Robust Risk Management Can Lower Costs

The intent of risk management is to identify potential issues before they occur; track these issues throughout planning, design, construction and operations; develop ways to accommodate these issues that best allocates risk; and monitor the issues as your project progresses to see if they develop and whether the plan to deal with them is appropriate.  A robust program of risk management helps to properly price and schedule a project and helps reduce those surprises that prevent a project from progressing as planned.  Tips for effective use of your risk management program include:

·        Start early.  Every assumption made during planning and design results in a potential risk.  Keep track from the beginning of the planning stage so that they are not forgotten or overlooked.  Go back regularly to check if the approach to handling each risk is appropriate and the potential impacts and probability of occurrence still make sense.

·        Be fair.  If you made the decision as an owner to limit your budget for design or research (geotechnical exploration for example), don’t be shocked if there are change requests due to differing site conditions.  Expect to set an appropriate probability of occurrence and contingency for unforeseen conditions and be prepared to deal with them in a timely manner.

·        Share your risk register.  Keeping information of where there may be problems from your contractor may not be the best way to protect yourself.  Consider whether it is better for everyone to know and discuss issues in advance or to find out the issue in the field when crews are mobilized, and delay costs are substantial.

·        Recognize that all risks can have an impact on project progress.  Advances in schedule management promote having several work areas available – dependent upon the effective flow of resources and equipment and the ability to work unimpeded – with less focus on a single critical path.  Knowing where potential problems might be helps to identify where to shift resources when there are delays and lower potential impact costs.

·        Appreciate that information collection has improved spectacularly in the past years and contractors are able to accurately measure productivity.   Calculating and claiming for a loss of productivity (the “measured mile” approach) is much more credible.  Anticipating and planning will reduce the impact when change occurs.

·        Not all change is negative.  Tracking of potential positive issues is just as important as tracking potential negative ones.  The ability to capitalize on a positive change that has been identified and monitored is just as important as avoiding problems.