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Risk Management in the Built Environment Qualitative and Quantitative Risk Management By Professor Simon Burtonshaw-Gunn – licensed under the Creative Commons Attribution – NonCommercial – Share Alike License http://creativecommons.org/licenses/by-nc-sa/2.5/ Risk Management in the Built Environment School of the Built Environment MSc Construction Management Risk Management in the Built Environment Presentation 3: Risk Response, Monitoring and Control Professor Simon Burtonshaw-Gunn Risk Management in the Built Environment Risk Response Planning, Monitoring and Control Identify Assess (Qualitative) Risk Reporting Managed and Control Evaluate (Quantitative) Approval Risk Actions Contingency Typical closed loop Risk Management Process Risk Management in the Built Environment Risk Response Planning, Monitoring and Control A standard framework for the decision making process where the importance of the change dictates the extent and formality of the assessment, documentation, review, consultation and approval stages. Decision Needed Proposed Options Appropriate Assessment Engage Stakeholders Validation Review and Acceptance Approval to Proceed Communicate and Implement Monitor and Improved Performance Independent Review Note that implementing the change effectively is the most important step, since it is only at this point that the risk is reduced. Risk Management in the Built Environment Risk Response Planning, Monitoring and Control • The options available to address risks will be based on one or more of the ‘4Ts’ risk response actions: Terminate, Treat, Tolerate, Transfer. Risk Management in the Built Environment Risk Response Planning, Monitoring and Control Terminate • Risk termination or avoidance centres on changing the project plan to eliminate the risk or to protect the project objectives from its impact. • Although not all risks can be totally eliminated some may be avoided by taking this pre-emptive action. Risk Management in the Built Environment Risk Response Planning, Monitoring and Control Transfer • Risk transfer is seeking to move the consequence of a risk to a third party together with ownership of the response. • Transferring the risk does not eliminate it; it simple gives another party responsibility for its management. • This is the most effective way of dealing with financial risk exposure and can be by a contract to another party or by payment of a premium in the case of insurance. Risk Management in the Built Environment Risk Response Planning, Monitoring and Control Treat • This strategy seeks to reduce the risk probability or its impact by taking early action to reduce the occurrence of the risk to an acceptable limit. • Risk mitigation may take the form of implementing new processes, undertaking more preliminary work or selecting more stable suppliers. • Risk mitigation can also include changing conditions so that the probability of the risk is reduced, by adding resources or time to the programme. Risk Management in the Built Environment Risk Response Planning, Monitoring and Control Tolerate • This strategy indicates that the project has decided not to change the project plan and to deal with a risk or is unable to identify any other suitable strategy to adopt. • Risk acceptance may also occur when the cost of dealing with it would not be cost effective. • In this event the development of a contingency plan to execute should the identified risk occur is a natural step. Risk Management in the Built Environment Risk Response Planning, Monitoring and Control Reject • In addition to the 4T’s is the action to Reject the risk if considered that it will not be a threat to the project. Risk Management in the Built Environment Risk Response Planning, Monitoring and Control Terminate Treat Tolerate Reject Examples for your experience? Risk Management in the Built Environment Risk Response Planning, Monitoring and Control • Workaround Plan • Risk Management Plan • Response Management Plan • Project Communication • Additional risk identification and analysis • Scope changes • Corrective action Risk Monitoring and Control • Project change requests • Updates to the Risk Response Plan • Risk database • Updates to Risk Identification checklists • Project Risk response audits • Periodic risk reviews • Earned value analysis • Critical design features management • Design reviews • Additional risk response planning Risk Management in the Built Environment Objectives Planning Communicate Action Monitor Feedback and revision Close Typical closed loop feedback system – where would you use this as part of a project control system?? Risk Management in the Built Environment School of the Built Environment MSc Construction Management Risk Management in the Built Environment Presentation 3: Risk Response, Monitoring and Control Professor Simon Burtonshaw-Gunn