Risk Management in Construction Projects
Uncertainty is a fundamental factor of projects. We know that we cannot predict the future with certainty. Uncertainty converse all of the environmental conditions in which a project has to operate, e.g. costs of people or materials, etc. [1]
There are two types of uncertainty; uncertain effectiveness and uncertain efficiency. These uncertainties have different effects on a project. Uncertain effectiveness can affect the quality of the project, such as the understanding of requirements, prioritization of conflicting requirements or reasonableness of requirements. While uncertain efficiency can affect the quality of process performance against the plan, such as the availability of resources, quality of the planning process, technological capabilities, the ability and drive of the people.[2]
Risk is an uncertain event or condition which can have a positive or negative effect on one or more objectives in a construction project, such as; scope, schedule, cost, performance and quality. One or more of these can be of impact on the project, and have both positive and negative outcomes. Positive- and negative-outcome risks are referred to as opportunities and threats for the project, and it is the management of all these that constitute the Risk Management in Construction Projects.
Risks are present already from the time a project starts. Therefore it is important to prioritize risk management, since it will likely lead to more problems if handling the risks is procrastinated.
The goal of risk management is to increase the likelihood and impact of positive events and meanwhile decrease the likelihood and impact of negative events in construction projects. [3]
For understanding risk, we have to look at the four fundamental elements, which are defined as risk management process:
- Identify
- Assess
- Respond
- Control
Risk management is a learning process through time and through the whole project life cycle. [4]
Contents |
Identification
Identification of risks is the first step through the risk management process. This process is usually influenced by experience from previous projects and information gathered by brainstorming sessions with the team when starting a construction project [4].
Risk identification is a repeated process due to the fact that new risks may occur or become known through a construction project’s life cycle. Each risk should be understood clearly in order to handle them effectively. [3]
The identification process helps determine potential risk events that might either have a positive (opportunities) or negative (threats) impact on the construction project’s goals [5].
Rumsfeld's known-knowns concept
Donald Rumsfeld’s known knowns concept helps categorize types of risks associated with a project. The known-knowns refers to things that are known to be known, risks that already are identified/planned. The known-unknowns refers to things that we know we don’t know [2], an example could be extra employees in the construction processes due to a schedule delay; if the construction project has to be put on hold due to bad weather conditions. The unknown-knowns refers to things that should be known but is known wrongly, or not known at all [2]; these are, for example, risks that someone already knows about but is keeping private[4]. Lastly, the unknown-unknowns refers to things that are unknown to be unknown [2] or “black swans”. These are risks that have not been identified and therefore are unknown[4].
Assessment and Analysis
Response
Control
References
- ↑ Taylor, Harvey | 2010 | Project Management | (4th Edition)
- ↑ 2.0 2.1 2.2 2.3 2.4 2.5 2.6 Geraldi, Joana | Thuesen, Christian | Oehmen, Josef | 2016 | "How to DO projects" | Uncertainty |(Version 0.5)
- ↑ 3.0 3.1 Project Management Institute | 2013 | "A Guide to Project Management Body of Knowledge" | (5th Edition)
- ↑ 4.0 4.1 4.2 4.3 Winch, Graham M. | 2010 | "Managing Construction Projects" | (2nd Edition)
- ↑ Dansk Standard| 2013 | "Guidance on project management" | DS/ISO 21500 | (2nd version)
