to find exact numbers from this process, it is very important to consider a budget line to mitigate the identified risks. This budget line will be defined depending on the project risk level, the higher the risk, the higher budget for this purpose. Usually in construction projects, this is a percentage of the overall budget. A budget line for the risks concerning the delivery of the final product (building or project) should also be considered, this to mitigate the cost for hidden faults that could emerge.

====Plan Risk Responses====
[[File:PlanRiskResponses.PNG|thumb|right|300px|Figure 7: Plan Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="PRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.437'' </ref>.]]
Plan Risk Responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks. The key benefit of this process is that it identifies appropriate ways to address overall project risk and individual project risks. This process also allocates resources and inserts activities into project documents and the project management plan as needed. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 7.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The expertise of the team involved in the project is again highly important for this process, the target is to propose specific advice to minimize risks and their economic consequences. The process in construction projects are more complex than in most other domains because of the fact that uncertainty factors are expressed in natural language with jargon.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref> Again the complexity of this process in construction projects is due to the difficulty to quantify the consequences of any threat or benefit, but a contingency plan should be developed for major risks. The project manager and the team should know exactly what to do in case of any event, even though the economic impact remains unknown.

[[File:ImplementRiskResponses.PNG|thumb|left|300px|Figure 8: Implement Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="IRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.449'' </ref>.]]
====Implement Risk Responses====
This process consits in implementing agreed-upon risk response plans. The key benefit of this process is that it ensures that agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize individual project opportunities. The inputs, tools and techniques, and outputs of the process are shown in Figure 8.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

This is the process where the planning is implemented and decision-makers and project managers need to know what to do in case of a contingency, and the impact that the previously identified risk could have. For example, consider the case where a contractor delays due to bad weather or even negligence, what actions should be taken? These actions should be aligned with the risk management plan and with the consequences previously identified, with the respective costs that this events may entail. The project manager needs to have very clear the cost of every contingency and the cost of the action that needs to be taken on the overall result of the project. For example, in the case of a delay in the program, the project manager needs to know the cost of each day of delay and what actions are allowed to be taken.

[[File:MonitorRisks.PNG|thumb|left|300px|Figure 9: Monitor Risks: Inputs, Tools & Techniques, and Outputs <ref name="MR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.453'' </ref>.]]
====Monitor Risk====
Monitor Risks is the process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project. The key benefit of this process is that it enables project decisions to be based on current information about overall project risk exposure and individual project risks. The inputs, tools and techniques, and outputs of the process are depicted in Figure 9.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The target is to use performance information during the project execution to determine if the followed strategy is the right one, if the risk management approach is still appropiate or if contingency reserves for cost or schedule require modification. It is essential for the project manager to know if the action taken after a risk occured, has been the right one and has reduced cost and time over-runs, maybe the action taken was even worst than the problem and a rethinking on the strategy has to be done.

It is also important to identify new risks or new threats that could have a negative impact on the project, or potential opportunities that eventually could benefit the overall project results.

==Limitations==
The Project Management Institute (PMI) standards in the PMBOK® Guide, establishes a detailed guide to manage the risks in every project. Risk management is the most uncertain discipline in project management and this makes harder to follow the guide to the detail. Even though, risk management is highly important in every project, project managers in construction industry are more likely to follow empirical methods to mitigate these risks. The porpose of this guide is to give an easy to follow method to decision makers and project managers.

However, following a defined process is hard for construction projects because every project is very different and "unknowable unkowns" are more frequent in this type of projects than in projects from industries with defined processes. This makes harder to follow the guide and this is one of the reasons why construction project managers tend to follow more empirical methods.

==Annotated Bibliography==
'''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458''' The book contains the last version of the PMBOK® Guide, the article is based on the process established by this book.

'''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.''' The article contains advisory on managing risks on construction projects.

==References==
<references />

A Guide to Risk Management in Construction Projects

2019-03-02T23:34:13Z

S182573:

''Developed by Jokin Brito''

==Abstract==
Throughout history, construction has been one of the most revenue generating industries in the world and like many other businesses, is being transformed to meet the highest demands of the twenty-first century. Only in the United States, more than 11.1 million people were employed by the construction industry in 2018<ref name=''labor''> ''Bls.gov. (2019). Employed persons by detailed industry, sex, race, and Hispanic or Latino ethnicity. [online] Available at: https://www.bls.gov/cps/cpsaat18.htm [Accessed 17 Feb. 2019].'' </ref>, the industry spending topped $1.23 trillion in 2017<ref name=''spending''> ''Construction spending in the United States from 1996 to 2017, s. (2019). U.S. construction spending: public and private sectors 2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/226355/us-public-and-private-sector-construction/ [Accessed 17 Feb. 2019].'' </ref> and it accounted for between 7% of total U.S. GDP.<ref name=''GDP''> ''2018 FMI Overview, Featuring FMI’s Fourth Quarter 2017 Construction Outlook. (2018). [online] Available at: https://www.fminet.com/wp-content/uploads/2018/01/Overview2018_FINAL-1.pdf [Accessed 17 Feb. 2019].'' </ref> Furthermore, today's construction industry involves more dynamic and uncertain planning than ever before. Decision-makers and project managers require better knowledge and systematic tools, not only in project management, but also in risk management, a discipline that has a special complexity in construction projects.
This article has the goal of giving project managers and decision-makers within construction industry a more detailed guide to fulfill the needs of any project they manage, where they can identify and reduce cost and time over-runs and security risks, in order to optimize the chances of project success. The guide follows the Project Management Institute (PMI) standards in the PMBOK® Guide.

Four phases can be found in project management, where the executing order is really important: scope, schedule, cost and risk. With the first three constraints defined, risk is the last but not least constraint remaining, and it is certainly the one that has no exact answer and the most abstract one. This guide could help project managers to define risks within their projects but it is a discipline that is highly dependent on the manager criteria.

==Background==

====Structure of this article====
The article structure is aligned with the standards in the PMBOK® Guide, following the same processes. First the key and basic concepts of risk management are given, where the types of risks that a project can suffer are explained. Then, the processes are analyzed giving examples and customizing them to the needs of construction industry. The goal is to give a clear guidance through the process to project managers in construction projects.

Finally, the limitations of risk management in construction projects are explained.

====Construction Industry====
The size of construction projects has outgrowed the industry's capacity to manage complex problems under conditions of uncertainty. Risk management in large scale projects becomes a more important part of overall construction management. Each project is very different from each other and they can't be managed in a systematic way, such as in other industries, thus risk management has always been a more trial-and-error method, which requires symbolic reasoning. Empirical knowledge plays a major role for decision-makers and project managers in every stage under uncertainty and many problems in the industry are not very well defined so the risks that this problems entail are much more difficult to define.

In this article the focus is giving a more systematic way of evaluating and defining risks on any construction project, helping project managers to base their decisions on the standars in the PMBOK® Guide and in the experience of previous projects.

[[File:PRMoverview.PNG|thumb|right|250px|Figure 1: Project Risk Management Overview <ref name="PRMO"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.396'' </ref>.]]
====Project Risk Management====
Project Risk management includes the processes of conducting risk management planning, identification, analysis,
response planning, response implementation, and monitoring risk on a project. The objectives of project risk management
are to increase the probability and/or impact of positive risks and to decrease the probability and/or impact of negative
risks, in order to optimize the chances of project success.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

The Project Risk Management processes according to the PMBOK® Guide are:

<ol>
<li> Plan Risk Management
<li> Identify Risks
<li> Perform Qualitative Risk Analysis
<li> Perform Quantitative Risk Analysis
<li> Plan Risk Responses
<li> Implement Risk Responses
<li> Monitor Risks
</ol>

The goal of this article is to provide guidance on each one of this processes, applied to any construcion project.

====Key Concepts====
All projects have a difficulty degree and a risky level that aim to deliver benefits and achieve certain goals. Even though this barely happens in the construction industry, organizations should always choose to make decisions in a controlled manner, balancing cost and benefit.
When risks of any project are not well managed, they have the potential to deviate the project from the original plan and fail to achieve the defined objectives.

In every project, risks exist at two levels:
*'''Individual project risk''' Uncertain event or condition that, if occurs, has an effect on one or more project objectives. When these risks are unmanaged, it may result in problems such as delay, cost overruns, performance shortfall or loss of reputation. Opportunities that are captured can lead to benefits in the same categories.
*'''Overall project risk''' Uncertainty of the project as a whole, representing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative. A good management of these risks, aims to keep project risk exposure within an acceptable range, maximizing the probability of achieving overall project objectives.

The aim of project risk management is to ensure that all types of risk are considered and that projects risks are understood in a wider context. Trends and ememerging practices for Project Risk Management include but are not limited to:

* '''Non-event risk:''' The two types of non-event risks are ''variability risk'', where uncertainty exists about some key characteristics of a planned event or activity or decision. And ''ambiguity risks'', where uncertainty exists about what might happen in the future.

* '''Project resilience:''' These emergent risks are better known as unknowable-unknowns and they can be tackled through developing project resilience. This requires each project to have an specific ''risk budget'' for known risks, ''flexible project'' processes that can cope while maintaining overall direction of the project, ''empowered project team'' that is trusted to get the job done with agreed-upon limits, ''frequent review'' of early warning signs and ''clear input from stakeholders'' to clarify areas where the project scope or strategy can be adjusted in response to emergent risks.

* '''Integrated risk management:''' Projects may be part of a program or portfolio, where risks also exist and should be owned and managed at the appropiate level. Some risks can be managed by the project team or manager but some risks may escalate to a higher level. A coordinated approach to enterprise-wide risk management ensures alignment and coherence in the way risk is managed across all levels.

Each project is unique and it is necessary to tailor the way Project Risk Management processes are applied. These considerations include project size, project complexity, project importance and development approach.

==Application==
====Plan Risk Management====
[[File:PlanRiskManagement.PNG|thumb|right|400px|Figure 2: Plan Risk Management: Inputs, Tools & Techniques, and Outputs <ref name="PRM"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.401'' </ref>.]]
This is the process where the risk management activities are defined, ensuring that the degree, type and visibility of risk management are propotionate to both risks and the importance of the project to the organization and other stakeholders. The process is defined once or at predefined points in the project. It may be necessary to revisit this process in a major phase change or if the project scope changes significantly.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Inputs, tools and techniques and outputs are predefined in this process as shown in figure 2 and they should be aligned with the project integration management process of the PMBOK® Guide. It should result on strategies and methodologies that should be followed to manage the risks, roles and responsabilities of each team member, the funding needed to perform these activities and defined risk categories. The definition of risk probability and impacts, which is usually arranged in a scale of five levels is very important, in order to understand and classify the impact that the identified risks can make on the project. The scale should include the probability of occurence, the cost of each level of probability in case of any event and the description of the impact on the project.

This task should be done mainly by the project risk manager, who will plan the strategy to follow during the next processes of the guide. The goal is to have a clear plan of what to do in the complete risk management process.

Reporting formats and tracking documents should also be elaborated to simplify how risks will be communicated.
[[File:IdentifyRisks.PNG|thumb|left|300px|Figure 3: Identify Risks: Inputs, Tools & Techniques, and Outputs <ref name="IR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.409'' </ref>.]]

====Identify Risks====
[[File:TotalRisk.PNG|thumb|left|300px|Figure 4: Risk identification, inspired from: "Construction Risk Management" <ref name="RIC"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.116.'' </ref>.]]
This is the process where the team should identify probable risks that could have both positive and negative impact on the project and gather them according to the risk plan previously done. This process is performed throughout the project. The inputs, tools & techniques and outputs that the team should follow are shown in Figure 3.

In this process is very important to involve the project team so they can develop and maintain a sense of ownership and responsibility for identified individual project risks, the level of overall project risk, and associated risk response actions. In construction projects, the previous experience of each member of the team is specially important in risk identification, a brainstorming meeting could be very helpful to create a list of possible threats or opportunities. Identify Risks is an iterative process, since new individual project risks may emerge as the project progresses through its life cycle and the level of overall project risk will also change.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Even though, every project is different and specially construction projects have a high level of uncertainty, external resources could also be taken into account, such as academic studies, industry studies and records from the same organization. The target is to have a list of every possible risk or uncertainty factors that affect productivity, cost, time, quality and performance, so the project management could categorize them according to the risk plan. This list includes the principal risks of all major parties (contractors, designers and owners) involved in a construction project.

It is also important that if any risk happens, the team has a prepared document regarding lessons learned, so this could help in future projects and identifying potential threats and opportunities. It can also be updated with information on techniques that were effective in identifying risks to improve performance in later phases or other projects.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref>.

====Perform Qualitative Risk Analysis====
[[File:PerformQualitativeRiskAnalysis.PNG|thumb|right|300px|Figure 5: Perform Qualitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.419'' </ref>.]]
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. The key benefit of this process is that it focuses efforts on high-priority risks. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 5.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

As previously said, construction projects have a high level of uncertainty and the expertise of the team could be very useful to develop a hierarchical chart, categorizing the previously identified risks by the probability of occurence and its impact on project objectives. Risks
can be prioritized for further analysis and planning of risk responses based on their probability and impacts. Industry studies of similar projects and published material could also be used, even though it could be hard to compare external projects with an specific projects.

It is very important to include representatives from all areas influencing the project scope, schedule and cost: sponsor, development, engineering, procurement, construction, operations, legal, etc.

====Perform Quantitative Risk Analysis====
[[File:PerformQuantitativeRiskAnalysis.PNG|thumb|right|300px|Figure 6: Perform Quantitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQNRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.428'' </ref>.]]
Is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. The key benefit of this process is that it quantifies overall project risk exposure, and it can also provide additional quantitative risk information to support risk response planning. This process is not required for every project, but where it is used, it is performed throughout the project. The inputs and outputs of this process are depicted in Figure 6.

Perform Quantitative Risk Analysis is not required for all projects. Undertaking a robust analysis depends on the availability of high-quality data about individual project risks and other sources of uncertainty, as well as a sound underlying project baseline for scope, schedule, and cost. Quantitative risk analysis usually requires specialized risk software and expertise in the development and interpretation of risk models.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>. Moreover, this methods are not very reliable in construction projects because of the uncertainty levels of the risks and the difficulty of quantifying the economical impact of this events.

Even though it's hard to find exact numbers from this process, it is very important to consider a budget line to mitigate the identified risks. This budget line will be defined depending on the project risk level, the higher the risk, the higher budget for this purpose. Usually in construction projects, this is a percentage of the overall budget. A budget line for the risks concerning the delivery of the final product (building or project) should also be considered, this to mitigate the cost for hidden faults that could emerge.

====Plan Risk Responses====
[[File:PlanRiskResponses.PNG|thumb|right|300px|Figure 7: Plan Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="PRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.437'' </ref>.]]
Plan Risk Responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks. The key benefit of this process is that it identifies appropriate ways to address overall project risk and individual project risks. This process also allocates resources and inserts activities into project documents and the project management plan as needed. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 7.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The expertise of the team involved in the project is again highly important for this process, the target is to propose specific advice to minimize risks and their economic consequences. The process in construction projects are more complex than in most other domains because of the fact that uncertainty factors are expressed in natural language with jargon.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref> Again the complexity of this process in construction projects is due to the difficulty to quantify the consequences of any threat or benefit, but a contingency plan should be developed for major risks. The project manager and the team should know exactly what to do in case of any event, even though the economic impact remains unknown.

[[File:ImplementRiskResponses.PNG|thumb|left|300px|Figure 8: Implement Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="IRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.449'' </ref>.]]
====Implement Risk Responses====
This process consits in implementing agreed-upon risk response plans. The key benefit of this process is that it ensures that agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize individual project opportunities. The inputs, tools and techniques, and outputs of the process are shown in Figure 8.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

This is the process where the planning is implemented and decision-makers and project managers need to know what to do in case of a contingency, and the impact that the previously identified risk could have. For example, consider the case where a contractor delays due to bad weather or even negligence, what actions should be taken? These actions should be aligned with the risk management plan and with the consequences previously identified, with the respective costs that this events may entail. The project manager needs to have very clear the cost of every contingency and the cost of the action that needs to be taken on the overall result of the project. For example, in the case of a delay in the program, the project manager needs to know the cost of each day of delay and what actions are allowed to be taken.

[[File:MonitorRisks.PNG|thumb|left|300px|Figure 9: Monitor Risks: Inputs, Tools & Techniques, and Outputs <ref name="MR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.453'' </ref>.]]
====Monitor Risk====
Monitor Risks is the process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project. The key benefit of this process is that it enables project decisions to be based on current information about overall project risk exposure and individual project risks. The inputs, tools and techniques, and outputs of the process are depicted in Figure 9.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The target is to use performance information during the project execution to determine if the followed strategy is the right one, if the risk management approach is still appropiate or if contingency reserves for cost or schedule require modification. It is essential for the project manager to know if the action taken after a risk occured, has been the right one and has reduced cost and time over-runs, maybe the action taken was even worst than the problem and a rethinking on the strategy has to be done.

It is also important to identify new risks or new threats that could have a negative impact on the project, or potential opportunities that eventually could benefit the overall project results.

==Limitations==
The Project Management Institute (PMI) standards in the PMBOK® Guide, establishes a detailed guide to manage the risks in every project. Risk management is the most uncertain discipline in project management and this makes harder to follow the guide to the detail. Even though, risk management is highly important in every project, project managers in construction industry are more likely to follow empirical methods to mitigate these risks. The porpose of this guide is to give an easy to follow method to decision makers and project managers.

However, following a defined process is hard for construction projects because every project is very different and "unknown unkowns" are more frequent in this type of projects than in projects from industries with defined processes. This makes harder to follow the guide and this is one of the reasons why construction project managers tend to follow more empirical methods.

==Annotated Bibliography==
'''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458''' The book contains the last version of the PMBOK® Guide, the article is based on the process established by this book.

'''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.''' The article contains advisory on managing risks on construction projects.

==References==
<references />

A Guide to Risk Management in Construction Projects

2019-03-02T23:24:19Z

S182573:

''Developed by Jokin Brito''

==Abstract==
Throughout history, construction has been one of the most revenue generating industries in the world and like many other businesses, is being transformed to meet the highest demands of the twenty-first century. Only in the United States, more than 11.1 million people were employed by the construction industry in 2018<ref name=''labor''> ''Bls.gov. (2019). Employed persons by detailed industry, sex, race, and Hispanic or Latino ethnicity. [online] Available at: https://www.bls.gov/cps/cpsaat18.htm [Accessed 17 Feb. 2019].'' </ref>, the industry spending topped $1.23 trillion in 2017<ref name=''spending''> ''Construction spending in the United States from 1996 to 2017, s. (2019). U.S. construction spending: public and private sectors 2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/226355/us-public-and-private-sector-construction/ [Accessed 17 Feb. 2019].'' </ref> and it accounted for between 7% of total U.S. GDP.<ref name=''GDP''> ''2018 FMI Overview, Featuring FMI’s Fourth Quarter 2017 Construction Outlook. (2018). [online] Available at: https://www.fminet.com/wp-content/uploads/2018/01/Overview2018_FINAL-1.pdf [Accessed 17 Feb. 2019].'' </ref> Furthermore, today's construction industry involves more dynamic and uncertain planning than ever before. Decision-makers and project managers require better knowledge and systematic tools, not only in project management, but also in risk management, a discipline that has a special complexity in construction projects.
This article has the goal of giving project managers and decision-makers within construction industry a more detailed guide to fulfill the needs of any project they manage, where they can identify and reduce cost and time over-runs and security risks, in order to optimize the chances of project success. The guide follows the Project Management Institute (PMI) standards in the PMBOK® Guide.

Four phases can be found in project management, where the executing order is really important: scope, schedule, cost and risk. With the first three constraints defined, risk is the last but not least constraint remaining, and it is certainly the one that has no exact answer and the most abstract one. This guide could help project managers to define risks within their projects but it is a discipline that is highly dependent on the manager criteria.

==Background==

====Structure of this article====
The article structure is aligned with the standards in the PMBOK® Guide, following the same processes. First the key and basic concepts of risk management are given, where the types of risks that a project can suffer are explained. Then, the processes are analyzed giving examples and customizing them to the needs of construction industry. The goal is to give a clear guidance through the process to project managers in construction projects.

Finally, the limitations of risk management in construction projects are explained.

====Construction Industry====
The size of construction projects has outgrowed the industry's capacity to manage complex problems under conditions of uncertainty. Risk management in large scale projects becomes a more important part of overall construction management. Each project is very different from each other and they can't be managed in a systematic way, such as in other industries, thus risk management has always been a more trial-and-error method, which requires symbolic reasoning. Empirical knowledge plays a major role for decision-makers and project managers in every stage under uncertainty and many problems in the industry are not very well defined so the risks that this problems entail are much more difficult to define.

In this article the focus is giving a more systematic way of evaluating and defining risks on any construction project, helping project managers to base their decisions on the standars in the PMBOK® Guide and in the experience of previous projects.

[[File:PRMoverview.PNG|thumb|right|250px|Figure 1: Project Risk Management Overview <ref name="PRMO"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.396'' </ref>.]]
====Project Risk Management====
Project Risk management includes the processes of conducting risk management planning, identification, analysis,
response planning, response implementation, and monitoring risk on a project. The objectives of project risk management
are to increase the probability and/or impact of positive risks and to decrease the probability and/or impact of negative
risks, in order to optimize the chances of project success.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

The Project Risk Management processes according to the PMBOK® Guide are:

<ol>
<li> Plan Risk Management
<li> Identify Risks
<li> Perform Qualitative Risk Analysis
<li> Perform Quantitative Risk Analysis
<li> Plan Risk Responses
<li> Implement Risk Responses
<li> Monitor Risks
</ol>

The goal of this article is to provide guidance on each one of this processes, applied to any construcion project.

====Key Concepts====
All projects have a difficulty degree and a risky level that aim to deliver benefits and achieve certain goals. Even though this barely happens in the construction industry, organizations should always choose to make decisions in a controlled manner, balancing cost and benefit.
When risks of any project are not well managed, they have the potential to deviate the project from the original plan and fail to achieve the defined objectives.

In every project, risks exist at two levels:
*'''Individual project risk''' Uncertain event or condition that, if occurs, has an effect on one or more project objectives. When these risks are unmanaged, it may result in problems such as delay, cost overruns, performance shortfall or loss of reputation. Opportunities that are captured can lead to benefits in the same categories.
*'''Overall project risk''' Uncertainty of the project as a whole, representing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative. A good management of these risks, aims to keep project risk exposure within an acceptable range, maximizing the probability of achieving overall project objectives.

The aim of project risk management is to ensure that all types of risk are considered and that projects risks are understood in a wider context. Trends and ememerging practices for Project Risk Management include but are not limited to:

* '''Non-event risk:''' The two types of non-event risks are ''variability risk'', where uncertainty exists about some key characteristics of a planned event or activity or decision. And ''ambiguity risks'', where uncertainty exists about what might happen in the future.

* '''Project resilience:''' These emergent risks are better known as unknowable-unknowns and they can be tackled through developing project resilience. This requires each project to have an specific ''risk budget'' for known risks, ''flexible project'' processes that can cope while maintaining overall direction of the project, ''empowered project team'' that is trusted to get the job done with agreed-upon limits, ''frequent review'' of early warning signs and ''clear input from stakeholders'' to clarify areas where the project scope or strategy can be adjusted in response to emergent risks.

* '''Integrated risk management:''' Projects may be part of a program or portfolio, where risks also exist and should be owned and managed at the appropiate level. Some risks can be managed by the project team or manager but some risks may escalate to a higher level. A coordinated approach to enterprise-wide risk management ensures alignment and coherence in the way risk is managed across all levels.

Each project is unique and it is necessary to tailor the way Project Risk Management processes are applied. These considerations include project size, project complexity, project importance and development approach.

==Application==
====Plan Risk Management====
[[File:PlanRiskManagement.PNG|thumb|right|400px|Figure 2: Plan Risk Management: Inputs, Tools & Techniques, and Outputs <ref name="PRM"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.401'' </ref>.]]
This is the process where the risk management activities are defined, ensuring that the degree, type and visibility of risk management are propotionate to both risks and the importance of the project to the organization and other stakeholders. The process is defined once or at predefined points in the project. It may be necessary to revisit this process in a major phase change or if the project scope changes significantly.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Inputs, tools and techniques and outputs are predefined in this process as shown in figure 2 and they should be aligned with the project integration management process of the PMBOK® Guide. It should result on strategies and methodologies that should be followed to manage the risks, roles and responsabilities of each team member, the funding needed to perform these activities and defined risk categories. The definition of risk probability and impacts, which is usually arranged in a scale of five levels is very important, in order to understand and classify the impact that the identified risks can make on the project. The scale should include the probability of occurence, the cost of each level of probability in case of any event and the description of the impact on the project.

This task should be done mainly by the project risk manager, who will plan the strategy to follow during the next processes of the guide. The goal is to have a clear plan of what to do in the complete risk management process.

Reporting formats and tracking documents should also be elaborated to simplify how risks will be communicated.
[[File:IdentifyRisks.PNG|thumb|left|300px|Figure 3: Identify Risks: Inputs, Tools & Techniques, and Outputs <ref name="IR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.409'' </ref>.]]

====Identify Risks====
[[File:TotalRisk.PNG|thumb|left|300px|Figure 4: Risk identification, inspired from: "Construction Risk Management" <ref name="RIC"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.116.'' </ref>.]]
This is the process where the team should identify probable risks that could have both positive and negative impact on the project and gather them according to the risk plan previously done. This process is performed throughout the project. The inputs, tools & techniques and outputs that the team should follow are shown in Figure 3.

In this process is very important to involve the project team so they can develop and maintain a sense of ownership and responsibility for identified individual project risks, the level of overall project risk, and associated risk response actions. In construction projects, the previous experience of each member of the team is specially important in risk identification, a brainstorming meeting could be very helpful to create a list of possible threats or opportunities. Identify Risks is an iterative process, since new individual project risks may emerge as the project progresses through its life cycle and the level of overall project risk will also change.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Even though, every project is different and specially construction projects have a high level of uncertainty, external resources could also be taken into account, such as academic studies, industry studies and records from the same organization. The target is to have a list of every possible risk or uncertainty factors that affect productivity, cost, time, quality and performance, so the project management could categorize them according to the risk plan. This list includes the principal risks of all major parties (contractors, designers and owners) involved in a construction project.

It is also important that if any risk happens, the team has a prepared document regarding lessons learned, so this could help in future projects and identifying potential threats and opportunities. It can also be updated with information on techniques that were effective in identifying risks to improve performance in later phases or other projects.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref>.

====Perform Qualitative Risk Analysis====
[[File:PerformQualitativeRiskAnalysis.PNG|thumb|right|300px|Figure 5: Perform Qualitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.419'' </ref>.]]
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. The key benefit of this process is that it focuses efforts on high-priority risks. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 5.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

As previously said, construction projects have a high level of uncertainty and the expertise of the team could be very useful to develop a hierarchical chart, categorizing the previously identified risks by the probability of occurence and its impact on project objectives. Risks
can be prioritized for further analysis and planning of risk responses based on their probability and impacts. Industry studies of similar projects and published material could also be used, even though it could be hard to compare external projects with an specific projects.

It is very important to include representatives from all areas influencing the project scope, schedule and cost: sponsor, development, engineering, procurement, construction, operations, legal, etc.

====Perform Quantitative Risk Analysis====
[[File:PerformQuantitativeRiskAnalysis.PNG|thumb|right|300px|Figure 6: Perform Quantitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQNRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.428'' </ref>.]]
Is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. The key benefit of this process is that it quantifies overall project risk exposure, and it can also provide additional quantitative risk information to support risk response planning. This process is not required for every project, but where it is used, it is performed throughout the project. The inputs and outputs of this process are depicted in Figure 6.

Perform Quantitative Risk Analysis is not required for all projects. Undertaking a robust analysis depends on the availability of high-quality data about individual project risks and other sources of uncertainty, as well as a sound underlying project baseline for scope, schedule, and cost. Quantitative risk analysis usually requires specialized risk software and expertise in the development and interpretation of risk models.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>. Moreover, this methods are not very reliable in construction projects because of the uncertainty levels of the risks and the difficulty of quantifying the economical impact of this events.

Even though it's hard to find exact numbers from this process, it is very important to consider a budget line to mitigate the identified risks. This budget line will be defined depending on the project risk level, the higher the risk, the higher budget for this purpose. Usually in construction projects, this is a percentage of the overall budget. A budget line for the risks concerning the delivery of the final product (building or project) should also be considered, this to mitigate the cost for hidden faults that could emerge.

====Plan Risk Responses====
[[File:PlanRiskResponses.PNG|thumb|right|300px|Figure 7: Plan Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="PRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.437'' </ref>.]]
Plan Risk Responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks. The key benefit of this process is that it identifies appropriate ways to address overall project risk and individual project risks. This process also allocates resources and inserts activities into project documents and the project management plan as needed. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 7.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The expertise of the team involved in the project is again highly important for this process, the target is to propose specific advice to minimize risks and their economic consequences. The process in construction projects are more complex than in most other domains because of the fact that uncertainty factors are expressed in natural language with jargon.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref> Again the complexity of this process in construction projects is due to the difficulty to quantify the consequences of any threat or benefit, but a contingency plan should be developed for major risks. The project manager and the team should know exactly what to do in case of any event, even though the economic impact remains unknown.

[[File:ImplementRiskResponses.PNG|thumb|left|300px|Figure 8: Implement Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="IRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.449'' </ref>.]]
====Implement Risk Responses====
This process consits in implementing agreed-upon risk response plans. The key benefit of this process is that it ensures that agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize individual project opportunities. The inputs, tools and techniques, and outputs of the process are shown in Figure 8.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

This is the process where the planning is implemented and decision-makers and project managers need to know what to do in case of a contingency, and the impact that the previously identified risk could have. For example, consider the case where a contractor delays due to bad weather or even negligence, what actions should be taken? this actions should be aligned with the risk management plan and with the consequences previously identified, with the respective costs that this events may entail. The project manager needs to have very clear the cost of every contingency and the cost of the action that needs to be taken on the overall result of the project. For example, in the case of a delay in the program, the project manager needs to know the cost of each day of delay and what actions are allowed to be taken.

[[File:MonitorRisks.PNG|thumb|left|300px|Figure 9: Monitor Risks: Inputs, Tools & Techniques, and Outputs <ref name="MR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.453'' </ref>.]]
====Monitor Risk====
Monitor Risks is the process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project. The key benefit of this process is that it enables project decisions to be based on current information about overall project risk exposure and individual project risks. The inputs, tools and techniques, and outputs of the process are depicted in Figure 9.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The target is to use performance information during the project execution to determine if the followed strategy is the right one, if the risk management approach is still appropiate or if contingency reserves for cost or schedule require modification. It is essential for the project manager to know if the action taken after a risk has occured has been the right one and it has reduced cost and time over-runs, maybe the action taken was even worst than the problem and a rethinking on the strategy has to be done.

It is also important to identify new risks or new threats that could have a negative on the project, or potential opportunities that eventually could benefit the overall project results.

==Limitations==
The Project Management Institute (PMI) standards in the PMBOK® Guide, establishes a detailed guide to manage the risks in every project. Risk management is the most uncertain discipline in project management and this makes harder to follow the guide to the detail. Even though, risk management is highly important in every project, project managers in construction industry are more likely to follow empirical methods to mitigate this risks. The porpose of this guide is to give an easy to follow method to decision makers and project managers.

However, following a defined process is hard for construction projects because every project is very different and "unknown unkowns" are more in this projects than in projects from industries with defined processes. This makes harder to follow the guide and this is one of the reasons why construction project managers follow more empirical methods.

==Annotated Bibliography==
'''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458''' The book contains the last version of the PMBOK® Guide, the article is based on the process established by this book.

'''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.''' The article contains advisory on managing risks on construction projects.

==References==
<references />

A Guide to Risk Management in Construction Projects

2019-03-02T23:17:44Z

S182573:

''Developed by Jokin Brito''

==Abstract==
Throughout history, construction has been one of the most revenue generating industries in the world and like many other businesses, is being transformed to meet the highest demands of the twenty-first century. Only in the United States, more than 11.1 million people were employed by the construction industry in 2018<ref name=''labor''> ''Bls.gov. (2019). Employed persons by detailed industry, sex, race, and Hispanic or Latino ethnicity. [online] Available at: https://www.bls.gov/cps/cpsaat18.htm [Accessed 17 Feb. 2019].'' </ref>, the industry spending topped $1.23 trillion in 2017<ref name=''spending''> ''Construction spending in the United States from 1996 to 2017, s. (2019). U.S. construction spending: public and private sectors 2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/226355/us-public-and-private-sector-construction/ [Accessed 17 Feb. 2019].'' </ref> and it accounted for between 7% of total U.S. GDP.<ref name=''GDP''> ''2018 FMI Overview, Featuring FMI’s Fourth Quarter 2017 Construction Outlook. (2018). [online] Available at: https://www.fminet.com/wp-content/uploads/2018/01/Overview2018_FINAL-1.pdf [Accessed 17 Feb. 2019].'' </ref> Furthermore, today's construction industry involves more dynamic and uncertain planning than ever before. Decision-makers and project managers require better knowledge and systematic tools, not only in project management, but also in risk management, a discipline that has a special complexity in construction projects.
This article has the goal of giving project managers and decision-makers within construction industry a more detailed guide to fulfill the needs of any project they manage, where they can identify and reduce cost and time over-runs and security risks, in order to optimize the chances of project success. The guide follows the Project Management Institute (PMI) standards in the PMBOK® Guide.

Four phases can be found in project management, where the executing order is really important: scope, schedule, cost and risk. With the first three constraints defined, risk is the last but not least constraint remaining, and it is certainly the one that has no exact answer and the most abstract one. This guide could help project managers to define risks within their projects but it is a discipline that is highly dependent on the manager criteria.

==Background==

====Structure of this article====
The article structure is aligned with the standards in the PMBOK® Guide, following the same processes. First the key and basic concepts of risk management are given, where the types of risks that a project can suffer are explained. Then, the processes are analyzed giving examples and customizing them to the needs of construction industry. The goal is to give a clear guidance through the process to project managers in construction projects.

Finally, the limitations of risk management in construction projects are explained.

====Construction Industry====
The size of construction projects has outgrowed the industry's capacity to manage complex problems under conditions of uncertainty. Risk management in large scale projects becomes a more important part of overall construction management. Each project is very different from each other and they can't be managed in a systematic way, such as in other industries, thus risk management has always been a more trial-and-error method, which requires symbolic reasoning. Empirical knowledge plays a major role for decision-makers and project managers in every stage under uncertainty and many problems in the industry are not very well defined so the risks that this problems entail are much more difficult to define.

In this article the focus is giving a more systematic way of evaluating and defining risks on any construction project, helping project managers to base their decisions on the standars in the PMBOK® Guide and in the experience of previous projects.

[[File:PRMoverview.PNG|thumb|right|250px|Figure 1: Project Risk Management Overview <ref name="PRMO"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.396'' </ref>.]]
====Project Risk Management====
Project Risk management includes the processes of conducting risk management planning, identification, analysis,
response planning, response implementation, and monitoring risk on a project. The objectives of project risk management
are to increase the probability and/or impact of positive risks and to decrease the probability and/or impact of negative
risks, in order to optimize the chances of project success.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

The Project Risk Management processes according to the PMBOK® Guide are:

<ol>
<li> Plan Risk Management
<li> Identify Risks
<li> Perform Qualitative Risk Analysis
<li> Perform Quantitative Risk Analysis
<li> Plan Risk Responses
<li> Implement Risk Responses
<li> Monitor Risks
</ol>

The goal of this article is to provide guidance on each one of this processes, applied to any construcion project.

====Key Concepts====
All projects have a difficulty degree and a risky level that aim to deliver benefits and achieve certain goals. Even though this barely happens in the construction industry, organizations should always choose to make decisions in a controlled manner, balancing cost and benefit.
When risks of any project are not well managed, they have the potential to deviate the project from the original plan and fail to achieve the defined objectives.

In every project, risks exist at two levels:
*'''Individual project risk''' Uncertain event or condition that, if occurs, has an effect on one or more project objectives. When these risks are unmanaged, it may result in problems such as delay, cost overruns, performance shortfall or loss of reputation. Opportunities that are captured can lead to benefits in the same categories.
*'''Overall project risk''' Uncertainty of the project as a whole, representing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative. A good management of these risks, aims to keep project risk exposure within an acceptable range, maximizing the probability of achieving overall project objectives.

The aim of project risk management is to ensure that all types of risk are considered and that projects risks are understood in a wider context. Trends and ememerging practices for Project Risk Management include but are not limited to:

* '''Non-event risk:''' The two types of non-event risks are ''variability risk'', where uncertainty exists about some key characteristics of a planned event or activity or decision. And ''ambiguity risks'', where uncertainty exists about what might happen in the future.

* '''Project resilience:''' These emergent risks are better known as unknowable-unknowns and they can be tackled through developing project resilience. This requires each project to have an specific ''risk budget'' for known risks, ''flexible project'' processes that can cope while maintaining overall direction of the project, ''empowered project team'' that is trusted to get the job done with agreed-upon limits, ''frequent review'' of early warning signs and ''clear input from stakeholders'' to clarify areas where the project scope or strategy can be adjusted in response to emergent risks.

* '''Integrated risk management:''' Projects may be part of a program or portfolio, where risks also exist and should be owned and managed at the appropiate level. Some risks can be managed by the project team or manager but some risks may escalate to a higher level. A coordinated approach to enterprise-wide risk management ensures alignment and coherence in the way risk is managed across all levels.

Each project is unique and it is necessary to tailor the way Project Risk Management processes are applied. These considerations include project size, project complexity, project importance and development approach.

==Application==
====Plan Risk Management====
[[File:PlanRiskManagement.PNG|thumb|right|400px|Figure 2: Plan Risk Management: Inputs, Tools & Techniques, and Outputs <ref name="PRM"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.401'' </ref>.]]
This is the process where the risk management activities are defined, ensuring that the degree, type and visibility of risk management are propotionate to both risks and the importance of the project to the organization and other stakeholders. The process is defined once or at predefined points in the project. It may be necessary to revisit this process in a major phase change or if the project scope changes significantly.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Inputs, tools and techniques and outputs are predefined in this process as shown in figure 2 and they should be aligned with the project integration management process of the PMBOK® Guide. It should result on strategies and methodologies that should be followed to manage the risks, roles and responsabilities of each team member, the funding needed to perform these activities and defined risk categories. The definition of risk probability and impacts, which is usually arranged in a scale of five levels is very important, in order to understand and classify the impact that the identified risks can make on the project. The scale should include the probability of occurence, the cost of each level of probability in case of any event and the description of the impact on the project.

This task should be done mainly by the project risk manager, who will plan the strategy to follow during the next processes of the guide. The goal is to have a clear plan of what to do in the complete risk management process.

Reporting formats and tracking documents should also be elaborated to simplify how risks will be communicated.
[[File:IdentifyRisks.PNG|thumb|left|300px|Figure 3: Identify Risks: Inputs, Tools & Techniques, and Outputs <ref name="IR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.409'' </ref>.]]

====Identify Risks====
[[File:TotalRisk.PNG|thumb|left|300px|Figure 4: Risk identification, inspired from: "Construction Risk Management" <ref name="RIC"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.116.'' </ref>.]]
This is the process where the team should identify probable risks that could have both positive and negative impact on the project and gather them according to the risk plan previously done. This process is performed throughout the project. The inputs, tools & techniques and outputs that the team should follow are shown in Figure 3.

In this process is very important to involve the project team so they can develop and maintain a sense of ownership and responsibility for identified individual project risks, the level of overall project risk, and associated risk response actions. In construction projects, the previous experience of each member of the team is specially important in risk identification, a brainstorming meeting could be very helpful to create a list of possible threats or opportunities. Identify Risks is an iterative process, since new individual project risks may emerge as the project progresses through its life cycle and the level of overall project risk will also change.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Even though, every project is different and specially construction projects have a high level of uncertainty, external resources could also be taken into account, such as academic studies, industry studies and records from the same organization. The target is to have a list of every possible risk or uncertainty factors that affect productivity, cost, time, quality and performance, so the project management could categorize them according to the risk plan. This list includes the principal risks of all major parties (contractors, designers and owners) involved in a construction project.

It is also important that if any risk happens, the team has a prepared document regarding lessons learned, so this could help in future projects and identifying potential threats and opportunities. It can also be updated with information on techniques that were effective in identifying risks to improve performance in later phases or other projects.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref>.

====Perform Qualitative Risk Analysis====
[[File:PerformQualitativeRiskAnalysis.PNG|thumb|right|300px|Figure 5: Perform Qualitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.419'' </ref>.]]
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. The key benefit of this process is that it focuses efforts on high-priority risks. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 5.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

As previously said, construction projects have a high level of uncertainty and the expertise of the team could be very useful to develop a hierarchical chart, categorizing the previously identified risks by the probability of occurence and its impact on project objectives. Risks
can be prioritized for further analysis and planning of risk responses based on their probability and impacts. Industry studies of similar projects and published material could also be used, even though it could be hard to compare external projects with an specific projects.

It is very important to include representatives from all areas influencing the project scope, schedule and cost: sponsor, development, engineering, procurement, construction, operations, legal, etc.

====Perform Quantitative Risk Analysis====
[[File:PerformQuantitativeRiskAnalysis.PNG|thumb|right|300px|Figure 6: Perform Quantitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQNRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.428'' </ref>.]]
Is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. The key benefit of this process is that it quantifies overall project risk exposure, and it can also provide additional quantitative risk information to support risk response planning. This process is not required for every project, but where it is used, it is performed throughout the project. The inputs and outputs of this process are depicted in Figure 6.

Perform Quantitative Risk Analysis is not required for all projects. Undertaking a robust analysis depends on the availability of high-quality data about individual project risks and other sources of uncertainty, as well as a sound underlying project baseline for scope, schedule, and cost. Quantitative risk analysis usually requires specialized risk software and expertise in the development and interpretation of risk models.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>. Moreover, this methods are not very reliable in construction projects because of the uncertainty levels of the risks and the difficulty of quantifying the economical impact of this events.

Even though it's hard to find exact numbers from this process, it is very important to consider a budget line to mitigate the identified risks. This budget line will be defined depending on the project risk level, the higher the risk, the higher budget for this purpose. Usually in construction projects, this is a percentage of the overall budget. A budget line for the risks concerning the delivery of the final product (building or project) should also be considered, this to mitigate the cost for hidden faults that could emerge.

====Plan Risk Responses====
[[File:PlanRiskResponses.PNG|thumb|right|300px|Figure 7: Plan Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="PRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.437'' </ref>.]]
Plan Risk Responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks. The key benefit of this process is that it identifies appropriate ways to address overall project risk and individual project risks. This process also allocates resources and inserts activities into project documents and the project management plan as needed. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 7.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The expertise of the team involved in the project is again highly important for this process, the target is to propose specific advice to minimize risks and their economic consequences. The process in construction projects are more complex than in most other domains because of the fact that uncertainty factors are expressed in natural language with jargon.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref> Again the complexity of this process in construction projects is due to the difficulty to quantify the consequences of any threat or benefit, but a contingency plan should be developed for major risks. The project manager and the team should know exactly what to do in case of any event, even though the economic impact remains unknown.

[[File:ImplementRiskResponses.PNG|thumb|left|300px|Figure 8: Implement Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="IRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.449'' </ref>.]]
====Implement Risk Responses====
This process consits in implementing agreed-upon risk response plans. The key benefit of this process is that it ensures that agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize individual project opportunities. The inputs, tools and techniques, and outputs of the process are shown in Figure 8.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

This is the process where the planning is implemented and decision-makers and project managers need to know what to do in case of a contingency, and the impact that the previously identified risk could have. For example, consider the case where a contractor delays due to bad weather or even neglignece, what actions should be taken? this actions should be aligned with the risk management plan and with the consequences previously identified, with the respective costs that this events may entail. The project manager needs to have very clear the cost of every contingency and the cost of the action that needs to be taken on the overall result of the project. For example, in the case of a delay in the program, the project manager needs to know the cost of each day of delay and what actions are allowed to be taken.

[[File:MonitorRisks.PNG|thumb|left|300px|Figure 9: Monitor Risks: Inputs, Tools & Techniques, and Outputs <ref name="MR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.453'' </ref>.]]
====Monitor Risk====
Monitor Risks is the process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project. The key benefit of this process is that it enables project decisions to be based on current information about overall project risk exposure and individual project risks. The inputs, tools and techniques, and outputs of the process are depicted in Figure 9.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The target is to use performance information during the project execution to determine if the followed strategy is the right one, if the risk management approach is still appropiate or if contingency reserves for cost or schedule require modification. It is essential for the project manager to know if the action taken after a risk has occured has been the right one and it has reduced cost and time over-runs, maybe the action taken was even worst than the problem and a rethinking on the strategy has to be done.

It is also important to identify new risks or new threats that could have a negative on the project, or potential opportunities that eventually could benefit the overall project results.

==Limitations==
The Project Management Institute (PMI) standards in the PMBOK® Guide, establishes a detailed guide to manage the risks in every project. Risk management is the most uncertain discipline in project management and this makes harder to follow the guide to the detail. Even though, risk management is highly important in every project, project managers in construction industry are more likely to follow empirical methods to mitigate this risks. The porpose of this guide is to give an easy to follow method to decision makers and project managers.

However, following a defined process is hard for construction projects because every project is very different and "unknown unkowns" are more in this projects than in projects from industries with defined processes. This makes harder to follow the guide and this is one of the reasons why construction project managers follow more empirical methods.

==Annotated Bibliography==
'''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458''' The book contains the last version of the PMBOK® Guide, the article is based on the process established by this book.

'''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.''' The article contains advisory on managing risks on construction projects.

==References==
<references />

A Guide to Risk Management in Construction Projects

2019-03-02T23:14:34Z

S182573:

''Developed by Jokin Brito''

==Abstract==
Throughout history, construction has been one of the most revenue generating industries in the world and like many other businesses, is being transformed to meet the highest demands of the twenty-first century. Only in the United States, more than 11.1 million people were employed by the construction industry in 2018<ref name=''labor''> ''Bls.gov. (2019). Employed persons by detailed industry, sex, race, and Hispanic or Latino ethnicity. [online] Available at: https://www.bls.gov/cps/cpsaat18.htm [Accessed 17 Feb. 2019].'' </ref>, the industry spending topped $1.23 trillion in 2017<ref name=''spending''> ''Construction spending in the United States from 1996 to 2017, s. (2019). U.S. construction spending: public and private sectors 2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/226355/us-public-and-private-sector-construction/ [Accessed 17 Feb. 2019].'' </ref> and it accounted for between 7% of total U.S. GDP.<ref name=''GDP''> ''2018 FMI Overview, Featuring FMI’s Fourth Quarter 2017 Construction Outlook. (2018). [online] Available at: https://www.fminet.com/wp-content/uploads/2018/01/Overview2018_FINAL-1.pdf [Accessed 17 Feb. 2019].'' </ref> Furthermore, today's construction industry involves more dynamic and uncertain planning than ever before. Decision-makers and project managers require better knowledge and systematic tools, not only in project management, but also in risk management, a discipline that has a special complexity in construction projects.
This article has the goal of giving project managers and decision-makers within construction industry a more detailed guide to fulfill the needs of any project they manage, where they can identify and reduce cost and time over-runs and security risks, in order to optimize the chances of project success. The guide follows the Project Management Institute (PMI) standards in the PMBOK® Guide.

Four phases can be found in project management, where the executing order is really important: scope, schedule, cost and risk. With the first three constraints defined, risk is the last but not least constraint remaining, and it is certainly the one that has no exact answer and the most abstract one. This guide could help project managers to define risks within their projects but it is a discipline that is highly dependent on the manager criteria.

==Background==

====Structure of this article====
The article structure is aligned with the standards in the PMBOK® Guide, following the same processes. First the key and basic concepts of risk management are given, where the types of risks that a project can suffer are explained. Then, the processes are analyzed giving examples and customizing them to the needs of construction industry. The goal is to give a clear guidance through the process to project managers in construction projects.

Finally, the limitations of risk management in construction projects are explained.

====Construction Industry====
The size of construction projects has outgrowed the industry's capacity to manage complex problems under conditions of uncertainty. Risk management in large scale projects becomes a more important part of overall construction management. Each project is very different from each other and they can't be managed in a systematic way, such as in other industries, thus risk management has always been a more trial-and-error method, which requires symbolic reasoning. Empirical knowledge plays a major role for decision-makers and project managers in every stage under uncertainty and many problems in the industry are not very well defined so the risks that this problems entail are much more difficult to define.

In this article the focus is giving a more systematic way of evaluating and defining risks on any construction project, helping project managers to base their decisions on the standars in the PMBOK® Guide and in the experience of previous projects.

[[File:PRMoverview.PNG|thumb|right|250px|Figure 1: Project Risk Management Overview <ref name="PRMO"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.396'' </ref>.]]
====Project Risk Management====
Project Risk management includes the processes of conducting risk management planning, identification, analysis,
response planning, response implementation, and monitoring risk on a project. The objectives of project risk management
are to increase the probability and/or impact of positive risks and to decrease the probability and/or impact of negative
risks, in order to optimize the chances of project success.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

The Project Risk Management processes according to the PMBOK® Guide are:

<ol>
<li> Plan Risk Management
<li> Identify Risks
<li> Perform Qualitative Risk Analysis
<li> Perform Quantitative Risk Analysis
<li> Plan Risk Responses
<li> Implement Risk Responses
<li> Monitor Risks
</ol>

The goal of this article is to provide guidance on each one of this processes, applied to any construcion project.

====Key Concepts====
All projects have a difficulty degree and a risky level that aim to deliver benefits and achieve certain goals. Even though this barely happens in the construction industry, organizations should always choose to make decisions in a controlled manner, balancing cost and benefit.
When risks of any project are not well managed, they have the potential to deviate the project from the original plan and fail to achieve the defined objectives.

In every project, risks exist at two levels:
*'''Individual project risk''' Uncertain event or condition that, if occurs, has an effect on one or more project objectives. When these risks are unmanaged, it may result in problems such as delay, cost overruns, performance shortfall or loss of reputation. Opportunities that are captured can lead to benefits in the same categories.
*'''Overall project risk''' Uncertainty of the project as a whole, representing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative. A good management of these risks, aims to keep project risk exposure within an acceptable range, maximizing the probability of achieving overall project objectives.

The aim of project risk management is to ensure that all types of risk are considered and that projects risks are understood in a wider context. Trends and ememerging practices for Project Risk Management include but are not limited to:

* '''Non-event risk:''' The two types of non-event risks are ''variability risk'', where uncertainty exists about some key characteristics of a planned event or activity or decision. And ''ambiguity risks'', where uncertainty exists about what might happen in the future.

* '''Project resilience:''' These emergent risks are better known as unknowable-unknowns and they can be tackled through developing project resilience. This requires each project to have an specific ''risk budget'' for known risks, ''flexible project'' processes that can cope while maintaining overall direction of the project, ''empowered project team'' that is trusted to get the job done with agreed-upon limits, ''frequent review'' of early warning signs and ''clear input from stakeholders'' to clarify areas where the project scope or strategy can be adjusted in response to emergent risks.

* '''Integrated risk management:''' Projects may be part of a program or portfolio, where risks also exist and should be owned and managed at the appropiate level. Some risks can be managed by the project team or manager but some risks may escalate to a higher level. A coordinated approach to enterprise-wide risk management ensures alignment and coherence in the way risk is managed across all levels.

Each project is unique and it is necessary to tailor the way Project Risk Management processes are applied. These considerations include project size, project complexity, project importance and development approach.

==Application==
====Plan Risk Management====
[[File:PlanRiskManagement.PNG|thumb|right|400px|Figure 2: Plan Risk Management: Inputs, Tools & Techniques, and Outputs <ref name="PRM"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.401'' </ref>.]]
This is the process where the risk management activities are defined, ensuring that the degree, type and visibility of risk management are propotionate to both risks and the importance of the project to the organization and other stakeholders. The process is defined once or at predefined points in the project. It may be necessary to revisit this process in a major phase change or if the project scope changes significantly.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Inputs, tools and techniques and outputs are predefined in this process as shown in figure 2 and they should be aligned with the project integration management process of the PMBOK® Guide. It should result on strategies and methodologies that should be followed to manage the risks, roles and responsabilities of each team member, the funding needed to perform these activities and defined risk categories. The definition of risk probability and impacts, which is usually arranged in a scale of five levels is very important, in order to understand and classify the impact that the identified risks can make on the project. The scale should include the probability of occurence, the cost of each level of probability in case of any event and the description of the impact on the project.

This task should be done mainly by the project risk manager, who will plan the strategy to follow during the next processes of the guide. The goal is to have a clear plan of what to do in the complete risk management process.

Reporting formats and tracking documents should also be elaborated to simplify how risks will be communicated.
[[File:IdentifyRisks.PNG|thumb|left|300px|Figure 3: Identify Risks: Inputs, Tools & Techniques, and Outputs <ref name="IR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.409'' </ref>.]]

====Identify Risks====
[[File:TotalRisk.PNG|thumb|left|300px|Figure 4: Risk identification, inspired from: "Construction Risk Management" <ref name="RIC"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.116.'' </ref>.]]
This is the process where the team should identify probable risks that could have both positive and negative impact on the project and gather them according to the risk plan previously done. This process is performed throughout the project. The inputs, tools & techniques and outputs that the team should follow are shown in Figure 3.

In this process is very important to involve the project team so they can develop and maintain a sense of ownership and responsibility for identified individual project risks, the level of overall project risk, and associated risk response actions. In construction projects, the previous experience of each member of the team is specially important in risk identification, a brainstorming meeting could be very helpful to create a list of possible threats or opportunities. Identify Risks is an iterative process, since new individual project risks may emerge as the project progresses through its life cycle and the level of overall project risk will also change.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Even though, every project is different and specially construction projects have a high level of uncertainty, external resources could also be taken into account, such as academic studies, industry studies and records from the same organization. The target is to have a list of every possible risk or uncertainty factors that affect productivity, cost, time, quality and performance, so the project management could categorize them according to the risk plan. This list includes the principal risks of all major parties (contractors, designers and owners) involved in a construction project.

It is also important that if any risk happens, the team have a prepared document regarding lessons learned, so this could help in future projects and identifying potential threats and opportunities. It can also be updated with information on techniques that were effective in identifying risks to improve performance in later phases or other projects.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref>.

====Perform Qualitative Risk Analysis====
[[File:PerformQualitativeRiskAnalysis.PNG|thumb|right|300px|Figure 5: Perform Qualitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.419'' </ref>.]]
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. The key benefit of this process is that it focuses efforts on high-priority risks. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 5.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

As previously said, construction projects have a high level of uncertainty and the expertise of the team could be very useful to develop a hierarchical chart, categorizing the previously identified risks by the probability of occurence and its impact on project objectives. Risks
can be prioritized for further analysis and planning of risk responses based on their probability and impacts. Industry studies of similar projects and published material could also be used, even though it could be hard to compare external projects with an specific projects.

It is very important to include representatives from all areas influencing the project scope, schedule and cost: sponsor, development, engineering, procurement, construction, operations, legal, etc.

====Perform Quantitative Risk Analysis====
[[File:PerformQuantitativeRiskAnalysis.PNG|thumb|right|300px|Figure 6: Perform Quantitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQNRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.428'' </ref>.]]
Is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. The key benefit of this process is that it quantifies overall project risk exposure, and it can also provide additional quantitative risk information to support risk response planning. This process is not required for every project, but where it is used, it is performed throughout the project. The inputs and outputs of this process are depicted in Figure 6.

Perform Quantitative Risk Analysis is not required for all projects. Undertaking a robust analysis depends on the availability of high-quality data about individual project risks and other sources of uncertainty, as well as a sound underlying project baseline for scope, schedule, and cost. Quantitative risk analysis usually requires specialized risk software and expertise in the development and interpretation of risk models.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>. Moreover, this methods are not very reliable in construction projects because of the uncertainty levels of the risks and the difficulty of quantifying the economical impact of this events.

Even though it's hard to find exact numbers from this process, it is very important to consider a budget line to mitigate the identified risks. This budget line will be defined depending on the project risk level, the higher the risk, the higher budget for this purpose. Usually in construction projects, this is a percentage of the overall budget. A budget line for the risks concerning the delivery of the final product (building or project) should also be considered, this to mitigate the cost for hidden faults that could emerge.

====Plan Risk Responses====
[[File:PlanRiskResponses.PNG|thumb|right|300px|Figure 7: Plan Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="PRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.437'' </ref>.]]
Plan Risk Responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks. The key benefit of this process is that it identifies appropriate ways to address overall project risk and individual project risks. This process also allocates resources and inserts activities into project documents and the project management plan as needed. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 7.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The expertise of the team involved in the project is again highly important for this process, the target is to propose specific advice to minimize risks and their economic consequences. The process in construction projects are more complex than in most other domains because of the fact that uncertainty factors are expressed in natural language with jargon.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref> Again the complexity of this process in construction projects is due to the difficulty to quantify the consequences of any threat or benefit, but a contingency plan should be developed for major risks. The project manager and the team should know exactly what to do in case of any event, even though the economic impact remains unknown.

[[File:ImplementRiskResponses.PNG|thumb|left|300px|Figure 8: Implement Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="IRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.449'' </ref>.]]
====Implement Risk Responses====
This process consits in implementing agreed-upon risk response plans. The key benefit of this process is that it ensures that agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize individual project opportunities. The inputs, tools and techniques, and outputs of the process are shown in Figure 8.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

This is the process where the planning is implemented and decision-makers and project managers need to know what to do in case of a contingency, and the impact that the previously identified risk could have. For example, consider the case where a contractor delays due to bad weather or even neglignece, what actions should be taken? this actions should be aligned with the risk management plan and with the consequences previously identified, with the respective costs that this events may entail. The project manager needs to have very clear the cost of every contingency and the cost of the action that needs to be taken on the overall result of the project. For example, in the case of a delay in the program, the project manager needs to know the cost of each day of delay and what actions are allowed to be taken.

[[File:MonitorRisks.PNG|thumb|left|300px|Figure 9: Monitor Risks: Inputs, Tools & Techniques, and Outputs <ref name="MR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.453'' </ref>.]]
====Monitor Risk====
Monitor Risks is the process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project. The key benefit of this process is that it enables project decisions to be based on current information about overall project risk exposure and individual project risks. The inputs, tools and techniques, and outputs of the process are depicted in Figure 9.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The target is to use performance information during the project execution to determine if the followed strategy is the right one, if the risk management approach is still appropiate or if contingency reserves for cost or schedule require modification. It is essential for the project manager to know if the action taken after a risk has occured has been the right one and it has reduced cost and time over-runs, maybe the action taken was even worst than the problem and a rethinking on the strategy has to be done.

It is also important to identify new risks or new threats that could have a negative on the project, or potential opportunities that eventually could benefit the overall project results.

==Limitations==
The Project Management Institute (PMI) standards in the PMBOK® Guide, establishes a detailed guide to manage the risks in every project. Risk management is the most uncertain discipline in project management and this makes harder to follow the guide to the detail. Even though, risk management is highly important in every project, project managers in construction industry are more likely to follow empirical methods to mitigate this risks. The porpose of this guide is to give an easy to follow method to decision makers and project managers.

However, following a defined process is hard for construction projects because every project is very different and "unknown unkowns" are more in this projects than in projects from industries with defined processes. This makes harder to follow the guide and this is one of the reasons why construction project managers follow more empirical methods.

==Annotated Bibliography==
'''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458''' The book contains the last version of the PMBOK® Guide, the article is based on the process established by this book.

'''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.''' The article contains advisory on managing risks on construction projects.

==References==
<references />

A Guide to Risk Management in Construction Projects

2019-03-02T23:10:50Z

S182573:

''Developed by Jokin Brito''

==Abstract==
Throughout history, construction has been one of the most revenue generating industries in the world and like many other businesses, is being transformed to meet the highest demands of the twenty-first century. Only in the United States, more than 11.1 million people were employed by the construction industry in 2018<ref name=''labor''> ''Bls.gov. (2019). Employed persons by detailed industry, sex, race, and Hispanic or Latino ethnicity. [online] Available at: https://www.bls.gov/cps/cpsaat18.htm [Accessed 17 Feb. 2019].'' </ref>, the industry spending topped $1.23 trillion in 2017<ref name=''spending''> ''Construction spending in the United States from 1996 to 2017, s. (2019). U.S. construction spending: public and private sectors 2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/226355/us-public-and-private-sector-construction/ [Accessed 17 Feb. 2019].'' </ref> and it accounted for between 7% of total U.S. GDP.<ref name=''GDP''> ''2018 FMI Overview, Featuring FMI’s Fourth Quarter 2017 Construction Outlook. (2018). [online] Available at: https://www.fminet.com/wp-content/uploads/2018/01/Overview2018_FINAL-1.pdf [Accessed 17 Feb. 2019].'' </ref> Furthermore, today's construction industry involves more dynamic and uncertain planning than ever before. Decision-makers and project managers require better knowledge and systematic tools, not only in project management, but also in risk management, a discipline that has a special complexity in construction projects.
This article has the goal of giving project managers and decision-makers within construction industry a more detailed guide to fulfill the needs of any project they manage, where they can identify and reduce cost and time over-runs and security risks, in order to optimize the chances of project success. The guide follows the Project Management Institute (PMI) standards in the PMBOK® Guide.

Four phases can be found in project management, where the executing order is really important: scope, schedule, cost and risk. With the first three constraints defined, risk is the last but not least constraint remaining, and it is certainly the one that has no exact answer and the most abstract one. This guide could help project managers to define risks within their projects but it is a discipline that is highly dependent on the manager criteria.

==Background==

====Structure of this article====
The article structure is aligned with the standards in the PMBOK® Guide, following the same processes. First the key and basic concepts of risk management are given, where the types of risks that a project can suffer are explained. Then, the processes are analyzed giving examples and customizing them to the needs of construction industry. The goal is to give a clear guidance through the process to project managers in construction projects.

Finally, the limitations of risk management in construction projects are explained.

====Construction Industry====
The size of construction projects has outgrowed the industry's capacity to manage complex problems under conditions of uncertainty. Risk management in large scale projects becomes a more important part of overall construction management. Each project is very different from each other and they can't be managed in a systematic way, such as in other industries, thus risk management has always been a more trial-and-error method, which requires symbolic reasoning. Empirical knowledge plays a major role for decision-makers and project managers in every stage under uncertainty and many problems in the industry are not very well defined so the risks that this problems entail are much more difficult to define.

In this article the focus is giving a more systematic way of evaluating and defining risks on any construction project, helping project managers to base their decisions on the standars in the PMBOK® Guide and in the experience of previous projects.

[[File:PRMoverview.PNG|thumb|right|250px|Figure 1: Project Risk Management Overview <ref name="PRMO"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.396'' </ref>.]]
====Project Risk Management====
Project Risk management includes the processes of conducting risk management planning, identification, analysis,
response planning, response implementation, and monitoring risk on a project. The objectives of project risk management
are to increase the probability and/or impact of positive risks and to decrease the probability and/or impact of negative
risks, in order to optimize the chances of project success.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

The Project Risk Management processes according to the PMBOK® Guide are:

<ol>
<li> Plan Risk Management
<li> Identify Risks
<li> Perform Qualitative Risk Analysis
<li> Perform Quantitative Risk Analysis
<li> Plan Risk Responses
<li> Implement Risk Responses
<li> Monitor Risks
</ol>

The goal of this article is to provide guidance on each one of this processes, applied to any construcion project.

====Key Concepts====
All projects have a difficulty degree and a risky level that aim to deliver benefits and achieve certain goals. Even though this barely happens in the construction industry, organizations should always choose to make decisions in a controlled manner, balancing cost and benefit.
When risks of any project are not well managed, they have the potential to deviate the project from the original plan and fail to achieve the defined objectives.

In every project, risks exist at two levels:
*'''Individual project risk''' Uncertain event or condition that, if occurs, has an effect on one or more project objectives. When these risks are unmanaged, it may result in problems such as delay, cost overruns, performance shortfall or loss of reputation. Opportunities that are captured can lead to benefits in the same categories.
*'''Overall project risk''' Uncertainty of the project as a whole, representing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative. A good management of these risks, aims to keep project risk exposure within an acceptable range, maximizing the probability of achieving overall project objectives.

The aim of project risk management is to ensure that all types of risk are considered and that projects risks are understood in a wider context. Trends and ememerging practices for Project Risk Management include but are not limited to:

* '''Non-event risk:''' The two types of non-event risks are ''variability risk'', where uncertainty exists about some key characteristics of a planned event or activity or decision. And ''ambiguity risks'', where uncertainty exists about what might happen in the future.

* '''Project resilience:''' These emergent risks are better known as unknowable-unknowns and they can be tackled through developing project resilience. This requires each project to have an specific ''risk budget'' for known risks, ''flexible project'' processes that can cope while maintaining overall direction of the project, ''empowered project team'' that is trusted to get the job done with agreed-upon limits, ''frequent review'' of early warning signs and ''clear input from stakeholders'' to clarify areas where the project scope or strategy can be adjusted in response to emergent risks.

* '''Integrated risk management:''' Projects may be part of a program or portfolio, where risks also exist and should be owned and managed at the appropiate level. Some risks can be managed by the project team or manager but some risks may escalate to a higher level. A coordinated approach to enterprise-wide risk management ensures alignment and coherence in the way risk is managed across all levels.

Each project is unique and it is necessary to tailor the way Project Risk Management processes are applied. These considerations include project size, project complexity, project importance and development approach.

==Application==
====Plan Risk Management====
[[File:PlanRiskManagement.PNG|thumb|right|400px|Figure 2: Plan Risk Management: Inputs, Tools & Techniques, and Outputs <ref name="PRM"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.401'' </ref>.]]
This is the process where the risk management activities are defined, ensuring that the degree, type and visibility of risk management are propotionate to both risks and the importance of the project to the organization and other stakeholders. The process is defined once or at predefined points in the project. It may be necessary to revisit this process in a major phase change or if the project scope changes significantly.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Inputs, tools and techniques and outputs are predefined in this process as shown in figure 2 and they should be aligned with the project integration management process of the PMBOK® Guide. It should result on strategies and methodologies that should be followed to manage the risks, roles and responsabilities of each team member, the funding needed to perform these activities and defined risk categories. The definition of risk probability and impacts, which is usually arranged in a scale of five levels is very important, in order to understand and classify the impact that the identified risks can make on the project. The scale should include the probability of occurence, the cost of each level of probability in case of any event and the description of the impact on the project.

This task should be done mainly by the project risk manager, who will plan the strategy to follow during the next processes of the guide. The goal is to have a clear plan of what to do in the complete risk management process.

Reporting formats and tracking documents should also be elaborated to simplify how risks will be communicated.
[[File:IdentifyRisks.PNG|thumb|left|300px|Figure 3: Identify Risks: Inputs, Tools & Techniques, and Outputs <ref name="IR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.409'' </ref>.]]

====Identify Risks====
[[File:TotalRisk.PNG|thumb|left|300px|Figure 4: Risk identification, inspired from: "Construction Risk Management" <ref name="RIC"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.116.'' </ref>.]]
This is the process where the team should identify probable risks that could have both positive and negative impact on the project and gather them according to the risk plan previously done. This process is performed throuhgout the project. The inputs, tools & techniques and outputs that the team should follow are shown in Figure 3.

In this process is very important to involve the project team so they can develop and maintain a sense of ownership and responsibility for identified individual project risks, the level of overall project risk, and associated risk response actions. In construction projects, the previous experience of each member of the team is specially important in risk identification, a brainstorming meeting could be very helpful to create a list of possible threats or opportunities. Identify Risks is an iterative process, since new individual project risks may emerge as the project progresses through its life cycle and the level of overall project risk will also change.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Even though, every project is different and specially construction projects have a high level of uncertainty, external resources could also be taken into account, such as academic studies, industry studies and records from the same organization. The target is to have a list of every possible risk or uncertainty factors that affect productivity, cost, time, quality and performance, so the project management could categorize them according to the risk plan. This list includes the principal risks of all major parties (contractors, designers and owners) involved in a construction project.

It is also important that if any risk happens, the team have a prepared document regarding lessons learned, so this could help in future projects and identifying potential threats and opportunities. It can also be updated with information on techniques that were effective in identifying risks to improve performance in later phases or other projects.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref>.

====Perform Qualitative Risk Analysis====
[[File:PerformQualitativeRiskAnalysis.PNG|thumb|right|300px|Figure 5: Perform Qualitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.419'' </ref>.]]
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. The key benefit of this process is that it focuses efforts on high-priority risks. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 5.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

As previously said, construction projects have a high level of uncertainty and the expertise of the team could be very useful to develop a hierarchical chart, categorizing the previously identified risks by the probability of occurence and its impact on project objectives. Risks
can be prioritized for further analysis and planning of risk responses based on their probability and impacts. Industry studies of similar projects and published material could also be used, even though it could be hard to compare external projects with an specific projects.

It is very important to include representatives from all areas influencing the project scope, schedule and cost: sponsor, development, engineering, procurement, construction, operations, legal, etc.

====Perform Quantitative Risk Analysis====
[[File:PerformQuantitativeRiskAnalysis.PNG|thumb|right|300px|Figure 6: Perform Quantitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQNRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.428'' </ref>.]]
Is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. The key benefit of this process is that it quantifies overall project risk exposure, and it can also provide additional quantitative risk information to support risk response planning. This process is not required for every project, but where it is used, it is performed throughout the project. The inputs and outputs of this process are depicted in Figure 6.

Perform Quantitative Risk Analysis is not required for all projects. Undertaking a robust analysis depends on the availability of high-quality data about individual project risks and other sources of uncertainty, as well as a sound underlying project baseline for scope, schedule, and cost. Quantitative risk analysis usually requires specialized risk software and expertise in the development and interpretation of risk models.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>. Moreover, this methods are not very reliable in construction projects because of the uncertainty levels of the risks and the difficulty of quantifying the economical impact of this events.

Even though it's hard to find exact numbers from this process, it is very important to consider a budget line to mitigate the identified risks. This budget line will be defined depending on the project risk level, the higher the risk, the higher budget for this purpose. Usually in construction projects, this is a percentage of the overall budget. A budget line for the risks concerning the delivery of the final product (building or project) should also be considered, this to mitigate the cost for hidden faults that could emerge.

====Plan Risk Responses====
[[File:PlanRiskResponses.PNG|thumb|right|300px|Figure 7: Plan Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="PRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.437'' </ref>.]]
Plan Risk Responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks. The key benefit of this process is that it identifies appropriate ways to address overall project risk and individual project risks. This process also allocates resources and inserts activities into project documents and the project management plan as needed. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 7.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The expertise of the team involved in the project is again highly important for this process, the target is to propose specific advice to minimize risks and their economic consequences. The process in construction projects are more complex than in most other domains because of the fact that uncertainty factors are expressed in natural language with jargon.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref> Again the complexity of this process in construction projects is due to the difficulty to quantify the consequences of any threat or benefit, but a contingency plan should be developed for major risks. The project manager and the team should know exactly what to do in case of any event, even though the economic impact remains unknown.

[[File:ImplementRiskResponses.PNG|thumb|left|300px|Figure 8: Implement Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="IRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.449'' </ref>.]]
====Implement Risk Responses====
This process consits in implementing agreed-upon risk response plans. The key benefit of this process is that it ensures that agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize individual project opportunities. The inputs, tools and techniques, and outputs of the process are shown in Figure 8.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

This is the process where the planning is implemented and decision-makers and project managers need to know what to do in case of a contingency, and the impact that the previously identified risk could have. For example, consider the case where a contractor delays due to bad weather or even neglignece, what actions should be taken? this actions should be aligned with the risk management plan and with the consequences previously identified, with the respective costs that this events may entail. The project manager needs to have very clear the cost of every contingency and the cost of the action that needs to be taken on the overall result of the project. For example, in the case of a delay in the program, the project manager needs to know the cost of each day of delay and what actions are allowed to be taken.

[[File:MonitorRisks.PNG|thumb|left|300px|Figure 9: Monitor Risks: Inputs, Tools & Techniques, and Outputs <ref name="MR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.453'' </ref>.]]
====Monitor Risk====
Monitor Risks is the process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project. The key benefit of this process is that it enables project decisions to be based on current information about overall project risk exposure and individual project risks. The inputs, tools and techniques, and outputs of the process are depicted in Figure 9.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The target is to use performance information during the project execution to determine if the followed strategy is the right one, if the risk management approach is still appropiate or if contingency reserves for cost or schedule require modification. It is essential for the project manager to know if the action taken after a risk has occured has been the right one and it has reduced cost and time over-runs, maybe the action taken was even worst than the problem and a rethinking on the strategy has to be done.

It is also important to identify new risks or new threats that could have a negative on the project, or potential opportunities that eventually could benefit the overall project results.

==Limitations==
The Project Management Institute (PMI) standards in the PMBOK® Guide, establishes a detailed guide to manage the risks in every project. Risk management is the most uncertain discipline in project management and this makes harder to follow the guide to the detail. Even though, risk management is highly important in every project, project managers in construction industry are more likely to follow empirical methods to mitigate this risks. The porpose of this guide is to give an easy to follow method to decision makers and project managers.

However, following a defined process is hard for construction projects because every project is very different and "unknown unkowns" are more in this projects than in projects from industries with defined processes. This makes harder to follow the guide and this is one of the reasons why construction project managers follow more empirical methods.

==Annotated Bibliography==
'''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458''' The book contains the last version of the PMBOK® Guide, the article is based on the process established by this book.

'''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.''' The article contains advisory on managing risks on construction projects.

==References==
<references />

A Guide to Risk Management in Construction Projects

2019-03-02T23:06:03Z

S182573:

''Developed by Jokin Brito''

==Abstract==
Throughout history, construction has been one of the most revenue generating industries in the world and like many other businesses, is being transformed to meet the highest demands of the twenty-first century. Only in the United States, more than 11.1 million people were employed by the construction industry in 2018<ref name=''labor''> ''Bls.gov. (2019). Employed persons by detailed industry, sex, race, and Hispanic or Latino ethnicity. [online] Available at: https://www.bls.gov/cps/cpsaat18.htm [Accessed 17 Feb. 2019].'' </ref>, the industry spending topped $1.23 trillion in 2017<ref name=''spending''> ''Construction spending in the United States from 1996 to 2017, s. (2019). U.S. construction spending: public and private sectors 2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/226355/us-public-and-private-sector-construction/ [Accessed 17 Feb. 2019].'' </ref> and it accounted for between 7% of total U.S. GDP.<ref name=''GDP''> ''2018 FMI Overview, Featuring FMI’s Fourth Quarter 2017 Construction Outlook. (2018). [online] Available at: https://www.fminet.com/wp-content/uploads/2018/01/Overview2018_FINAL-1.pdf [Accessed 17 Feb. 2019].'' </ref> Furthermore, today's construction industry involves more dynamic and uncertain planning than ever before. Decision-makers and project managers require better knowledge and systematic tools, not only in project management, but also in risk management, a discipline that has a special complexity in construction projects.
This article has the goal of giving project managers and decision-makers within construction industry a more detailed guide to fulfill the needs of any project they manage, where they can identify and reduce cost and time over-runs and security risks, in order to optimize the chances of project success. The guide follows the Project Management Institute (PMI) standards in the PMBOK® Guide.

Four phases can be found in project management, where the executing order is really important: scope, schedule, cost and risk. With the first three constraints defined, risk is the last but not least constraint remaining, and it is certainly the one that has no exact answer and the most abstract one. This guide could help project managers to define risks within their projects but it is a discipline that is highly dependent on the manager criteria.

==Background==

====Structure of this article====
The article structure is aligned with the standards in the PMBOK® Guide, following the same processes. First the key and basic concepts of risk management are given, where the types of risks that a project can suffer are explained. Then, the processes are analyzed giving examples and customizing them to the needs of construction industry. The goal is to give a clear guidance through the process to project managers in construction projects.

Finally, the limitations of risk management in construction projects are explained.

====Construction Industry====
The size of construction projects has outgrowed the industry's capacity to manage complex problems under conditions of uncertainty. Risk management in large scale projects becomes a more important part of overall construction management. Each project is very different from each other and they can't be managed in a systematic way, such as in other industries, thus risk management has always been a more trial-and-error method, which requires symbolic reasoning. Empirical knowledge plays a major role for decision-makers and project managers in every stage under uncertainty and many problems in the industry are not very well defined so the risks that this problems entail are much more difficult to define.

In this article the focus is giving a more systematic way of evaluating and defining risks on any construction project, helping project managers to base their decisions on the standars in the PMBOK® Guide and in the experience of previous projects.

[[File:PRMoverview.PNG|thumb|right|250px|Figure 1: Project Risk Management Overview <ref name="PRMO"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.396'' </ref>.]]
====Project Risk Management====
Project Risk management includes the processes of conducting risk management planning, identification, analysis,
response planning, response implementation, and monitoring risk on a project. The objectives of project risk management
are to increase the probability and/or impact of positive risks and to decrease the probability and/or impact of negative
risks, in order to optimize the chances of project success.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

The Project Risk Management processes according to the PMBOK® Guide are:

<ol>
<li> Plan Risk Management
<li> Identify Risks
<li> Perform Qualitative Risk Analysis
<li> Perform Quantitative Risk Analysis
<li> Plan Risk Responses
<li> Implement Risk Responses
<li> Monitor Risks
</ol>

The goal of this article is to provide guidance on each one of this processes, applied to any construcion project.

====Key Concepts====
All projects have a difficulty degree and a risky level that aim to deliver benefits and achieve certain goals. Even though this barely happens in the construction industry, organizations should always choose to make decisions in a controlled manner, balancing cost and benefit.
When risks of any project are not well managed, they have the potential to deviate the project from the original plan and fail to achieve the defined objectives.

In every project, risks exist at two levels:
*'''Individual project risk''' Uncertain event or condition that, if occurs, has an effect on one or more project objectives. When these risks are unmanaged, it may result in problems such as delay, cost overruns, performance shortfall or loss of reputation. Opportunities that are captured can lead to benefits in the same categories.
*'''Overall project risk''' Uncertainty of the project as a whole, representing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative. A good management of these risks, aims to keep project risk exposure within an acceptable range, maximizing the probability of achieving overall project objectives.

The aim of project risk management is to ensure that all types of risk are considered and that projects risks are understood in a wider context. Trends and ememerging practices for Project Risk Management include but are not limited to:

* '''Non-event risk:''' The two types of non-event risks are ''variability risk'', where uncertainty exists about some key characteristics of a planned event or activity or decision. And ''ambiguity risks'', where uncertainty exists about what might happen in the future.

* '''Project resilience:''' These emergent risks are better known as unknowable-unknowns and they can be tackled through developing project resilience. This requires each project to have an specific ''risk budget'' for known risks, ''flexible project'' processes that can cope while maintaining overall direction of the project, ''empowered project team'' that is trusted to get the job done with agreed-upon limits, ''frequent review'' of early warning signs and ''clear input from stakeholders'' to clarify areas where the project scope or strategy can be adjusted in response to emergent risks.

* '''Integrated risk management:''' Projects may be part of a program or portfolio, where risks also exist and should be owned and managed at the appropiate level. Some risks can be managed by the project team or manager but some risks may escalete to a higher level. A coordinated approach to enterprise-wide risk management ensures alignment and coherence in the way risk is managed across all levels.

Each project is unique and it is necessary to tailor the way Project Risk Management processes are applied. These considerations include project size, project complexity, project importance and development approach.

==Application==
====Plan Risk Management====
[[File:PlanRiskManagement.PNG|thumb|right|400px|Figure 2: Plan Risk Management: Inputs, Tools & Techniques, and Outputs <ref name="PRM"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.401'' </ref>.]]
This is the process where the risk management activities are defined, ensuring that the degree, type and visibility of risk management are propotionate to both risks and the importance of the project to the organization and other stakeholders. The process is defined once or at predefined points in the project. It may be necessary to revisit this process in a major phase change or if the project scope changes significantly.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Inputs, tools and techniques and outputs are predefined in this process as shown in figure 2 and they should be aligned with the project integration management process of the PMBOK® Guide. It should result on strategies and methodologies that should be followed to manage the risks, roles and responsabilities of each team member, the funding needed to perform these activities and defined risk categories. The definition of risk probability and impacts, which is usually arranged in a scale of five levels is very important, in order to understand and classify the impact that the identified risks can make on the project. The scale should include the probability of occurence, the cost of each level of probability in case of any event and the description of the impact on the project.

This task should be done mainly by the project risk manager, who will plan the strategy to follow during the next processes of the guide. The goal is to have a clear plan of what to do in the complete risk management process.

Reporting formats and tracking documents should also be elaborated to simplify how risks will be communicated.
[[File:IdentifyRisks.PNG|thumb|left|300px|Figure 3: Identify Risks: Inputs, Tools & Techniques, and Outputs <ref name="IR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.409'' </ref>.]]

====Identify Risks====
[[File:TotalRisk.PNG|thumb|left|300px|Figure 4: Risk identification, inspired from: "Construction Risk Management" <ref name="RIC"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.116.'' </ref>.]]
This is the process where the team should identify probable risks that could have both positive and negative impact on the project and gather them according to the risk plan previously done. This process is performed throuhgout the project. The inputs, tools & techniques and outputs that the team should follow are shown in Figure 3.

In this process is very important to involve the project team so they can develop and maintain a sense of ownership and responsibility for identified individual project risks, the level of overall project risk, and associated risk response actions. In construction projects, the previous experience of each member of the team is specially important in risk identification, a brainstorming meeting could be very helpful to create a list of possible threats or opportunities. Identify Risks is an iterative process, since new individual project risks may emerge as the project progresses through its life cycle and the level of overall project risk will also change.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Even though, every project is different and specially construction projects have a high level of uncertainty, external resources could also be taken into account, such as academic studies, industry studies and records from the same organization. The target is to have a list of every possible risk or uncertainty factors that affect productivity, cost, time, quality and performance, so the project management could categorize them according to the risk plan. This list includes the principal risks of all major parties (contractors, designers and owners) involved in a construction project.

It is also important that if any risk happens, the team have a prepared document regarding lessons learned, so this could help in future projects and identifying potential threats and opportunities. It can also be updated with information on techniques that were effective in identifying risks to improve performance in later phases or other projects.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref>.

====Perform Qualitative Risk Analysis====
[[File:PerformQualitativeRiskAnalysis.PNG|thumb|right|300px|Figure 5: Perform Qualitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.419'' </ref>.]]
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. The key benefit of this process is that it focuses efforts on high-priority risks. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 5.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

As previously said, construction projects have a high level of uncertainty and the expertise of the team could be very useful to develop a hierarchical chart, categorizing the previously identified risks by the probability of occurence and its impact on project objectives. Risks
can be prioritized for further analysis and planning of risk responses based on their probability and impacts. Industry studies of similar projects and published material could also be used, even though it could be hard to compare external projects with an specific projects.

It is very important to include representatives from all areas influencing the project scope, schedule and cost: sponsor, development, engineering, procurement, construction, operations, legal, etc.

====Perform Quantitative Risk Analysis====
[[File:PerformQuantitativeRiskAnalysis.PNG|thumb|right|300px|Figure 6: Perform Quantitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQNRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.428'' </ref>.]]
Is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. The key benefit of this process is that it quantifies overall project risk exposure, and it can also provide additional quantitative risk information to support risk response planning. This process is not required for every project, but where it is used, it is performed throughout the project. The inputs and outputs of this process are depicted in Figure 6.

Perform Quantitative Risk Analysis is not required for all projects. Undertaking a robust analysis depends on the availability of high-quality data about individual project risks and other sources of uncertainty, as well as a sound underlying project baseline for scope, schedule, and cost. Quantitative risk analysis usually requires specialized risk software and expertise in the development and interpretation of risk models.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>. Moreover, this methods are not very reliable in construction projects because of the uncertainty levels of the risks and the difficulty of quantifying the economical impact of this events.

Even though it's hard to find exact numbers from this process, it is very important to consider a budget line to mitigate the identified risks. This budget line will be defined depending on the project risk level, the higher the risk, the higher budget for this purpose. Usually in construction projects, this is a percentage of the overall budget. A budget line for the risks concerning the delivery of the final product (building or project) should also be considered, this to mitigate the cost for hidden faults that could emerge.

====Plan Risk Responses====
[[File:PlanRiskResponses.PNG|thumb|right|300px|Figure 7: Plan Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="PRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.437'' </ref>.]]
Plan Risk Responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks. The key benefit of this process is that it identifies appropriate ways to address overall project risk and individual project risks. This process also allocates resources and inserts activities into project documents and the project management plan as needed. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 7.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The expertise of the team involved in the project is again highly important for this process, the target is to propose specific advice to minimize risks and their economic consequences. The process in construction projects are more complex than in most other domains because of the fact that uncertainty factors are expressed in natural language with jargon.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref> Again the complexity of this process in construction projects is due to the difficulty to quantify the consequences of any threat or benefit, but a contingency plan should be developed for major risks. The project manager and the team should know exactly what to do in case of any event, even though the economic impact remains unknown.

[[File:ImplementRiskResponses.PNG|thumb|left|300px|Figure 8: Implement Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="IRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.449'' </ref>.]]
====Implement Risk Responses====
This process consits in implementing agreed-upon risk response plans. The key benefit of this process is that it ensures that agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize individual project opportunities. The inputs, tools and techniques, and outputs of the process are shown in Figure 8.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

This is the process where the planning is implemented and decision-makers and project managers need to know what to do in case of a contingency, and the impact that the previously identified risk could have. For example, consider the case where a contractor delays due to bad weather or even neglignece, what actions should be taken? this actions should be aligned with the risk management plan and with the consequences previously identified, with the respective costs that this events may entail. The project manager needs to have very clear the cost of every contingency and the cost of the action that needs to be taken on the overall result of the project. For example, in the case of a delay in the program, the project manager needs to know the cost of each day of delay and what actions are allowed to be taken.

[[File:MonitorRisks.PNG|thumb|left|300px|Figure 9: Monitor Risks: Inputs, Tools & Techniques, and Outputs <ref name="MR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.453'' </ref>.]]
====Monitor Risk====
Monitor Risks is the process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project. The key benefit of this process is that it enables project decisions to be based on current information about overall project risk exposure and individual project risks. The inputs, tools and techniques, and outputs of the process are depicted in Figure 9.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The target is to use performance information during the project execution to determine if the followed strategy is the right one, if the risk management approach is still appropiate or if contingency reserves for cost or schedule require modification. It is essential for the project manager to know if the action taken after a risk has occured has been the right one and it has reduced cost and time over-runs, maybe the action taken was even worst than the problem and a rethinking on the strategy has to be done.

It is also important to identify new risks or new threats that could have a negative on the project, or potential opportunities that eventually could benefit the overall project results.

==Limitations==
The Project Management Institute (PMI) standards in the PMBOK® Guide, establishes a detailed guide to manage the risks in every project. Risk management is the most uncertain discipline in project management and this makes harder to follow the guide to the detail. Even though, risk management is highly important in every project, project managers in construction industry are more likely to follow empirical methods to mitigate this risks. The porpose of this guide is to give an easy to follow method to decision makers and project managers.

However, following a defined process is hard for construction projects because every project is very different and "unknown unkowns" are more in this projects than in projects from industries with defined processes. This makes harder to follow the guide and this is one of the reasons why construction project managers follow more empirical methods.

==Annotated Bibliography==
'''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458''' The book contains the last version of the PMBOK® Guide, the article is based on the process established by this book.

'''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.''' The article contains advisory on managing risks on construction projects.

==References==
<references />

A Guide to Risk Management in Construction Projects

2019-03-02T23:04:47Z

S182573:

''Developed by Jokin Brito''

==Abstract==
Throughout history, construction has been one of the most revenue generating industries in the world and like many other businesses, is being transformed to meet the highest demands of the twenty-first century. Only in the United States, more than 11.1 million people were employed by the construction industry in 2018<ref name=''labor''> ''Bls.gov. (2019). Employed persons by detailed industry, sex, race, and Hispanic or Latino ethnicity. [online] Available at: https://www.bls.gov/cps/cpsaat18.htm [Accessed 17 Feb. 2019].'' </ref>, the industry spending topped $1.23 trillion in 2017<ref name=''spending''> ''Construction spending in the United States from 1996 to 2017, s. (2019). U.S. construction spending: public and private sectors 2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/226355/us-public-and-private-sector-construction/ [Accessed 17 Feb. 2019].'' </ref> and it accounted for between 7% of total U.S. GDP.<ref name=''GDP''> ''2018 FMI Overview, Featuring FMI’s Fourth Quarter 2017 Construction Outlook. (2018). [online] Available at: https://www.fminet.com/wp-content/uploads/2018/01/Overview2018_FINAL-1.pdf [Accessed 17 Feb. 2019].'' </ref> Furthermore, today's construction industry involves more dynamic and uncertain planning than ever before. Decision-makers and project managers require better knowledge and systematic tools, not only in project management, but also in risk management, a discipline that has a special complexity in construction projects.
This article has the goal of giving project managers and decision-makers within construction industry a more detailed guide to fulfill the needs of any project they manage, where they can identify and reduce cost and time over-runs and security risks, in order to optimize the chances of project success. The guide follows the Project Management Institute (PMI) standards in the PMBOK® Guide.

Four phases can be found in project management, where the executing order is really important: scope, schedule, cost and risk. With the first three constraints defined, risk is the last but not least constraint remaining, and it is certainly the one that has no exact answer and the most abstract one. This guide could help project managers to define risks within their projects but it is a discipline that is highly dependent on the manager criteria.

==Background==

====Structure of this article====
The article structure is aligned with the standards in the PMBOK® Guide, following the same processes. First the key and basic concepts of risk management are given, where the types of risks that a project can suffer are explained. Then, the processes are analyzed giving examples and customizing them to the needs of construction industry. The goal is to give a clear guidance through the process to project managers in construction projects.

Finally, the limitations of risk management in construction projects are explained.

====Construction Industry====
The size of construction projects has outgrowed the industry's capacity to manage complex problems under conditions of uncertainty. Risk management in large scale projects becomes a more important part of overall construction management. Each project is very different from each other and they can't be managed in a systematic way, such as in other industries, thus risk management has always been a more trial-and-error method, which requires symbolic reasoning. Empirical knowledge plays a major role for decision-makers and project managers in every stage under uncertainty and many problems in the industry are not very well defined so the risks that this problems entail are much more difficult to define.

In this article the focus is on giving a more systematic way of evaluating and defining risks on any construction project, helping project managers to base their decisions on the standars in the PMBOK® Guide and in the experience of previous projects.

[[File:PRMoverview.PNG|thumb|right|250px|Figure 1: Project Risk Management Overview <ref name="PRMO"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.396'' </ref>.]]
====Project Risk Management====
Project Risk management includes the processes of conducting risk management planning, identification, analysis,
response planning, response implementation, and monitoring risk on a project. The objectives of project risk management
are to increase the probability and/or impact of positive risks and to decrease the probability and/or impact of negative
risks, in order to optimize the chances of project success.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

The Project Risk Management processes according to the PMBOK® Guide are:

<ol>
<li> Plan Risk Management
<li> Identify Risks
<li> Perform Qualitative Risk Analysis
<li> Perform Quantitative Risk Analysis
<li> Plan Risk Responses
<li> Implement Risk Responses
<li> Monitor Risks
</ol>

The goal of this article is to provide guidance on each one of this processes, applied to any construcion project.

====Key Concepts====
All projects have a difficulty degree and a risky level that aim to deliver benefits and achieve certain goals. Even though this barely happens in the construction industry, organizations should always choose to make decisions in a controlled manner, balancing cost and benefit.
When risks of any project are not well managed, they have the potential to deviate the project from the original plan and fail to achieve the defined objectives.

In every project, risks exist at two levels:
*'''Individual project risk''' Uncertain event or condition that, if occurs, has an effect on one or more project objectives. When these risks are unmanaged, it may result in problems such as delay, cost overruns, performance shortfall or loss of reputation. Opportunities that are captured can lead to benefits in the same categories.
*'''Overall project risk''' Uncertainty of the project as a whole, representing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative. A good management of these risks, aims to keep project risk exposure within an acceptable range, maximizing the probability of achieving overall project objectives.

The aim of project risk management is to ensure that all types of risk are considered and that projects risks are understood in a wider context. Trends and ememerging practices for Project Risk Management include but are not limited to:

* '''Non-event risk:''' The two types of non-event risks are ''variability risk'', where uncertainty exists about some key characteristics of a planned event or activity or decision. And ''ambiguity risks'', where uncertainty exists about what might happen in the future.

* '''Project resilience:''' These emergent risks are better known as unknowable-unknowns and they can be tackled through developing project resilience. This requires each project to have an specific ''risk budget'' for known risks, ''flexible project'' processes that can cope while maintaining overall direction of the project, ''empowered project team'' that is trusted to get the job done with agreed-upon limits, ''frequent review'' of early warning signs and ''clear input from stakeholders'' to clarify areas where the project scope or strategy can be adjusted in response to emergent risks.

* '''Integrated risk management:''' Projects may be part of a program or portfolio, where risks also exist and should be owned and managed at the appropiate level. Some risks can be managed by the project team or manager but some risks may escalete to a higher level. A coordinated approach to enterprise-wide risk management ensures alignment and coherence in the way risk is managed across all levels.

Each project is unique and it is necessary to tailor the way Project Risk Management processes are applied. These considerations include project size, project complexity, project importance and development approach.

==Application==
====Plan Risk Management====
[[File:PlanRiskManagement.PNG|thumb|right|400px|Figure 2: Plan Risk Management: Inputs, Tools & Techniques, and Outputs <ref name="PRM"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.401'' </ref>.]]
This is the process where the risk management activities are defined, ensuring that the degree, type and visibility of risk management are propotionate to both risks and the importance of the project to the organization and other stakeholders. The process is defined once or at predefined points in the project. It may be necessary to revisit this process in a major phase change or if the project scope changes significantly.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Inputs, tools and techniques and outputs are predefined in this process as shown in figure 2 and they should be aligned with the project integration management process of the PMBOK® Guide. It should result on strategies and methodologies that should be followed to manage the risks, roles and responsabilities of each team member, the funding needed to perform these activities and defined risk categories. The definition of risk probability and impacts, which is usually arranged in a scale of five levels is very important, in order to understand and classify the impact that the identified risks can make on the project. The scale should include the probability of occurence, the cost of each level of probability in case of any event and the description of the impact on the project.

This task should be done mainly by the project risk manager, who will plan the strategy to follow during the next processes of the guide. The goal is to have a clear plan of what to do in the complete risk management process.

Reporting formats and tracking documents should also be elaborated to simplify how risks will be communicated.
[[File:IdentifyRisks.PNG|thumb|left|300px|Figure 3: Identify Risks: Inputs, Tools & Techniques, and Outputs <ref name="IR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.409'' </ref>.]]

====Identify Risks====
[[File:TotalRisk.PNG|thumb|left|300px|Figure 4: Risk identification, inspired from: "Construction Risk Management" <ref name="RIC"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.116.'' </ref>.]]
This is the process where the team should identify probable risks that could have both positive and negative impact on the project and gather them according to the risk plan previously done. This process is performed throuhgout the project. The inputs, tools & techniques and outputs that the team should follow are shown in Figure 3.

In this process is very important to involve the project team so they can develop and maintain a sense of ownership and responsibility for identified individual project risks, the level of overall project risk, and associated risk response actions. In construction projects, the previous experience of each member of the team is specially important in risk identification, a brainstorming meeting could be very helpful to create a list of possible threats or opportunities. Identify Risks is an iterative process, since new individual project risks may emerge as the project progresses through its life cycle and the level of overall project risk will also change.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Even though, every project is different and specially construction projects have a high level of uncertainty, external resources could also be taken into account, such as academic studies, industry studies and records from the same organization. The target is to have a list of every possible risk or uncertainty factors that affect productivity, cost, time, quality and performance, so the project management could categorize them according to the risk plan. This list includes the principal risks of all major parties (contractors, designers and owners) involved in a construction project.

It is also important that if any risk happens, the team have a prepared document regarding lessons learned, so this could help in future projects and identifying potential threats and opportunities. It can also be updated with information on techniques that were effective in identifying risks to improve performance in later phases or other projects.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref>.

====Perform Qualitative Risk Analysis====
[[File:PerformQualitativeRiskAnalysis.PNG|thumb|right|300px|Figure 5: Perform Qualitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.419'' </ref>.]]
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. The key benefit of this process is that it focuses efforts on high-priority risks. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 5.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

As previously said, construction projects have a high level of uncertainty and the expertise of the team could be very useful to develop a hierarchical chart, categorizing the previously identified risks by the probability of occurence and its impact on project objectives. Risks
can be prioritized for further analysis and planning of risk responses based on their probability and impacts. Industry studies of similar projects and published material could also be used, even though it could be hard to compare external projects with an specific projects.

It is very important to include representatives from all areas influencing the project scope, schedule and cost: sponsor, development, engineering, procurement, construction, operations, legal, etc.

====Perform Quantitative Risk Analysis====
[[File:PerformQuantitativeRiskAnalysis.PNG|thumb|right|300px|Figure 6: Perform Quantitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQNRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.428'' </ref>.]]
Is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. The key benefit of this process is that it quantifies overall project risk exposure, and it can also provide additional quantitative risk information to support risk response planning. This process is not required for every project, but where it is used, it is performed throughout the project. The inputs and outputs of this process are depicted in Figure 6.

Perform Quantitative Risk Analysis is not required for all projects. Undertaking a robust analysis depends on the availability of high-quality data about individual project risks and other sources of uncertainty, as well as a sound underlying project baseline for scope, schedule, and cost. Quantitative risk analysis usually requires specialized risk software and expertise in the development and interpretation of risk models.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>. Moreover, this methods are not very reliable in construction projects because of the uncertainty levels of the risks and the difficulty of quantifying the economical impact of this events.

Even though it's hard to find exact numbers from this process, it is very important to consider a budget line to mitigate the identified risks. This budget line will be defined depending on the project risk level, the higher the risk, the higher budget for this purpose. Usually in construction projects, this is a percentage of the overall budget. A budget line for the risks concerning the delivery of the final product (building or project) should also be considered, this to mitigate the cost for hidden faults that could emerge.

====Plan Risk Responses====
[[File:PlanRiskResponses.PNG|thumb|right|300px|Figure 7: Plan Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="PRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.437'' </ref>.]]
Plan Risk Responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks. The key benefit of this process is that it identifies appropriate ways to address overall project risk and individual project risks. This process also allocates resources and inserts activities into project documents and the project management plan as needed. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 7.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The expertise of the team involved in the project is again highly important for this process, the target is to propose specific advice to minimize risks and their economic consequences. The process in construction projects are more complex than in most other domains because of the fact that uncertainty factors are expressed in natural language with jargon.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref> Again the complexity of this process in construction projects is due to the difficulty to quantify the consequences of any threat or benefit, but a contingency plan should be developed for major risks. The project manager and the team should know exactly what to do in case of any event, even though the economic impact remains unknown.

[[File:ImplementRiskResponses.PNG|thumb|left|300px|Figure 8: Implement Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="IRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.449'' </ref>.]]
====Implement Risk Responses====
This process consits in implementing agreed-upon risk response plans. The key benefit of this process is that it ensures that agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize individual project opportunities. The inputs, tools and techniques, and outputs of the process are shown in Figure 8.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

This is the process where the planning is implemented and decision-makers and project managers need to know what to do in case of a contingency, and the impact that the previously identified risk could have. For example, consider the case where a contractor delays due to bad weather or even neglignece, what actions should be taken? this actions should be aligned with the risk management plan and with the consequences previously identified, with the respective costs that this events may entail. The project manager needs to have very clear the cost of every contingency and the cost of the action that needs to be taken on the overall result of the project. For example, in the case of a delay in the program, the project manager needs to know the cost of each day of delay and what actions are allowed to be taken.

[[File:MonitorRisks.PNG|thumb|left|300px|Figure 9: Monitor Risks: Inputs, Tools & Techniques, and Outputs <ref name="MR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.453'' </ref>.]]
====Monitor Risk====
Monitor Risks is the process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project. The key benefit of this process is that it enables project decisions to be based on current information about overall project risk exposure and individual project risks. The inputs, tools and techniques, and outputs of the process are depicted in Figure 9.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The target is to use performance information during the project execution to determine if the followed strategy is the right one, if the risk management approach is still appropiate or if contingency reserves for cost or schedule require modification. It is essential for the project manager to know if the action taken after a risk has occured has been the right one and it has reduced cost and time over-runs, maybe the action taken was even worst than the problem and a rethinking on the strategy has to be done.

It is also important to identify new risks or new threats that could have a negative on the project, or potential opportunities that eventually could benefit the overall project results.

==Limitations==
The Project Management Institute (PMI) standards in the PMBOK® Guide, establishes a detailed guide to manage the risks in every project. Risk management is the most uncertain discipline in project management and this makes harder to follow the guide to the detail. Even though, risk management is highly important in every project, project managers in construction industry are more likely to follow empirical methods to mitigate this risks. The porpose of this guide is to give an easy to follow method to decision makers and project managers.

However, following a defined process is hard for construction projects because every project is very different and "unknown unkowns" are more in this projects than in projects from industries with defined processes. This makes harder to follow the guide and this is one of the reasons why construction project managers follow more empirical methods.

==Annotated Bibliography==
'''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458''' The book contains the last version of the PMBOK® Guide, the article is based on the process established by this book.

'''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.''' The article contains advisory on managing risks on construction projects.

==References==
<references />

A Guide to Risk Management in Construction Projects

2019-03-02T23:01:10Z

S182573:

''Developed by Jokin Brito''

==Abstract==
Throughout history, construction has been one of the most revenue generating industries in the world and like many other businesses, is being transformed to meet the highest demands of the twenty-first century. Only in the United States, more than 11.1 million people were employed by the construction industry in 2018<ref name=''labor''> ''Bls.gov. (2019). Employed persons by detailed industry, sex, race, and Hispanic or Latino ethnicity. [online] Available at: https://www.bls.gov/cps/cpsaat18.htm [Accessed 17 Feb. 2019].'' </ref>, the industry spending topped $1.23 trillion in 2017<ref name=''spending''> ''Construction spending in the United States from 1996 to 2017, s. (2019). U.S. construction spending: public and private sectors 2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/226355/us-public-and-private-sector-construction/ [Accessed 17 Feb. 2019].'' </ref> and it accounted for between 7% of total U.S. GDP.<ref name=''GDP''> ''2018 FMI Overview, Featuring FMI’s Fourth Quarter 2017 Construction Outlook. (2018). [online] Available at: https://www.fminet.com/wp-content/uploads/2018/01/Overview2018_FINAL-1.pdf [Accessed 17 Feb. 2019].'' </ref> Furthermore, today's construction industry involves more dynamic and uncertain planning than ever before. Decision-makers and project managers require better knowledge and systematic tools, not only in project management, but also in risk management, a discipline that has a special complexity in construction projects.
This article has the goal of giving project managers and decision-makers within construction industry a more detailed guide to fulfill the needs of any project they manage, where they can identify and reduce cost and time over-runs and security risks, in order to optimize the chances of project success. The guide follows the Project Management Institute (PMI) standards in the PMBOK® Guide.

Four phases can be found in project management, where the executing order is really important: scope, schedule, cost and risk. With the first three constraints defined, risk is the last but not least constraint remaining, and it is certainly the one that has no exact answer and the most abstract one. This guide could help project managers to define risks within their projects but it is a discipline that is highly dependent on the manager criteria.

==Background==

====Structure of this article====
The article structure is aligned with the standards in the PMBOK® Guide, following the same processes. First the key and basic concepts of risk management are given, where the types of risks that a project can suffer are explained. Then, the processes are explained giving examples and customizing them to the needs of construction industry. The goal is to give a clear guidance through the process to project managers in construction projects.

Finally, the limitations of risk management in construction projects are explained.

====Construction Industry====
The size of construction projects has outgrowed the industry's capacity to manage complex problems under conditions of uncertainty. Risk management in large scale projects becomes a more important part of overall construction management. Each project is very different from each other and they can't be managed in a systematic way, such as in other industries, thus risk management has always been a more trial-and-error method, which requires symbolic reasoning. Empirical knowledge plays a major role for decision-makers and project managers in every stage under uncertainty and many problems in the industry are not very well defined so the risks that this problems entail are much more difficult to define.

In this article the focus is on giving a more systematic way of evaluating and defining risks on any construction project, helping project managers to base their decisions on the standars in the PMBOK® Guide and in the experience of previous projects.

[[File:PRMoverview.PNG|thumb|right|250px|Figure 1: Project Risk Management Overview <ref name="PRMO"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.396'' </ref>.]]
====Project Risk Management====
Project Risk management includes the processes of conducting risk management planning, identification, analysis,
response planning, response implementation, and monitoring risk on a project. The objectives of project risk management
are to increase the probability and/or impact of positive risks and to decrease the probability and/or impact of negative
risks, in order to optimize the chances of project success.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

The Project Risk Management processes according to the PMBOK® Guide are:

<ol>
<li> Plan Risk Management
<li> Identify Risks
<li> Perform Qualitative Risk Analysis
<li> Perform Quantitative Risk Analysis
<li> Plan Risk Responses
<li> Implement Risk Responses
<li> Monitor Risks
</ol>

The goal of this article is to provide guidance on each one of this processes, applied to any construcion project.

====Key Concepts====
All projects have a difficulty degree and a risky level that aim to deliver benefits and achieve certain goals. Even though this barely happens in the construction industry, organizations should always choose to make decisions in a controlled manner, balancing cost and benefit.
When risks of any project are not well managed, they have the potential to deviate the project from the original plan and fail to achieve the defined objectives.

In every project, risks exist at two levels:
*'''Individual project risk''' Uncertain event or condition that, if occurs, has an effect on one or more project objectives. When these risks are unmanaged, it may result in problems such as delay, cost overruns, performance shortfall or loss of reputation. Opportunities that are captured can lead to benefits in the same categories.
*'''Overall project risk''' Uncertainty of the project as a whole, representing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative. A good management of these risks, aims to keep project risk exposure within an acceptable range, maximizing the probability of achieving overall project objectives.

The aim of project risk management is to ensure that all types of risk are considered and that projects risks are understood in a wider context. Trends and ememerging practices for Project Risk Management include but are not limited to:

* '''Non-event risk:''' The two types of non-event risks are ''variability risk'', where uncertainty exists about some key characteristics of a planned event or activity or decision. And ''ambiguity risks'', where uncertainty exists about what might happen in the future.

* '''Project resilience:''' These emergent risks are better known as unknowable-unknowns and they can be tackled through developing project resilience. This requires each project to have an specific ''risk budget'' for known risks, ''flexible project'' processes that can cope while maintaining overall direction of the project, ''empowered project team'' that is trusted to get the job done with agreed-upon limits, ''frequent review'' of early warning signs and ''clear input from stakeholders'' to clarify areas where the project scope or strategy can be adjusted in response to emergent risks.

* '''Integrated risk management:''' Projects may be part of a program or portfolio, where risks also exist and should be owned and managed at the appropiate level. Some risks can be managed by the project team or manager but some risks may escalete to a higher level. A coordinated approach to enterprise-wide risk management ensures alignment and coherence in the way risk is managed across all levels.

Each project is unique and it is necessary to tailor the way Project Risk Management processes are applied. These considerations include project size, project complexity, project importance and development approach.

==Application==
====Plan Risk Management====
[[File:PlanRiskManagement.PNG|thumb|right|400px|Figure 2: Plan Risk Management: Inputs, Tools & Techniques, and Outputs <ref name="PRM"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.401'' </ref>.]]
This is the process where the risk management activities are defined, ensuring that the degree, type and visibility of risk management are propotionate to both risks and the importance of the project to the organization and other stakeholders. The process is defined once or at predefined points in the project. It may be necessary to revisit this process in a major phase change or if the project scope changes significantly.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Inputs, tools and techniques and outputs are predefined in this process as shown in figure 2 and they should be aligned with the project integration management process of the PMBOK® Guide. It should result on strategies and methodologies that should be followed to manage the risks, roles and responsabilities of each team member, the funding needed to perform these activities and defined risk categories. The definition of risk probability and impacts, which is usually arranged in a scale of five levels is very important, in order to understand and classify the impact that the identified risks can make on the project. The scale should include the probability of occurence, the cost of each level of probability in case of any event and the description of the impact on the project.

This task should be done mainly by the project risk manager, who will plan the strategy to follow during the next processes of the guide. The goal is to have a clear plan of what to do in the complete risk management process.

Reporting formats and tracking documents should also be elaborated to simplify how risks will be communicated.
[[File:IdentifyRisks.PNG|thumb|left|300px|Figure 3: Identify Risks: Inputs, Tools & Techniques, and Outputs <ref name="IR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.409'' </ref>.]]

====Identify Risks====
[[File:TotalRisk.PNG|thumb|left|300px|Figure 4: Risk identification, inspired from: "Construction Risk Management" <ref name="RIC"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.116.'' </ref>.]]
This is the process where the team should identify probable risks that could have both positive and negative impact on the project and gather them according to the risk plan previously done. This process is performed throuhgout the project. The inputs, tools & techniques and outputs that the team should follow are shown in Figure 3.

In this process is very important to involve the project team so they can develop and maintain a sense of ownership and responsibility for identified individual project risks, the level of overall project risk, and associated risk response actions. In construction projects, the previous experience of each member of the team is specially important in risk identification, a brainstorming meeting could be very helpful to create a list of possible threats or opportunities. Identify Risks is an iterative process, since new individual project risks may emerge as the project progresses through its life cycle and the level of overall project risk will also change.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Even though, every project is different and specially construction projects have a high level of uncertainty, external resources could also be taken into account, such as academic studies, industry studies and records from the same organization. The target is to have a list of every possible risk or uncertainty factors that affect productivity, cost, time, quality and performance, so the project management could categorize them according to the risk plan. This list includes the principal risks of all major parties (contractors, designers and owners) involved in a construction project.

It is also important that if any risk happens, the team have a prepared document regarding lessons learned, so this could help in future projects and identifying potential threats and opportunities. It can also be updated with information on techniques that were effective in identifying risks to improve performance in later phases or other projects.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref>.

====Perform Qualitative Risk Analysis====
[[File:PerformQualitativeRiskAnalysis.PNG|thumb|right|300px|Figure 5: Perform Qualitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.419'' </ref>.]]
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. The key benefit of this process is that it focuses efforts on high-priority risks. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 5.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

As previously said, construction projects have a high level of uncertainty and the expertise of the team could be very useful to develop a hierarchical chart, categorizing the previously identified risks by the probability of occurence and its impact on project objectives. Risks
can be prioritized for further analysis and planning of risk responses based on their probability and impacts. Industry studies of similar projects and published material could also be used, even though it could be hard to compare external projects with an specific projects.

It is very important to include representatives from all areas influencing the project scope, schedule and cost: sponsor, development, engineering, procurement, construction, operations, legal, etc.

====Perform Quantitative Risk Analysis====
[[File:PerformQuantitativeRiskAnalysis.PNG|thumb|right|300px|Figure 6: Perform Quantitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQNRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.428'' </ref>.]]
Is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. The key benefit of this process is that it quantifies overall project risk exposure, and it can also provide additional quantitative risk information to support risk response planning. This process is not required for every project, but where it is used, it is performed throughout the project. The inputs and outputs of this process are depicted in Figure 6.

Perform Quantitative Risk Analysis is not required for all projects. Undertaking a robust analysis depends on the availability of high-quality data about individual project risks and other sources of uncertainty, as well as a sound underlying project baseline for scope, schedule, and cost. Quantitative risk analysis usually requires specialized risk software and expertise in the development and interpretation of risk models.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>. Moreover, this methods are not very reliable in construction projects because of the uncertainty levels of the risks and the difficulty of quantifying the economical impact of this events.

Even though it's hard to find exact numbers from this process, it is very important to consider a budget line to mitigate the identified risks. This budget line will be defined depending on the project risk level, the higher the risk, the higher budget for this purpose. Usually in construction projects, this is a percentage of the overall budget. A budget line for the risks concerning the delivery of the final product (building or project) should also be considered, this to mitigate the cost for hidden faults that could emerge.

====Plan Risk Responses====
[[File:PlanRiskResponses.PNG|thumb|right|300px|Figure 7: Plan Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="PRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.437'' </ref>.]]
Plan Risk Responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks. The key benefit of this process is that it identifies appropriate ways to address overall project risk and individual project risks. This process also allocates resources and inserts activities into project documents and the project management plan as needed. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 7.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The expertise of the team involved in the project is again highly important for this process, the target is to propose specific advice to minimize risks and their economic consequences. The process in construction projects are more complex than in most other domains because of the fact that uncertainty factors are expressed in natural language with jargon.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref> Again the complexity of this process in construction projects is due to the difficulty to quantify the consequences of any threat or benefit, but a contingency plan should be developed for major risks. The project manager and the team should know exactly what to do in case of any event, even though the economic impact remains unknown.

[[File:ImplementRiskResponses.PNG|thumb|left|300px|Figure 8: Implement Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="IRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.449'' </ref>.]]
====Implement Risk Responses====
This process consits in implementing agreed-upon risk response plans. The key benefit of this process is that it ensures that agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize individual project opportunities. The inputs, tools and techniques, and outputs of the process are shown in Figure 8.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

This is the process where the planning is implemented and decision-makers and project managers need to know what to do in case of a contingency, and the impact that the previously identified risk could have. For example, consider the case where a contractor delays due to bad weather or even neglignece, what actions should be taken? this actions should be aligned with the risk management plan and with the consequences previously identified, with the respective costs that this events may entail. The project manager needs to have very clear the cost of every contingency and the cost of the action that needs to be taken on the overall result of the project. For example, in the case of a delay in the program, the project manager needs to know the cost of each day of delay and what actions are allowed to be taken.

[[File:MonitorRisks.PNG|thumb|left|300px|Figure 9: Monitor Risks: Inputs, Tools & Techniques, and Outputs <ref name="MR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.453'' </ref>.]]
====Monitor Risk====
Monitor Risks is the process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project. The key benefit of this process is that it enables project decisions to be based on current information about overall project risk exposure and individual project risks. The inputs, tools and techniques, and outputs of the process are depicted in Figure 9.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The target is to use performance information during the project execution to determine if the followed strategy is the right one, if the risk management approach is still appropiate or if contingency reserves for cost or schedule require modification. It is essential for the project manager to know if the action taken after a risk has occured has been the right one and it has reduced cost and time over-runs, maybe the action taken was even worst than the problem and a rethinking on the strategy has to be done.

It is also important to identify new risks or new threats that could have a negative on the project, or potential opportunities that eventually could benefit the overall project results.

==Limitations==
The Project Management Institute (PMI) standards in the PMBOK® Guide, establishes a detailed guide to manage the risks in every project. Risk management is the most uncertain discipline in project management and this makes harder to follow the guide to the detail. Even though, risk management is highly important in every project, project managers in construction industry are more likely to follow empirical methods to mitigate this risks. The porpose of this guide is to give an easy to follow method to decision makers and project managers.

However, following a defined process is hard for construction projects because every project is very different and "unknown unkowns" are more in this projects than in projects from industries with defined processes. This makes harder to follow the guide and this is one of the reasons why construction project managers follow more empirical methods.

==Annotated Bibliography==
'''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458''' The book contains the last version of the PMBOK® Guide, the article is based on the process established by this book.

'''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.''' The article contains advisory on managing risks on construction projects.

==References==
<references />

A Guide to Risk Management in Construction Projects

2019-03-02T22:54:14Z

S182573:

''Developed by Jokin Brito''

==Abstract==
Throughout history, construction has been one of the most revenue generating industries in the world and like many other businesses, is being transformed to meet the highest demands of the twenty-first century. Only in the United States, more than 11.1 million people were employed by the construction industry in 2018<ref name=''labor''> ''Bls.gov. (2019). Employed persons by detailed industry, sex, race, and Hispanic or Latino ethnicity. [online] Available at: https://www.bls.gov/cps/cpsaat18.htm [Accessed 17 Feb. 2019].'' </ref>, the industry spending topped $1.23 trillion in 2017<ref name=''spending''> ''Construction spending in the United States from 1996 to 2017, s. (2019). U.S. construction spending: public and private sectors 2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/226355/us-public-and-private-sector-construction/ [Accessed 17 Feb. 2019].'' </ref> and it accounted for between 7% of total U.S. GDP.<ref name=''GDP''> ''2018 FMI Overview, Featuring FMI’s Fourth Quarter 2017 Construction Outlook. (2018). [online] Available at: https://www.fminet.com/wp-content/uploads/2018/01/Overview2018_FINAL-1.pdf [Accessed 17 Feb. 2019].'' </ref> Furthermore, today's construction industry involves more dynamic and uncertain planning than ever before. Decision-makers and project managers require better knowledge and systematic tools, not only in project management, but also in risk management, a discipline that has a special complexity in construction projects.
This article has the goal of giving project managers and decision-makers within construction industry a more detailed guide to fulfill the needs of any project they manage, where they can identify and reduce cost and time over-runs and security risks, in order to optimize the chances of project success. The guide follows the Project Management Institute (PMI) standards in the PMBOK® Guide.

Four phases can be found in project management, where the executing order is really important: scope, schedule, cost and risk. With the first three constraints defined, risk is the last but not least constraint remaining, and it is certainly the one that have no exact answer and the most abstract one. This guide could help project managers to define risks within their projects but it is a discipline that is highly dependent on the manager criteria.

==Background==

====Structure of this article====
The article structure is aligned with the standards in the PMBOK® Guide, following the same processes. First the key and basic concepts of risk management are given, where the types of risks that a project can suffer are explained. Then, the processes are explained giving examples and customizing them to the needs of construction industry. The goal is to give a clear guidance through the process to project managers in construction projects.

Finally, the limitations of risk management in construction projects are explained.

====Construction Industry====
The size of construction projects has outgrowed the industry's capacity to manage complex problems under conditions of uncertainty. Risk management in large scale projects becomes a more important part of overall construction management. Each project is very different from each other and they can't be managed in a systematic way, such as in other industries, thus risk management has always been a more trial-and-error method, which requires symbolic reasoning. Empirical knowledge plays a major role for decision-makers and project managers in every stage under uncertainty and many problems in the industry are not very well defined so the risks that this problems entail are much more difficult to define.

In this article the focus is on giving a more systematic way of evaluating and defining risks on any construction project, helping project managers to base their decisions on the standars in the PMBOK® Guide and in the experience of previous projects.

[[File:PRMoverview.PNG|thumb|right|250px|Figure 1: Project Risk Management Overview <ref name="PRMO"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.396'' </ref>.]]
====Project Risk Management====
Project Risk management includes the processes of conducting risk management planning, identification, analysis,
response planning, response implementation, and monitoring risk on a project. The objectives of project risk management
are to increase the probability and/or impact of positive risks and to decrease the probability and/or impact of negative
risks, in order to optimize the chances of project success.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

The Project Risk Management processes according to the PMBOK® Guide are:

<ol>
<li> Plan Risk Management
<li> Identify Risks
<li> Perform Qualitative Risk Analysis
<li> Perform Quantitative Risk Analysis
<li> Plan Risk Responses
<li> Implement Risk Responses
<li> Monitor Risks
</ol>

The goal of this article is to provide guidance on each one of this processes, applied to any construcion project.

====Key Concepts====
All projects have a difficulty degree and a risky level that aim to deliver benefits and achieve certain goals. Even though this barely happens in the construction industry, organizations should always choose to make decisions in a controlled manner, balancing cost and benefit.
When risks of any project are not well managed, they have the potential to deviate the project from the original plan and fail to achieve the defined objectives.

In every project, risks exist at two levels:
*'''Individual project risk''' Uncertain event or condition that, if occurs, has an effect on one or more project objectives. When these risks are unmanaged, it may result in problems such as delay, cost overruns, performance shortfall or loss of reputation. Opportunities that are captured can lead to benefits in the same categories.
*'''Overall project risk''' Uncertainty of the project as a whole, representing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative. A good management of these risks, aims to keep project risk exposure within an acceptable range, maximizing the probability of achieving overall project objectives.

The aim of project risk management is to ensure that all types of risk are considered and that projects risks are understood in a wider context. Trends and ememerging practices for Project Risk Management include but are not limited to:

* '''Non-event risk:''' The two types of non-event risks are ''variability risk'', where uncertainty exists about some key characteristics of a planned event or activity or decision. And ''ambiguity risks'', where uncertainty exists about what might happen in the future.

* '''Project resilience:''' These emergent risks are better known as unknowable-unknowns and they can be tackled through developing project resilience. This requires each project to have an specific ''risk budget'' for known risks, ''flexible project'' processes that can cope while maintaining overall direction of the project, ''empowered project team'' that is trusted to get the job done with agreed-upon limits, ''frequent review'' of early warning signs and ''clear input from stakeholders'' to clarify areas where the project scope or strategy can be adjusted in response to emergent risks.

* '''Integrated risk management:''' Projects may be part of a program or portfolio, where risks also exist and should be owned and managed at the appropiate level. Some risks can be managed by the project team or manager but some risks may escalete to a higher level. A coordinated approach to enterprise-wide risk management ensures alignment and coherence in the way risk is managed across all levels.

Each project is unique and it is necessary to tailor the way Project Risk Management processes are applied. These considerations include project size, project complexity, project importance and development approach.

==Application==
====Plan Risk Management====
[[File:PlanRiskManagement.PNG|thumb|right|400px|Figure 2: Plan Risk Management: Inputs, Tools & Techniques, and Outputs <ref name="PRM"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.401'' </ref>.]]
This is the process where the risk management activities are defined, ensuring that the degree, type and visibility of risk management are propotionate to both risks and the importance of the project to the organization and other stakeholders. The process is defined once or at predefined points in the project. It may be necessary to revisit this process in a major phase change or if the project scope changes significantly.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Inputs, tools and techniques and outputs are predefined in this process as shown in figure 2 and they should be aligned with the project integration management process of the PMBOK® Guide. It should result on strategies and methodologies that should be followed to manage the risks, roles and responsabilities of each team member, the funding needed to perform these activities and defined risk categories. The definition of risk probability and impacts, which is usually arranged in a scale of five levels is very important, in order to understand and classify the impact that the identified risks can make on the project. The scale should include the probability of occurence, the cost of each level of probability in case of any event and the description of the impact on the project.

This task should be done mainly by the project risk manager, who will plan the strategy to follow during the next processes of the guide. The goal is to have a clear plan of what to do in the complete risk management process.

Reporting formats and tracking documents should also be elaborated to simplify how risks will be communicated.
[[File:IdentifyRisks.PNG|thumb|left|300px|Figure 3: Identify Risks: Inputs, Tools & Techniques, and Outputs <ref name="IR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.409'' </ref>.]]

====Identify Risks====
[[File:TotalRisk.PNG|thumb|left|300px|Figure 4: Risk identification, inspired from: "Construction Risk Management" <ref name="RIC"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.116.'' </ref>.]]
This is the process where the team should identify probable risks that could have both positive and negative impact on the project and gather them according to the risk plan previously done. This process is performed throuhgout the project. The inputs, tools & techniques and outputs that the team should follow are shown in Figure 3.

In this process is very important to involve the project team so they can develop and maintain a sense of ownership and responsibility for identified individual project risks, the level of overall project risk, and associated risk response actions. In construction projects, the previous experience of each member of the team is specially important in risk identification, a brainstorming meeting could be very helpful to create a list of possible threats or opportunities. Identify Risks is an iterative process, since new individual project risks may emerge as the project progresses through its life cycle and the level of overall project risk will also change.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Even though, every project is different and specially construction projects have a high level of uncertainty, external resources could also be taken into account, such as academic studies, industry studies and records from the same organization. The target is to have a list of every possible risk or uncertainty factors that affect productivity, cost, time, quality and performance, so the project management could categorize them according to the risk plan. This list includes the principal risks of all major parties (contractors, designers and owners) involved in a construction project.

It is also important that if any risk happens, the team have a prepared document regarding lessons learned, so this could help in future projects and identifying potential threats and opportunities. It can also be updated with information on techniques that were effective in identifying risks to improve performance in later phases or other projects.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref>.

====Perform Qualitative Risk Analysis====
[[File:PerformQualitativeRiskAnalysis.PNG|thumb|right|300px|Figure 5: Perform Qualitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.419'' </ref>.]]
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. The key benefit of this process is that it focuses efforts on high-priority risks. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 5.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

As previously said, construction projects have a high level of uncertainty and the expertise of the team could be very useful to develop a hierarchical chart, categorizing the previously identified risks by the probability of occurence and its impact on project objectives. Risks
can be prioritized for further analysis and planning of risk responses based on their probability and impacts. Industry studies of similar projects and published material could also be used, even though it could be hard to compare external projects with an specific projects.

It is very important to include representatives from all areas influencing the project scope, schedule and cost: sponsor, development, engineering, procurement, construction, operations, legal, etc.

====Perform Quantitative Risk Analysis====
[[File:PerformQuantitativeRiskAnalysis.PNG|thumb|right|300px|Figure 6: Perform Quantitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQNRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.428'' </ref>.]]
Is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. The key benefit of this process is that it quantifies overall project risk exposure, and it can also provide additional quantitative risk information to support risk response planning. This process is not required for every project, but where it is used, it is performed throughout the project. The inputs and outputs of this process are depicted in Figure 6.

Perform Quantitative Risk Analysis is not required for all projects. Undertaking a robust analysis depends on the availability of high-quality data about individual project risks and other sources of uncertainty, as well as a sound underlying project baseline for scope, schedule, and cost. Quantitative risk analysis usually requires specialized risk software and expertise in the development and interpretation of risk models.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>. Moreover, this methods are not very reliable in construction projects because of the uncertainty levels of the risks and the difficulty of quantifying the economical impact of this events.

Even though it's hard to find exact numbers from this process, it is very important to consider a budget line to mitigate the identified risks. This budget line will be defined depending on the project risk level, the higher the risk, the higher budget for this purpose. Usually in construction projects, this is a percentage of the overall budget. A budget line for the risks concerning the delivery of the final product (building or project) should also be considered, this to mitigate the cost for hidden faults that could emerge.

====Plan Risk Responses====
[[File:PlanRiskResponses.PNG|thumb|right|300px|Figure 7: Plan Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="PRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.437'' </ref>.]]
Plan Risk Responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks. The key benefit of this process is that it identifies appropriate ways to address overall project risk and individual project risks. This process also allocates resources and inserts activities into project documents and the project management plan as needed. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 7.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The expertise of the team involved in the project is again highly important for this process, the target is to propose specific advice to minimize risks and their economic consequences. The process in construction projects are more complex than in most other domains because of the fact that uncertainty factors are expressed in natural language with jargon.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref> Again the complexity of this process in construction projects is due to the difficulty to quantify the consequences of any threat or benefit, but a contingency plan should be developed for major risks. The project manager and the team should know exactly what to do in case of any event, even though the economic impact remains unknown.

[[File:ImplementRiskResponses.PNG|thumb|left|300px|Figure 8: Implement Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="IRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.449'' </ref>.]]
====Implement Risk Responses====
This process consits in implementing agreed-upon risk response plans. The key benefit of this process is that it ensures that agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize individual project opportunities. The inputs, tools and techniques, and outputs of the process are shown in Figure 8.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

This is the process where the planning is implemented and decision-makers and project managers need to know what to do in case of a contingency, and the impact that the previously identified risk could have. For example, consider the case where a contractor delays due to bad weather or even neglignece, what actions should be taken? this actions should be aligned with the risk management plan and with the consequences previously identified, with the respective costs that this events may entail. The project manager needs to have very clear the cost of every contingency and the cost of the action that needs to be taken on the overall result of the project. For example, in the case of a delay in the program, the project manager needs to know the cost of each day of delay and what actions are allowed to be taken.

[[File:MonitorRisks.PNG|thumb|left|300px|Figure 9: Monitor Risks: Inputs, Tools & Techniques, and Outputs <ref name="MR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.453'' </ref>.]]
====Monitor Risk====
Monitor Risks is the process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project. The key benefit of this process is that it enables project decisions to be based on current information about overall project risk exposure and individual project risks. The inputs, tools and techniques, and outputs of the process are depicted in Figure 9.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The target is to use performance information during the project execution to determine if the followed strategy is the right one, if the risk management approach is still appropiate or if contingency reserves for cost or schedule require modification. It is essential for the project manager to know if the action taken after a risk has occured has been the right one and it has reduced cost and time over-runs, maybe the action taken was even worst than the problem and a rethinking on the strategy has to be done.

It is also important to identify new risks or new threats that could have a negative on the project, or potential opportunities that eventually could benefit the overall project results.

==Limitations==
The Project Management Institute (PMI) standards in the PMBOK® Guide, establishes a detailed guide to manage the risks in every project. Risk management is the most uncertain discipline in project management and this makes harder to follow the guide to the detail. Even though, risk management is highly important in every project, project managers in construction industry are more likely to follow empirical methods to mitigate this risks. The porpose of this guide is to give an easy to follow method to decision makers and project managers.

However, following a defined process is hard for construction projects because every project is very different and "unknown unkowns" are more in this projects than in projects from industries with defined processes. This makes harder to follow the guide and this is one of the reasons why construction project managers follow more empirical methods.

==Annotated Bibliography==
'''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458''' The book contains the last version of the PMBOK® Guide, the article is based on the process established by this book.

'''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.''' The article contains advisory on managing risks on construction projects.

==References==
<references />

A Guide to Risk Management in Construction Projects

2019-03-02T22:11:07Z

S182573:

''Developed by Jokin Brito''

==Abstract==
Throughout history, construction has been one of the most revenue generating industries in the world and like many other businesses, is being transformed to meet the highest demands of the twenty-first century. Only in the United States, more than 11.1 million people were employed by the construction industry in 2018<ref name=''labor''> ''Bls.gov. (2019). Employed persons by detailed industry, sex, race, and Hispanic or Latino ethnicity. [online] Available at: https://www.bls.gov/cps/cpsaat18.htm [Accessed 17 Feb. 2019].'' </ref>, the industry spending topped $1.23 trillion in 2017<ref name=''spending''> ''Construction spending in the United States from 1996 to 2017, s. (2019). U.S. construction spending: public and private sectors 2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/226355/us-public-and-private-sector-construction/ [Accessed 17 Feb. 2019].'' </ref> and it accounted for between 7% of total U.S. GDP.<ref name=''GDP''> ''2018 FMI Overview, Featuring FMI’s Fourth Quarter 2017 Construction Outlook. (2018). [online] Available at: https://www.fminet.com/wp-content/uploads/2018/01/Overview2018_FINAL-1.pdf [Accessed 17 Feb. 2019].'' </ref> Furthermore, today's construction industry involves more dynamic and uncertain planning than ever before. Decision-makers and project managers require better knowledge and systematic tools, not only in project management, but also in risk management, a discipline that has a special complexity in construction projects.
This article has the goal of giving project managers and decision-makers within construction industry a more detailed guide to fulfill the needs of any project they manage, where they can identify and reduce cost and time over-runs and security risks, in order to optimize the chances of project success. The guide follows the Project Management Institute (PMI) standards in the PMBOK® Guide.

Four phases can be found in project management, where the executing order is really important: scope, schedule, cost and risk. With the first three constraints defined, risk is the last but not least constraint remaining, and it is certainly the one that have no exact answer and the most abstract one. This guide could help project managers to define risks within their projects but it is a discipline that is highly dependent on the manager criteria.

==Background==

====Structure of this article====
The article structure is aligned with the standards in the PMBOK® Guide, following the same processes. First the key and basic concepts of risk management are given, where the types of risks that a project can suffer are explained. Then, the processes are explained giving examples and customizing them to the needs of construction industry. The goal is to give a clear guidance through the process to project managers in construction projects.

Finally, the limitations of risk management in construction projects are explained.

====Construction Industry====
The size of construction projects has outgrowed the industry's capacity to manage complex problems under conditions of uncertainty. Risk management in large scale projects becomes a more important part of overall construction management. Each project is very different from each other and they can't be managed in a systematic way, such as in other industries, thus risk management has always been a more trial-and-error method, which requires symbolic reasoning. Empirical knowledge plays a major role for decision-makers and project managers in every stage under uncertainty and many problems in the industry are not very well defined so the risks that this problems entail are much more difficult to define.

In this article the focus is on giving a more systematic way of evaluating and defining risks on any construction project, helping project managers to base their decisions on the standars in the PMBOK® Guide and in the experience of previous projects.

[[File:PRMoverview.PNG|thumb|right|250px|Figure 1: Project Risk Management Overview <ref name="PRMO"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.396'' </ref>.]]
====Project Risk Management====
Project Risk management includes the processes of conducting risk management planning, identification, analysis,
response planning, response implementation, and monitoring risk on a project. The objectives of project risk management
are to increase the probability and/or impact of positive risks and to decrease the probability and/or impact of negative
risks, in order to optimize the chances of project success.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

The Project Risk Management processes according to the PMBOK® Guide are:

<ol>
<li> Plan Risk Management
<li> Identify Risks
<li> Perform Qualitative Risk Analysis
<li> Perform Quantitative Risk Analysis
<li> Plan Risk Responses
<li> Implement Risk Responses
<li> Monitor Risks
</ol>

The goal of this article is to provide guidance on each one of this processes, applied to any construcion project.

====Key Concepts====
All projects have a difficulty degree and a risky level that aim to deliver benefits and achieve certain goals. Even though this barely happens in the construction industry, organizations should always choose to make decisions in a controlled manner, balancing cost and benefit.
When risks of any project are not well managed, they have the potential to deviate the project from the original plan and fail to achieve the defined objectives.

In every project, risks exist at two levels:
*'''Individual project risk''' Uncertain event or condition that, if occurs, has an effect on one or more project objectives. When these risks are unmanaged, it may result in problems such as delay, cost overruns, performance shortfall or loss of reputation. Opportunities that are captured can lead to benefits in the same categories.
*'''Overall project risk''' Uncertainty of the project as a whole, representing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative. A good management of these risks, aims to keep project risk exposure within an acceptable range, maximizing the probability of achieving overall project objectives.

The aim of project risk management is to ensure that all types of risk are considered and that projects risks are understood in a wider context. Trends and ememerging practices for Project Risk Management include but are not limited to:

* '''Non-event risk:''' The two types of non-event risks are ''variability risk'', where uncertainty exists about some key characteristics of a planned event or activity or decision. And ''ambiguity risks'', where uncertainty exists about what might happen in the future.

* '''Project resilience:''' These emergent risks are better known as unknowable-unknowns and they can be tackled through developing project resilience. This requires each project to have an specific ''risk budget'' for known risks, ''flexible project'' processes that can cope while maintaining overall direction of the project, ''empowered project team'' that is trusted to get the job done with agreed-upon limits, ''frequent review'' of early warning signs and ''clear input from stakeholders'' to clarify areas where the project scope or strategy can be adjusted in response to emergent risks.

* '''Integrated risk management:''' Projects may be part of a program or portfolio, where risks also exist and should be owned and managed at the appropiate level. Some risks can be managed by the project team or manager but some risks may escalete to a higher level. A coordinated approach to enterprise-wide risk management ensures alignment and coherence in the way risk is managed across all levels.

Each project is unique and it is necessary to tailor the way Project Risk Management processes are applied. These considerations include project size, project complexity, project importance and development approach.

==Application==
====Plan Risk Management====
[[File:PlanRiskManagement.PNG|thumb|right|400px|Figure 2: Plan Risk Management: Inputs, Tools & Techniques, and Outputs <ref name="PRM"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.401'' </ref>.]]
This is the process where the risk management activities are defined, ensuring that the degree, type and visibility of risk management are propotionate to both risks and the importance of the project to the organization and other stakeholders. The process is defined once or at predefined points in the project. It may be necessary to revisit this process in a major phase change or if the project scope changes significantly.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Inputs, tools and techniques and outputs are predefined in this process as shown in figure 2 and they should be aligned with the project integration management process of the PMBOK® Guide. It should result on strategies and methodologies that should be followed to manage the risks, roles and responsabilities of each team member, the funding needed to perform these activities and defined risk categories. The definition of risk probability and impacts, which is usually arranged in a scale of five levels is very important, in order to understand and classify the impact that the identified risks can make on the project. The scale should include the probability of occurence, the cost of each level of probability in case of any event and the description of the impact on the project.

This task should be done mainly by the project risk manager, who will plan the strategy to follow during the next processes of the guide. The goal is to have a clear plan of what to do in the complete risk management process.

Reporting formats and tracking documents should also be elaborated to simplify how risks will be communicated.
[[File:IdentifyRisks.PNG|thumb|left|300px|Figure 3: Identify Risks: Inputs, Tools & Techniques, and Outputs <ref name="IR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.409'' </ref>.]]

====Identify Risks====
[[File:TotalRisk.PNG|thumb|left|300px|Figure 4: Risk identification, inspired from: "Construction Risk Management" <ref name="RIC"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.116.'' </ref>.]]
This is the process where the team should identify probable risks that could have both positive and negative impact on the project and gather them according to the risk plan previously done. This process is performed throuhgout the project. The inputs, tools & techniques and outputs that the team should follow are shown in Figure 3.

In this process is very important to involve the project team so they can develop and maintain a sense of ownership and responsibility for identified individual project risks, the level of overall project risk, and associated risk response actions. In construction projects, the previous experience of each member of the team is specially important in risk identification, a brainstorming meeting could be very helpful to create a list of possible threats or opportunities. Identify Risks is an iterative process, since new individual project risks may emerge as the project progresses through its life cycle and the level of overall project risk will also change.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Even though, every project is different and specially construction projects have a high level of uncertainty, external resources could also be taken into account, such as academic studies, industry studies and records from the same organization. The target is to have a list of every possible risk or uncertainty factors that affect productivity, cost, time, quality and performance, so the project management could categorize them according to the risk plan. This list includes the principal risks of all major parties (contractors, designers and owners) involved in a construction project.

It is also important that if any risk happens, the team have a prepared document regarding lessons learned, so this could help in future projects and identifying potential threats and opportunities. It can also be updated with information on techniques that were effective in identifying risks to improve performance in later phases or other projects.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref>.

====Perform Qualitative Risk Analysis====
[[File:PerformQualitativeRiskAnalysis.PNG|thumb|right|300px|Figure 5: Perform Qualitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.419'' </ref>.]]
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. The key benefit of this process is that it focuses efforts on high-priority risks. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 5.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

As previously said, construction projects have a high level of uncertainty and the expertise of the team could be very useful to develop a hierarchical chart, categorizing the previously identified risks by the probability of occurence and its impact on project objectives. Risks
can be prioritized for further analysis and planning of risk responses based on their probability and impacts. Industry studies of similar projects and published material could also be used, even though it could be hard to compare external projects with an specific projects.

It is very important to include representatives from all areas influencing the project scope, schedule and cost: sponsor, development, engineering, procurement, construction, operations, legal, etc.

====Perform Quantitative Risk Analysis====
[[File:PerformQuantitativeRiskAnalysis.PNG|thumb|right|300px|Figure 6: Perform Quantitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQNRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.428'' </ref>.]]
Is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. The key benefit of this process is that it quantifies overall project risk exposure, and it can also provide additional quantitative risk information to support risk response planning. This process is not required for every project, but where it is used, it is performed throughout the project. The inputs and outputs of this process are depicted in Figure 6.

Perform Quantitative Risk Analysis is not required for all projects. Undertaking a robust analysis depends on the availability of high-quality data about individual project risks and other sources of uncertainty, as well as a sound underlying project baseline for scope, schedule, and cost. Quantitative risk analysis usually requires specialized risk software and expertise in the development and interpretation of risk models.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>. Moreover, this methods are not very reliable in construction projects because of the uncertainty levels of the risks and the difficulty of quantifying the economical impact of this events.

Even though it's hard to find exact numbers from this process, it is very important to consider a budget line to mitigate the identified risks. This budget line will be defined depending on the project risk level, the higher the risk, the higher budget for this purpose. Usually in construction projects, this is a percentage of the overall budget. A budget line for the risks concerning the delivery of the final product (building or project) should also be considered, this to mitigate the cost for hidden faults that could emerge.

====Plan Risk Responses====
[[File:PlanRiskResponses.PNG|thumb|right|300px|Figure 7: Plan Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="PRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.437'' </ref>.]]
Plan Risk Responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks. The key benefit of this process is that it identifies appropriate ways to address overall project risk and individual project risks. This process also allocates resources and inserts activities into project documents and the project management plan as needed. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 7.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The expertise of the team involved in the project is again highly important for this process, the target is to propose specific advice to minimize risks and their economic consequences. The process in construction projects are more complex than in most other domains because of the fact that uncertainty factors are expressed in natural language with jargon.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref> Again the complexity of this process in construction projects is due to the difficulty to quantify the consequences of any threat or benefit, but a contingency plan should be developed for major risks. The project manager and the team should know exactly what to do in case of any event, even though the economic impact remains unknown.

[[File:ImplementRiskResponses.PNG|thumb|left|300px|Figure 8: Implement Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="IRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.449'' </ref>.]]
====Implement Risk Responses====
This process consits in implementing agreed-upon risk response plans. The key benefit of this process is that it ensures that agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize individual project opportunities. The inputs, tools and techniques, and outputs of the process are shown in Figure 8.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

This is the process where the planning is implemented and decision-makers and project managers need to know what to do in case of a contingency, and the impact that the previously identified risk could have. For example, consider the case where a contractor delays due to bad weather or even neglignece, what actions should be taken? this actions should be aligned with the risk management plan and with the consequences previously identified, with the respective costs that this events may entail. The project manager needs to have very clear the cost of every contingency and the cost of the action that needs to be taken on the overall result of the project. For example, in the case of a delay in the program, the project manager needs to know the cost of each day of delay and what actions are allowed to be taken.

[[File:MonitorRisks.PNG|thumb|left|300px|Figure 9: Monitor Risks: Inputs, Tools & Techniques, and Outputs <ref name="MR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.453'' </ref>.]]
====Monitor Risk====
Monitor Risks is the process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project. The key benefit of this process is that it enables project decisions to be based on current information about overall project risk exposure and individual project risks. The inputs, tools and techniques, and outputs of the process are depicted in Figure 9.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The target is to use performance information during the project execution to determine if the followed strategy is the right one, if the risk management approach is still appropiate or if contingency reserves for cost or schedule require modification. It is essential for the project manager to know if the action taken after a risk has occured has been the right one and it has reduced cost and time over-runs, maybe the action taken was even worst than the problem and a rethinking on the strategy has to be done.

It is also important to identify new risks or new threats that could have a negative on the project, or potential opportunities that eventually could benefit the overall project results.

==Limitations==
The Project Management Institute (PMI) standards in the PMBOK® Guide, establishes a detailed guide to manage the risks in every project. Risk management is the most uncertain discipline in project management and this makes harder to follow the guide to the detail. Even though, risk management is highly important in every project, project managers in construction industry are more likely to follow empirical methods to mitigate this risks. The porpose of this guide is to give an easy to follow method to decision makers and project managers.

However, following a defined process is hard for construction projects because every project is very different and "unknown unkowns" are more in this projects than in projects from industries with defined processes. This makes harder to follow the guide and this is one of the reasons why construction project managers follow more empirical methods.

==Annotated Bibliography==

==References==
<references />

A Guide to Risk Management in Construction Projects

2019-03-02T21:28:06Z

S182573:

''Developed by Jokin Brito''

==Abstract==
Throughout history, construction has been one of the most revenue generating industries in the world and like many other businesses, is being transformed to meet the highest demands of the twenty-first century. Only in the United States, more than 11.1 million people were employed by the construction industry in 2018<ref name=''labor''> ''Bls.gov. (2019). Employed persons by detailed industry, sex, race, and Hispanic or Latino ethnicity. [online] Available at: https://www.bls.gov/cps/cpsaat18.htm [Accessed 17 Feb. 2019].'' </ref>, the industry spending topped $1.23 trillion in 2017<ref name=''spending''> ''Construction spending in the United States from 1996 to 2017, s. (2019). U.S. construction spending: public and private sectors 2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/226355/us-public-and-private-sector-construction/ [Accessed 17 Feb. 2019].'' </ref> and it accounted for between 7% of total U.S. GDP.<ref name=''GDP''> ''2018 FMI Overview, Featuring FMI’s Fourth Quarter 2017 Construction Outlook. (2018). [online] Available at: https://www.fminet.com/wp-content/uploads/2018/01/Overview2018_FINAL-1.pdf [Accessed 17 Feb. 2019].'' </ref> Furthermore, today's construction industry involves more dynamic and uncertain planning than ever before. Decision-makers and project managers require better knowledge and systematic tools, not only in project management, but also in risk management, a discipline that has a special complexity in construction projects.
This article has the goal of giving project managers and decision-makers within construction industry a more detailed guide to fulfill the needs of any project they manage, where they can identify and reduce cost and time over-runs and security risks, in order to optimize the chances of project success. The guide follows the Project Management Institute (PMI) standards in the PMBOK® Guide.

Four phases can be found in project management, where the executing order is really important: scope, schedule, cost and risk. With the first three constraints defined, risk is the last but not least constraint remaining, and it is certainly the one that have no exact answer and the most abstract one. This guide could help project managers to define risks within their projects but it is a discipline that is highly dependent on the manager criteria.

==Background==

====Structure of this article====
The article structure is aligned with the standards in the PMBOK® Guide, following the same processes. First the key and basic concepts of risk management are given, where the types of risks that a project can suffer are explained. Then, the processes are explained giving examples and customizing them to the needs of construction industry. The goal is to give a clear guidance through the process to project managers in construction projects.

Finally, the limitations of risk management in construction projects are explained.

====Construction Industry====
The size of construction projects has outgrowed the industry's capacity to manage complex problems under conditions of uncertainty. Risk management in large scale projects becomes a more important part of overall construction management. Each project is very different from each other and they can't be managed in a systematic way, such as in other industries, thus risk management has always been a more trial-and-error method, which requires symbolic reasoning. Empirical knowledge plays a major role for decision-makers and project managers in every stage under uncertainty and many problems in the industry are not very well defined so the risks that this problems entail are much more difficult to define.

In this article the focus is on giving a more systematic way of evaluating and defining risks on any construction project, helping project managers to base their decisions on the standars in the PMBOK® Guide and in the experience of previous projects.

[[File:PRMoverview.PNG|thumb|right|250px|Figure 1: Project Risk Management Overview <ref name="PRMO"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.396'' </ref>.]]
====Project Risk Management====
Project Risk management includes the processes of conducting risk management planning, identification, analysis,
response planning, response implementation, and monitoring risk on a project. The objectives of project risk management
are to increase the probability and/or impact of positive risks and to decrease the probability and/or impact of negative
risks, in order to optimize the chances of project success.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

The Project Risk Management processes according to the PMBOK® Guide are:

<ol>
<li> Plan Risk Management
<li> Identify Risks
<li> Perform Qualitative Risk Analysis
<li> Perform Quantitative Risk Analysis
<li> Plan Risk Responses
<li> Implement Risk Responses
<li> Monitor Risks
</ol>

The goal of this article is to provide guidance on each one of this processes, applied to any construcion project.

====Key Concepts====
All projects have a difficulty degree and a risky level that aim to deliver benefits and achieve certain goals. Even though this barely happens in the construction industry, organizations should always choose to make decisions in a controlled manner, balancing cost and benefit.
When risks of any project are not well managed, they have the potential to deviate the project from the original plan and fail to achieve the defined objectives.

In every project, risks exist at two levels:
*'''Individual project risk''' Uncertain event or condition that, if occurs, has an effect on one or more project objectives. When these risks are unmanaged, it may result in problems such as delay, cost overruns, performance shortfall or loss of reputation. Opportunities that are captured can lead to benefits in the same categories.
*'''Overall project risk''' Uncertainty of the project as a whole, representing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative. A good management of these risks, aims to keep project risk exposure within an acceptable range, maximizing the probability of achieving overall project objectives.

The aim of project risk management is to ensure that all types of risk are considered and that projects risks are understood in a wider context. Trends and ememerging practices for Project Risk Management include but are not limited to:

* '''Non-event risk:''' The two types of non-event risks are ''variability risk'', where uncertainty exists about some key characteristics of a planned event or activity or decision. And ''ambiguity risks'', where uncertainty exists about what might happen in the future.

* '''Project resilience:''' These emergent risks are better known as unknowable-unknowns and they can be tackled through developing project resilience. This requires each project to have an specific ''risk budget'' for known risks, ''flexible project'' processes that can cope while maintaining overall direction of the project, ''empowered project team'' that is trusted to get the job done with agreed-upon limits, ''frequent review'' of early warning signs and ''clear input from stakeholders'' to clarify areas where the project scope or strategy can be adjusted in response to emergent risks.

* '''Integrated risk management:''' Projects may be part of a program or portfolio, where risks also exist and should be owned and managed at the appropiate level. Some risks can be managed by the project team or manager but some risks may escalete to a higher level. A coordinated approach to enterprise-wide risk management ensures alignment and coherence in the way risk is managed across all levels.

Each project is unique and it is necessary to tailor the way Project Risk Management processes are applied. These considerations include project size, project complexity, project importance and development approach.

==Application==
====Plan Risk Management====
[[File:PlanRiskManagement.PNG|thumb|right|400px|Figure 2: Plan Risk Management: Inputs, Tools & Techniques, and Outputs <ref name="PRM"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.401'' </ref>.]]
This is the process where the risk management activities are defined, ensuring that the degree, type and visibility of risk management are propotionate to both risks and the importance of the project to the organization and other stakeholders. The process is defined once or at predefined points in the project. It may be necessary to revisit this process in a major phase change or if the project scope changes significantly.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Inputs, tools and techniques and outputs are predefined in this process as shown in figure 2 and they should be aligned with the project integration management process of the PMBOK® Guide. It should result on strategies and methodologies that should be followed to manage the risks, roles and responsabilities of each team member, the funding needed to perform these activities and defined risk categories. The definition of risk probability and impacts, which is usually arranged in a scale of five levels is very important, in order to understand and classify the impact that the identified risks can make on the project. The scale should include the probability of occurence, the cost of each level of probability in case of any event and the description of the impact on the project.

This task should be done mainly by the project risk manager, who will plan the strategy to follow during the next processes of the guide. The goal is to have a clear plan of what to do in the complete risk management process.

Reporting formats and tracking documents should also be elaborated to simplify how risks will be communicated.
[[File:IdentifyRisks.PNG|thumb|left|300px|Figure 3: Identify Risks: Inputs, Tools & Techniques, and Outputs <ref name="IR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.409'' </ref>.]]

====Identify Risks====
[[File:TotalRisk.PNG|thumb|left|300px|Figure 4: Risk identification, inspired from: "Construction Risk Management" <ref name="RIC"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.116.'' </ref>.]]
This is the process where the team should identify probable risks that could have both positive and negative impact on the project and gather them according to the risk plan previously done. This process is performed throuhgout the project. The inputs, tools & techniques and outputs that the team should follow are shown in Figure 3.

In this process is very important to involve the project team so they can develop and maintain a sense of ownership and responsibility for identified individual project risks, the level of overall project risk, and associated risk response actions. In construction projects, the previous experience of each member of the team is specially important in risk identification, a brainstorming meeting could be very helpful to create a list of possible threats or opportunities. Identify Risks is an iterative process, since new individual project risks may emerge as the project progresses through its life cycle and the level of overall project risk will also change.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Even though, every project is different and specially construction projects have a high level of uncertainty, external resources could also be taken into account, such as academic studies, industry studies and records from the same organization. The target is to have a list of every possible risk or uncertainty factors that affect productivity, cost, time, quality and performance, so the project management could categorize them according to the risk plan. This list includes the principal risks of all major parties (contractors, designers and owners) involved in a construction project.

It is also important that if any risk happens, the team have a prepared document regarding lessons learned, so this could help in future projects and identifying potential threats and opportunities. It can also be updated with information on techniques that were effective in identifying risks to improve performance in later phases or other projects.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref>.

====Perform Qualitative Risk Analysis====
[[File:PerformQualitativeRiskAnalysis.PNG|thumb|right|300px|Figure 5: Perform Qualitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.419'' </ref>.]]
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. The key benefit of this process is that it focuses efforts on high-priority risks. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 5.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

As previously said, construction projects have a high level of uncertainty and the expertise of the team could be very useful to develop a hierarchical chart, categorizing the previously identified risks by the probability of occurence and its impact on project objectives. Risks
can be prioritized for further analysis and planning of risk responses based on their probability and impacts. Industry studies of similar projects and published material could also be used, even though it could be hard to compare external projects with an specific projects.

It is very important to include representatives from all areas influencing the project scope, schedule and cost: sponsor, development, engineering, procurement, construction, operations, legal, etc.

====Perform Quantitative Risk Analysis====
[[File:PerformQuantitativeRiskAnalysis.PNG|thumb|right|300px|Figure 6: Perform Quantitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQNRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.428'' </ref>.]]
Is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. The key benefit of this process is that it quantifies overall project risk exposure, and it can also provide additional quantitative risk information to support risk response planning. This process is not required for every project, but where it is used, it is performed throughout the project. The inputs and outputs of this process are depicted in Figure 6.

Perform Quantitative Risk Analysis is not required for all projects. Undertaking a robust analysis depends on the availability of high-quality data about individual project risks and other sources of uncertainty, as well as a sound underlying project baseline for scope, schedule, and cost. Quantitative risk analysis usually requires specialized risk software and expertise in the development and interpretation of risk models.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>. Moreover, this methods are not very reliable in construction projects because of the uncertainty levels of the risks and the difficulty of quantifying the economical impact of this events.

Even though it's hard to find exact numbers from this process, it is very important to consider a budget line to mitigate the identified risks. This budget line will be defined depending on the project risk level, the higher the risk, the higher budget for this purpose. Usually in construction projects, this is a percentage of the overall budget. A budget for the risks concerning the delivery of the final product (building or project) should also be considered, this to mitigate the cost for hidden faults that could emerge.

====Plan Risk Responses====
[[File:PlanRiskResponses.PNG|thumb|right|300px|Figure 7: Plan Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="PRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.437'' </ref>.]]
Plan Risk Responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks. The key benefit of this process is that it identifies appropriate ways to address overall project risk and individual project risks. This process also allocates resources and inserts activities into project documents and the project management plan as needed. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 7.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The expertise of the team involved in the project is again highly important for this process, the target is to propose specific advice to minimize risks and their economic consequences. The process in construction projects are more complex than in most other domains because of the fact that uncertainty factors are expressed in natural language with jargon.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref> Again the complexity of this process in construction projects is due to the difficulty to quantify the consequences of any threat or benefit, but a contingency plan should be developed for major risks. The project manager and the team should know exactly what to do in case of any event, even though the economic impact remains unknown.

[[File:ImplementRiskResponses.PNG|thumb|left|300px|Figure 8: Implement Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="IRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.449'' </ref>.]]
====Implement Risk Responses====
This process consits in implementing agreed-upon risk response plans. The key benefit of this process is that it ensures that agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize individual project opportunities. The inputs, tools and techniques, and outputs of the process are shown in Figure 8.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

This is the process where the planning is implemented and decision-makers and project managers need to know what to do in case of a contingency, and the impact that the previously identified risk could have. For example, consider the case where a contractor delays due to bad weather or even neglignece, what actions should be taken? this actions should be aligned with the risk management plan and with the consequences previously identified, with the respective costs that this events may entail. The project manager needs to have very clear the cost of every contingency and the cost of the action that needs to be taken on the overall result of the project. For example, in the case of a delay in the program, the project manager needs to know the cost of each day of delay and what actions are allowed to be taken.

[[File:MonitorRisks.PNG|thumb|left|300px|Figure 9: Monitor Risks: Inputs, Tools & Techniques, and Outputs <ref name="MR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.453'' </ref>.]]
====Monitor Risk====
Monitor Risks is the process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project. The key benefit of this process is that it enables project decisions to be based on current information about overall project risk exposure and individual project risks. The inputs, tools and techniques, and outputs of the process are depicted in Figure 9.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The target is to use performance information during the project execution to determine if the followed strategy is the right one, if the risk management approach is still appropiate or if contingency reserves for cost or schedule require modification. It is essential for the project manager to know if the action taken after a risk has occured has been the right one and it has reduced cost and time over-runs, maybe the action taken was even worst than the problem and a rethinking on the strategy has to be done.

It is also important to identify new risks or new threats that could have a negative on the project, or potential opportunities that eventually could benefit the overall project results.

==Limitations==

==Annotated Bibliography==

==References==
<references />

A Guide to Risk Management in Construction Projects

2019-03-01T22:05:15Z

S182573:

''Developed by Jokin Brito''

==Abstract==
Throughout history, construction has been one of the most revenue generating industries in the world and like many other businesses, is being transformed to meet the highest demands of the twenty-first century. Only in the United States, more than 11.1 million people were employed by the construction industry in 2018<ref name=''labor''> ''Bls.gov. (2019). Employed persons by detailed industry, sex, race, and Hispanic or Latino ethnicity. [online] Available at: https://www.bls.gov/cps/cpsaat18.htm [Accessed 17 Feb. 2019].'' </ref>, the industry spending topped $1.23 trillion in 2017<ref name=''spending''> ''Construction spending in the United States from 1996 to 2017, s. (2019). U.S. construction spending: public and private sectors 2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/226355/us-public-and-private-sector-construction/ [Accessed 17 Feb. 2019].'' </ref> and it accounted for between 7% of total U.S. GDP.<ref name=''GDP''> ''2018 FMI Overview, Featuring FMI’s Fourth Quarter 2017 Construction Outlook. (2018). [online] Available at: https://www.fminet.com/wp-content/uploads/2018/01/Overview2018_FINAL-1.pdf [Accessed 17 Feb. 2019].'' </ref> Furthermore, today's construction industry involves more dynamic and uncertain planning than ever before. Decision-makers and project managers require better knowledge and systematic tools, not only in project management, but also in risk management, a discipline that has a special complexity in construction projects.
This article has the goal of giving project managers and decision-makers within construction industry a more detailed guide to fulfill the needs of any project they manage, where they can identify and reduce cost and time over-runs and security risks, in order to optimize the chances of project success. The guide follows the Project Management Institute (PMI) standards in the PMBOK® Guide.

==Background==

====Structure of this article====
The article structure is aligned with the standards in the PMBOK® Guide, following the same processes. First the key and basic concepts of risk management are given, where the types of risks that a project can suffer are explained. Then, the processes are explained giving examples and customizing them to the needs of construction industry. The goal is to give a clear guidance through the process to project managers in construction projects.

Finally, the limitations of risk management in construction projects are explained.

====Construction Industry====
The size of construction projects has outgrowed the industry's capacity to manage complex problems under conditions of uncertainty. Risk management in large scale projects becomes a more important part of overall construction management. Each project is very different from each other and they can't be managed in a systematic way, such as in other industries, thus risk management has always been a more trial-and-error method, which requires symbolic reasoning. Empirical knowledge plays a major role for decision-makers and project managers in every stage under uncertainty and many problems in the industry are not very well defined so the risks that this problems entail are much more difficult to define.

In this article the focus is on giving a more systematic way of evaluating and defining risks on any construction project, helping project managers to base their decisions on the standars in the PMBOK® Guide and in the experience of previous projects.

[[File:PRMoverview.PNG|thumb|right|250px|Figure 1: Project Risk Management Overview <ref name="PRMO"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.396'' </ref>.]]
====Project Risk Management====
Project Risk management includes the processes of conducting risk management planning, identification, analysis,
response planning, response implementation, and monitoring risk on a project. The objectives of project risk management
are to increase the probability and/or impact of positive risks and to decrease the probability and/or impact of negative
risks, in order to optimize the chances of project success.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

The Project Risk Management processes according to the PMBOK® Guide are:

<ol>
<li> Plan Risk Management
<li> Identify Risks
<li> Perform Qualitative Risk Analysis
<li> Perform Quantitative Risk Analysis
<li> Plan Risk Responses
<li> Implement Risk Responses
<li> Monitor Risks
</ol>

The goal of this article is to provide guidance on each one of this processes, applied to any construcion project.

====Key Concepts====
All projects have a difficulty degree and a risky level that aim to deliver benefits and achieve certain goals. Even though this barely happens in the construction industry, organizations should always choose to make decisions in a controlled manner, balancing cost and benefit.
When risks of any project are not well managed, they have the potential to deviate the project from the original plan and fail to achieve the defined objectives.

In every project, risks exist at two levels:
*'''Individual project risk''' Uncertain event or condition that, if occurs, has an effect on one or more project objectives. When these risks are unmanaged, it may result in problems such as delay, cost overruns, performance shortfall or loss of reputation. Opportunities that are captured can lead to benefits in the same categories.
*'''Overall project risk''' Uncertainty of the project as a whole, representing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative. A good management of these risks, aims to keep project risk exposure within an acceptable range, maximizing the probability of achieving overall project objectives.

The aim of project risk management is to ensure that all types of risk are considered and that projects risks are understood in a wider context. Trends and ememerging practices for Project Risk Management include but are not limited to:

* '''Non-event risk:''' The two types of non-event risks are ''variability risk'', where uncertainty exists about some key characteristics of a planned event or activity or decision. And ''ambiguity risks'', where uncertainty exists about what might happen in the future.

* '''Project resilience:''' These emergent risks are better known as unknowable-unknowns and they can be tackled through developing project resilience. This requires each project to have an specific ''risk budget'' for known risks, ''flexible project'' processes that can cope while maintaining overall direction of the project, ''empowered project team'' that is trusted to get the job done with agreed-upon limits, ''frequent review'' of early warning signs and ''clear input from stakeholders'' to clarify areas where the project scope or strategy can be adjusted in response to emergent risks.

* '''Integrated risk management:''' Projects may be part of a program or portfolio, where risks also exist and should be owned and managed at the appropiate level. Some risks can be managed by the project team or manager but some risks may escalete to a higher level. A coordinated approach to enterprise-wide risk management ensures alignment and coherence in the way risk is managed across all levels.

Each project is unique and it is necessary to tailor the way Project Risk Management processes are applied. These considerations include project size, project complexity, project importance and development approach.

==Application==
====Plan Risk Management====
[[File:PlanRiskManagement.PNG|thumb|right|400px|Figure 2: Plan Risk Management: Inputs, Tools & Techniques, and Outputs <ref name="PRM"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.401'' </ref>.]]
This is the process where the risk management activities are defined, ensuring that the degree, type and visibility of risk management are propotionate to both risks and the importance of the project to the organization and other stakeholders. The process is defined once or at predefined points in the project. It may be necessary to revisit this process in a major phase change or if the project scope changes significantly.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Inputs, tools and techniques and outputs are predefined in this process as shown in figure 2 and they should be aligned with the project integration management process of the PMBOK® Guide. It should result on strategies and methodologies that should be followed to manage the risks, roles and responsabilities of each team member, the funding needed to perform these activities and defined risk categories. The definition of risk probability and impacts, which is usually arranged in a scale of five levels is very important, in order to understand and classify the impact that the identified risks can make on the project. The scale should include the probability of occurence, the cost of each level of probability in case of any event and the description of the impact on the project.

Reporting formats and tracking documents should also be elaborated to simplify how risks will be communicated.
[[File:IdentifyRisks.PNG|thumb|left|300px|Figure 3: Identify Risks: Inputs, Tools & Techniques, and Outputs <ref name="IR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.409'' </ref>.]]

====Identify Risks====
[[File:TotalRisk.PNG|thumb|left|300px|Figure 4: Risk identification, inspired from: "Construction Risk Management" <ref name="RIC"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.116.'' </ref>.]]
This is the process where the team should identify probable risks that could have both positive and negative impact on the project and gather them according to the risk plan previously done. This process is performed throuhgout the project. The inputs, tools & techniques and outputs that the team should follow are shown in Figure 3.

In this process is very important to involve the project team so they can develop and maintain a sense of ownership and responsibility for identified individual project risks, the level of overall project risk, and associated risk response actions. In construction projects, the previous experience of each member of the team is specially important in risk identification, a brainstorming meeting could be very helpful to create a list of possible threats or opportunities. Identify Risks is an iterative process, since new individual project risks may emerge as the project progresses through its life cycle and the level of overall project risk will also change.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Even though, every project is different and specially construction projects have a high level of uncertainty, external resources could also be taken into account, such as academic studies, industry studies and records from the same organization. The target is to have a list of every possible risk or uncertainty factors that affect productivity, cost, time, quality and performance, so the project management could categorize them according to the risk plan. This list includes the principal risks of all major parties (contractors, designers and owners) involved in a construction project.

It is also important that if any risk happens, the team have a prepared document regarding lessons learned, so this could help in future projects and identifying potential threats and opportunities. It can also be updated with information on techniques that were effective in identifying risks to improve performance in later phases or other projects.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref>.

====Perform Qualitative Risk Analysis====
[[File:PerformQualitativeRiskAnalysis.PNG|thumb|right|300px|Figure 5: Perform Qualitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.419'' </ref>.]]
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. The key benefit of this process is that it focuses efforts on high-priority risks. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 5.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

As previously said, construction projects have a high level of uncertainty and the expertise of the team could be very useful to develop a hierarchical chart, categorizing the previously identified risks by the probability of occurence and its impact on project objectives. Risks
can be prioritized for further analysis and planning of risk responses based on their probability and impacts. Industry studies of similar projects and published material could also be used, even though it could be hard to compare external projects with an specific projects.

====Perform Quantitative Risk Analysis====
[[File:PerformQuantitativeRiskAnalysis.PNG|thumb|right|300px|Figure 6: Perform Quantitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQNRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.428'' </ref>.]]
Is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. The key benefit of this process is that it quantifies overall project risk exposure, and it can also provide additional quantitative risk information to support risk response planning. This process is not required for every project, but where it is used, it is performed throughout the project. The inputs and outputs of this process are depicted in Figure 6.

Perform Quantitative Risk Analysis is not required for all projects. Undertaking a robust analysis depends on the availability of high-quality data about individual project risks and other sources of uncertainty, as well as a sound underlying project baseline for scope, schedule, and cost. Quantitative risk analysis usually requires specialized risk software and expertise in the development and interpretation of risk models.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>. Moreover, this methods are not very reliable in construction projects because of the uncertainty levels of the risks and the difficulty of quantifying the economical impact of this events.

====Plan Risk Responses====
[[File:PlanRiskResponses.PNG|thumb|right|300px|Figure 7: Plan Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="PRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.437'' </ref>.]]
Plan Risk Responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks. The key benefit of this process is that it identifies appropriate ways to address overall project risk and individual project risks. This process also allocates resources and inserts activities into project documents and the project management plan as needed. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 7.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The expertise of the team involved in the project is again highly important for this process, the target is to propose specific advice to minimize risks and their economic consequences. The process in construction projects are more complex than in most other domains because of the fact that uncertainty factors are expressed in natural language with jargon.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref> Again the complexity of this process in construction projects is due to the difficulty to quantify the consequences of any threat or benefit, but a contingency plan should be developed for major risks. The project manager and the team should know exactly what to do in case of any event, even though the economic impact remains unknown.

[[File:ImplementRiskResponses.PNG|thumb|left|300px|Figure 8: Implement Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="IRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.449'' </ref>.]]
====Implement Risk Responses====
This process consits in implementing agreed-upon risk response plans. The key benefit of this process is that it ensures that agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize individual project opportunities. The inputs, tools and techniques, and outputs of the process are shown in Figure 8.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

This is the process where the planning is implemented and decision-makers and project managers need to know what to do in case of a contingency, and the impact that the previously identified risk could have. For example, consider the case where a contractor delays due to bad weather or even neglignece, what actions should be taken? this actions should be aligned with the risk management plan and with the consequences previously identified, with the respective costs that this events may entail. The project manager needs to have very clear the cost of every contingency and the cost of the action that needs to be taken on the overall result of the project. For example, in the case of a delay in the program, the project manager needs to know the cost of each day of delay and what actions are allowed to be taken.

[[File:MonitorRisks.PNG|thumb|left|300px|Figure 9: Monitor Risks: Inputs, Tools & Techniques, and Outputs <ref name="MR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.453'' </ref>.]]
====Monitor Risk====
Monitor Risks is the process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project. The key benefit of this process is that it enables project decisions to be based on current information about overall project risk exposure and individual project risks. The inputs, tools and techniques, and outputs of the process are depicted in Figure 9.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The target is to use performance information during the project execution to determine if the followed strategy is the right one, if the risk management approach is still appropiate or if contingency reserves for cost or schedule require modification. It is essential for the project manager to know if the action taken after a risk has occured has been the right one and it has reduced cost and time over-runs, maybe the action taken was even worst than the problem and a rethinking on the strategy has to be done.

It is also important to identify new risks or new threats that could have a negative on the project, or potential opportunities that eventually could benefit the overall project results.

==Limitations==

==Annotated Bibliography==

==References==
<references />

Talk:The Project Charter

2019-02-25T21:06:34Z

S182573:

==Feedback 1 | Reviewer name: Johan Hilsøe==
===Question 1 · TEXT===
'''Quality of the summary:'''

Does the summary make the key focus, insights and/or contribution of the article clear?

What would you suggest to improve?

===Answer 1===
The summary provides a good overview of what to expect of the article. Especially the last section is a nice overview of the article. Maybe consider describing what a project charter is in a single sentence or two, before explaining the limitations, pros and cons.

===Question 2 · TEXT===
'''Structure and logic of the article:'''

Is the argument clear?

Is there a logical flow to the article?

Does one part build upon the other?

Is the article consistent in its argument and free of contradictions?

What would you suggest to improve?

===Answer 2===
It makes sense to explain why one would make a project charter and then explain exactly what it contains. The example links it all together, but the picture could be larger. Also, I think that it shouldn't contain confidential information blanked out - rather make a new one with made up contents.

===Question 3 · TEXT===
'''Grammar and style:'''

Is the writing free of grammatical and spelling errors?

Is the language precise without unnecessary fill words?

What would you suggest to improve?

===Answer 3===
Most of the article is in perfect english. The abstract needs a fine-tuning though :).

===Question 4 · TEXT===
'''Figures and tables:'''

Are figures and tables clear?

Do they summarize the key points of the article in a meaningful way?

What would you suggest to improve?

===Answer 4===
The text links to the pictures well. No comments.

===Question 5 · TEXT===
'''Interest and relevance:'''

Is the article of high practical and / or academic relevance?

Is it made clear in the article why / how it is relevant?

What would you suggest to improve?

===Answer 5===
Very relevant, especially linked to the process of a project.

===Question 6 · TEXT===
'''Depth of treatment:'''

Is the article interesting for a practitioner or academic to read?

Does it make a significant contribution beyond a cursory web search?

What would you suggest to improve?

===Answer 6===
The article provides rather good information on the project charter, but the subject can easily be Googled. If possible, dig deeper in to the pros and cons and how to use it. Use the example :).

===Question 7 · TEXT===
'''Annotated bibliography:'''

Does the article properly cite and acknowledge previous work?

Does it briefly summarize the key references at the end of the article?

Is it based on empirical data instead of opinion?

What would you suggest to improve?

===Answer 7===
Perfect, provides why the references are used. Maybe one more reference would be good.

==Feedback 2 | Reviewer name: ''Jokin Brito''==
===Question 1 · TEXT===
'''Quality of the summary:'''

Does the summary make the key focus, insights and/or contribution of the article clear?

What would you suggest to improve?

===Answer 1===
''The summary gives a good idea about the topic, it talks about how this can help a project to be successful and helps the reader to stay interested.''

===Question 2 · TEXT===
'''Structure and logic of the article:'''

Is the argument clear?

Is there a logical flow to the article?

Does one part build upon the other?

Is the article consistent in its argument and free of contradictions?

What would you suggest to improve?

===Answer 2===
''The structure makes the article a little hard to read, I would give more examples of how the project charter can be made instead of writing all the tools as bullet points. Even though it helps a project manager to understand the importance of making a project charter.''

===Question 3 · TEXT===
'''Grammar and style:'''

Is the writing free of grammatical and spelling errors?

Is the language precise without unnecessary fill words?

What would you suggest to improve?

===Answer 3===
''The grammar is good, just some minor mistakes in the abstract''

===Question 4 · TEXT===
'''Figures and tables:'''

Are figures and tables clear?

Do they summarize the key points of the article in a meaningful way?

What would you suggest to improve?

===Answer 4===
''The figures are good but I would try to create new figures instead of censoring the existing ones, also I would add figure numbers.''

===Question 5 · TEXT===
'''Interest and relevance:'''

Is the article of high practical and / or academic relevance?

Is it made clear in the article why / how it is relevant?

What would you suggest to improve?

===Answer 5===
''The article is interesting and very relevant to project management, it explains well why this tool is important in any project''

===Question 6 · TEXT===
'''Depth of treatment:'''

Is the article interesting for a practitioner or academic to read?

Does it make a significant contribution beyond a cursory web search?

What would you suggest to improve?

===Answer 6===
''I would add some empirical knowledge or real life examples. The pros and cones are good.''

===Question 7 · TEXT===
'''Annotated bibliography:'''

Does the article properly cite and acknowledge previous work?

Does it briefly summarize the key references at the end of the article?

Is it based on empirical data instead of opinion?

What would you suggest to improve?

===Answer 7===
''This part is vey well done.''

Talk:Unidentified Risks

2019-02-25T19:53:21Z

S182573:

==Feedback on Abstract:==

{|
|'''Text clarity & language'''|| The text is okay, however the beginning needs to be more coherent. Consider using brackets less often. I would not include the agenda in the abstract as it's automatically generated.
|-
|'''Description of the tool/theory/concept'''|| Good.
|-
|'''Article purpose explanation'''|| Well elaborated.
|-
|'''Relevance to curriculum '''|| Relevant
|-
|'''References'''|| Complete adding your references.
|}

==Feedback 1 | Reviewer name: ''Johannes Oschinsky''==
===Question 1 · TEXT===
Review of the article: A Guide to Risk Management in Construction Projects

'''Quality of the summary:'''

Does the summary make the key focus, insights and/or contribution of the article clear?

What would you suggest to improve?

===Answer 1===
The abstract shows a good view on what the article is going to be about. For me it is missing the relation towards project management. A suggestion is to mention its importance in one sentence.

===Question 2 · TEXT===
'''Structure and logic of the article:'''

Is the argument clear?

Is there a logical flow to the article?

Does one part build upon the other?

Is the article consistent in its argument and free of contradictions?

What would you suggest to improve?

===Answer 2===
There is a logical flow in the article which can be followed. The parts are well structured and build upon. Good way of first explaining what uncertainty is and afterward what kind of uncertainty exists. Again, for me it is missing why it relates to project management.

===Question 3 · TEXT===
'''Grammar and style:'''

Is the writing free of grammatical and spelling errors?

Is the language precise without unnecessary fill words?

What would you suggest to improve?

===Answer 3===
It is well written and easy to understand. Nothing to add.

===Question 4 · TEXT===
'''Figures and tables:'''

Are figures and tables clear?

Do they summarize the key points of the article in a meaningful way?

What would you suggest to improve?

===Answer 4===
The figures are good to understand and relates to the writing. No need off improvement.

===Question 5 · TEXT===
'''Interest and relevance:'''

Is the article of high practical and / or academic relevance?

Is it made clear in the article why / how it is relevant?

What would you suggest to improve?

===Answer 5===
Using the quotes from different people underlines the relevance of the topic. Unfortunately, the topic about the tools are not written yet, but you seem to include also the practical way of how to identify uncertainty.
===Question 6 · TEXT===
'''Depth of treatment:'''

Is the article interesting for a practitioner or academic to read?

Does it make a significant contribution beyond a cursory web search?

What would you suggest to improve?

===Answer 6===
It really helps to understand what uncertainty is and which kind of uncertainty exist and that in just one article. I think it is a good page to get clarity about that topic. It tells exactly what you have to know about the topic and does not turn too much into detail.

===Question 7 · TEXT===
'''Annotated bibliography:'''

Does the article properly cite and acknowledge previous work?

Does it briefly summarize the key references at the end of the article?

Is it based on empirical data instead of opinion?

What would you suggest to improve?

===Answer 7===
Explanation about the sources are not given yet. I would suggest taking the most used sources and write why you think the sources are valid sources.

==Feedback 2 | Reviewer name: ''Jokin Brito''==
===Question 1 · TEXT===
'''Quality of the summary:'''

Does the summary make the key focus, insights and/or contribution of the article clear?

What would you suggest to improve?

===Answer 1===
''The summary is good, it explains what the article is about and it gives a clear idea of the concept you are going to write. I would write a better explanation on the connection with project management and the importance of the unknown unknowns''

===Question 2 · TEXT===
'''Structure and logic of the article:'''

Is the argument clear?

Is there a logical flow to the article?

Does one part build upon the other?

Is the article consistent in its argument and free of contradictions?

What would you suggest to improve?

===Answer 2===
''The argument is clear, although I would try to be more focused in the main topic than with explaining the other types of risks with so many detail. I would also give some examples of the unknown unkowns and how to tackle them.''

===Question 3 · TEXT===
'''Grammar and style:'''

Is the writing free of grammatical and spelling errors?

Is the language precise without unnecessary fill words?

What would you suggest to improve?

===Answer 3===
''The grammar is good and the text is well understood. No unnecessary language''

===Question 4 · TEXT===
'''Figures and tables:'''

Are figures and tables clear?

Do they summarize the key points of the article in a meaningful way?

What would you suggest to improve?

===Answer 4===
''The figures are clear and relevant to the text''

===Question 5 · TEXT===
'''Interest and relevance:'''

Is the article of high practical and / or academic relevance?

Is it made clear in the article why / how it is relevant?

What would you suggest to improve?

===Answer 5===
''I think the topic is very relevant for project managers but I would be very careful explaining the tools and how to tackle this type of risks, it could make the difference for a very good and useful article''

===Question 6 · TEXT===
'''Depth of treatment:'''

Is the article interesting for a practitioner or academic to read?

Does it make a significant contribution beyond a cursory web search?

What would you suggest to improve?

===Answer 6===
''This topic is interesting for every project manager but I would explain in better detail how to define this risks and how can we solve them or if there is no way of doing it. In the first paragraph of the abstract you mention some studies that have found a way to have mor certainty about this risks, it would be interesting to have details of this studies.''

===Question 7 · TEXT===
'''Annotated bibliography:'''

Does the article properly cite and acknowledge previous work?

Does it briefly summarize the key references at the end of the article?

Is it based on empirical data instead of opinion?

What would you suggest to improve?

===Answer 7===
''The bibliography is properly cited.''

Talk:Unidentified Risks

2019-02-25T19:52:31Z

S182573:

Talk:Unidentified Risks

2019-02-25T19:51:00Z

S182573:

==Feedback on Abstract:==

{|
|'''Text clarity & language'''|| The text is okay, however the beginning needs to be more coherent. Consider using brackets less often. I would not include the agenda in the abstract as it's automatically generated.
|-
|'''Description of the tool/theory/concept'''|| Good.
|-
|'''Article purpose explanation'''|| Well elaborated.
|-
|'''Relevance to curriculum '''|| Relevant
|-
|'''References'''|| Complete adding your references.
|}

==Feedback 1 | Reviewer name: ''Johannes Oschinsky''==
===Question 1 · TEXT===
Review of the article: A Guide to Risk Management in Construction Projects

'''Quality of the summary:'''

Does the summary make the key focus, insights and/or contribution of the article clear?

What would you suggest to improve?

===Answer 1===
The abstract shows a good view on what the article is going to be about. For me it is missing the relation towards project management. A suggestion is to mention its importance in one sentence.

===Question 2 · TEXT===
'''Structure and logic of the article:'''

Is the argument clear?

Is there a logical flow to the article?

Does one part build upon the other?

Is the article consistent in its argument and free of contradictions?

What would you suggest to improve?

===Answer 2===
There is a logical flow in the article which can be followed. The parts are well structured and build upon. Good way of first explaining what uncertainty is and afterward what kind of uncertainty exists. Again, for me it is missing why it relates to project management.

===Question 3 · TEXT===
'''Grammar and style:'''

Is the writing free of grammatical and spelling errors?

Is the language precise without unnecessary fill words?

What would you suggest to improve?

===Answer 3===
It is well written and easy to understand. Nothing to add.

===Question 4 · TEXT===
'''Figures and tables:'''

Are figures and tables clear?

Do they summarize the key points of the article in a meaningful way?

What would you suggest to improve?

===Answer 4===
The figures are good to understand and relates to the writing. No need off improvement.

===Question 5 · TEXT===
'''Interest and relevance:'''

Is the article of high practical and / or academic relevance?

Is it made clear in the article why / how it is relevant?

What would you suggest to improve?

===Answer 5===
Using the quotes from different people underlines the relevance of the topic. Unfortunately, the topic about the tools are not written yet, but you seem to include also the practical way of how to identify uncertainty.
===Question 6 · TEXT===
'''Depth of treatment:'''

Is the article interesting for a practitioner or academic to read?

Does it make a significant contribution beyond a cursory web search?

What would you suggest to improve?

===Answer 6===
It really helps to understand what uncertainty is and which kind of uncertainty exist and that in just one article. I think it is a good page to get clarity about that topic. It tells exactly what you have to know about the topic and does not turn too much into detail.

===Question 7 · TEXT===
'''Annotated bibliography:'''

Does the article properly cite and acknowledge previous work?

Does it briefly summarize the key references at the end of the article?

Is it based on empirical data instead of opinion?

What would you suggest to improve?

===Answer 7===
Explanation about the sources are not given yet. I would suggest taking the most used sources and write why you think the sources are valid sources.

==Feedback 2 | Reviewer name: ''Jokin Brito''==
===Question 1 · TEXT===
'''Quality of the summary:'''

Does the summary make the key focus, insights and/or contribution of the article clear?

What would you suggest to improve?

===Answer 1===
''The summary is good, it explains what the article is about and it gives a clear idea of the concept you are going to write. I would write a better explanation on the connection with project management and the importance of the unknown unknowns''

===Question 2 · TEXT===
'''Structure and logic of the article:'''

Is the argument clear?

Is there a logical flow to the article?

Does one part build upon the other?

Is the article consistent in its argument and free of contradictions?

What would you suggest to improve?

===Answer 2===
''The argument is clear, although I would try to be more focused in the main topic than with explaining the other types of risks with so many detail. I would also give some examples of the unknown unkowns and how to tackle them.''

===Question 3 · TEXT===
'''Grammar and style:'''

Is the writing free of grammatical and spelling errors?

Is the language precise without unnecessary fill words?

What would you suggest to improve?

===Answer 3===
''The grammar is good and the text is well understood. No unnecessary language''

===Question 4 · TEXT===
'''Figures and tables:'''

Are figures and tables clear?

Do they summarize the key points of the article in a meaningful way?

What would you suggest to improve?

===Answer 4===
''The figures are clear and relevant to the text''

===Question 5 · TEXT===
'''Interest and relevance:'''

Is the article of high practical and / or academic relevance?

Is it made clear in the article why / how it is relevant?

What would you suggest to improve?

===Answer 5===
''I think the topic is very relevant for project managers but I would be very careful explaining the tools and how to tackle this type of risks, it could make the difference for a very good and useful article''

===Question 6 · TEXT===
'''Depth of treatment:'''

Is the article interesting for a practitioner or academic to read?

Does it make a significant contribution beyond a cursory web search?

What would you suggest to improve?

===Answer 6===
''This topic is interesting for every project manager but I would explain in better detail how to define this risks and how can we solve them or if there is no way of doing it.''

===Question 7 · TEXT===
'''Annotated bibliography:'''

Does the article properly cite and acknowledge previous work?

Does it briefly summarize the key references at the end of the article?

Is it based on empirical data instead of opinion?

What would you suggest to improve?

===Answer 7===
''Answer here''

A Guide to Risk Management in Construction Projects

2019-02-22T17:24:33Z

S182573:

''Developed by Jokin Brito''

==Abstract==
Throughout history, construction has been one of the most revenue generating industries in the world and like many other businesses, is being transformed to meet the highest demands of the twenty-first century. Only in the United States, more than 11.1 million people were employed by the construction industry in 2018<ref name=''labor''> ''Bls.gov. (2019). Employed persons by detailed industry, sex, race, and Hispanic or Latino ethnicity. [online] Available at: https://www.bls.gov/cps/cpsaat18.htm [Accessed 17 Feb. 2019].'' </ref>, the industry spending topped $1.23 trillion in 2017<ref name=''spending''> ''Construction spending in the United States from 1996 to 2017, s. (2019). U.S. construction spending: public and private sectors 2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/226355/us-public-and-private-sector-construction/ [Accessed 17 Feb. 2019].'' </ref> and it accounted for between 7% of total U.S. GDP.<ref name=''GDP''> ''2018 FMI Overview, Featuring FMI’s Fourth Quarter 2017 Construction Outlook. (2018). [online] Available at: https://www.fminet.com/wp-content/uploads/2018/01/Overview2018_FINAL-1.pdf [Accessed 17 Feb. 2019].'' </ref> Furthermore, today's construction industry involves more dynamic and uncertain planning than ever before. Decision-makers and project managers require better knowledge and systematic tools, not only in project management, but also in risk management, a discipline that has a special complexity in construction projects.
This article has the goal of giving project managers and decision-makers within construction industry a more detailed guide to fulfill the needs of any project they manage, where they can identify and reduce cost and time over-runs and security risks, in order to optimize the chances of project success. The guide follows the Project Management Institute (PMI) standards in the PMBOK® Guide.

==Background==

====Structure of this article====
The article structure is aligned with the standards in the PMBOK® Guide, following the same processes. First the key and basic concepts of risk management are given, where the types of risks that a project can suffer are explained. Then, the processes are explained giving examples and customizing them to the needs of construction industry.

Finally, the limitations of risk management in construction projects are explained.

====Construction Industry====
The size of construction projects has outgrowed the industry's capacity to manage complex problems under conditions of uncertainty. Risk management in large scale projects becomes a more important part of overall construction management. Each project is very different from each other and they can't be managed in a systematic way, such as in other industries, thus risk management has always been a more trial-and-error method, which requires symbolic reasoning. Empirical knowledge plays a major role for decision-makers and project managers in every stage under uncertainty and many problems in the industry are not very well defined so the risks that this problems entail are much more difficult to define.

In this article the focus is on giving a more systematic way of evaluating and defining risks on any construction project, helping project managers to base their decisions on the standars in the PMBOK® Guide and in the experience of previous projects.

[[File:PRMoverview.PNG|thumb|right|250px|Figure 1: Project Risk Management Overview <ref name="PRMO"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.396'' </ref>.]]
====Project Risk Management====
Project Risk management includes the processes of conducting risk management planning, identification, analysis,
response planning, response implementation, and monitoring risk on a project. The objectives of project risk management
are to increase the probability and/or impact of positive risks and to decrease the probability and/or impact of negative
risks, in order to optimize the chances of project success.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

The Project Risk Management processes according to the PMBOK® Guide are:

<ol>
<li> Plan Risk Management
<li> Identify Risks
<li> Perform Qualitative Risk Analysis
<li> Perform Quantitative Risk Analysis
<li> Plan Risk Responses
<li> Implement Risk Responses
<li> Monitor Risks
</ol>

The goal of this article is to provide guidance on each one of this processes, applied to any construcion project.

====Key Concepts====
All projects have a difficulty degree and a risky level that aim to deliver benefits and achieve certain goals. Even though this barely happens in the construction industry, organizations should always choose to make decisions in a controlled manner, balancing cost and benefit.
When risks of any project are not well managed, they have the potential to deviate the project from the original plan and fail to achieve the defined objectives.

In every project, risks exist at two levels:
*'''Individual project risk''' Uncertain event or condition that, if occurs, has an effect on one or more project objectives. When these risks are unmanaged, it may result in problems such as delay, cost overruns, performance shortfall or loss of reputation. Opportunities that are captured can lead to benefits in the same categories.
*'''Overall project risk''' Uncertainty of the project as a whole, representing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative. A good management of these risks, aims to keep project risk exposure within an acceptable range, maximizing the probability of achieving overall project objectives.

The aim of project risk management is to ensure that all types of risk are considered and that projects risks are understood in a wider context. Trends and ememerging practices for Project Risk Management include but are not limited to:

* '''Non-event risk:''' The two types of non-event risks are ''variability risk'', where uncertainty exists about some key characteristics of a planned event or activity or decision. And ''ambiguity risks'', where uncertainty exists about what might happen in the future.

* '''Project resilience:''' These emergent risks are better known as unknowable-unknowns and they can be tackled through developing project resilience. This requires each project to have an specific ''risk budget'' for known risks, ''flexible project'' processes that can cope while maintaining overall direction of the project, ''empowered project team'' that is trusted to get the job done with agreed-upon limits, ''frequent review'' of early warning signs and ''clear input from stakeholders'' to clarify areas where the project scope or strategy can be adjusted in response to emergent risks.

* '''Integrated risk management:''' Projects may be part of a program or portfolio, where risks also exist and should be owned and managed at the appropiate level. Some risks can be managed by the project team or manager but some risks may escalete to a higher level. A coordinated approach to enterprise-wide risk management ensures alignment and coherence in the way risk is managed across all levels.

Each project is unique and it is necessary to tailor the way Project Risk Management processes are applied. These considerations include project size, project complexity, project importance and development approach.

==Application==
====Plan Risk Management====
[[File:PlanRiskManagement.PNG|thumb|right|400px|Figure 2: Plan Risk Management: Inputs, Tools & Techniques, and Outputs <ref name="PRM"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.401'' </ref>.]]
This is the process where the risk management activities are defined, ensuring that the degree, type and visibility of risk management are propotionate to both risks and the importance of the project to the organization and other stakeholders. The process is defined once or at predefined points in the project. It may be necessary to revisit this process in a major phase change or if the project scope changes significantly.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Inputs, tools and techniques and outputs are predefined in this process as shown in figure 2 and they should be aligned with the project integration management process of the PMBOK® Guide. It should result on strategies and methodologies that should be followed to manage the risks, roles and responsabilities of each team member, the funding needed to perform these activities and defined risk categories. The definition of risk probability and impacts, which is usually arranged in a scale of five levels is very important, in order to understand and classify the impact that the identified risks can make on the project. The scale should include the probability of occurence, the cost of each level of probability in case of any event and the description of the impact on the project.

Reporting formats and tracking documents should also be elaborated to simplify how risks will be communicated.
[[File:IdentifyRisks.PNG|thumb|left|300px|Figure 3: Identify Risks: Inputs, Tools & Techniques, and Outputs <ref name="IR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.409'' </ref>.]]

====Identify Risks====
[[File:TotalRisk.PNG|thumb|left|300px|Figure 4: Risk identification, inspired from: "Construction Risk Management" <ref name="RIC"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.116.'' </ref>.]]
This is the process where the team should identify probable risks that could have both positive and negative impact on the project and gather them according to the risk plan previously done. This process is performed throuhgout the project. The inputs, tools & techniques and outputs that the team should follow are shown in Figure 3.

In this process is very important to involve the project team so they can develop and maintain a sense of ownership and responsibility for identified individual project risks, the level of overall project risk, and associated risk response actions. In construction projects, the previous experience of each member of the team is specially important in risk identification, a brainstorming meeting could be very helpful to create a list of possible threats or opportunities. Identify Risks is an iterative process, since new individual project risks may emerge as the project progresses through its life cycle and the level of overall project risk will also change.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Even though, every project is different and specially construction projects have a high level of uncertainty, external resources could also be taken into account, such as academic studies, industry studies and records from the same organization. The target is to have a list of every possible risk or uncertainty factors that affect productivity, cost, time, quality and performance, so the project management could categorize them according to the risk plan. This list includes the principal risks of all major parties (contractors, designers and owners) involved in a construction project.

It is also important that if any risk happens, the team have a prepared document regarding lessons learned, so this could help in future projects and identifying potential threats and opportunities. It can also be updated with information on techniques that were effective in identifying risks to improve performance in later phases or other projects.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref>.

====Perform Qualitative Risk Analysis====
[[File:PerformQualitativeRiskAnalysis.PNG|thumb|right|300px|Figure 5: Perform Qualitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.419'' </ref>.]]
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. The key benefit of this process is that it focuses efforts on high-priority risks. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 5.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

As previously said, construction projects have a high level of uncertainty and the expertise of the team could be very useful to develop a hierarchical chart, categorizing the previously identified risks by the probability of occurence and its impact on project objectives. Risks
can be prioritized for further analysis and planning of risk responses based on their probability and impacts. Industry studies of similar projects and published material could also be used, even though it could be hard to compare external projects with an specific projects.

====Perform Quantitative Risk Analysis====
[[File:PerformQuantitativeRiskAnalysis.PNG|thumb|right|300px|Figure 6: Perform Quantitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQNRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.428'' </ref>.]]
Is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. The key benefit of this process is that it quantifies overall project risk exposure, and it can also provide additional quantitative risk information to support risk response planning. This process is not required for every project, but where it is used, it is performed throughout the project. The inputs and outputs of this process are depicted in Figure 6.

Perform Quantitative Risk Analysis is not required for all projects. Undertaking a robust analysis depends on the availability of high-quality data about individual project risks and other sources of uncertainty, as well as a sound underlying project baseline for scope, schedule, and cost. Quantitative risk analysis usually requires specialized risk software and expertise in the development and interpretation of risk models.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>. Moreover, this methods are not very reliable in construction projects because of the uncertainty levels of the risks and the difficulty of quantifying the economical impact of this events.

====Plan Risk Responses====
[[File:PlanRiskResponses.PNG|thumb|right|300px|Figure 7: Plan Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="PRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.437'' </ref>.]]
Plan Risk Responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks. The key benefit of this process is that it identifies appropriate ways to address overall project risk and individual project risks. This process also allocates resources and inserts activities into project documents and the project management plan as needed. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 7.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The expertise of the team involved in the project is again highly important for this process, the target is to propose specific advice to minimize risks and their economic consequences. The process in construction projects are more complex than in most other domains because of the fact that uncertainty factors are expressed in natural language with jargon.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref> Again the complexity of this process in construction projects is due to the difficulty to quantify the consequences of any threat or benefit, but a contingency plan should be developed for major risks. The project manager and the team should know exactly what to do in case of any event, even though the economic impact remains unknown.

[[File:ImplementRiskResponses.PNG|thumb|left|300px|Figure 8: Implement Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="IRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.449'' </ref>.]]
====Implement Risk Responses====
This process consits in implementing agreed-upon risk response plans. The key benefit of this process is that it ensures that agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize individual project opportunities. The inputs, tools and techniques, and outputs of the process are shown in Figure 8.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

This is the process where the planning is implemented and decision-makers and project managers need to know what to do in case of a contingency, and the impact that the previously identified risk could have. For example, consider the case where a contractor delays due to bad weather or even neglignece, what actions should be taken? this actions should be aligned with the risk management plan and with the consequences previously identified, with the respective costs that this events may entail. The project manager needs to have very clear the cost of every contingency and the cost of the action that needs to be taken on the overall result of the project. For example, in the case of a delay in the program, the project manager needs to know the cost of each day of delay and what actions are allowed to be taken.

[[File:MonitorRisks.PNG|thumb|left|300px|Figure 9: Monitor Risks: Inputs, Tools & Techniques, and Outputs <ref name="MR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.453'' </ref>.]]
====Monitor Risk====
Monitor Risks is the process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project. The key benefit of this process is that it enables project decisions to be based on current information about overall project risk exposure and individual project risks. The inputs, tools and techniques, and outputs of the process are depicted in Figure 9.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The target is to use performance information during the project execution to determine if the followed strategy is the right one, if the risk management approach is still appropiate or if contingency reserves for cost or schedule require modification. It is essential for the project manager to know if the action taken after a risk has occured has been the right one and it has reduced cost and time over-runs, maybe the action taken was even worst than the problem and a rethinking on the strategy has to be done.

It is also important to identify new risks or new threats that could have a negative on the project, or potential opportunities that eventually could benefit the overall project results.

==Limitations==

==References==
<references />

A Guide to Risk Management in Construction Projects

2019-02-22T14:06:07Z

S182573:

''Developed by Jokin Brito''

==Abstract==
Throughout history, construction has been one of the most revenue generating industries in the world and like many other businesses, is being transformed to meet the highest demands of the twenty-first century. Only in the United States, more than 11.1 million people were employed by the construction industry in 2018<ref name=''labor''> ''Bls.gov. (2019). Employed persons by detailed industry, sex, race, and Hispanic or Latino ethnicity. [online] Available at: https://www.bls.gov/cps/cpsaat18.htm [Accessed 17 Feb. 2019].'' </ref>, the industry spending topped $1.23 trillion in 2017<ref name=''spending''> ''Construction spending in the United States from 1996 to 2017, s. (2019). U.S. construction spending: public and private sectors 2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/226355/us-public-and-private-sector-construction/ [Accessed 17 Feb. 2019].'' </ref> and it accounted for between 7% of total U.S. GDP.<ref name=''GDP''> ''2018 FMI Overview, Featuring FMI’s Fourth Quarter 2017 Construction Outlook. (2018). [online] Available at: https://www.fminet.com/wp-content/uploads/2018/01/Overview2018_FINAL-1.pdf [Accessed 17 Feb. 2019].'' </ref> Furthermore, today's construction industry involves more dynamic and uncertain planning than ever before. Decision-makers and project managers require better knowledge and systematic tools, not only in project management, but also in risk management, a discipline that has a special complexity in construction projects.
This article has the goal of giving project managers and decision-makers within construction industry a more detailed guide to fulfill the needs of any project they manage, where they can identify and reduce cost and time over-runs and security risks, in order to optimize the chances of project success. The guide follows the Project Management Institute (PMI) standards in the PMBOK® Guide.

==Background==

====Structure of this article====
The article structure is aligned with the

====Construction Industry====
The size of construction projects has outgrowed the industry's capacity to manage complex problems under conditions of uncertainty. Risk management in large scale projects becomes a more important part of overall construction management. Each project is very different from each other and they can't be managed in a systematic way, such as in other industries, thus risk management has always been a more trial-and-error method, which requires symbolic reasoning. Empirical knowledge plays a major role for decision-makers and project managers in every stage under uncertainty and many problems in the industry are not very well defined so the risks that this problems entail are much more difficult to define.

In this article the focus is on giving a more systematic way of evaluating and defining risks on any construction project, helping project managers to base their decisions on the standars in the PMBOK® Guide and in the experience of previous projects.

[[File:PRMoverview.PNG|thumb|right|250px|Figure 1: Project Risk Management Overview <ref name="PRMO"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.396'' </ref>.]]
====Project Risk Management====
Project Risk management includes the processes of conducting risk management planning, identification, analysis,
response planning, response implementation, and monitoring risk on a project. The objectives of project risk management
are to increase the probability and/or impact of positive risks and to decrease the probability and/or impact of negative
risks, in order to optimize the chances of project success.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

The Project Risk Management processes according to the PMBOK® Guide are:

<ol>
<li> Plan Risk Management
<li> Identify Risks
<li> Perform Qualitative Risk Analysis
<li> Perform Quantitative Risk Analysis
<li> Plan Risk Responses
<li> Implement Risk Responses
<li> Monitor Risks
</ol>

The goal of this article is to provide guidance on each one of this processes, applied to any construcion project.

====Key Concepts====
All projects have a difficulty degree and a risky level that aim to deliver benefits and achieve certain goals. Even though this barely happens in the construction industry, organizations should always choose to make decisions in a controlled manner, balancing cost and benefit.
When risks of any project are not well managed, they have the potential to deviate the project from the original plan and fail to achieve the defined objectives.

In every project, risks exist at two levels:
*'''Individual project risk''' Uncertain event or condition that, if occurs, has an effect on one or more project objectives. When these risks are unmanaged, it may result in problems such as delay, cost overruns, performance shortfall or loss of reputation. Opportunities that are captured can lead to benefits in the same categories.
*'''Overall project risk''' Uncertainty of the project as a whole, representing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative. A good management of these risks, aims to keep project risk exposure within an acceptable range, maximizing the probability of achieving overall project objectives.

The aim of project risk management is to ensure that all types of risk are considered and that projects risks are understood in a wider context. Trends and ememerging practices for Project Risk Management include but are not limited to:

* '''Non-event risk:''' The two types of non-event risks are ''variability risk'', where uncertainty exists about some key characteristics of a planned event or activity or decision. And ''ambiguity risks'', where uncertainty exists about what might happen in the future.

* '''Project resilience:''' These emergent risks are better known as unknowable-unknowns and they can be tackled through developing project resilience. This requires each project to have an specific ''risk budget'' for known risks, ''flexible project'' processes that can cope while maintaining overall direction of the project, ''empowered project team'' that is trusted to get the job done with agreed-upon limits, ''frequent review'' of early warning signs and ''clear input from stakeholders'' to clarify areas where the project scope or strategy can be adjusted in response to emergent risks.

* '''Integrated risk management:''' Projects may be part of a program or portfolio, where risks also exist and should be owned and managed at the appropiate level. Some risks can be managed by the project team or manager but some risks may escalete to a higher level. A coordinated approach to enterprise-wide risk management ensures alignment and coherence in the way risk is managed across all levels.

Each project is unique and it is necessary to tailor the way Project Risk Management processes are applied. These considerations include project size, project complexity, project importance and development approach.

==Application==
====Plan Risk Management====
[[File:PlanRiskManagement.PNG|thumb|right|400px|Figure 2: Plan Risk Management: Inputs, Tools & Techniques, and Outputs <ref name="PRM"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.401'' </ref>.]]
This is the process where the risk management activities are defined, ensuring that the degree, type and visibility of risk management are propotionate to both risks and the importance of the project to the organization and other stakeholders. The process is defined once or at predefined points in the project. It may be necessary to revisit this process in a major phase change or if the project scope changes significantly.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Inputs, tools and techniques and outputs are predefined in this process as shown in figure 2 and they should be aligned with the project integration management process of the PMBOK® Guide. It should result on strategies and methodologies that should be followed to manage the risks, roles and responsabilities of each team member, the funding needed to perform these activities and defined risk categories. The definition of risk probability and impacts, which is usually arranged in a scale of five levels is very important, in order to understand and classify the impact that the identified risks can make on the project. The scale should include the probability of occurence, the cost of each level of probability in case of any event and the description of the impact on the project.

Reporting formats and tracking documents should also be elaborated to simplify how risks will be communicated.
[[File:IdentifyRisks.PNG|thumb|left|300px|Figure 3: Identify Risks: Inputs, Tools & Techniques, and Outputs <ref name="IR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.409'' </ref>.]]

====Identify Risks====
[[File:TotalRisk.PNG|thumb|left|300px|Figure 4: Risk identification, inspired from: "Construction Risk Management" <ref name="RIC"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.116.'' </ref>.]]
This is the process where the team should identify probable risks that could have both positive and negative impact on the project and gather them according to the risk plan previously done. This process is performed throuhgout the project. The inputs, tools & techniques and outputs that the team should follow are shown in Figure 3.

In this process is very important to involve the project team so they can develop and maintain a sense of ownership and responsibility for identified individual project risks, the level of overall project risk, and associated risk response actions. In construction projects, the previous experience of each member of the team is specially important in risk identification, a brainstorming meeting could be very helpful to create a list of possible threats or opportunities. Identify Risks is an iterative process, since new individual project risks may emerge as the project progresses through its life cycle and the level of overall project risk will also change.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Even though, every project is different and specially construction projects have a high level of uncertainty, external resources could also be taken into account, such as academic studies, industry studies and records from the same organization. The target is to have a list of every possible risk or uncertainty factors that affect productivity, cost, time, quality and performance, so the project management could categorize them according to the risk plan. This list includes the principal risks of all major parties (contractors, designers and owners) involved in a construction project.

It is also important that if any risk happens, the team have a prepared document regarding lessons learned, so this could help in future projects and identifying potential threats and opportunities. It can also be updated with information on techniques that were effective in identifying risks to improve performance in later phases or other projects.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref>.

====Perform Qualitative Risk Analysis====
[[File:PerformQualitativeRiskAnalysis.PNG|thumb|right|300px|Figure 5: Perform Qualitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.419'' </ref>.]]
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. The key benefit of this process is that it focuses efforts on high-priority risks. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 5.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

As previously said, construction projects have a high level of uncertainty and the expertise of the team could be very useful to develop a hierarchical chart, categorizing the previously identified risks by the probability of occurence and its impact on project objectives. Risks
can be prioritized for further analysis and planning of risk responses based on their probability and impacts. Industry studies of similar projects and published material could also be used, even though it could be hard to compare external projects with an specific projects.

====Perform Quantitative Risk Analysis====
[[File:PerformQuantitativeRiskAnalysis.PNG|thumb|right|300px|Figure 6: Perform Quantitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQNRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.428'' </ref>.]]
Is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. The key benefit of this process is that it quantifies overall project risk exposure, and it can also provide additional quantitative risk information to support risk response planning. This process is not required for every project, but where it is used, it is performed throughout the project. The inputs and outputs of this process are depicted in Figure 6.

Perform Quantitative Risk Analysis is not required for all projects. Undertaking a robust analysis depends on the availability of high-quality data about individual project risks and other sources of uncertainty, as well as a sound underlying project baseline for scope, schedule, and cost. Quantitative risk analysis usually requires specialized risk software and expertise in the development and interpretation of risk models.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>. Moreover, this methods are not very reliable in construction projects because of the uncertainty levels of the risks and the difficulty of quantifying the economical impact of this events.

====Plan Risk Responses====
[[File:PlanRiskResponses.PNG|thumb|right|300px|Figure 7: Plan Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="PRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.437'' </ref>.]]
Plan Risk Responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks. The key benefit of this process is that it identifies appropriate ways to address overall project risk and individual project risks. This process also allocates resources and inserts activities into project documents and the project management plan as needed. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 7.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The expertise of the team involved in the project is again highly important for this process, the target is to propose specific advice to minimize risks and their economic consequences. The process in construction projects are more complex than in most other domains because of the fact that uncertainty factors are expressed in natural language with jargon.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref> Again the complexity of this process in construction projects is due to the difficulty to quantify the consequences of any threat or benefit, but a contingency plan should be developed for major risks. The project manager and the team should know exactly what to do in case of any event, even though the economic impact remains unknown.

[[File:ImplementRiskResponses.PNG|thumb|left|300px|Figure 8: Implement Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="IRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.449'' </ref>.]]
====Implement Risk Responses====
This process consits in implementing agreed-upon risk response plans. The key benefit of this process is that it ensures that agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize individual project opportunities. The inputs, tools and techniques, and outputs of the process are shown in Figure 8.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

This is the process where the planning is implemented and decision-makers and project managers need to know what to do in case of a contingency, and the impact that the previously identified risk could have. For example, consider the case where a contractor delays due to bad weather or even neglignece, what actions should be taken? this actions should be aligned with the risk management plan and with the consequences previously identified, with the respective costs that this events may entail. The project manager needs to have very clear the cost of every contingency and the cost of the action that needs to be taken on the overall result of the project. For example, in the case of a delay in the program, the project manager needs to know the cost of each day of delay and what actions are allowed to be taken.

[[File:MonitorRisks.PNG|thumb|left|300px|Figure 9: Monitor Risks: Inputs, Tools & Techniques, and Outputs <ref name="MR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.453'' </ref>.]]
====Monitor Risk====
Monitor Risks is the process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project. The key benefit of this process is that it enables project decisions to be based on current information about overall project risk exposure and individual project risks. The inputs, tools and techniques, and outputs of the process are depicted in Figure 9.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The target is to use performance information during the project execution to determine if the followed strategy is the right one, if the risk management approach is still appropiate or if contingency reserves for cost or schedule require modification. It is essential for the project manager to know if the action taken after a risk has occured has been the right one and it has reduced cost and time over-runs, maybe the action taken was even worst than the problem and a rethinking on the strategy has to be done.

It is also important to identify new risks or new threats that could have a negative on the project, or potential opportunities that eventually could benefit the overall project results.

==Limitations==

==References==
<references />

A Guide to Risk Management in Construction Projects

2019-02-22T14:04:24Z

S182573:

''Developed by Jokin Brito''

==Abstract==
Throughout history, construction has been one of the most revenue generating industries in the world and like many other businesses, is being transformed to meet the highest demands of the twenty-first century. Only in the United States, more than 11.1 million people were employed by the construction industry in 2018<ref name=''labor''> ''Bls.gov. (2019). Employed persons by detailed industry, sex, race, and Hispanic or Latino ethnicity. [online] Available at: https://www.bls.gov/cps/cpsaat18.htm [Accessed 17 Feb. 2019].'' </ref>, the industry spending topped $1.23 trillion in 2017<ref name=''spending''> ''Construction spending in the United States from 1996 to 2017, s. (2019). U.S. construction spending: public and private sectors 2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/226355/us-public-and-private-sector-construction/ [Accessed 17 Feb. 2019].'' </ref> and it accounted for between 7% of total U.S. GDP.<ref name=''GDP''> ''2018 FMI Overview, Featuring FMI’s Fourth Quarter 2017 Construction Outlook. (2018). [online] Available at: https://www.fminet.com/wp-content/uploads/2018/01/Overview2018_FINAL-1.pdf [Accessed 17 Feb. 2019].'' </ref> Furthermore, today's construction industry involves more dynamic and uncertain planning than ever before. Decision-makers and project managers require better knowledge and systematic tools, not only in project management, but also in risk management, a discipline that has a special complexity in construction projects.
This article has the goal of giving project managers and decision-makers within construction industry a more detailed guide to fulfill the needs of any project they manage, where they can identify and reduce cost and time over-runs and security risks, in order to optimize the chances of project success. The guide follows the Project Management Institute (PMI) standards in the PMBOK® Guide.

==Background==

====Structure of this article====

====Construction Industry====
The size of construction projects has outgrowed the industry's capacity to manage complex problems under conditions of uncertainty. Risk management in large scale projects becomes a more important part of overall construction management. Each project is very different from each other and they can't be managed in a systematic way, such as in other industries, thus risk management has always been a more trial-and-error method, which requires symbolic reasoning. Empirical knowledge plays a major role for decision-makers and project managers in every stage under uncertainty and many problems in the industry are not very well defined so the risks that this problems entail are much more difficult to define.

In this article the focus is on giving a more systematic way of evaluating and defining risks on any construction project, helping project managers to base their decisions on the standars in the PMBOK® Guide and in the experience of previous projects.

[[File:PRMoverview.PNG|thumb|right|250px|Figure 1: Project Risk Management Overview <ref name="PRMO"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.396'' </ref>.]]
====Project Risk Management====
Project Risk management includes the processes of conducting risk management planning, identification, analysis,
response planning, response implementation, and monitoring risk on a project. The objectives of project risk management
are to increase the probability and/or impact of positive risks and to decrease the probability and/or impact of negative
risks, in order to optimize the chances of project success.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

The Project Risk Management processes according to the PMBOK® Guide are:

<ol>
<li> Plan Risk Management
<li> Identify Risks
<li> Perform Qualitative Risk Analysis
<li> Perform Quantitative Risk Analysis
<li> Plan Risk Responses
<li> Implement Risk Responses
<li> Monitor Risks
</ol>

The goal of this article is to provide guidance on each one of this processes, applied to any construcion project.

====Key Concepts====
All projects have a difficulty degree and a risky level that aim to deliver benefits and achieve certain goals. Even though this barely happens in the construction industry, organizations should always choose to make decisions in a controlled manner, balancing cost and benefit.
When risks of any project are not well managed, they have the potential to deviate the project from the original plan and fail to achieve the defined objectives.

In every project, risks exist at two levels:
*'''Individual project risk''' Uncertain event or condition that, if occurs, has an effect on one or more project objectives. When these risks are unmanaged, it may result in problems such as delay, cost overruns, performance shortfall or loss of reputation. Opportunities that are captured can lead to benefits in the same categories.
*'''Overall project risk''' Uncertainty of the project as a whole, representing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative. A good management of these risks, aims to keep project risk exposure within an acceptable range, maximizing the probability of achieving overall project objectives.

The aim of project risk management is to ensure that all types of risk are considered and that projects risks are understood in a wider context. Trends and ememerging practices for Project Risk Management include but are not limited to:

* '''Non-event risk:''' The two types of non-event risks are ''variability risk'', where uncertainty exists about some key characteristics of a planned event or activity or decision. And ''ambiguity risks'', where uncertainty exists about what might happen in the future.

* '''Project resilience:''' These emergent risks are better known as unknowable-unknowns and they can be tackled through developing project resilience. This requires each project to have an specific ''risk budget'' for known risks, ''flexible project'' processes that can cope while maintaining overall direction of the project, ''empowered project team'' that is trusted to get the job done with agreed-upon limits, ''frequent review'' of early warning signs and ''clear input from stakeholders'' to clarify areas where the project scope or strategy can be adjusted in response to emergent risks.

* '''Integrated risk management:''' Projects may be part of a program or portfolio, where risks also exist and should be owned and managed at the appropiate level. Some risks can be managed by the project team or manager but some risks may escalete to a higher level. A coordinated approach to enterprise-wide risk management ensures alignment and coherence in the way risk is managed across all levels.

Each project is unique and it is necessary to tailor the way Project Risk Management processes are applied. These considerations include project size, project complexity, project importance and development approach.

==Application==
====Plan Risk Management====
[[File:PlanRiskManagement.PNG|thumb|right|400px|Figure 2: Plan Risk Management: Inputs, Tools & Techniques, and Outputs <ref name="PRM"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.401'' </ref>.]]
This is the process where the risk management activities are defined, ensuring that the degree, type and visibility of risk management are propotionate to both risks and the importance of the project to the organization and other stakeholders. The process is defined once or at predefined points in the project. It may be necessary to revisit this process in a major phase change or if the project scope changes significantly.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Inputs, tools and techniques and outputs are predefined in this process as shown in figure 2 and they should be aligned with the project integration management process of the PMBOK® Guide. It should result on strategies and methodologies that should be followed to manage the risks, roles and responsabilities of each team member, the funding needed to perform these activities and defined risk categories. The definition of risk probability and impacts, which is usually arranged in a scale of five levels is very important, in order to understand and classify the impact that the identified risks can make on the project. The scale should include the probability of occurence, the cost of each level of probability in case of any event and the description of the impact on the project.

Reporting formats and tracking documents should also be elaborated to simplify how risks will be communicated.
[[File:IdentifyRisks.PNG|thumb|left|300px|Figure 3: Identify Risks: Inputs, Tools & Techniques, and Outputs <ref name="IR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.409'' </ref>.]]

====Identify Risks====
[[File:TotalRisk.PNG|thumb|left|300px|Figure 4: Risk identification, inspired from: "Construction Risk Management" <ref name="RIC"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.116.'' </ref>.]]
This is the process where the team should identify probable risks that could have both positive and negative impact on the project and gather them according to the risk plan previously done. This process is performed throuhgout the project. The inputs, tools & techniques and outputs that the team should follow are shown in Figure 3.

In this process is very important to involve the project team so they can develop and maintain a sense of ownership and responsibility for identified individual project risks, the level of overall project risk, and associated risk response actions. In construction projects, the previous experience of each member of the team is specially important in risk identification, a brainstorming meeting could be very helpful to create a list of possible threats or opportunities. Identify Risks is an iterative process, since new individual project risks may emerge as the project progresses through its life cycle and the level of overall project risk will also change.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Even though, every project is different and specially construction projects have a high level of uncertainty, external resources could also be taken into account, such as academic studies, industry studies and records from the same organization. The target is to have a list of every possible risk or uncertainty factors that affect productivity, cost, time, quality and performance, so the project management could categorize them according to the risk plan. This list includes the principal risks of all major parties (contractors, designers and owners) involved in a construction project.

It is also important that if any risk happens, the team have a prepared document regarding lessons learned, so this could help in future projects and identifying potential threats and opportunities. It can also be updated with information on techniques that were effective in identifying risks to improve performance in later phases or other projects.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref>.

====Perform Qualitative Risk Analysis====
[[File:PerformQualitativeRiskAnalysis.PNG|thumb|right|300px|Figure 5: Perform Qualitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.419'' </ref>.]]
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. The key benefit of this process is that it focuses efforts on high-priority risks. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 5.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

As previously said, construction projects have a high level of uncertainty and the expertise of the team could be very useful to develop a hierarchical chart, categorizing the previously identified risks by the probability of occurence and its impact on project objectives. Risks
can be prioritized for further analysis and planning of risk responses based on their probability and impacts. Industry studies of similar projects and published material could also be used, even though it could be hard to compare external projects with an specific projects.

====Perform Quantitative Risk Analysis====
[[File:PerformQuantitativeRiskAnalysis.PNG|thumb|right|300px|Figure 6: Perform Quantitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQNRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.428'' </ref>.]]
Is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. The key benefit of this process is that it quantifies overall project risk exposure, and it can also provide additional quantitative risk information to support risk response planning. This process is not required for every project, but where it is used, it is performed throughout the project. The inputs and outputs of this process are depicted in Figure 6.

Perform Quantitative Risk Analysis is not required for all projects. Undertaking a robust analysis depends on the availability of high-quality data about individual project risks and other sources of uncertainty, as well as a sound underlying project baseline for scope, schedule, and cost. Quantitative risk analysis usually requires specialized risk software and expertise in the development and interpretation of risk models.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>. Moreover, this methods are not very reliable in construction projects because of the uncertainty levels of the risks and the difficulty of quantifying the economical impact of this events.

====Plan Risk Responses====
[[File:PlanRiskResponses.PNG|thumb|right|300px|Figure 7: Plan Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="PRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.437'' </ref>.]]
Plan Risk Responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks. The key benefit of this process is that it identifies appropriate ways to address overall project risk and individual project risks. This process also allocates resources and inserts activities into project documents and the project management plan as needed. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 7.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The expertise of the team involved in the project is again highly important for this process, the target is to propose specific advice to minimize risks and their economic consequences. The process in construction projects are more complex than in most other domains because of the fact that uncertainty factors are expressed in natural language with jargon.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref> Again the complexity of this process in construction projects is due to the difficulty to quantify the consequences of any threat or benefit, but a contingency plan should be developed for major risks. The project manager and the team should know exactly what to do in case of any event, even though the economic impact remains unknown.

[[File:ImplementRiskResponses.PNG|thumb|left|300px|Figure 8: Implement Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="IRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.449'' </ref>.]]
====Implement Risk Responses====
This process consits in implementing agreed-upon risk response plans. The key benefit of this process is that it ensures that agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize individual project opportunities. The inputs, tools and techniques, and outputs of the process are shown in Figure 8.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

This is the process where the planning is implemented and decision-makers and project managers need to know what to do in case of a contingency, and the impact that the previously identified risk could have. For example, consider the case where a contractor delays due to bad weather or even neglignece, what actions should be taken? this actions should be aligned with the risk management plan and with the consequences previously identified, with the respective costs that this events may entail. The project manager needs to have very clear the cost of every contingency and the cost of the action that needs to be taken on the overall result of the project. For example, in the case of a delay in the program, the project manager needs to know the cost of each day of delay and what actions are allowed to be taken.

[[File:MonitorRisks.PNG|thumb|left|300px|Figure 9: Monitor Risks: Inputs, Tools & Techniques, and Outputs <ref name="MR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.453'' </ref>.]]
====Monitor Risk====
Monitor Risks is the process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project. The key benefit of this process is that it enables project decisions to be based on current information about overall project risk exposure and individual project risks. The inputs, tools and techniques, and outputs of the process are depicted in Figure 9.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The target is to use performance information during the project execution to determine if the followed strategy is the right one, if the risk management approach is still appropiate or if contingency reserves for cost or schedule require modification. It is essential for the project manager to know if the action taken after a risk has occured has been the right one and it has reduced cost and time over-runs, maybe the action taken was even worst than the problem and a rethinking on the strategy has to be done.

It is also important to identify new risks or new threats that could have a negative on the project, or potential opportunities that eventually could benefit the overall project results.

==Limitations==

==References==
<references />

A Guide to Risk Management in Construction Projects

2019-02-22T14:02:33Z

S182573:

''Developed by Jokin Brito''

==Abstract==
Throughout history, construction has been one of the most revenue generating industries in the world and like many other businesses, is being transformed to meet the highest demands of the twenty-first century. Only in the United States, more than 11.1 million people were employed by the construction industry in 2018<ref name=''labor''> ''Bls.gov. (2019). Employed persons by detailed industry, sex, race, and Hispanic or Latino ethnicity. [online] Available at: https://www.bls.gov/cps/cpsaat18.htm [Accessed 17 Feb. 2019].'' </ref>, the industry spending topped $1.23 trillion in 2017<ref name=''spending''> ''Construction spending in the United States from 1996 to 2017, s. (2019). U.S. construction spending: public and private sectors 2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/226355/us-public-and-private-sector-construction/ [Accessed 17 Feb. 2019].'' </ref> and it accounted for between 7% of total U.S. GDP.<ref name=''GDP''> ''2018 FMI Overview, Featuring FMI’s Fourth Quarter 2017 Construction Outlook. (2018). [online] Available at: https://www.fminet.com/wp-content/uploads/2018/01/Overview2018_FINAL-1.pdf [Accessed 17 Feb. 2019].'' </ref> Furthermore, today's construction industry involves more dynamic and uncertain planning than ever before. Decision-makers and project managers require better knowledge and systematic tools, not only in project management, but also in risk management, a discipline that has a special complexity in construction projects.
This article has the goal of giving project managers and decision-makers within construction industry a more detailed guide to fulfill the needs of any project they manage, where they can identify and reduce cost and time over-runs and security risks, in order to optimize the chances of project success. The guide follows the Project Management Institute (PMI) standards in the PMBOK® Guide.

==Background==

====Structure of this article====

====Construction Industry====
The size of construction projects has outgrowed the industry's capacity to manage complex problems under conditions of uncertainty. Risk management in large scale projects becomes a more important part of overall construction management. Each project is very different from each other and they can't be managed in a systematic way, such as in other industries, thus risk management has always been a more trial-and-error method, which requires symbolic reasoning. Empirical knowledge plays a major role for decision-makers and project managers in every stage under uncertainty and many problems in the industry are not very well defined so the risks that this problems entail are much more difficult to define.

In this article the focus is on giving a more systematic way of evaluating and defining risks on any construction project, helping project managers to base their decisions on the standars in the PMBOK® Guide and in the experience of previous projects.

[[File:PRMoverview.PNG|thumb|right|250px|Figure 1: Project Risk Management Overview <ref name="PRMO"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.396'' </ref>.]]
====Project Risk Management====
Project Risk management includes the processes of conducting risk management planning, identification, analysis,
response planning, response implementation, and monitoring risk on a project. The objectives of project risk management
are to increase the probability and/or impact of positive risks and to decrease the probability and/or impact of negative
risks, in order to optimize the chances of project success.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

The Project Risk Management processes according to the PMBOK® Guide are:

<ol>
<li> Plan Risk Management
<li> Identify Risks
<li> Perform Qualitative Risk Analysis
<li> Perform Quantitative Risk Analysis
<li> Plan Risk Responses
<li> Implement Risk Responses
<li> Monitor Risks
</ol>

The goal of this article is to provide guidance on each one of this processes, applied to any construcion project.

====Key Concepts====
All projects have a difficulty degree and a risky level that aim to deliver benefits and achieve certain goals. Even though this barely happens in the construction industry, organizations should always choose to make decisions in a controlled manner, balancing cost and benefit.
When risks of any project are not well managed, they have the potential to deviate the project from the original plan and fail to achieve the defined objectives.

In every project, risks exist at two levels:
*'''Individual project risk''' Uncertain event or condition that, if occurs, has an effect on one or more project objectives. When these risks are unmanaged, it may result in problems such as delay, cost overruns, performance shortfall or loss of reputation. Opportunities that are captured can lead to benefits in the same categories.
*'''Overall project risk''' Uncertainty of the project as a whole, representing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative. A good management of these risks, aims to keep project risk exposure within an acceptable range, maximizing the probability of achieving overall project objectives.

The aim of project risk management is to ensure that all types of risk are considered and that projects risks are understood in a wider context. Trends and ememerging practices for Project Risk Management include but are not limited to:

* '''Non-event risk:''' The two types of non-event risks are ''variability risk'', where uncertainty exists about some key characteristics of a planned event or activity or decision. And ''ambiguity risks'', where uncertainty exists about what might happen in the future.

* '''Project resilience:''' These emergent risks are better known as unknowable-unknowns and they can be tackled through developing project resilience. This requires each project to have an specific ''risk budget'' for known risks, ''flexible project'' processes that can cope while maintaining overall direction of the project, ''empowered project team'' that is trusted to get the job done with agreed-upon limits, ''frequent review'' of early warning signs and ''clear input from stakeholders'' to clarify areas where the project scope or strategy can be adjusted in response to emergent risks.

* '''Integrated risk management:''' Projects may be part of a program or portfolio, where risks also exist and should be owned and managed at the appropiate level. Some risks can be managed by the project team or manager but some risks may escalete to a higher level. A coordinated approach to enterprise-wide risk management ensures alignment and coherence in the way risk is managed across all levels.

Each project is unique and it is necessary to tailor the way Project Risk Management processes are applied. These considerations include project size, project complexity, project importance and development approach.

==Application==
====Plan Risk Management====
[[File:PlanRiskManagement.PNG|thumb|right|400px|Figure 2: Plan Risk Management: Inputs, Tools & Techniques, and Outputs <ref name="PRM"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.401'' </ref>.]]
This is the process where the risk management activities are defined, ensuring that the degree, type and visibility of risk management are propotionate to both risks and the importance of the project to the organization and other stakeholders. The process is defined once or at predefined points in the project. It may be necessary to revisit this process in a major phase change or if the project scope changes significantly.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Inputs, tools and techniques and outputs are predefined in this process as shown in figure 2 and they should be aligned with the project integration management process of the PMBOK® Guide. It should result on strategies and methodologies that should be followed to manage the risks, roles and responsabilities of each team member, the funding needed to perform these activities and defined risk categories. The definition of risk probability and impacts, which is usually arranged in a scale of five levels is very important, in order to understand and classify the impact that the identified risks can make on the project. The scale should include the probability of occurence, the cost of each level of probability in case of any event and the description of the impact on the project.

Reporting formats and tracking documents should also be elaborated to simplify how risks will be communicated.
[[File:IdentifyRisks.PNG|thumb|left|300px|Figure 3: Identify Risks: Inputs, Tools & Techniques, and Outputs <ref name="IR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.409'' </ref>.]]

====Identify Risks====
[[File:TotalRisk.PNG|thumb|left|300px|Figure 4: Risk identification, inspired from: "Construction Risk Management" <ref name="RIC"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.116.'' </ref>.]]
This is the process where the team should identify probable risks that could have both positive and negative impact on the project and gather them according to the risk plan previously done. This process is performed throuhgout the project. The inputs, tools & techniques and outputs that the team should follow are shown in Figure 3.

In this process is very important to involve the project team so they can develop and maintain a sense of ownership and responsibility for identified individual project risks, the level of overall project risk, and associated risk response actions. In construction projects, the previous experience of each member of the team is specially important in risk identification, a brainstorming meeting could be very helpful to create a list of possible threats or opportunities. Identify Risks is an iterative process, since new individual project risks may emerge as the project progresses through its life cycle and the level of overall project risk will also change.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Even though, every project is different and specially construction projects have a high level of uncertainty, external resources could also be taken into account, such as academic studies, industry studies and records from the same organization. The target is to have a list of every possible risk or uncertainty factors that affect productivity, cost, time, quality and performance, so the project management could categorize them according to the risk plan. This list includes the principal risks of all major parties (contractors, designers and owners) involved in a construction project.

It is also important that if any risk happens, the team have a prepared document regarding lessons learned, so this could help in future projects and identifying potential threats and opportunities. It can also be updated with information on techniques that were effective in identifying risks to improve performance in later phases or other projects.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref>.

====Perform Qualitative Risk Analysis====
[[File:PerformQualitativeRiskAnalysis.PNG|thumb|right|300px|Figure 5: Perform Qualitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.419'' </ref>.]]
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. The key benefit of this process is that it focuses efforts on high-priority risks. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 5.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

As previously said, construction projects have a high level of uncertainty and the expertise of the team could be very useful to develop a hierarchical chart, categorizing the previously identified risks by the probability of occurence and its impact on project objectives. Risks
can be prioritized for further analysis and planning of risk responses based on their probability and impacts. Industry studies of similar projects and published material could also be used, even though it could be hard to compare external projects with an specific projects.

====Perform Quantitative Risk Analysis====
[[File:PerformQuantitativeRiskAnalysis.PNG|thumb|right|300px|Figure 6: Perform Quantitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQNRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.428'' </ref>.]]
Is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. The key benefit of this process is that it quantifies overall project risk exposure, and it can also provide additional quantitative risk information to support risk response planning. This process is not required for every project, but where it is used, it is performed throughout the project. The inputs and outputs of this process are depicted in Figure 6.

Perform Quantitative Risk Analysis is not required for all projects. Undertaking a robust analysis depends on the availability of high-quality data about individual project risks and other sources of uncertainty, as well as a sound underlying project baseline for scope, schedule, and cost. Quantitative risk analysis usually requires specialized risk software and expertise in the development and interpretation of risk models.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>. Moreover, this methods are not very reliable in construction projects because of the uncertainty levels of the risks and the difficulty of quantifying the economical impact of this events.

====Plan Risk Responses====
[[File:PlanRiskResponses.PNG|thumb|right|300px|Figure 7: Plan Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="PRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.437'' </ref>.]]
Plan Risk Responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks. The key benefit of this process is that it identifies appropriate ways to address overall project risk and individual project risks. This process also allocates resources and inserts activities into project documents and the project management plan as needed. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 7.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The expertise of the team involved in the project is again highly important for this process, the target is to propose specific advice to minimize risks and their economic consequences. The process in construction projects are more complex than in most other domains because of the fact that uncertainty factors are expressed in natural language with jargon.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref> Again the complexity of this process in construction projects is due to the difficulty to quantify the consequences of any threat or benefit, but a contingency plan should be developed for major risks. The project manager and the team should know exactly what to do in case of any event, even though the economic impact remains unknown.

[[File:ImplementRiskResponses.PNG|thumb|left|300px|Figure 8: Implement Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="IRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.449'' </ref>.]]
====Implement Risk Responses====
This process consits in implementing agreed-upon risk response plans. The key benefit of this process is that it ensures that agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize individual project opportunities. The inputs, tools and techniques, and outputs of the process are shown in Figure 8.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

This is the process where the planning is implemented and decision-makers and project managers need to know what to do in case of a contingency, and the impact that the previously identified risk could have. For example, consider the case where a contractor delays due to bad weather or even neglignece, what actions should be taken? this actions should be aligned with the risk management plan and with the consequences previously identified, with the respective costs that this events may entail. The project manager needs to have very clear the cost of every contingency and the cost of the action that needs to be taken on the overall result of the project. For example, in the case of a delay in the program, the project manager needs to know the cost of each day of delay and what actions are allowed to be taken.

[[File:MonitorRisks.PNG|thumb|left|300px|Figure 9: Monitor Risks: Inputs, Tools & Techniques, and Outputs <ref name="MR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.453'' </ref>.]]
====Monitor Risk====
Monitor Risks is the process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project. The key benefit of this process is that it enables project decisions to be based on current information about overall project risk exposure and individual project risks. The inputs, tools and techniques, and outputs of the process are depicted in Figure 9.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The target is to use performance information during the project execution to determine if the followed strategy is the right one, if the risk management approach is still appropiate or if contingency reserves for cost or schedule require modification. It is essential for the project manager to know if the action taken after a risk has occured has been the right one and it has reduced cost and time over-runs, maybe the action taken was even worst than the problem and a rethinking on the strategy has to be done.

==Limitations==

==References==
<references />

File:MonitorRisks.PNG

2019-02-22T13:55:07Z

S182573:

A Guide to Risk Management in Construction Projects

2019-02-22T13:22:26Z

S182573:

''Developed by Jokin Brito''

==Abstract==
Throughout history, construction has been one of the most revenue generating industries in the world and like many other businesses, is being transformed to meet the highest demands of the twenty-first century. Only in the United States, more than 11.1 million people were employed by the construction industry in 2018<ref name=''labor''> ''Bls.gov. (2019). Employed persons by detailed industry, sex, race, and Hispanic or Latino ethnicity. [online] Available at: https://www.bls.gov/cps/cpsaat18.htm [Accessed 17 Feb. 2019].'' </ref>, the industry spending topped $1.23 trillion in 2017<ref name=''spending''> ''Construction spending in the United States from 1996 to 2017, s. (2019). U.S. construction spending: public and private sectors 2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/226355/us-public-and-private-sector-construction/ [Accessed 17 Feb. 2019].'' </ref> and it accounted for between 7% of total U.S. GDP.<ref name=''GDP''> ''2018 FMI Overview, Featuring FMI’s Fourth Quarter 2017 Construction Outlook. (2018). [online] Available at: https://www.fminet.com/wp-content/uploads/2018/01/Overview2018_FINAL-1.pdf [Accessed 17 Feb. 2019].'' </ref> Furthermore, today's construction industry involves more dynamic and uncertain planning than ever before. Decision-makers and project managers require better knowledge and systematic tools, not only in project management, but also in risk management, a discipline that has a special complexity in construction projects.
This article has the goal of giving project managers and decision-makers within construction industry a more detailed guide to fulfill the needs of any project they manage, where they can identify and reduce cost and time over-runs and security risks, in order to optimize the chances of project success. The guide follows the Project Management Institute (PMI) standards in the PMBOK® Guide.

==Background==

====Structure of this article====

====Construction Industry====
The size of construction projects has outgrowed the industry's capacity to manage complex problems under conditions of uncertainty. Risk management in large scale projects becomes a more important part of overall construction management. Each project is very different from each other and they can't be managed in a systematic way, such as in other industries, thus risk management has always been a more trial-and-error method, which requires symbolic reasoning. Empirical knowledge plays a major role for decision-makers and project managers in every stage under uncertainty and many problems in the industry are not very well defined so the risks that this problems entail are much more difficult to define.

In this article the focus is on giving a more systematic way of evaluating and defining risks on any construction project, helping project managers to base their decisions on the standars in the PMBOK® Guide and in the experience of previous projects.

[[File:PRMoverview.PNG|thumb|right|250px|Figure 1: Project Risk Management Overview <ref name="PRMO"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.396'' </ref>.]]
====Project Risk Management====
Project Risk management includes the processes of conducting risk management planning, identification, analysis,
response planning, response implementation, and monitoring risk on a project. The objectives of project risk management
are to increase the probability and/or impact of positive risks and to decrease the probability and/or impact of negative
risks, in order to optimize the chances of project success.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

The Project Risk Management processes according to the PMBOK® Guide are:

<ol>
<li> Plan Risk Management
<li> Identify Risks
<li> Perform Qualitative Risk Analysis
<li> Perform Quantitative Risk Analysis
<li> Plan Risk Responses
<li> Implement Risk Responses
<li> Monitor Risks
</ol>

The goal of this article is to provide guidance on each one of this processes, applied to any construcion project.

====Key Concepts====
All projects have a difficulty degree and a risky level that aim to deliver benefits and achieve certain goals. Even though this barely happens in the construction industry, organizations should always choose to make decisions in a controlled manner, balancing cost and benefit.
When risks of any project are not well managed, they have the potential to deviate the project from the original plan and fail to achieve the defined objectives.

In every project, risks exist at two levels:
*'''Individual project risk''' Uncertain event or condition that, if occurs, has an effect on one or more project objectives. When these risks are unmanaged, it may result in problems such as delay, cost overruns, performance shortfall or loss of reputation. Opportunities that are captured can lead to benefits in the same categories.
*'''Overall project risk''' Uncertainty of the project as a whole, representing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative. A good management of these risks, aims to keep project risk exposure within an acceptable range, maximizing the probability of achieving overall project objectives.

The aim of project risk management is to ensure that all types of risk are considered and that projects risks are understood in a wider context. Trends and ememerging practices for Project Risk Management include but are not limited to:

* '''Non-event risk:''' The two types of non-event risks are ''variability risk'', where uncertainty exists about some key characteristics of a planned event or activity or decision. And ''ambiguity risks'', where uncertainty exists about what might happen in the future.

* '''Project resilience:''' These emergent risks are better known as unknowable-unknowns and they can be tackled through developing project resilience. This requires each project to have an specific ''risk budget'' for known risks, ''flexible project'' processes that can cope while maintaining overall direction of the project, ''empowered project team'' that is trusted to get the job done with agreed-upon limits, ''frequent review'' of early warning signs and ''clear input from stakeholders'' to clarify areas where the project scope or strategy can be adjusted in response to emergent risks.

* '''Integrated risk management:''' Projects may be part of a program or portfolio, where risks also exist and should be owned and managed at the appropiate level. Some risks can be managed by the project team or manager but some risks may escalete to a higher level. A coordinated approach to enterprise-wide risk management ensures alignment and coherence in the way risk is managed across all levels.

Each project is unique and it is necessary to tailor the way Project Risk Management processes are applied. These considerations include project size, project complexity, project importance and development approach.

==Application==
====Plan Risk Management====
[[File:PlanRiskManagement.PNG|thumb|right|400px|Figure 2: Plan Risk Management: Inputs, Tools & Techniques, and Outputs <ref name="PRM"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.401'' </ref>.]]
This is the process where the risk management activities are defined, ensuring that the degree, type and visibility of risk management are propotionate to both risks and the importance of the project to the organization and other stakeholders. The process is defined once or at predefined points in the project. It may be necessary to revisit this process in a major phase change or if the project scope changes significantly.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Inputs, tools and techniques and outputs are predefined in this process as shown in figure 2 and they should be aligned with the project integration management process of the PMBOK® Guide. It should result on strategies and methodologies that should be followed to manage the risks, roles and responsabilities of each team member, the funding needed to perform these activities and defined risk categories. The definition of risk probability and impacts, which is usually arranged in a scale of five levels is very important, in order to understand and classify the impact that the identified risks can make on the project. The scale should include the probability of occurence, the cost of each level of probability in case of any event and the description of the impact on the project.

Reporting formats and tracking documents should also be elaborated to simplify how risks will be communicated.
[[File:IdentifyRisks.PNG|thumb|left|300px|Figure 3: Identify Risks: Inputs, Tools & Techniques, and Outputs <ref name="IR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.409'' </ref>.]]

====Identify Risks====
[[File:TotalRisk.PNG|thumb|left|300px|Figure 4: Risk identification, inspired from: "Construction Risk Management" <ref name="RIC"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.116.'' </ref>.]]
This is the process where the team should identify probable risks that could have both positive and negative impact on the project and gather them according to the risk plan previously done. This process is performed throuhgout the project. The inputs, tools & techniques and outputs that the team should follow are shown in Figure 3.

In this process is very important to involve the project team so they can develop and maintain a sense of ownership and responsibility for identified individual project risks, the level of overall project risk, and associated risk response actions. In construction projects, the previous experience of each member of the team is specially important in risk identification, a brainstorming meeting could be very helpful to create a list of possible threats or opportunities. Identify Risks is an iterative process, since new individual project risks may emerge as the project progresses through its life cycle and the level of overall project risk will also change.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Even though, every project is different and specially construction projects have a high level of uncertainty, external resources could also be taken into account, such as academic studies, industry studies and records from the same organization. The target is to have a list of every possible risk or uncertainty factors that affect productivity, cost, time, quality and performance, so the project management could categorize them according to the risk plan. This list includes the principal risks of all major parties (contractors, designers and owners) involved in a construction project.

It is also important that if any risk happens, the team have a prepared document regarding lessons learned, so this could help in future projects and identifying potential threats and opportunities. It can also be updated with information on techniques that were effective in identifying risks to improve performance in later phases or other projects.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref>.

====Perform Qualitative Risk Analysis====
[[File:PerformQualitativeRiskAnalysis.PNG|thumb|right|300px|Figure 5: Perform Qualitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.419'' </ref>.]]
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. The key benefit of this process is that it focuses efforts on high-priority risks. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 5.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

As previously said, construction projects have a high level of uncertainty and the expertise of the team could be very useful to develop a hierarchical chart, categorizing the previously identified risks by the probability of occurence and its impact on project objectives. Risks
can be prioritized for further analysis and planning of risk responses based on their probability and impacts. Industry studies of similar projects and published material could also be used, even though it could be hard to compare external projects with an specific projects.

====Perform Quantitative Risk Analysis====
[[File:PerformQuantitativeRiskAnalysis.PNG|thumb|right|300px|Figure 6: Perform Quantitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQNRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.428'' </ref>.]]
Is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. The key benefit of this process is that it quantifies overall project risk exposure, and it can also provide additional quantitative risk information to support risk response planning. This process is not required for every project, but where it is used, it is performed throughout the project. The inputs and outputs of this process are depicted in Figure 6.

Perform Quantitative Risk Analysis is not required for all projects. Undertaking a robust analysis depends on the availability of high-quality data about individual project risks and other sources of uncertainty, as well as a sound underlying project baseline for scope, schedule, and cost. Quantitative risk analysis usually requires specialized risk software and expertise in the development and interpretation of risk models.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>. Moreover, this methods are not very reliable in construction projects because of the uncertainty levels of the risks and the difficulty of quantifying the economical impact of this events.

====Plan Risk Responses====
[[File:PlanRiskResponses.PNG|thumb|right|300px|Figure 7: Plan Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="PRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.437'' </ref>.]]
Plan Risk Responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks. The key benefit of this process is that it identifies appropriate ways to address overall project risk and individual project risks. This process also allocates resources and inserts activities into project documents and the project management plan as needed. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 7.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The expertise of the team involved in the project is again highly important for this process, the target is to propose specific advice to minimize risks and their economic consequences. The process in construction projects are more complex than in most other domains because of the fact that uncertainty factors are expressed in natural language with jargon.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref> Again the complexity of this process in construction projects is due to the difficulty to quantify the consequences of any threat or benefit, but a contingency plan should be developed for major risks. The project manager and the team should know exactly what to do in case of any event, even though the economic impact remains unknown.

[[File:ImplementRiskResponses.PNG|thumb|left|300px|Figure 8: Implement Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="IRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.449'' </ref>.]]
====Implement Risk Responses====
This process consits in implementing agreed-upon risk response plans. The key benefit of this process is that it ensures that agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize individual project opportunities. The inputs, tools and techniques, and outputs of the process are shown in Figure 8.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

This is the process where the planning is implemented and decision-makers and project managers need to know what to do in case of a contingency, and the impact that the previously identified risk could have. For example, consider the case where a contractor delays due to bad weather or even neglignece, what actions should be taken? this actions should be aligned with the risk management plan and with the consequences previously identified, with the respective costs that this events may entail. The project manager needs to have very clear the cost of every contingency and the cost of the action that needs to be taken on the overall result of the project. For example, in the case of a delay in the program, the project manager needs to know the cost of each day of delay and what actions are allowed to be taken.

====Monitor Risk====

==Limitations==

==References==
<references />

A Guide to Risk Management in Construction Projects

2019-02-22T13:02:12Z

S182573:

''Developed by Jokin Brito''

==Abstract==
Throughout history, construction has been one of the most revenue generating industries in the world and like many other businesses, is being transformed to meet the highest demands of the twenty-first century. Only in the United States, more than 11.1 million people were employed by the construction industry in 2018<ref name=''labor''> ''Bls.gov. (2019). Employed persons by detailed industry, sex, race, and Hispanic or Latino ethnicity. [online] Available at: https://www.bls.gov/cps/cpsaat18.htm [Accessed 17 Feb. 2019].'' </ref>, the industry spending topped $1.23 trillion in 2017<ref name=''spending''> ''Construction spending in the United States from 1996 to 2017, s. (2019). U.S. construction spending: public and private sectors 2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/226355/us-public-and-private-sector-construction/ [Accessed 17 Feb. 2019].'' </ref> and it accounted for between 7% of total U.S. GDP.<ref name=''GDP''> ''2018 FMI Overview, Featuring FMI’s Fourth Quarter 2017 Construction Outlook. (2018). [online] Available at: https://www.fminet.com/wp-content/uploads/2018/01/Overview2018_FINAL-1.pdf [Accessed 17 Feb. 2019].'' </ref> Furthermore, today's construction industry involves more dynamic and uncertain planning than ever before. Decision-makers and project managers require better knowledge and systematic tools, not only in project management, but also in risk management, a discipline that has a special complexity in construction projects.
This article has the goal of giving project managers and decision-makers within construction industry a more detailed guide to fulfill the needs of any project they manage, where they can identify and reduce cost and time over-runs and security risks, in order to optimize the chances of project success. The guide follows the Project Management Institute (PMI) standards in the PMBOK® Guide.

==Background==

====Structure of this article====

====Construction Industry====
The size of construction projects has outgrowed the industry's capacity to manage complex problems under conditions of uncertainty. Risk management in large scale projects becomes a more important part of overall construction management. Each project is very different from each other and they can't be managed in a systematic way, such as in other industries, thus risk management has always been a more trial-and-error method, which requires symbolic reasoning. Empirical knowledge plays a major role for decision-makers and project managers in every stage under uncertainty and many problems in the industry are not very well defined so the risks that this problems entail are much more difficult to define.

In this article the focus is on giving a more systematic way of evaluating and defining risks on any construction project, helping project managers to base their decisions on the standars in the PMBOK® Guide and in the experience of previous projects.

[[File:PRMoverview.PNG|thumb|right|250px|Figure 1: Project Risk Management Overview <ref name="PRMO"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.396'' </ref>.]]
====Project Risk Management====
Project Risk management includes the processes of conducting risk management planning, identification, analysis,
response planning, response implementation, and monitoring risk on a project. The objectives of project risk management
are to increase the probability and/or impact of positive risks and to decrease the probability and/or impact of negative
risks, in order to optimize the chances of project success.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

The Project Risk Management processes according to the PMBOK® Guide are:

<ol>
<li> Plan Risk Management
<li> Identify Risks
<li> Perform Qualitative Risk Analysis
<li> Perform Quantitative Risk Analysis
<li> Plan Risk Responses
<li> Implement Risk Responses
<li> Monitor Risks
</ol>

The goal of this article is to provide guidance on each one of this processes, applied to any construcion project.

====Key Concepts====
All projects have a difficulty degree and a risky level that aim to deliver benefits and achieve certain goals. Even though this barely happens in the construction industry, organizations should always choose to make decisions in a controlled manner, balancing cost and benefit.
When risks of any project are not well managed, they have the potential to deviate the project from the original plan and fail to achieve the defined objectives.

In every project, risks exist at two levels:
*'''Individual project risk''' Uncertain event or condition that, if occurs, has an effect on one or more project objectives. When these risks are unmanaged, it may result in problems such as delay, cost overruns, performance shortfall or loss of reputation. Opportunities that are captured can lead to benefits in the same categories.
*'''Overall project risk''' Uncertainty of the project as a whole, representing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative. A good management of these risks, aims to keep project risk exposure within an acceptable range, maximizing the probability of achieving overall project objectives.

The aim of project risk management is to ensure that all types of risk are considered and that projects risks are understood in a wider context. Trends and ememerging practices for Project Risk Management include but are not limited to:

* '''Non-event risk:''' The two types of non-event risks are ''variability risk'', where uncertainty exists about some key characteristics of a planned event or activity or decision. And ''ambiguity risks'', where uncertainty exists about what might happen in the future.

* '''Project resilience:''' These emergent risks are better known as unknowable-unknowns and they can be tackled through developing project resilience. This requires each project to have an specific ''risk budget'' for known risks, ''flexible project'' processes that can cope while maintaining overall direction of the project, ''empowered project team'' that is trusted to get the job done with agreed-upon limits, ''frequent review'' of early warning signs and ''clear input from stakeholders'' to clarify areas where the project scope or strategy can be adjusted in response to emergent risks.

* '''Integrated risk management:''' Projects may be part of a program or portfolio, where risks also exist and should be owned and managed at the appropiate level. Some risks can be managed by the project team or manager but some risks may escalete to a higher level. A coordinated approach to enterprise-wide risk management ensures alignment and coherence in the way risk is managed across all levels.

Each project is unique and it is necessary to tailor the way Project Risk Management processes are applied. These considerations include project size, project complexity, project importance and development approach.

==Application==
====Plan Risk Management====
[[File:PlanRiskManagement.PNG|thumb|right|400px|Figure 2: Plan Risk Management: Inputs, Tools & Techniques, and Outputs <ref name="PRM"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.401'' </ref>.]]
This is the process where the risk management activities are defined, ensuring that the degree, type and visibility of risk management are propotionate to both risks and the importance of the project to the organization and other stakeholders. The process is defined once or at predefined points in the project. It may be necessary to revisit this process in a major phase change or if the project scope changes significantly.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Inputs, tools and techniques and outputs are predefined in this process as shown in figure 2 and they should be aligned with the project integration management process of the PMBOK® Guide. It should result on strategies and methodologies that should be followed to manage the risks, roles and responsabilities of each team member, the funding needed to perform these activities and defined risk categories. The definition of risk probability and impacts, which is usually arranged in a scale of five levels is very important, in order to understand and classify the impact that the identified risks can make on the project. The scale should include the probability of occurence, the cost of each level of probability in case of any event and the description of the impact on the project.

Reporting formats and tracking documents should also be elaborated to simplify how risks will be communicated.
[[File:IdentifyRisks.PNG|thumb|left|300px|Figure 3: Identify Risks: Inputs, Tools & Techniques, and Outputs <ref name="IR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.409'' </ref>.]]

====Identify Risks====
[[File:TotalRisk.PNG|thumb|left|300px|Figure 4: Risk identification, inspired from: "Construction Risk Management" <ref name="RIC"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.116.'' </ref>.]]
This is the process where the team should identify probable risks that could have both positive and negative impact on the project and gather them according to the risk plan previously done. This process is performed throuhgout the project. The inputs, tools & techniques and outputs that the team should follow are shown in Figure 3.

In this process is very important to involve the project team so they can develop and maintain a sense of ownership and responsibility for identified individual project risks, the level of overall project risk, and associated risk response actions. In construction projects, the previous experience of each member of the team is specially important in risk identification, a brainstorming meeting could be very helpful to create a list of possible threats or opportunities. Identify Risks is an iterative process, since new individual project risks may emerge as the project progresses through its life cycle and the level of overall project risk will also change.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Even though, every project is different and specially construction projects have a high level of uncertainty, external resources could also be taken into account, such as academic studies, industry studies and records from the same organization. The target is to have a list of every possible risk or uncertainty factors that affect productivity, cost, time, quality and performance, so the project management could categorize them according to the risk plan. This list includes the principal risks of all major parties (contractors, designers and owners) involved in a construction project.

It is also important that if any risk happens, the team have a prepared document regarding lessons learned, so this could help in future projects and identifying potential threats and opportunities. It can also be updated with information on techniques that were effective in identifying risks to improve performance in later phases or other projects.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref>.

====Perform Qualitative Risk Analysis====
[[File:PerformQualitativeRiskAnalysis.PNG|thumb|right|300px|Figure 5: Perform Qualitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.419'' </ref>.]]
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. The key benefit of this process is that it focuses efforts on high-priority risks. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 5.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

As previously said, construction projects have a high level of uncertainty and the expertise of the team could be very useful to develop a hierarchical chart, categorizing the previously identified risks by the probability of occurence and its impact on project objectives. Risks
can be prioritized for further analysis and planning of risk responses based on their probability and impacts. Industry studies of similar projects and published material could also be used, even though it could be hard to compare external projects with an specific projects.

====Perform Quantitative Risk Analysis====
[[File:PerformQuantitativeRiskAnalysis.PNG|thumb|right|300px|Figure 6: Perform Quantitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQNRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.428'' </ref>.]]
Is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. The key benefit of this process is that it quantifies overall project risk exposure, and it can also provide additional quantitative risk information to support risk response planning. This process is not required for every project, but where it is used, it is performed throughout the project. The inputs and outputs of this process are depicted in Figure 6.

Perform Quantitative Risk Analysis is not required for all projects. Undertaking a robust analysis depends on the availability of high-quality data about individual project risks and other sources of uncertainty, as well as a sound underlying project baseline for scope, schedule, and cost. Quantitative risk analysis usually requires specialized risk software and expertise in the development and interpretation of risk models.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>. Moreover, this methods are not very reliable in construction projects because of the uncertainty levels of the risks and the difficulty of quantifying the economical impact of this events.

====Plan Risk Responses====
[[File:PlanRiskResponses.PNG|thumb|right|300px|Figure 7: Plan Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="PRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.437'' </ref>.]]
Plan Risk Responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks. The key benefit of this process is that it identifies appropriate ways to address overall project risk and individual project risks. This process also allocates resources and inserts activities into project documents and the project management plan as needed. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 7.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The expertise of the team involved in the project is again highly important for this process, the target is to propose specific advice to minimize risks and their economic consequences. The process in construction projects are more complex than in most other domains because of the fact that uncertainty factors are expressed in natural language with jargon.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref> Again the complexity of this process in construction projects is due to the difficulty to quantify the consequences of any threat or benefit, but a contingency plan should be developed for major risks. The project manager and the team should know exactly what to do in case of any event, even though the economic impact remains unknown.

[[File:ImplementRiskResponses.PNG|thumb|left|300px|Figure 8: Implement Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="IRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.449'' </ref>.]]
====Implement Risk Responses====
This process consits in implementing agreed-upon risk response plans. The key benefit of this process is that it ensures that agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize individual project opportunities. The inputs, tools and techniques, and outputs of the process are shown in Figure 8.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

This is the process where the planning its implemented and decision-makers and project managers need to know what to do in case of a contingency, and the impact that the previously identified risk couls have. For example, consider the case where a contractor delays due to bad weather or even neglignece, what actions should be taken? this actions should be aligned with the risk management plan and with the consequences previously identified, with the respective costs that this events may entail.

====Monitor Risk====

==Limitations==

==References==
<references />

A Guide to Risk Management in Construction Projects

2019-02-22T12:44:11Z

S182573:

''Developed by Jokin Brito''

==Abstract==
Throughout history, construction has been one of the most revenue generating industries in the world and like many other businesses, is being transformed to meet the highest demands of the twenty-first century. Only in the United States, more than 11.1 million people were employed by the construction industry in 2018<ref name=''labor''> ''Bls.gov. (2019). Employed persons by detailed industry, sex, race, and Hispanic or Latino ethnicity. [online] Available at: https://www.bls.gov/cps/cpsaat18.htm [Accessed 17 Feb. 2019].'' </ref>, the industry spending topped $1.23 trillion in 2017<ref name=''spending''> ''Construction spending in the United States from 1996 to 2017, s. (2019). U.S. construction spending: public and private sectors 2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/226355/us-public-and-private-sector-construction/ [Accessed 17 Feb. 2019].'' </ref> and it accounted for between 7% of total U.S. GDP.<ref name=''GDP''> ''2018 FMI Overview, Featuring FMI’s Fourth Quarter 2017 Construction Outlook. (2018). [online] Available at: https://www.fminet.com/wp-content/uploads/2018/01/Overview2018_FINAL-1.pdf [Accessed 17 Feb. 2019].'' </ref> Furthermore, today's construction industry involves more dynamic and uncertain planning than ever before. Decision-makers and project managers require better knowledge and systematic tools, not only in project management, but also in risk management, a discipline that has a special complexity in construction projects.
This article has the goal of giving project managers and decision-makers within construction industry a more detailed guide to fulfill the needs of any project they manage, where they can identify and reduce cost and time over-runs and security risks, in order to optimize the chances of project success. The guide follows the Project Management Institute (PMI) standards in the PMBOK® Guide.

==Background==

====Structure of this article====

====Construction Industry====
The size of construction projects has outgrowed the industry's capacity to manage complex problems under conditions of uncertainty. Risk management in large scale projects becomes a more important part of overall construction management. Each project is very different from each other and they can't be managed in a systematic way, such as in other industries, thus risk management has always been a more trial-and-error method, which requires symbolic reasoning. Empirical knowledge plays a major role for decision-makers and project managers in every stage under uncertainty and many problems in the industry are not very well defined so the risks that this problems entail are much more difficult to define.

In this article the focus is on giving a more systematic way of evaluating and defining risks on any construction project, helping project managers to base their decisions on the standars in the PMBOK® Guide and in the experience of previous projects.

[[File:PRMoverview.PNG|thumb|right|250px|Figure 1: Project Risk Management Overview <ref name="PRMO"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.396'' </ref>.]]
====Project Risk Management====
Project Risk management includes the processes of conducting risk management planning, identification, analysis,
response planning, response implementation, and monitoring risk on a project. The objectives of project risk management
are to increase the probability and/or impact of positive risks and to decrease the probability and/or impact of negative
risks, in order to optimize the chances of project success.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

The Project Risk Management processes according to the PMBOK® Guide are:

<ol>
<li> Plan Risk Management
<li> Identify Risks
<li> Perform Qualitative Risk Analysis
<li> Perform Quantitative Risk Analysis
<li> Plan Risk Responses
<li> Implement Risk Responses
<li> Monitor Risks
</ol>

The goal of this article is to provide guidance on each one of this processes, applied to any construcion project.

====Key Concepts====
All projects have a difficulty degree and a risky level that aim to deliver benefits and achieve certain goals. Even though this barely happens in the construction industry, organizations should always choose to make decisions in a controlled manner, balancing cost and benefit.
When risks of any project are not well managed, they have the potential to deviate the project from the original plan and fail to achieve the defined objectives.

In every project, risks exist at two levels:
*'''Individual project risk''' Uncertain event or condition that, if occurs, has an effect on one or more project objectives. When these risks are unmanaged, it may result in problems such as delay, cost overruns, performance shortfall or loss of reputation. Opportunities that are captured can lead to benefits in the same categories.
*'''Overall project risk''' Uncertainty of the project as a whole, representing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative. A good management of these risks, aims to keep project risk exposure within an acceptable range, maximizing the probability of achieving overall project objectives.

The aim of project risk management is to ensure that all types of risk are considered and that projects risks are understood in a wider context. Trends and ememerging practices for Project Risk Management include but are not limited to:

* '''Non-event risk:''' The two types of non-event risks are ''variability risk'', where uncertainty exists about some key characteristics of a planned event or activity or decision. And ''ambiguity risks'', where uncertainty exists about what might happen in the future.

* '''Project resilience:''' These emergent risks are better known as unknowable-unknowns and they can be tackled through developing project resilience. This requires each project to have an specific ''risk budget'' for known risks, ''flexible project'' processes that can cope while maintaining overall direction of the project, ''empowered project team'' that is trusted to get the job done with agreed-upon limits, ''frequent review'' of early warning signs and ''clear input from stakeholders'' to clarify areas where the project scope or strategy can be adjusted in response to emergent risks.

* '''Integrated risk management:''' Projects may be part of a program or portfolio, where risks also exist and should be owned and managed at the appropiate level. Some risks can be managed by the project team or manager but some risks may escalete to a higher level. A coordinated approach to enterprise-wide risk management ensures alignment and coherence in the way risk is managed across all levels.

Each project is unique and it is necessary to tailor the way Project Risk Management processes are applied. These considerations include project size, project complexity, project importance and development approach.

==Application==
====Plan Risk Management====
[[File:PlanRiskManagement.PNG|thumb|right|400px|Figure 2: Plan Risk Management: Inputs, Tools & Techniques, and Outputs <ref name="PRM"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.401'' </ref>.]]
This is the process where the risk management activities are defined, ensuring that the degree, type and visibility of risk management are propotionate to both risks and the importance of the project to the organization and other stakeholders. The process is defined once or at predefined points in the project. It may be necessary to revisit this process in a major phase change or if the project scope changes significantly.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Inputs, tools and techniques and outputs are predefined in this process as shown in figure 2 and they should be aligned with the project integration management process of the PMBOK® Guide. It should result on strategies and methodologies that should be followed to manage the risks, roles and responsabilities of each team member, the funding needed to perform these activities and defined risk categories. The definition of risk probability and impacts, which is usually arranged in a scale of five levels is very important, in order to understand and classify the impact that the identified risks can make on the project. The scale should include the probability of occurence, the cost of each level of probability in case of any event and the description of the impact on the project.

Reporting formats and tracking documents should also be elaborated to simplify how risks will be communicated.
[[File:IdentifyRisks.PNG|thumb|left|300px|Figure 3: Identify Risks: Inputs, Tools & Techniques, and Outputs <ref name="IR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.409'' </ref>.]]

====Identify Risks====
[[File:TotalRisk.PNG|thumb|left|300px|Figure 4: Risk identification, inspired from: "Construction Risk Management" <ref name="RIC"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.116.'' </ref>.]]
This is the process where the team should identify probable risks that could have both positive and negative impact on the project and gather them according to the risk plan previously done. This process is performed throuhgout the project. The inputs, tools & techniques and outputs that the team should follow are shown in Figure 3.

In this process is very important to involve the project team so they can develop and maintain a sense of ownership and responsibility for identified individual project risks, the level of overall project risk, and associated risk response actions. In construction projects, the previous experience of each member of the team is specially important in risk identification, a brainstorming meeting could be very helpful to create a list of possible threats or opportunities. Identify Risks is an iterative process, since new individual project risks may emerge as the project progresses through its life cycle and the level of overall project risk will also change.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Even though, every project is different and specially construction projects have a high level of uncertainty, external resources could also be taken into account, such as academic studies, industry studies and records from the same organization. The target is to have a list of every possible risk or uncertainty factors that affect productivity, cost, time, quality and performance, so the project management could categorize them according to the risk plan. This list includes the principal risks of all major parties (contractors, designers and owners) involved in a construction project.

It is also important that if any risk happens, the team have a prepared document regarding lessons learned, so this could help in future projects and identifying potential threats and opportunities. It can also be updated with information on techniques that were effective in identifying risks to improve performance in later phases or other projects.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref>.

====Perform Qualitative Risk Analysis====
[[File:PerformQualitativeRiskAnalysis.PNG|thumb|right|300px|Figure 5: Perform Qualitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.419'' </ref>.]]
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. The key benefit of this process is that it focuses efforts on high-priority risks. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 5.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

As previously said, construction projects have a high level of uncertainty and the expertise of the team could be very useful to develop a hierarchical chart, categorizing the previously identified risks by the probability of occurence and its impact on project objectives. Risks
can be prioritized for further analysis and planning of risk responses based on their probability and impacts. Industry studies of similar projects and published material could also be used, even though it could be hard to compare external projects with an specific projects.

====Perform Quantitative Risk Analysis====
[[File:PerformQuantitativeRiskAnalysis.PNG|thumb|right|300px|Figure 6: Perform Quantitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQNRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.428'' </ref>.]]
Is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. The key benefit of this process is that it quantifies overall project risk exposure, and it can also provide additional quantitative risk information to support risk response planning. This process is not required for every project, but where it is used, it is performed throughout the project. The inputs and outputs of this process are depicted in Figure 6.

Perform Quantitative Risk Analysis is not required for all projects. Undertaking a robust analysis depends on the availability of high-quality data about individual project risks and other sources of uncertainty, as well as a sound underlying project baseline for scope, schedule, and cost. Quantitative risk analysis usually requires specialized risk software and expertise in the development and interpretation of risk models.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>. Moreover, this methods are not very reliable in construction projects because of the uncertainty levels of the risks and the difficulty of quantifying the economical impact of this events.

====Plan Risk Responses====
[[File:PlanRiskResponses.PNG|thumb|right|300px|Figure 7: Plan Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="PRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.437'' </ref>.]]
Plan Risk Responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks. The key benefit of this process is that it identifies appropriate ways to address overall project risk and individual project risks. This process also allocates resources and inserts activities into project documents and the project management plan as needed. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 7.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The expertise of the team involved in the project is again highly important for this process, the target is to propose specific advice to minimize risks and their economic consequences. The process in construction projects are more complex than in most other domains because of the fact that uncertainty factors are expressed in natural language with jargon.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref> Again the complexity of this process in construction projects is due to the difficulty to quantify the consequences of any threat or benefit, but a contingency plan should be developed for major risks. The project manager and the team should know exactly what to do in case of any event, even though the economic impact remains unknown.

[[File:ImplementRiskResponses.PNG|thumb|left|300px|Figure 8: Implement Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="IRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.449'' </ref>.]]
====Implement Risk Responses====
This process consits in implementing agreed-upon risk response plans. The key benefit of this process is that it ensures that agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize individual project opportunities. The inputs, tools and techniques, and outputs of the process are shown in Figure 8.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

====Monitor Risk====

==Limitations==

==References==
<references />

File:ImplementRiskResponses.PNG

2019-02-22T12:41:07Z

S182573:

A Guide to Risk Management in Construction Projects

2019-02-22T12:12:49Z

S182573:

''Developed by Jokin Brito''

==Abstract==
Throughout history, construction has been one of the most revenue generating industries in the world and like many other businesses, is being transformed to meet the highest demands of the twenty-first century. Only in the United States, more than 11.1 million people were employed by the construction industry in 2018<ref name=''labor''> ''Bls.gov. (2019). Employed persons by detailed industry, sex, race, and Hispanic or Latino ethnicity. [online] Available at: https://www.bls.gov/cps/cpsaat18.htm [Accessed 17 Feb. 2019].'' </ref>, the industry spending topped $1.23 trillion in 2017<ref name=''spending''> ''Construction spending in the United States from 1996 to 2017, s. (2019). U.S. construction spending: public and private sectors 2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/226355/us-public-and-private-sector-construction/ [Accessed 17 Feb. 2019].'' </ref> and it accounted for between 7% of total U.S. GDP.<ref name=''GDP''> ''2018 FMI Overview, Featuring FMI’s Fourth Quarter 2017 Construction Outlook. (2018). [online] Available at: https://www.fminet.com/wp-content/uploads/2018/01/Overview2018_FINAL-1.pdf [Accessed 17 Feb. 2019].'' </ref> Furthermore, today's construction industry involves more dynamic and uncertain planning than ever before. Decision-makers and project managers require better knowledge and systematic tools, not only in project management, but also in risk management, a discipline that has a special complexity in construction projects.
This article has the goal of giving project managers and decision-makers within construction industry a more detailed guide to fulfill the needs of any project they manage, where they can identify and reduce cost and time over-runs and security risks, in order to optimize the chances of project success. The guide follows the Project Management Institute (PMI) standards in the PMBOK® Guide.

==Background==

====Structure of this article====

====Construction Industry====
The size of construction projects has outgrowed the industry's capacity to manage complex problems under conditions of uncertainty. Risk management in large scale projects becomes a more important part of overall construction management. Each project is very different from each other and they can't be managed in a systematic way, such as in other industries, thus risk management has always been a more trial-and-error method, which requires symbolic reasoning. Empirical knowledge plays a major role for decision-makers and project managers in every stage under uncertainty and many problems in the industry are not very well defined so the risks that this problems entail are much more difficult to define.

In this article the focus is on giving a more systematic way of evaluating and defining risks on any construction project, helping project managers to base their decisions on the standars in the PMBOK® Guide and in the experience of previous projects.

[[File:PRMoverview.PNG|thumb|right|250px|Figure 1: Project Risk Management Overview <ref name="PRMO"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.396'' </ref>.]]
====Project Risk Management====
Project Risk management includes the processes of conducting risk management planning, identification, analysis,
response planning, response implementation, and monitoring risk on a project. The objectives of project risk management
are to increase the probability and/or impact of positive risks and to decrease the probability and/or impact of negative
risks, in order to optimize the chances of project success.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

The Project Risk Management processes according to the PMBOK® Guide are:

<ol>
<li> Plan Risk Management
<li> Identify Risks
<li> Perform Qualitative Risk Analysis
<li> Perform Quantitative Risk Analysis
<li> Plan Risk Responses
<li> Implement Risk Responses
<li> Monitor Risks
</ol>

The goal of this article is to provide guidance on each one of this processes, applied to any construcion project.

====Key Concepts====
All projects have a difficulty degree and a risky level that aim to deliver benefits and achieve certain goals. Even though this barely happens in the construction industry, organizations should always choose to make decisions in a controlled manner, balancing cost and benefit.
When risks of any project are not well managed, they have the potential to deviate the project from the original plan and fail to achieve the defined objectives.

In every project, risks exist at two levels:
*'''Individual project risk''' Uncertain event or condition that, if occurs, has an effect on one or more project objectives. When these risks are unmanaged, it may result in problems such as delay, cost overruns, performance shortfall or loss of reputation. Opportunities that are captured can lead to benefits in the same categories.
*'''Overall project risk''' Uncertainty of the project as a whole, representing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative. A good management of these risks, aims to keep project risk exposure within an acceptable range, maximizing the probability of achieving overall project objectives.

The aim of project risk management is to ensure that all types of risk are considered and that projects risks are understood in a wider context. Trends and ememerging practices for Project Risk Management include but are not limited to:

* '''Non-event risk:''' The two types of non-event risks are ''variability risk'', where uncertainty exists about some key characteristics of a planned event or activity or decision. And ''ambiguity risks'', where uncertainty exists about what might happen in the future.

* '''Project resilience:''' These emergent risks are better known as unknowable-unknowns and they can be tackled through developing project resilience. This requires each project to have an specific ''risk budget'' for known risks, ''flexible project'' processes that can cope while maintaining overall direction of the project, ''empowered project team'' that is trusted to get the job done with agreed-upon limits, ''frequent review'' of early warning signs and ''clear input from stakeholders'' to clarify areas where the project scope or strategy can be adjusted in response to emergent risks.

* '''Integrated risk management:''' Projects may be part of a program or portfolio, where risks also exist and should be owned and managed at the appropiate level. Some risks can be managed by the project team or manager but some risks may escalete to a higher level. A coordinated approach to enterprise-wide risk management ensures alignment and coherence in the way risk is managed across all levels.

Each project is unique and it is necessary to tailor the way Project Risk Management processes are applied. These considerations include project size, project complexity, project importance and development approach.

==Application==
====Plan Risk Management====
[[File:PlanRiskManagement.PNG|thumb|right|400px|Figure 2: Plan Risk Management: Inputs, Tools & Techniques, and Outputs <ref name="PRM"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.401'' </ref>.]]
This is the process where the risk management activities are defined, ensuring that the degree, type and visibility of risk management are propotionate to both risks and the importance of the project to the organization and other stakeholders. The process is defined once or at predefined points in the project. It may be necessary to revisit this process in a major phase change or if the project scope changes significantly.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Inputs, tools and techniques and outputs are predefined in this process as shown in figure 2 and they should be aligned with the project integration management process of the PMBOK® Guide. It should result on strategies and methodologies that should be followed to manage the risks, roles and responsabilities of each team member, the funding needed to perform these activities and defined risk categories. The definition of risk probability and impacts, which is usually arranged in a scale of five levels is very important, in order to understand and classify the impact that the identified risks can make on the project. The scale should include the probability of occurence, the cost of each level of probability in case of any event and the description of the impact on the project.

Reporting formats and tracking documents should also be elaborated to simplify how risks will be communicated.
[[File:IdentifyRisks.PNG|thumb|left|300px|Figure 3: Identify Risks: Inputs, Tools & Techniques, and Outputs <ref name="IR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.409'' </ref>.]]

====Identify Risks====
[[File:TotalRisk.PNG|thumb|left|300px|Figure 4: Risk identification, inspired from: "Construction Risk Management" <ref name="RIC"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.116.'' </ref>.]]
This is the process where the team should identify probable risks that could have both positive and negative impact on the project and gather them according to the risk plan previously done. This process is performed throuhgout the project. The inputs, tools & techniques and outputs that the team should follow are shown in Figure 3.

In this process is very important to involve the project team so they can develop and maintain a sense of ownership and responsibility for identified individual project risks, the level of overall project risk, and associated risk response actions. In construction projects, the previous experience of each member of the team is specially important in risk identification, a brainstorming meeting could be very helpful to create a list of possible threats or opportunities. Identify Risks is an iterative process, since new individual project risks may emerge as the project progresses through its life cycle and the level of overall project risk will also change.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Even though, every project is different and specially construction projects have a high level of uncertainty, external resources could also be taken into account, such as academic studies, industry studies and records from the same organization. The target is to have a list of every possible risk or uncertainty factors that affect productivity, cost, time, quality and performance, so the project management could categorize them according to the risk plan. This list includes the principal risks of all major parties (contractors, designers and owners) involved in a construction project.

It is also important that if any risk happens, the team have a prepared document regarding lessons learned, so this could help in future projects and identifying potential threats and opportunities. It can also be updated with information on techniques that were effective in identifying risks to improve performance in later phases or other projects.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref>.

====Perform Qualitative Risk Analysis====
[[File:PerformQualitativeRiskAnalysis.PNG|thumb|right|300px|Figure 5: Perform Qualitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.419'' </ref>.]]
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. The key benefit of this process is that it focuses efforts on high-priority risks. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 5.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

As previously said, construction projects have a high level of uncertainty and the expertise of the team could be very useful to develop a hierarchical chart, categorizing the previously identified risks by the probability of occurence and its impact on project objectives. Risks
can be prioritized for further analysis and planning of risk responses based on their probability and impacts. Industry studies of similar projects and published material could also be used, even though it could be hard to compare external projects with an specific projects.

====Perform Quantitative Risk Analysis====
[[File:PerformQuantitativeRiskAnalysis.PNG|thumb|right|300px|Figure 6: Perform Quantitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQNRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.428'' </ref>.]]
Is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. The key benefit of this process is that it quantifies overall project risk exposure, and it can also provide additional quantitative risk information to support risk response planning. This process is not required for every project, but where it is used, it is performed throughout the project. The inputs and outputs of this process are depicted in Figure 6.

Perform Quantitative Risk Analysis is not required for all projects. Undertaking a robust analysis depends on the availability of high-quality data about individual project risks and other sources of uncertainty, as well as a sound underlying project baseline for scope, schedule, and cost. Quantitative risk analysis usually requires specialized risk software and expertise in the development and interpretation of risk models.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>. Moreover, this methods are not very reliable in construction projects because of the uncertainty levels of the risks and the difficulty of quantifying the economical impact of this events.

====Plan Risk Responses====
[[File:PlanRiskResponses.PNG|thumb|right|300px|Figure 7: Plan Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="PRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.437'' </ref>.]]
Plan Risk Responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks. The key benefit of this process is that it identifies appropriate ways to address overall project risk and individual project risks. This process also allocates resources and inserts activities into project documents and the project management plan as needed. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 7.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The expertise of the team involved in the project is again highly important for this process, the target is to propose specific advice to minimize risks and their economic consequences. The process in construction projects are more complex than in most other domains because of the fact that uncertainty factors are expressed in natural language with jargon.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref> Again the complexity of this process in construction projects is due to the difficulty to quantify the consequences of any threat or benefit, but a contingency plan should be developed for major risks. The project manager and the team should know exactly what to do in case of any event, even though the economic impact remains unknown.

====Implement Risk Responses====

====Monitor Risk====

==Limitations==

==References==
<references />

A Guide to Risk Management in Construction Projects

2019-02-21T21:56:09Z

S182573:

''Developed by Jokin Brito''

==Abstract==
Throughout history, construction has been one of the most revenue generating industries in the world and like many other businesses, is being transformed to meet the highest demands of the twenty-first century. Only in the United States, more than 11.1 million people were employed by the construction industry in 2018<ref name=''labor''> ''Bls.gov. (2019). Employed persons by detailed industry, sex, race, and Hispanic or Latino ethnicity. [online] Available at: https://www.bls.gov/cps/cpsaat18.htm [Accessed 17 Feb. 2019].'' </ref>, the industry spending topped $1.23 trillion in 2017<ref name=''spending''> ''Construction spending in the United States from 1996 to 2017, s. (2019). U.S. construction spending: public and private sectors 2017 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/226355/us-public-and-private-sector-construction/ [Accessed 17 Feb. 2019].'' </ref> and it accounted for between 7% of total U.S. GDP.<ref name=''GDP''> ''2018 FMI Overview, Featuring FMI’s Fourth Quarter 2017 Construction Outlook. (2018). [online] Available at: https://www.fminet.com/wp-content/uploads/2018/01/Overview2018_FINAL-1.pdf [Accessed 17 Feb. 2019].'' </ref> Furthermore, today's construction industry involves more dynamic and uncertain planning than ever before. Decision-makers and project managers require better knowledge and systematic tools, not only in project management, but also in risk management, a discipline that has a special complexity in construction projects.
This article has the goal of giving project managers and decision-makers within construction industry a more detailed guide to fulfill the needs of any project they manage, where they can identify and reduce cost and time over-runs and security risks, in order to optimize the chances of project success. The guide follows the Project Management Institute (PMI) standards in the PMBOK® Guide.

==Background==

====Structure of this article====

====Construction Industry====
The size of construction projects has outgrowed the industry's capacity to manage complex problems under conditions of uncertainty. Risk management in large scale projects becomes a more important part of overall construction management. Each project is very different from each other and they can't be managed in a systematic way, such as in other industries, thus risk management has always been a more trial-and-error method, which requires symbolic reasoning. Empirical knowledge plays a major role for decision-makers and project managers in every stage under uncertainty and many problems in the industry are not very well defined so the risks that this problems entail are much more difficult to define.

In this article the focus is on giving a more systematic way of evaluating and defining risks on any construction project, helping project managers to base their decisions on the standars in the PMBOK® Guide and in the experience of previous projects.

[[File:PRMoverview.PNG|thumb|right|250px|Figure 1: Project Risk Management Overview <ref name="PRMO"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.396'' </ref>.]]
====Project Risk Management====
Project Risk management includes the processes of conducting risk management planning, identification, analysis,
response planning, response implementation, and monitoring risk on a project. The objectives of project risk management
are to increase the probability and/or impact of positive risks and to decrease the probability and/or impact of negative
risks, in order to optimize the chances of project success.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

The Project Risk Management processes according to the PMBOK® Guide are:

<ol>
<li> Plan Risk Management
<li> Identify Risks
<li> Perform Qualitative Risk Analysis
<li> Perform Quantitative Risk Analysis
<li> Plan Risk Responses
<li> Implement Risk Responses
<li> Monitor Risks
</ol>

The goal of this article is to provide guidance on each one of this processes, applied to any construcion project.

====Key Concepts====
All projects have a difficulty degree and a risky level that aim to deliver benefits and achieve certain goals. Even though this barely happens in the construction industry, organizations should always choose to make decisions in a controlled manner, balancing cost and benefit.
When risks of any project are not well managed, they have the potential to deviate the project from the original plan and fail to achieve the defined objectives.

In every project, risks exist at two levels:
*'''Individual project risk''' Uncertain event or condition that, if occurs, has an effect on one or more project objectives. When these risks are unmanaged, it may result in problems such as delay, cost overruns, performance shortfall or loss of reputation. Opportunities that are captured can lead to benefits in the same categories.
*'''Overall project risk''' Uncertainty of the project as a whole, representing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative. A good management of these risks, aims to keep project risk exposure within an acceptable range, maximizing the probability of achieving overall project objectives.

The aim of project risk management is to ensure that all types of risk are considered and that projects risks are understood in a wider context. Trends and ememerging practices for Project Risk Management include but are not limited to:

* '''Non-event risk:''' The two types of non-event risks are ''variability risk'', where uncertainty exists about some key characteristics of a planned event or activity or decision. And ''ambiguity risks'', where uncertainty exists about what might happen in the future.

* '''Project resilience:''' These emergent risks are better known as unknowable-unknowns and they can be tackled through developing project resilience. This requires each project to have an specific ''risk budget'' for known risks, ''flexible project'' processes that can cope while maintaining overall direction of the project, ''empowered project team'' that is trusted to get the job done with agreed-upon limits, ''frequent review'' of early warning signs and ''clear input from stakeholders'' to clarify areas where the project scope or strategy can be adjusted in response to emergent risks.

* '''Integrated risk management:''' Projects may be part of a program or portfolio, where risks also exist and should be owned and managed at the appropiate level. Some risks can be managed by the project team or manager but some risks may escalete to a higher level. A coordinated approach to enterprise-wide risk management ensures alignment and coherence in the way risk is managed across all levels.

Each project is unique and it is necessary to tailor the way Project Risk Management processes are applied. These considerations include project size, project complexity, project importance and development approach.

==Application==
====Plan Risk Management====
[[File:PlanRiskManagement.PNG|thumb|right|400px|Figure 2: Plan Risk Management: Inputs, Tools & Techniques, and Outputs <ref name="PRM"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.401'' </ref>.]]
This is the process where the risk management activities are defined, ensuring that the degree, type and visibility of risk management are propotionate to both risks and the importance of the project to the organization and other stakeholders. The process is defined once or at predefined points in the project. It may be necessary to revisit this process in a major phase change or if the project scope changes significantly.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Inputs, tools and techniques and outputs are predefined in this process as shown in figure 2 and they should be aligned with the project integration management process of the PMBOK® Guide. It should result on strategies and methodologies that should be followed to manage the risks, roles and responsabilities of each team member, the funding needed to perform these activities and defined risk categories. The definition of risk probability and impacts, which is usually arranged in a scale of five levels is very important, in order to understand and classify the impact that the identified risks can make on the project. The scale should include the probability of occurence, the cost of each level of probability in case of any event and the description of the impact on the project.

Reporting formats and tracking documents should also be elaborated to simplify how risks will be communicated.
[[File:IdentifyRisks.PNG|thumb|left|300px|Figure 3: Identify Risks: Inputs, Tools & Techniques, and Outputs <ref name="IR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.409'' </ref>.]]

====Identify Risks====
[[File:TotalRisk.PNG|thumb|left|300px|Figure 4: Risk identification, inspired from: "Construction Risk Management" <ref name="RIC"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.116.'' </ref>.]]
This is the process where the team should identify probable risks that could have both positive and negative impact on the project and gather them according to the risk plan previously done. This process is performed throuhgout the project. The inputs, tools & techniques and outputs that the team should follow are shown in Figure 3.

In this process is very important to involve the project team so they can develop and maintain a sense of ownership and responsibility for identified individual project risks, the level of overall project risk, and associated risk response actions. In construction projects, the previous experience of each member of the team is specially important in risk identification, a brainstorming meeting could be very helpful to create a list of possible threats or opportunities. Identify Risks is an iterative process, since new individual project risks may emerge as the project progresses through its life cycle and the level of overall project risk will also change.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

Even though, every project is different and specially construction projects have a high level of uncertainty, external resources could also be taken into account, such as academic studies, industry studies and records from the same organization. The target is to have a list of every possible risk or uncertainty factors that affect productivity, cost, time, quality and performance, so the project management could categorize them according to the risk plan. This list includes the principal risks of all major parties (contractors, designers and owners) involved in a construction project.

It is also important that if any risk happens, the team have a prepared document regarding lessons learned, so this could help in future projects and identifying potential threats and opportunities. It can also be updated with information on techniques that were effective in identifying risks to improve performance in later phases or other projects.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref>.

====Perform Qualitative Risk Analysis====
[[File:PerformQualitativeRiskAnalysis.PNG|thumb|right|300px|Figure 5: Perform Qualitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.419'' </ref>.]]
Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. The key benefit of this process is that it focuses efforts on high-priority risks. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 5.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>.

As previously said, construction projects have a high level of uncertainty and the expertise of the team could be very useful to develop a hierarchical chart, categorizing the previously identified risks by the probability of occurence and its impact on project objectives. Risks
can be prioritized for further analysis and planning of risk responses based on their probability and impacts. Industry studies of similar projects and published material could also be used, even though it could be hard to compare external projects with an specific projects.

====Perform Quantitative Risk Analysis====
[[File:PerformQuantitativeRiskAnalysis.PNG|thumb|right|300px|Figure 6: Perform Quantitative Risk Analysis: Inputs, Tools & Techniques, and Outputs <ref name="PQNRA"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.428'' </ref>.]]
Is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. The key benefit of this process is that it quantifies overall project risk exposure, and it can also provide additional quantitative risk information to support risk response planning. This process is not required for every project, but where it is used, it is performed throughout the project. The inputs and outputs of this process are depicted in Figure 6.

Perform Quantitative Risk Analysis is not required for all projects. Undertaking a robust analysis depends on the availability of high-quality data about individual project risks and other sources of uncertainty, as well as a sound underlying project baseline for scope, schedule, and cost. Quantitative risk analysis usually requires specialized risk software and expertise in the development and interpretation of risk models.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>. Moreover, this methods are not very reliable in construction projects because of the uncertainty levels of the risks and the difficulty of quantifying the economical impact of this events.

====Plan Risk Responses====
[[File:PlanRiskResponses.PNG|thumb|right|300px|Figure 7: Plan Risk Responses: Inputs, Tools & Techniques, and Outputs <ref name="PRR"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.437'' </ref>.]]
Plan Risk Responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks. The key benefit of this process is that it identifies appropriate ways to address overall project risk and individual project risks. This process also allocates resources and inserts activities into project documents and the project management plan as needed. This process is performed throughout the project. The inputs, tools and techniques, and outputs of the process are depicted in Figure 7.<ref name="PMBOK"> ''A guide to the project management body of knowledge. (2017). 6th ed. Newtown Square, Pennsylvania, USA: Project Management Institute, pp.395-458'' </ref>

The expertise of the team involved in the project is again highly important for this process, the target is to propose specific advice to minimize risks and their economic consequences. The process in construction projects are more complex than in most other domains because of the fact that uncertainty factors are expressed in natural language with jargon.<ref name="CRM"> ''Kangari, R. (1988). Construction Risk Management. Civ. Engng Syst., Vol. 5, p.114-120.'' </ref> Again the complexity of this process in construction projects is due to the difficulty to quantify the consequences of any threat or benefit, but a contingency plan should be developed for major risks. The project manager and the team should know exactly what to do in case of any event, even though the economic impact remains unknown.

==Limitations==

==References==
<references />

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A Guide to Risk Management in Construction Projects

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A Guide to Risk Management in Construction Projects

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A Guide to Risk Management in Construction Projects

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A Guide to Risk Management in Construction Projects

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Articles Spring Term 2019

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=Overview of 2019 Wiki articles=

{| class="wikitable sortable"
|+Spring Term 2019 Wiki Articles
|13
|Dimitrios
|Kokkinopoulos
|s182528
|[[Due Diligence on Wind Farm Assets]]
|-
|-
|13
|Evgenia
|Chatzivasileiou
|s182299
|[[Project Sponsorship]]
|-
|-
|13
|Theodoros
|Seremetakis
|s183272
|[[Investment portfolio management]]
|-
|5
|Federica
|Menti
|S182994
|[[Getting Things Done (David Allen)]]
|-
|-
|2
|Panagiotis
|Vounatsos
|PanosVoun
|[[Epistemic vs. Aleatory uncertainty]]
|-
|-
|9
|Jack
|Frain
|Fraino12345
|[[Stakeholder Management Processes in Projects]]
|-
|-
|14
|Alexandros
|Bellos
|AlexBellos
|[[Effective Brainstorming]]
|-
|-
|Group Number Pending
|Edoardo
|Braccini
|EdoBraa
|[[Benefits Realisation Management (BRM)]]
|-
|-
|2
|Andrea
|Könnecke
|Andrea Könnecke
|[[Shannon & Weaver Model for Communication]]
|-
|-
|Group 10
|Srdjan
|Gluhovic
|srdjangluhovic
|[[Project Scope Control Management]]
|-
|-
|11
|Casper
|Claudinger
|Casper
|[[Managing projects in a functional organization]]
|-
|-
|8
|Ronglian
|Wei
|Panda Lian
|[[Conceptual levels of competence]]
|-
|-
|4
|Jesper
|Wolters
|Wolters
|[[Resource allocation and crashing]]
|-
|-
|3
|Oliwia
|Sonia
|Lubiarz
|[[Meeting Management]]
|-
|-
|Group Number Pending
|Francisco
|Almirudis
|Frank Almirudis
|[[Scheduling: Critical path, PERT and Gantt]]
|-
|-
|Group Number Pending
|Bartlomiej
|Maciej
|Tyczynski
|[[Outcome, output, benefit]]
|-
|-
|16
|Brynja
|Benediktsdóttir
|Brynja Ben.
|[[The Periodic Table of Project Management]]
|-
|-
|16
|Jonina Thora
|Einarsdottir
|Jonina Thora
|[[Project Management Success Factors]]
|-
|-
|Group Number 5
|Pedro
|Lopes da Cunha
|PedroLopesCunha
|[[Project Management: Cost vs. Price]]
|-
|-
|1
|Sarantis
|Pavlidis
|Sarantis
|[[Types of activities]]
|-
|Group Number Pending
|Rikke
|Andersen
|RikkeA
|[[Cognitive Bias]]
|-
|-
|12
|Johan
|Hilsøe
|s154073
|[[Unidentified Risks]]
|-
|-
|Group Number Pending
|Mads
|Kronholm
|Mads Kronholm
|[[DMAIC]]
|-
|-
|Group 11
|Anne
|Dittmann
|Anne
|[[Organisational Design and Structures]]
|-
|-
|12
|Thea
|Pedersen
|Thea
|[[Agile One Page Project Management]]
|-
|-
|13
|Madalina
|Grigoras
|s186465
|[[Value to whom?]]
|-
|-
|4
|Martin
|Eberholst Carlsen
|Martineberholstcarlsen
|[[Project Initiation Management in construction]]
|-
|-
|6
|Rasmine
|Søgren
|s145320
|[[Outcome]]
|-
|-
|6
|Julie
|Rostgaard Andersen
|s123790
|[[Use of Business Model Canvas to Kickstart the project management]]
|-
|-
|8
|Dilan
|Casablanca
|Dilan Casablanca
|[[Prefabricated houses (industrial process)]]
|-
|5
|Sandro
|Pina
|SandroPina
|[[Create a pitch]]
|-
|-
|11
|Kristoffer
|Glahn
|s133378
|[[Vision statement]]
|-
|-
|Group Number 8
|Maria Christina
|Prokou
|Mprokou
|[[Negotiation Skills]]
|-
|-
|3
|Habib (Seyed)
|Bahrami
|Habib
|[[Project Uniqueness]]
|-
|-
|12
|Amani
|Alabdullah
|s173307
|[[Integrated Project Delivery (IPD)]]
|-
|-
|12
|Andreas
|Riposati
|Ripo
|[[Basic estimation techniques]]
|-
|-
|10
|Mark
|Christiansen
|s152736
|[[Stephen Covey's seven principles]]
|-
|-
|6
|Signe
|Bjerrum
|s141886
|[[The Triple Constraint in Project Management]]
|-
|-
|9
|Sebastian
|Walther
|Sebastian
|[[Value Canvas in Projects]]
|-
|-
|9
|Keegan
|van Kooten
|Keegan
|[[Planning Poker for Improved Project Delivery]]
|-
|-
| 8
|Hagos Zeru
|Gide
|Trhas
|[[BIM as a project management tool on construction companies]]
|-
|-
|-
|-
|Group Number Pending
|William
|Durant
|Mangum
|[[Crisis Management when there is a Project Cost Overrun]]
|-
|-
|-
|9
|Shri Tejas
|Vedula
|Tehass 7
|[[The implementation of KPIs]]
|-
|-
|9
|Casper
|Gandil Qvortrup
|CasperGandil
|[[Application of Balanced Scorecard in Portfolio Management]]
|-
|-
|12
|Veronika Zsuzsanna
|Bankó
|Veronikabanko
|[[Determining Measurement Methods in Earned Value Management]]
|-
|-
|Group Number Pending
|Mercedes
|Hachmann
|Mercedes Hachmann
|[[Design Thinking]]
|-
|-
|Group 1
|Rasmus
|Bjerg
|Rasmusbjerg
|[[Cash flow and milestone payments]]
|-
|-
|15
|Moritz
|Gutheil
|MoritzGutheil
|[[Dan Pink on Motivation]]
|-
|-
|Group 5
|Giorgia
|Scartozzi
|GiorgiaS
|[[Resource-Constrained Critical Path Method]]
|-
|-
|Group 3
|Hannah
|Kürschner
|Hannah
|[[Projects integrating Sustainable Methods]]
|-
|-
|Group 17
|Daniel
|Vorting
|s141018
|[[Product family master plan]]
|-
|-
|Group 10
|André
|Condamine
|S173349
|[[Belbin's Team Roles]]
|-
|-
|7
|Kristine
|Kaulberg
|Kristbk
|[[Governance of Project Management]]
|-
|Group Number 17
|Sai Mahesh
|Nadukuru
|Sm nadukuru
|[[Process Planning and Cost Estimation]]
|-
|-
|7
|Gustav
|Josephsen
|Gustav Josephsen
|[[Potentials of Key Performance Indicators]]
|-
|-
|11
|Rikke Louise Kjær
|Knudsen
|RikkeK
|[[Milestones in Project Planning]]
|-
|-
|2
|Hedin
|Gunnarsstein Poulsen
|hedinp
|[[Resources]]
|-
|-
|3
|Isabel
|Wang
|isabel.w
|[[Benefits Realization Management as a key driver of Project Management Effectiveness]]
|-
|12
|Frederik
|Sørensen
|FTSN
|[[Hersey and Blanchard's Situational Leadership]]
|-
|4
|Simon
|Muurholm Hansen
|Muurholm
|[[Performance-based contracting]]
|-
|6
|Charles
|Hemmingsen
|s122801
|[[Programmification of work]]
|-
|17
|Alberto
|Tognon
|s172420
|[[Project Management in pharmaceutical industry]]
|-
|17
|Stefano
|Di Lenardo
|s190056
|[[Risk management in industry 4.0]]
|-
|5
|Arndt
|Oschinsky
|AJO
|[[The Project Charter]]
|-

|16
|Dana Rut
|Gunnarsdóttir
|s180289
|[[Project Management Reporting]]
|-

|-
|8
|Anna
|Shevchenko
|Anutka
|[[SAFe]]
|-

|-
|1
|Thomas
|Boel
|Morning
|[[Cost Control]]
|-

|-
|6
|Ole
|Moe
|s186359
|[[Prince2]]
|-

|-
|2
|Nikolaj
|Petersen
|s173344
|[[Managing habits in a project]]
|-

|-
|15
|Sofie
|Martinussen
|Sofie Martinussen
|[[Improve communication with active listening]]
|-

|-
|2
|Sophia
|Nielsen
|s114901
|[[Adaptive Project Management]]
|-

|-
|10
|Costanza
|Sesti
|Costanza Sesti
|[[Systems Theory in Project Management]]
|-
|-
|-
|7
|Mathias
|Steuch
|Msteuch
|[[SMART goals - A Project Manager Tool]]
|-
|-
|-
|16
|Marie
|Bukkholm
|s182741
|[[Resource breakdown structure]]
|-
|-
|16
|Karina
|Kindingstad
|Karina
|[[Benefits of systems engineering]]
|-
|-
|16
|Robert
|Kjønås
|RobertK
|[[Human behaviors in scheduling]]
|-
|-
|8
|Bashir
|Isse
|BJI
|[[Decision-making]]
|-
|-
|15
|Andreas
|Tuxen
|S153408
|[[Requirements management using SysML]]
|-
|-
|-
|3
|Helene
|Gravdal
|S182610
|[[Key performance indicator (KPI)]]
|-
|17
|Rajat
|Kumar
|S181289
|[[Risk Log]]
|-
|-
|9
|Osman Furkan
|Simsek
|S182730
|[[Maslow's Hierarchy of Needs and Project Management]]
|-
|1
|Søren
|Bojesen
|s135284
|[[Evolutionary purpose as motivational driver in project and programme management]]
|-
|15
|Mads Mohr
|Madsen
|s144416
|[[Application of Agile]]
|-
|-
|7
|Helena Brandt
|Rejndrup
|S145492
|[[Leadership vs. management]]
|-
|-
|13
|Behzad
|Sanie
|S122919
|[[Four types of dependency]]
|-
|-
|1
|Kevin
|Lim
|s123368
|[[What is SWOT]]
|-
|-
|1
|Alexander
|Bagge
|s123908
|[[Risk identification methods]]
|-
|-
|7
|Mie Cuhre
|Anker
|s143895
|[[Optimism bias, Strategic Misinterpretation and Reference Class Forecasting (RCF)]]
|-
|-
|10
|Martin
|Kirk
|s162004
|[[Communication and Media Richness Assurance in High-performance Projects]]
|-
|-
|11
|Birita
|Poulsen
|s144296
|[[Designing Organizational Structure]]
|-
|-
|13
|Simone
|Bruhn
|s152998
|[[Gantt chart and Scheduling techniques]]
|-
|-
|14
|Rasmus
|Vedel
|S143855
|[[Conflict Resolution in Project Management]]
|-
|-
|11
|Lars Brandt
|Holst
|s180230
|[[Quality Management Systems]]
|-
|-
|4
|Tianhao
|Chen
|Tianhao
|[[Action elements]]
|-
|-
|15
|Tom
|Ruetgers
|Tom_Ruetgers
|[[Crisis management]]
|-
|-
|4
|Jokin
|Brito
|s182753
|[[A Guide to Risk Management in Construction Projects]]
|-
|-

Articles Spring Term 2019

2019-02-20T15:24:04Z

S182573:

=Overview of 2019 Wiki articles=

{| class="wikitable sortable"
|+Spring Term 2019 Wiki Articles
|13
|Dimitrios
|Kokkinopoulos
|s182528
|[[Due Diligence on Wind Farm Assets]]
|-
|-
|13
|Evgenia
|Chatzivasileiou
|s182299
|[[Project Sponsorship]]
|-
|-
|13
|Theodoros
|Seremetakis
|s183272
|[[Investment portfolio management]]
|-
|5
|Federica
|Menti
|S182994
|[[Getting Things Done (David Allen)]]
|-
|-
|2
|Panagiotis
|Vounatsos
|PanosVoun
|[[Epistemic vs. Aleatory uncertainty]]
|-
|-
|9
|Jack
|Frain
|Fraino12345
|[[Stakeholder Management Processes in Projects]]
|-
|-
|14
|Alexandros
|Bellos
|AlexBellos
|[[Effective Brainstorming]]
|-
|-
|Group Number Pending
|Edoardo
|Braccini
|EdoBraa
|[[Benefits Realisation Management (BRM)]]
|-
|-
|2
|Andrea
|Könnecke
|Andrea Könnecke
|[[Shannon & Weaver Model for Communication]]
|-
|-
|Group 10
|Srdjan
|Gluhovic
|srdjangluhovic
|[[Project Scope Control Management]]
|-
|-
|11
|Casper
|Claudinger
|Casper
|[[Managing projects in a functional organization]]
|-
|-
|8
|Ronglian
|Wei
|Panda Lian
|[[Conceptual levels of competence]]
|-
|-
|4
|Jesper
|Wolters
|Wolters
|[[Resource allocation and crashing]]
|-
|-
|3
|Oliwia
|Sonia
|Lubiarz
|[[Meeting Management]]
|-
|-
|Group Number Pending
|Francisco
|Almirudis
|Frank Almirudis
|[[Scheduling: Critical path, PERT and Gantt]]
|-
|-
|Group Number Pending
|Bartlomiej
|Maciej
|Tyczynski
|[[Outcome, output, benefit]]
|-
|-
|16
|Brynja
|Benediktsdóttir
|Brynja Ben.
|[[The Periodic Table of Project Management]]
|-
|-
|16
|Jonina Thora
|Einarsdottir
|Jonina Thora
|[[Project Management Success Factors]]
|-
|-
|Group Number 5
|Pedro
|Lopes da Cunha
|PedroLopesCunha
|[[Project Management: Cost vs. Price]]
|-
|-
|1
|Sarantis
|Pavlidis
|Sarantis
|[[Types of activities]]
|-
|Group Number Pending
|Rikke
|Andersen
|RikkeA
|[[Cognitive Bias]]
|-
|-
|12
|Johan
|Hilsøe
|s154073
|[[Unidentified Risks]]
|-
|-
|Group Number Pending
|Mads
|Kronholm
|Mads Kronholm
|[[DMAIC]]
|-
|-
|Group 11
|Anne
|Dittmann
|Anne
|[[Organisational Design and Structures]]
|-
|-
|12
|Thea
|Pedersen
|Thea
|[[Agile One Page Project Management]]
|-
|-
|13
|Madalina
|Grigoras
|s186465
|[[Value to whom?]]
|-
|-
|4
|Martin
|Eberholst Carlsen
|Martineberholstcarlsen
|[[Project Initiation Management in construction]]
|-
|-
|6
|Rasmine
|Søgren
|s145320
|[[Outcome]]
|-
|-
|6
|Julie
|Rostgaard Andersen
|s123790
|[[Use of Business Model Canvas to Kickstart the project management]]
|-
|-
|8
|Dilan
|Casablanca
|Dilan Casablanca
|[[Prefabricated houses (industrial process)]]
|-
|5
|Sandro
|Pina
|SandroPina
|[[Create a pitch]]
|-
|-
|11
|Kristoffer
|Glahn
|s133378
|[[Vision statement]]
|-
|-
|Group Number 8
|Maria Christina
|Prokou
|Mprokou
|[[Negotiation Skills]]
|-
|-
|3
|Habib (Seyed)
|Bahrami
|Habib
|[[Project Uniqueness]]
|-
|-
|12
|Amani
|Alabdullah
|s173307
|[[Integrated Project Delivery (IPD)]]
|-
|-
|12
|Andreas
|Riposati
|Ripo
|[[Basic estimation techniques]]
|-
|-
|10
|Mark
|Christiansen
|s152736
|[[Stephen Covey's seven principles]]
|-
|-
|6
|Signe
|Bjerrum
|s141886
|[[The Triple Constraint in Project Management]]
|-
|-
|9
|Sebastian
|Walther
|Sebastian
|[[Value Canvas in Projects]]
|-
|-
|9
|Keegan
|van Kooten
|Keegan
|[[Planning Poker for Improved Project Delivery]]
|-
|-
| 8
|Hagos Zeru
|Gide
|Trhas
|[[BIM as a project management tool on construction companies]]
|-
|-
|-
|-
|Group Number Pending
|William
|Durant
|Mangum
|[[Crisis Management when there is a Project Cost Overrun]]
|-
|-
|-
|9
|Shri Tejas
|Vedula
|Tehass 7
|[[The implementation of KPIs]]
|-
|-
|9
|Casper
|Gandil Qvortrup
|CasperGandil
|[[Application of Balanced Scorecard in Portfolio Management]]
|-
|-
|12
|Veronika Zsuzsanna
|Bankó
|Veronikabanko
|[[Determining Measurement Methods in Earned Value Management]]
|-
|-
|Group Number Pending
|Mercedes
|Hachmann
|Mercedes Hachmann
|[[Design Thinking]]
|-
|-
|Group 1
|Rasmus
|Bjerg
|Rasmusbjerg
|[[Cash flow and milestone payments]]
|-
|-
|15
|Moritz
|Gutheil
|MoritzGutheil
|[[Dan Pink on Motivation]]
|-
|-
|Group 5
|Giorgia
|Scartozzi
|GiorgiaS
|[[Resource-Constrained Critical Path Method]]
|-
|-
|Group 3
|Hannah
|Kürschner
|Hannah
|[[Projects integrating Sustainable Methods]]
|-
|-
|Group 17
|Daniel
|Vorting
|s141018
|[[Product family master plan]]
|-
|-
|Group 10
|André
|Condamine
|S173349
|[[Belbin's Team Roles]]
|-
|-
|7
|Kristine
|Kaulberg
|Kristbk
|[[Governance of Project Management]]
|-
|Group Number 17
|Sai Mahesh
|Nadukuru
|Sm nadukuru
|[[Process Planning and Cost Estimation]]
|-
|-
|7
|Gustav
|Josephsen
|Gustav Josephsen
|[[Potentials of Key Performance Indicators]]
|-
|-
|11
|Rikke Louise Kjær
|Knudsen
|RikkeK
|[[Milestones in Project Planning]]
|-
|-
|2
|Hedin
|Gunnarsstein Poulsen
|hedinp
|[[Resources]]
|-
|-
|3
|Isabel
|Wang
|isabel.w
|[[Benefits Realization Management as a key driver of Project Management Effectiveness]]
|-
|12
|Frederik
|Sørensen
|FTSN
|[[Hersey and Blanchard's Situational Leadership]]
|-
|4
|Simon
|Muurholm Hansen
|Muurholm
|[[Performance-based contracting]]
|-
|6
|Charles
|Hemmingsen
|s122801
|[[Programmification of work]]
|-
|17
|Alberto
|Tognon
|s172420
|[[Project Management in pharmaceutical industry]]
|-
|17
|Stefano
|Di Lenardo
|s190056
|[[Risk management in industry 4.0]]
|-
|5
|Arndt
|Oschinsky
|AJO
|[[The Project Charter]]
|-

|16
|Dana Rut
|Gunnarsdóttir
|s180289
|[[Project Management Reporting]]
|-

|-
|8
|Anna
|Shevchenko
|Anutka
|[[SAFe]]
|-

|-
|1
|Thomas
|Boel
|Morning
|[[Cost Control]]
|-

|-
|6
|Ole
|Moe
|s186359
|[[Prince2]]
|-

|-
|2
|Nikolaj
|Petersen
|s173344
|[[Managing habits in a project]]
|-

|-
|15
|Sofie
|Martinussen
|Sofie Martinussen
|[[Improve communication with active listening]]
|-

|-
|2
|Sophia
|Nielsen
|s114901
|[[Adaptive Project Management]]
|-

|-
|10
|Costanza
|Sesti
|Costanza Sesti
|[[Systems Theory in Project Management]]
|-
|-
|-
|7
|Mathias
|Steuch
|Msteuch
|[[SMART goals - A Project Manager Tool]]
|-
|-
|-
|16
|Marie
|Bukkholm
|s182741
|[[Resource breakdown structure]]
|-
|-
|16
|Karina
|Kindingstad
|Karina
|[[Benefits of systems engineering]]
|-
|-
|16
|Robert
|Kjønås
|RobertK
|[[Human behaviors in scheduling]]
|-
|-
|8
|Bashir
|Isse
|BJI
|[[Decision-making]]
|-
|-
|15
|Andreas
|Tuxen
|S153408
|[[Requirements management using SysML]]
|-
|-
|-
|3
|Helene
|Gravdal
|S182610
|[[Key performance indicator (KPI)]]
|-
|17
|Rajat
|Kumar
|S181289
|[[Risk Log]]
|-
|-
|9
|Osman Furkan
|Simsek
|S182730
|[[Maslow's Hierarchy of Needs and Project Management]]
|-
|1
|Søren
|Bojesen
|s135284
|[[Evolutionary purpose as motivational driver in project and programme management]]
|-
|15
|Mads Mohr
|Madsen
|s144416
|[[Application of Agile]]
|-
|-
|7
|Helena Brandt
|Rejndrup
|S145492
|[[Leadership vs. management]]
|-
|-
|13
|Behzad
|Sanie
|S122919
|[[Four types of dependency]]
|-
|-
|1
|Kevin
|Lim
|s123368
|[[What is SWOT]]
|-
|-
|1
|Alexander
|Bagge
|s123908
|[[Risk identification methods]]
|-
|-
|7
|Mie Cuhre
|Anker
|s143895
|[[Optimism bias, Strategic Misinterpretation and Reference Class Forecasting (RCF)]]
|-
|-
|10
|Martin
|Kirk
|s162004
|[[Communication and Media Richness Assurance in High-performance Projects]]
|-
|-
|11
|Birita
|Poulsen
|s144296
|[[Designing Organizational Structure]]
|-
|-
|13
|Simone
|Bruhn
|s152998
|[[Gantt chart and Scheduling techniques]]
|-
|-
|14
|Rasmus
|Vedel
|S143855
|[[Conflict Resolution in Project Management]]
|-
|-
|11
|Lars Brandt
|Holst
|s180230
|[[Quality Management Systems]]
|-
|-
|4
|Tianhao
|Chen
|Tianhao
|[[Action elements]]
|-
|-
|15
|Tom
|Ruetgers
|Tom_Ruetgers
|[[Crisis management]]
|-
|-
4
|Jokin
|Brito
|s182753
|[[A Guide to Risk Management in construction projects]]
|-
|-

A Guide to Risk Management in Construction Projects

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A Guide to Risk Management in Construction Projects

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A Guide to Risk Management in Construction Projects

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A Guide to Risk Management in Construction Projects

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A Guide to Risk Management in Construction Projects

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File:PRMoverview.PNG

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A Guide to Risk Management in Construction Projects

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A Guide to Risk Management in Construction Projects

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