Welcome, this is the module for risk allocation and planning.
We going to be talking today about risk management and
how that helps engineering construction projects.
And how that's used as a construction management tool [COUGH]
to leverage projects and gain project success.
We're going to tie this subject to project management and
the project management functions in a project.
And we're going to be looking, if you notice,
this module is not called Risk Management.
And it's purposefully like that, because we want to
stay away from the academic concepts that we hear and
read around the topic of risk and go into a more applicable concept.
What does that mean?
What does managing risk really mean, and
how can we relate to it In a pragmatic format?
A little bit about myself; I'm a construction management professional,
Civil Engineer by training.
But basically, since my academic formation,
my passion has been in exploring risks,
in exploring key areas of success for
large infrastructure projects.
I have done risk assessments for various types of assets,
from transportation, power, water supplies,
water treatment facilities, commercial and residential development.
And I have worked in four continents on that subject.
They've done research about them and their applicability.
And that's why I want to emphasize that this module
will be more pragmatic and will explore some real
life samples that you can see how risk can be applied.
And can be allocated and can be transferred,
if you will, to the different partners or
the different entities involved in a project.
The agenda for today is very straightforward,
we'll go into an introduction of the risk management overview.
We'll go into the treatments of risk.
How can we utilize the risk management concepts into avoiding risk,
mitigating risk, allocating risk, or accepting them?
We'll explore some of the basic concepts of risk treatment.
But we're going to be putting a lot of emphasis in what is our ability
to allocate risk?
And there is a common
denominator in the industry that says the risks are unavoidable and uncontrollable.
And that's, in my view, a misleading concept.
Because in fact, we as professionals,
as much as we understand the risks and the uncertainties in our project,
we have a good handle on how the risk can be treated.
And can be allocated, or transferred, or
responsibilities for each one of the risk
elements on the project can be allocated.
Lastly, as part of the risk treatment, and
as far as we have gone through exhausting all the treatments of risk,
we'll explore how risk assessment can be introduced in your planning exercises,
specifically related to construction schedules.
But the same concepts apply for budgeting in the project.
So the risk management overview.
We have seen, the last 15 years in the US, and
20 years, more or less, around the globe,
specifically starting from the Australian practice,
that risk management concepts have been formalized in our industry,
in the engineering construction industry.
The risk management concepts, were not falling at that point.
I mean, they've been applied before, but they haven't been formalized.
And what does that mean?
That means that now we're doing risk management in a systematic and
disciplined approach.
Now there is a number of advantage of doing it systematically, and
we'll go through that.
The risk management tools are meant to be proactive.
So that when we are managing a project, we don't wait until
events happen that affect our project to react to them and solve.
Instead of becoming a problem solver, we've become a proactive
organization that have answers to risks before they actually actualize,
and they actually get realized in the project.
And, as we go through the risk management process,
you will see that this tool is used often in large projects, to promote interfaces.
So areas of a construction or an engineering project
that typically work as silos in separate units and
that can survive by themself, now are forced to interface, interact.
Understand what the other areas are doing, and
how their decisions can impact other areas in the project.
So typically we had, again 15, 20 years ago,
these project managers that were tremendous about solving problems.
They were fantastic about creating workflows,
delegating issues to be handled through their project teams.
So they are the ones that are sitting down at this desk and
saying, what do we need to do differently?
We have always built, we have always completed immense and important projects.
What do we need to do different with risk management?
Well, what we need to do different is to improve and
leverage the systematic and disciplined approach, so that we can be proactive and
less surprises are realized in the projects.
A proactive approach means that you are prepared and
you can act to avoid or to treat risks before they actually get realized.
They are inclusive, because now people that would only know
that something was about to happen, happen in the project when the risks get realize.
Now they can know about the potentials beforehand, and
they can plan and they can prepare themselves.
Planning is an important tool, and
developing strategic planning to develop a project is important.
But developing strategic planning for the what-ifs, the elements of
the project that are not 100% sure that will happen, is equally important.
And sometimes can make the difference between a successful project or
an unsuccessful project.
So in summary here, what do we do different?
We do a formalized systematic approach that lend
Into a proactive mentality towards the project.
Why is that so important?
Well, first of all, if you think about the project management or
the construction management responsibilities.
Once a construction manager gets involved in a project,
very easily you get overwhelmed with a number of
deliverables, activities, decisions, that have to be made on a daily basis.
Now, the time that they spend thinking about what-ifs or
elements that could affect their project is limited, and
typically, it's not in the same span of time.
So very rarely, you could ask a project manager or
construction manager to sit down for four hours and think about the project
as a whole, and how different elements affect their project.
When we talk about risk
management in the formalized ways of risk management, that's what we ask.
We ask that you don't spend half an hour today,
half an hour next week and think about this element two weeks from now.
We ask that you sit down, look at the entire complex of a project.
And holistically, from concept design to commissioning, maintenance,
and operations, holistically, you can look at all the phases.
Look at all the potential scenarios that may or
may not happen that could deviate this project from being successful.
It will also get you thinking about confidence levels.
So that now you don't think about your project finishing December 31st,
but you think about this project finishing between December and February.
And we have 20% chance of finishing in the December timeframe,
80% chance to finish in the January timeframe.
So it gets you thinking about probabilities,
gets you thinking about ranges, and allows you to prepare and
talk about the project in those terminologies.
It allows a project manager or a project management team
to think about proactive mitigation on real strategies.
So it's not about If we have a different site condition we will deal with that and
we'll go back to design, and wait three weeks or
four weeks to figure out how we're going to approach it.
But proactively, if there is an indication that maybe a different site condition,
then you can start developing those plans, or those workaround scenarios.
So that when it actually gets realized, if it gets realized,
you have an action plan that doesn't have to wait three weeks.
That can be implemented right away, or
with a very short, or with a much shorter implementation phase.
And more importantly, the formalized tools for
risk management support decision making.
And this is an important, and I have underlined it here, because this is a very
important concept, and I wanted to talk a little bit more about this.
When we talk about project managers and construction managers in a project,
and it doesn't have to be a small or large project, it's in all context.
We're talking about a decision making person.
A person that constantly, or an entity, because it could be
a group of people too, that constantly are making decisions.
Now oftentimes those decisions have to be made with
limited information or with information that is constantly
changing in the environment or the context where they are.
So the formalized approach or tools of risk management, what they do is,
they assisst the project manager, or the project management entity,
to handle and understand those uncertainties.
And to have a good approach about decision making with limited information.
And do it in such a way that is traceable, it's documentable, and it's transparent.