A project risk means any possible event that could result in a positive or negative impact on a project’s objectives, in terms of time and/or cost. These are what we call the ‘Known Unknowns’ because we can identify them but are uncertain whether they will / will not happen. As a best practice, before the commencement of any project, the company attempting to deliver the proposed project should have a management procedure for Risks that are known by the project team and communicated with the stakeholders. This will differ from company to company and project to project so it is important as Project Controllers to not only be familiar with the procedure but contribute during its development, as it will be an integral part of controlling/mitigating cost/time overruns.
A well-written risk management plan for construction will contain information about how the project team will foresee risks, estimate their impact and define responses to these risks. During the development of the risk management plan, a thorough, or at least as thorough as possible given the knowledge then, risk workshop should be completed to identify risks and analyse their relative probability and potential impact. Any assumptions made at this point should be captured within the risk register and conveyed to all stakeholders. Each risk should be managed based on the stakeholder’s appetite for risk. Those that can be dealt with should be accepted, those that can be avoided eliminated, those too severe should be transferred and those that cannot be avoided reduced (-) / exploited (+). Only once the workshop is completed and the stakeholders are aware of risks to the project’s success should a project be authorised for commencement.
A register for both risks and opportunities should always be kept and archived creating a documented sequence of progression throughout the project, eliminating closed risks, and identifying new ones. It is recommended the above process shown in figure 1, highlighted in the blue box, should be completed monthly to give regular dynamic information to the necessary stakeholders. As part of the monthly process, existing risks to the project should be reviewed for any changes before new risks are discussed. Good risk management should note the originator as well as the owner of each risk with at least the following information listed:
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