3 TOOLS FOR RISK IDENTIFICATION IN CONSTRUCTION PROJECTS

Why do project delays and related issues crop up over and over again?  The company has project managers with experience and knowledge, but it also has project team members whose knowledge isn’t so extensive.  And most of all, once the project is underway, no one seems to have time to plan, look ahead and strategize.  As a consequence, the project manager ends up putting out fires yet again.                                    Risk Identification                                            ‘

Risk management is essential before the project is in full swing – early on – in the planning stages.

And where are the sources of crucial information concerning risk? That’s easy – just take a look at previous projects and talk to experienced project managers!

And how exactly do you garner the information?

The first method is the formalized “Grampa Simpson” method, or the Expert Interview.  Create a series of questions like those below.  Ask PMs, site supers and foremen with experience in these projects, to talk about it – and record that info.   Then review and synthesize.  With the “Grampa Simpson” method – tongue in cheek – you end up with the biggest, noisiest problems, but not necessarily the most costly. And yes, sometimes you’ll have to sit through the whole story – including how Gerry, that knucklehead engineer or consultant, said this or that and so on.

To get this to work, create a standard set of open questions, keep good records and synthesize the information. Simply examining the project plan in isolation is often insufficient.  Risk deals with uncertainty and unknowns.  Mitigation of risk encompasses every bit of information that is available.  In identifying risk, the following tools or techniques can been used:

  1. Expert interviews: Your company employs people with experience.  The company that contracted you for this project has experience.  Typical interview questions are:
  • Did anything go off schedule or not as planned in the last project?
  • What were the biggest issues faced in terms of meeting the deadlines? Costs?  Scope?
  • Were there any significant shortcomings?
  • Were there any significant areas of uncertainty?
  • What drove the project off course?

The interview questions will not give you a risk analysis.  They will point you in a direction of inquiry.

  1. Brainstorming: Everyone has been to meetings where the open ended question has been asked. The markers, white boards and flip charts are out and a lot of random thoughts are expressed.  Sometimes good ideas come out of brainstorming, but this technique has a few flaws:
    • It is very hard to keep a meeting on-topic.
    • The strongest personalities usually dominate, and definitely, the management hierarchy will influence whether a good idea is voiced or not. Everyone censors when the boss is in the room.

So to make brainstorming work, we suggest conducting surveys outside of meetings.  Ask the questions, but ask them electronically.  Gather the results and synthesize.  This methodology has been formalized and is typically referred to as the ‘Delphi Technique’.  The anonymity of the responses ensures that respondents will not be worried about what the boss will say, or what their co-workers will think.  People can get more creative at no risk.  There is expertise in the field and in the office that can be tapped into.

Questions similar to those asked in the expert interviews can be asked, but the questions should be framed in a future tense:

  • Is XYZ likely to happen?
  • What is the impact?
  • How do we mitigate this impact?
  • How do we prevent XYZ from occurring?
  1. Delphi Technique : The essence of the Delphi Technique is:
    • Coordinator formulates problem and distributes it to experts (site people, consultants, PMs, trades, anyone with an interest)
    • Experts send written response.
    • Coordinator sends out position papers and experts have a chance to reconsider and resubmit.
    • Resubmissions are reviewed and a finalized list of risks is placed on the risk listing form.

Because this is a more structured methodology, and because the questions are revisited and re-examined,   reliable results can be achieved.

“The Delphi method is a structured communication technique, originally developed as a systematic, interactive forecasting method which relies on a panel of experts.  The experts answer questionnaires in two or more rounds. After each round, a facilitator provides an anonymous summary of the experts’ forecasts from the previous round as well as the reasons they provided for their judgements. Thus, experts are encouraged to revise their earlier answers in light of the replies of other members of their panel. It is believed that during this process the range of the answers will decrease and the group will converge towards the “correct” answer. Finally, the process is stopped after a pre-defined stop criterion (e.g. number of rounds, achievement of consensus, and stability of results) and the mean or median scores of the final rounds determine the results. Delphi is based on the principle that forecasts (or decisions) from a structured group of individuals are more accurate than those from unstructured groups.  Delphi has been widely used for business.”  [1]

Key characteristics of this methodology include

  • Anonymity of the participants. The identity of participants is not revealed even after final completion.  This eliminates bias (a key feature of groupthink) as well as the bandwagon effect.
  • Information is structured by the facilitator to eliminate irrelevant comments.
  • Participants can provide as much feedback as they wish and modify their own answers.
  • The facilitator sends out questionnaires, collects and analyzes responses, identifies common and conflicting views and provides these views for re-evaluation by the participants. This round continues until consensus is reached.

[1] http://en.wikipedia.org/wiki/Delphi_method   Wikipedia

Advertisements

HOW TO IDENTIFY RISK

“There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.” – Donald Rumsfeld

During the development of the project plan, during the estimating process and during scheduling, experienced personnel can predict risk based on previous projects.  Risk is inherent in the development of estimates in terms of time and cost, in scheduling in terms of cost and in the plan overall in the determination of scope and resource requirements.  Risk stems from current and known circumstances.  What is required then, in conjunction with an estimating and project planning tool such as MS Project, is a tool to collect and record this risk information as it occurs to estimators and planners. knownknowns

Known Knowns:   The things that we know about are, for the most part, mitigated for in the project plan.  We know from experience or circumstance that these issues will come up and we plan for them in our estimates of time, costs, resources and materials.  It is relatively easy to plan these things as we know that we will be addressing them in the future.  A good project plan will already incorporate these risks into it.  Sometimes, the variability is significant, and we incorporate these into an initial risk management plan.

Unknown Knowns: There are risks that we mitigate and plan for unconsciously.  They can be built into our company processes, ‘the way things have always been done’;  things that we know about and have mitigated for in the project plan but are unrecognized as risks.

Known Unknowns: There are areas in a project estimate, plan and/or schedule, that have uncertainty associated with them.  These areas of uncertainty are the known unknowns and are the most significant part of the risk management process.  We know we do not know what will happen, but we want to plan for the eventualities, to minimize bad consequences and maximize benefits.  Risk management allows us to do this.

Unknown Unknowns :  What you truly do not know about as so cannot mitigate against generally  comes back to bite.  These are outside our realm of experience and therefore ability to predict and mitigate.

For more information on how to identify risk and creating a risk management plan, go to riskmp.com   or join us in a workshop … across Canada ….  Risk Management Workshop.

AN ESSENTIAL PROJECT MANAGEMENT SKILL

Every project manager wants to reduce ‘management by crisis’, overtime costs for employees and contractors, and late nights at the office. —– Risk management allows you to minimize the number and impact of these surprises. A comprehensive risk management plan allows you to improve your construction processes and thereby gain a competitive advantage. It increases the probability of project success, most importantly profitability.

 

What are the potential impacts of not having a Risk Management Plan and Process in place? Consider the

  1. Cost of not meeting a commitment
  2. Embarrassment to the company and loss of good will in the marketplace due to not meeting a commitment
  3. The appearance of not knowing what you are doing to a customer. This can decrease the customer’s trust in you and create openings for your competition.

On the other hand, the positive impact of effective risk management is

  1.  increased profitability
  2. less overtime
  3. fewer deficiencies and
  4. a competitive advantage.

 

Risk Management is a tool to prevent problems from occurring or escalating and facilitates a focus on the right results the first time.

 

Risk

Every project plan, every estimate, carries embedded within it elements of risk. Risk is uncertainty. To address this uncertainty, we use expert estimators, past experience and best guesses. MS Project and most project management tools provide us with the means to record these best guesses. But what really happens, as every project manager knows, is not always what is on the project plan. The best guesses are often just guesses. Risk Management is a vehicle for looking at the uncertainty in these guesses, measuring it, examining the consequences and deciding what to do about them. It is the next step in PROACTIVE Project Management.

“It’s what you don’t know or understand that comes back to bite you.”

Project Management – Risk Management in Construction

The first step in addressing Project Risk is Evaluation and Assessment

Questions to ask include:  Is this appropriate project risk and opportunity?  As a project manager, it is important to identify risk in project schedules (times, durations),  costing and  estimates and in execution or flow of the project.

Once risks have been identified, assess the identified risks in terms of probabilities and opportunity or cost levels.  What is the likelihood of a risk event occurring?  What is the expected impact?  Quantify occurrence of each risk and opportunity.

The next step is to address the risks.  In practise, typically only the most likely (top 10) risks get addressed.  Establish a project risk management plan which includes risk avoidance and risk mitigation strategies.  Develop the risk plan and communicate this plan to key parties.  In this digital age, there is every reason to employ a software tool that will help you organize, quantify and address individual risks to create an effective plan.  Tools such as RISKmp.com  will help you create and  clarify the plan in a timely manner.

Develop a plan to address risks over the course of the project life cycle.  Risks will change over time, so the risk management plan will change over time.   The risk management plan is not something that can be left in the outbox.  It is important to continually follow up on risks and plans.  This  is an essential part of project management.

Track and monitor.   As the project develops, risks will  change, so plans must change.  Keeping records can get messy. In this digital age that we live in, employ tools such as riskmp.com.  Such tools ensure that this process requires minimal time and effort.

Communicate with key project team members.  Successful risk mitigation requires communication with management, owners, contractors, subs and all interested parties. Again, employ digital tools to communicate clearly and concisely.  Tools such as  Riskmp.com provides you with tools to effectively communicate risk.

Establishing project governance programs, managing the risk register, addressing challenges that may arise from technical issues in engineering, scheduling, construction, and other areas.