Risk Assessment
ADDING VALUE THROUGH EFFECTIVE RISK MANAGEMENT
While projects may appear as attractive investments, such projects usually involve elevated levels of risk. The successful delivery of such projects has proven to be difficult for owners, contractors, and other participants to the process, including investors and insurance interests.
Formal risk management puts us in control of the situation—or at least removes much of the uncertainty from our future.
The objectives of project risk management are to increase the likelihood and impact of positive events, and decrease the likelihood and impact of negative events in the project. A risk may have one or more causes and if it occurs, it may have one or more impacts.
Risk management is a key project process, one that should begin at the earliest stages of the project and carry through until the facility is completed and turned over for operations. Failure to have an effective risk management process indicates that the organization and team are willing to leave a lot of the project to chance.
Risks and the perception of risks will vary with projects and among project participants. What may be a risk to an owner, may not be a risk to a constructor. Undertaking this process during the early stages of a project has the potential to affect project success significantly.
It should be noted that the risk management process is proactive and helps project teams stay “in front” of potentially damaging issues, and recognize issues that present opportunities for their ventures. It is also important to understand that the risk management process must be tailored to the size and complexity of each venture; in other words, it should be practical in its approach, so that it is actually useful.
The methodology adopted by the team uses 6 (six) steps to manage the risks of the enterprise in question. These are: Criticism of the
schedule, identification of risks, qualitative and quantitative analysis elaboration of the risk response plan and, finally, monitoring and control of risks on an ongoing basis.
Some mistakes:
- Decisions risks are often made by top management, separated from other business, technical and operation risks of the project.
- Few project participants have a complete understanding of the portfolio of risks, it´s life cycle view of the risks is uncommon.
- Risk management does not refer to a single step, where a document is produced and then goes to the drawer.
- Risk management doesn´t work alone. It needs a communication plan connected to it.
Risk assessment includes the identification, cataloging and evaluation of specific hazards and uncertainty, such as the diverse set of political, geographic, economic, environmental, regulatory, and cultural risk factors
Few project participants have a complete understanding of the portfolio of risks that happen on such projects, and a life cycle view of the risks is uncommon. It should start an early stage of project development though operation of the facility.
Certainly these issues are different depending on the project type and location as well. Think Management team believed there would be significant benefit if a standard baseline (impact) risk value could be determined for each element of the table above:
The Thinking Management can provide numerous benefits to the project team. These include use as:
• A checklist that a project team can use for determining potential project risks.
• Standardized risk terminology for international ventures.
• A process for identifying and assessing risk that will also facilitate prediction of disruptions, potential for disputes, etc.
• A means to monitor progress in addressing risk control at various stages during the project life cycle.
• A tool that aids in communication and promotes alignment by highlighting poorly defined areas of risk for investors, owners, and design or construction contractors.
• A tool that facilitates communication and understanding between project participants and decision makers.
• A means for project team participants to reconcile differences using a common basis for project evaluation.
• A risk identification and assessment training tool for organizations and individuals throughout the industry.
• A benchmarking tool for organizations to use in evaluating its risk management process versus the performance of past projects, both within their organization and externally, in order to predict the probability of success on future projects.
• Framework for capturing lessons learned.
How do they manage risks?
A variety of techniques and practices exist to identify and assess risks that occur on projects, but there are no standard technique or practice.
The Bow tie tool
The Bow-Tie diagrams typically have the following basic elements: Causes (threats), Events, Top Events (triggering loss of control), Outcomes (consequences), Proactive Controls (threat barriers), Reactive Controls (recovery measures), Escalating Factors (linked to any control), and Escalation Controls (mitigate escalation factors).
The left side of the diagram shows the causes and the threat barriers (proactive controls) in a form similar to that of a fault tree.
The right hand side shows the consequences and the recovery preparedness barriers (reactive controls).
For each of the potential causes, the Bow-Tie methodology allows identifying escalating factors, and suggesting corresponding controls for mitigating risk/improving recovery.
The Bow tie benefits
- Visualization of the relationship between undesirable event, its causes, accidental scenarios, the preventive and mitigation measures to limit their consequences.
- Demonstrates the effectiveness of existing controls.
- Structured risk analysis.
- Extremely versatile / Success in various applications.
- It focuses on the adoption of barriers, having a great ease of understanding and communication as a tool.
Companies that use risk can:
- Protect and enhance business value by fostering a risk-aware culture, supporting decision-making.
- Enable the organization to quickly, consistently, and efficiently respond to challenges provided by risks.
- Enable a company to meet their objectives while improving performance.