CB 715-M

Risk Management in
Construction

Dr. Eng. Ahmed Eldeep

Ph.D., PMP®, PMI-RMP®, SFC, 6σ
Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 1
Welcome

Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 2

Course Course Description
Description /
This course is designed to provide students with the knowledge concerned with
Objectives
principals of risk management and project risks in construction. Risk identification

and risk analysis/assessments. Risk processes and risk response plans.

Practical aspects implementing risk management.

Course Objectives

To provide students with the fundamentals and deep knowledge of risk

management in construction.

Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 3

 Learning Objectives

▪ Principles and concepts; ▪ Monitor project risks;

▪ Definitions and terms; ▪ Practical aspects of implementing risk

management (e.g. risk register.)
▪ Risk Management Processes;

▪ Risk identification, assessments;

▪ Quantification and prioritization of risks;

▪ Risk response plans;

▪ Managing the risk management process;

Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 4

 Course Contents

Introduction Plan risk management, Plan risk

overview and identify risks responses

Risk management Qualitative and Manage and

processes quantitative risk monitor risks
analysis

Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 5

Assessment 20 %
Absence

Assignments 20 %

Midterm Exam 20 %

Final Exam 40 %

▪ You will be expected to Write 2 assignments.

▪ Each assignment will have a due date, No late submission.

Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 6

 Principles and Concepts

Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 7

What is Risk? Project risk is an uncertain event or condition that, if it occurs, has a positive
or negative effect on the project.

Opportunities or Threats

This definition includes two key dimensions of risk: uncertainty and effect
on a project’s objectives.
▪ When assessing the importance of a project risk, these two dimensions
must both be considered. The uncertainty dimension may be described
using the term “probability” and the effect may be called “impact”
(though other descriptors are possible, such as “likelihood” and
“consequence”).
▪ It is important to address both threats and opportunities within a unified
Project Risk Management process.
Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 8
 • Risks are uncertain future events or conditions which may or may
What is Risk?
not occur, but which would matter if they did occur.
• Threats which occur may be called issues or problems; opportunities
which occur may be called benefits. Both issues/problems and benefits
entail project management actions that are outside the scope of the
Project Risk Management process.

Project Risk Management Goals

✓ Identify project risks which could considered as Threats;

✓ Develop strategies which either significantly reduce their effect on

project or take steps to avoid the threats;

✓ At the same time, steps should be taken to maximize associated

Opportunities.

Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 9

Risk VS Issue
Risk Issue

Project risk is an uncertain event Something that is occurring now

or condition that, if it occurs, has in the present. You know about it,
a positive or negative effect on and it is being dealt with.
the project.

Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 10

 Definitions

• Uncertainty: Lack of knowledge that reduce confidence in conclusions.

• Risk Averse: Someone who doesn’t want to take risks.

• Risk Seeking: Someone who want to take risks.

Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 11

 Definitions

• Risk appetite: The degree an organization or individual of willing to take Risks.

• Risk threshold: The limits of the Risk approval by organization. Or The level of risk exposure above which

risks are addressed and below which risks may be accepted.

Risk Threshold

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Risk Attitudes & Risk Tolerances

Risk Seekers Risk Neutral Risk Tolerant

(Risk Taker) Risk Averse

▪ Looks at Risk as a
▪ Uncomfortable with risk ▪ Embraces Risk for ▪ Don’t worry too much
challenge.
▪ Avoids Risks Future Payoff in a about the risk unless
▪ Sometimes this
▪ Not creative and supportive calculated way. it becomes an Issue.
excessive optimism
for new ideas
cause them losses

Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 13

Risk Attitudes & Risk Tolerances

❑ Risk Attitude is inbuilt in human nature, some people are scared of it and some others
enjoy. It truly depends on person to person that how he look into the risk.

Risk Seeker company vs. Risk Averse Company

Risk
Risk
Seeker
Averse
Young
Conservative
employees
and old
companies
New
Company

Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 14

 Project Risk Management

Risk Parameters

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Risk Parameters

Frequency
When evaluating risk the following should
determined;

• Probability : How much percent risk may

occur. Risk
Probability Impact
• Impact: Range of possible outcomes (Time
parameters
– Money).

• Timing: When the risk is expected to take

place.
Timing
• Frequency: How often this risk is expected
to happen.

Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 16

 Risk Parameter

Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 17

 Project Risk Management

The objectives of project risk management:

✓ Increase the probability and/or impact of positive risks;

✓ Decrease the probability and/or impact of negative risks,
in order to optimize the chances of Project Success

▪ A project risk can be decreased significantly by actively

planning, identifying, assessing, and developing responses
to potential risk events and managing their impact on a project.

Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 18

 Project Risk Management

Decrease
Greater probability
Control of of negative
project events

Increase
Proactive probability
approach of Positive
Risk events
Management

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 Project Risk Management

Key concepts for project risk management

Risk exists at two levels within every project

❑ Individual project risk can affect one or more project

objectives in a negative or positive way.

❑ Overall project risk is the effect of uncertainty on the project as

a whole, arising from all sources of uncertainty including
individual risks, representing the exposure of stakeholders to the
implications of variations in project outcome, both positive and negative.

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Key concepts Risk is every where
about risk
Imagine a Situation, you are planning a small vacation trip to nearby

city / country with your family.

You are discussing with your family members / Friends to understand

the risk involved, if you are planning to go on your car.

Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 21

 Risk is every where

First Step – Identify the Risk Involved.

✓ Car could breakdown;

✓ Car accident;

✓ Get lost; Your vacation trip

✓ Hotel Reservation problem;

✓ What happens if purse is stolen;

✓ Rain can affect your trip.

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 Risk is every where

First Step - Record risks in RISK REGISTER

Risk ID T/O Risk Description Probability Impact Score Response

R1 T Car could breakdown

R2 T Car accident

R3 T Get lost

R4 T Hotel Reservation problem

What happens if purse is
R5 T
stolen
R6 T Rain can affect your trip

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 Risk is every where

Second Step – Qualitative risk analysis

Risk ID T/O Risk Description Probability Impact Score Response

R1 T Car could breakdown Medium Medium Medium

R2 T Car accident High Low Low

R3 T Get lost High High High

R4 T Hotel Reservation problem Medium High Medium

What happens if purse is
R5 T High Low Low
stolen
R6 T Rain can affect your trip Medium Low Low

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 Risk is every where

Third Step – Quantitative risk analysis - Quantifies the risk exposure

Expected
Risk ID T/O Risk Description Probability Impact Response
Value
R1 T Car could breakdown 0.5 1000 500

R2 T Car accident 0.1 2000 200

R3 T Get lost 0.75 600 450

R4 T Hotel Reservation problem 0.3 2500 750

What happens if purse is 6000
R5 T 0.1 600
stolen
R6 T Rain can affect your trip 0.1 1200 120

Total 620

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 Risk is every where

Fourth Step – Response plan

Risk Response
Risk ID T/O Risk Description Response
Owner

R1 T Car could breakdown Car dealer / Workshop List Mother

R2 T Car accident Car dealer / Workshop List Mother

R3 T Get lost GPS Father

R4 T Hotel Reservation problem List of all Hotel Daughter / Son

What happens if purse is Keep the money in different
R5 T Father
stolen locations
R6 T Rain can affect your trip List of all Hotel Daughter / Son

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 Stakeholder Risk Attitudes Understanding stakeholders’ attitudes toward
risk is an important component of risk
management planning

• The risk attitudes of the project stakeholders determine the extent to which an individual risk or overall
project risk matters.
• A wide range of factors influence risk attitude; These include the scale of the project within the
range of stakeholders’ overall activities, the strength of public commitments made about the
performance of the project, and the stakeholders’ sensitivity to issues such as environmental
impacts, industrial relations, and other factors.
• How risk is regarded is usually also strongly influenced by an organization’s culture. Different
organizations are more or less open, and this often impacts the way risk management can be applied.
• These attitudes should be identified and managed proactively. They may differ from one project to
another.
• In fact a single stakeholder may adopt different risk attitudes at various stages in the same
project.

Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 27

Create Risk
Strategy How would you describe the • What criteria determines inclusion
organization/ project’s risk appetite? in the risk register?
• Risk-seeking?
• Risk-neutral? Management Guidelines
First, understand risk
• Risk-averse?
parameters for the • Use qualitative (high, medium,
organization and the The risk threshold is tied to low, etc.)
project! individual and organizational risk or quantitative (numerical) ratings
appetites. Do you know: • Set a maximum risk exposure
• Which are too high to accept? level that can be managed without
escalation
• Which are low enough to just be
accepted?

Project professionals need to understand the risk appetite and threshold

for the project and the organization (the system within which it lives).

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 Introduction to Project Risk Management Processes

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 Introduction

• Risk is everywhere !!!

• From driving a car to parachuting, its’ inherent in the activities we

choose.

• Within a project, risk are unplanned events or conditions that can

have a positive or negative effect on its success.

• Not all risks are bad, but almost all are seen as threat.
Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 30
 Project Risk Management

▪ Project Risk Management aims to identify and prioritize risks in advance of their occurrence, and
provide action-oriented information to project managers. This orientation requires consideration of

events that may or may not occur and are therefore described in terms of likelihood or probability of

occurrence in addition to other dimensions such as their impact on objectives

▪ Project Risk Management is not an optional activity: it is essential to successful project

management.

▪ Project Risk Management should be applied to all projects and hence be included in project

plans and operational documents. In this way, it becomes an integral part of every aspect of managing

the project, in every phase and in every process group.

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 Project Risk Management

▪ Project Risk Management addresses the uncertainty in project estimates and assumptions.
Therefore, it builds upon and extends other project management processes. For instance, project
scheduling provides dates and critical paths based on activity durations and resource availability
assumed to be known with certainty. Quantitative risk analysis explores the uncertainty in the
estimated durations and may provide alternative dates and critical paths that are more realistic
given the risks to the project.

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 Understand Risk Management processes

Iterative Process
• It is the nature of projects that circumstances change as they are being planned and executed. The
amount of information available about risks will usually increase as time goes on.
• Some risks will occur while others will not, new risks will arise or be discovered, and the
characteristics of those already identified may change.
• As a result, the Project Risk Management processes should be repeated and the corresponding
plans progressively elaborated throughout the lifetime of the project.
• To ensure that Project Risk Management remains effective, the identification and analysis of risks
should be revisited periodically, the progress on risk response actions should be monitored, and the
action plans adjusted accordingly
• The development of an initial risk management plan and risk assessment is the start of the
process, not the end.

Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 33

 Project Risk Management

Responsibility for Project Risk Management

• It may be considered simplistic to say “risk management is everyone’s responsibility”. However it

is important that management of project risk is not left to a few risk specialists.
• Project Risk Management should be included as an integral part of all other project processes.
Since project risks can affect project objectives.
• Roles and responsibilities for Project Risk Management should be clearly defined and
communicated, and individuals should be held responsible and accountable for results. This includes
allocating responsibility for specific activities within the risk process, as well as for resulting actions
required to implement agreed-upon responses. Responsibility should also be allocated for ensuring
that risk-related lessons are captured for future use

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 Project Risk Management

Project Manager’s Role for Project Risk Management

✓ The project manager has particular responsibilities in relation to the Project Risk Management
process. The project manager has overall responsibility for delivering a successful project which
fully meets the defined objectives. The project manager is accountable for the day-to-day
management of the project, including effective risk management.
The role of the project manager may include;
• Encouraging senior management support for Project Risk Management activities.
• Determining the acceptable levels of risk for the project in consultation with stakeholders.
• Developing and approving the risk management plan.
• Promoting the Project Risk Management process for the project.
• Facilitating open and honest communication about risk within the project team and with management
and other stakeholders.

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 Project Risk Management

The role of the project manager may include;

• Approving risk responses and associated actions prior to implementation.
• Applying project contingency funds to deal with identified risks that occur during the project.
• Overseeing risk management by subcontractors and suppliers.
• Regularly reporting risk status to key stakeholders, with recommendations for appropriate strategic
decisions and actions to maintain acceptable risk exposure.
• Escalating identified risks to senior management where appropriate: such risks include any which are
outside the authority or control of the project manager, any which require input or action from outside
the project, and any for which the release of management reserve funds might be appropriate.
• Monitoring the efficiency and effectiveness of the Project Risk Management process.
• • Auditing risk responses for their effectiveness and documenting lessons learned.

Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 36

 Project Risk Management

Good Risk Management Practice

• Project Risk Management should be conducted on all projects.

• The degree, level of detail, sophistication of tools, and amount of time and resources applied

to Project Risk Management should be in proportion to the characteristics of the project under

management and the value that they can add to the outcome.

• Thus, a large project that provides value to an important customer would theoretically require

more resources, time, and attention to Project Risk Management than would a smaller, short-

term, internal project that can be conducted in the background with a flexible deadline.

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 Project Risk Management Different projects are exposed to different
levels of risk

Critical Success Factors for Project Risk Management

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Learning How Do we Manage Risks in the project?

Objectives
1) Plan Risk management;

2) Identify Risks;

3) Perform Qualitative Risk Analysis; Planning

4) Perform Quantitative Risk Analysis;

5) Plan Risk Responses;

6) Implement Risk Responses; Executing

7) Monitor Risks.
Monitor and Control

Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 39

 Please understand that most of the process has
Risk Register as a output

Skipping of One Processes- Sequence of Risk Management Processes

A project team can Skip Qualitative Risk Analysis when they have

enough expertise and experience with previous projects and risk

responses.

Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 40

Any Question..

Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 41

Let’s Get to Work!

Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 42

Feel Free To Contact With Me Any Time

Dr. Ahmed Eldeep

002-01063813636 @ah7madmo

/Dr-Eng Ahmed Eldeep [email protected]

/Dr. Ahmed Eldeep, Ph.D, PMP®, RMP®

Dr. Ahmed Eldeep, Ph.D., PMP ®, PMI-RMP® Introduction and Overview 43