PROJECT RISK MANAGEMENT OVERVIEW

Preamble
Few things are as risky as construction projects. There are several heavy equipment, crews
working in precarious situations and complicated logistics, safety hazards and risk factors to
manage. The key question is, as a civil engineering project manager, how do you meet your
deadline while managing all that risk?
The answer is construction risk management. It can be mind-bogglingly complex, which is why
you should make a detailed construction risk management plan. Let’s take a look at the basics,
what a construction project manager is responsible for, types of risk in construction projects
and how to deliver a successful project.

Construction Risk Management: Definition

Construction risk management is the process of evaluating and implementing procedures to
reduce the impact of risks in construction projects. This risk management process involves
thorough planning to create a risk management plan that allows project managers to identify,
monitor and mitigate risks as they may arise.
A construction risk management plan is developed in the early stages of the construction plan-
ning process. It details what project risks might occur and the risk response to resolve them.
This includes designating someone on the crew to own the issue and address it.

Types of Risk in Construction Projects

In general, risk is anything that will delay the project or create additional costs. There are many
sources of risk on a construction site. To create a better risk management plan, it’s essential to
know what risks there are, and where they will occur:
1. Safety Risk: Your crew is your most valuable resource. Nothing can be done without
them. They are also subject to safety hazards, as many of the tasks assigned to them can
be dangerous. While your crew is skilled and experienced, accidents can happen. Know
the safety risks to your crew, what hazards they might fall prey to and create a safety
plan to ensure employee safety.
2. Financial Risk: Without money, nothing happens. No one gets paid, and you can’t rent
equipment. That’s why any factors that can interrupt your cash flow need to be identi-
fied. This can include a cost increase for materials, competition in the market, inflation
and price variations etc. The more you understand the financial risk, the more likely
you’ll stay within budget.
3. Legal Risk: Managing construction projects involves more than the constraints of time,
cost and scope, including quality. There are legal constraints, such as regulations, code
violations and contract terms disputes with your clients, vendors and subcontractors.
Any of these things can send your construction project off track.
4. Project Risk: Project risks are universal project management risks associated with
managing any project. These include poor management of the resources, missing dead-
lines and falling behind schedule. The construction project manager must be thoroughly
aware of the difficulties that can throw the project off track.

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 5. Environmental Risk: Also referred to as the “act of God,” such as floods, earthquakes
and other kinds of natural disasters. Anything nature unexpectedly unleashes that makes
the construction site inaccessible is costly and potentially destructive for a construction
project.

CONSTRUCTION PLANNING
A construction plan is a set of documents that defines the requirements for a construction pro-
ject, such as the activities, resources, schedule and budget. A construction plan is created during
the construction planning process and includes the following:
1. A written document that defines the methodologies and approaches to be employed
2. Blueprints, computer-aided designs, photographs, and images illustrating the design
3. A work breakdown structure that identifies all the activities that make up the project
4. A construction project schedule that organizes all the project activities on a timeline
5. The construction project participants and stakeholders such as contractors, sponsors,
crews, consultants, client representatives etc.
Prior to breaking ground, creating a construction plan and construction schedule is of crucial
importance in construction management, given that such projects tend to be large and complex.
Proper and thorough construction planning greatly increases the likelihood of a successful pro-
ject. The more information the construction plan has about your project, the less likely it will
be that issues arise during the execution phase.

Types of Construction Management Plans

In view of the various project stakeholders, construction management plans (CMPs) can take
multiple forms; of which each form requires a detailed but easy-to-understand roadmap to keep
stakeholders up-to-date. These stakeholders include clients, contractors and municipalities, and
each may require one of the following three types of construction management plans:
1. A CMP delivered by the client that maps out the entire project, from inception to com-
pletion.
2. A CMP that comes from the contractor focuses on the construction work and the exe-
cution plan.
3. A CMP that puts the project in the context of the surrounding area, primarily concerned
with the rules and regulations of the municipality where the project is taking place.
Regardless of what type of construction planning you’re involved in, the best way to start is at
the end. You need to know what it is you’re planning for, and where it will stand in the envi-
ronment in which you’re building it.

The 5 Phases of a Construction Project

The high-level structure of any construction plan will follow the five broad phases of project
management (initiation, planning, execution, monitor and control, and closure).
1. Initiation: Determine the stakeholders, resources and project budget

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 2. Planning: Create specific, measurable, attainable, realistic and timely (SMART) goals.
Define the work activities and create a schedule
3. Execution: Assign contractor teams to carry out tasks and oversee the progress
4. Monitor and Control: Monitor and track progress and performance
5. Control: Close out the project and evaluate the performance
The project manager is usually the person tasked with making the construction plan. However,
the creation of a construction plan isn’t done in isolation. Stakeholders need to be included to
understand and manage their expectations, and construction crews must be consulted as well
to get insights from their skills and experiences in similar jobs.
Because a construction project involves a lot of different phases and teams, it’s important that
they’re all part of the construction planning process. For example, estimators (quantity survey-
ors) will need the project plan to guide them in procuring materials. Moreover, the various
perspectives will improve the viability of the final construction project plan.
To make a construction plan, you need to identify all the different aspects of your project in-
cluding the project management team, stakeholders, activities, resource requirements, sched-
uling and budget. Start with the following construction planning steps.

Construction Planning Steps

Step 1. Define the Project
What are the purposes and objectives of the construction project? Who are the stakeholders?
How are you planning to execute it?
Step 2. Determine the Business Benefits
What is the return on investment of the project?
Step 3. Estimate the Project Activities
Use a work breakdown structure to visualize your project scope and define all the activities
needed to produce the deliverables and reach the milestones of your construction project.
Step 4. Define the Resource Requirements
Allocate resources for each activity. What materials and equipment will be needed? What are
the labor requirements?
Step 5. Do a Material Takeoff (MTO)
A material takeoff consists in itemizing every construction material that will be needed. This
is done by using measurement scales of length, area and volume.
Step 6. Prepare a Construction Estimate
Once you’ve defined your material takeoff, you can prepare a construction estimate. This is
done by assigning costs to the itemized construction materials that were previously identified
in the Material takeoff (MTO).
Step 7. Create a Budget
To create a budget, add all the construction costs. This includes materials, labor, equipment
and overhead costs.

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Step 8. Create a Schedule
Now that you know the activities and resources needed for your project, you need to create a
timeline to procure the resources and execute the activities.
Step 9. Identify Construction Permissions
What must you do to get approval and adhere to building and municipal codes?
Step 10. Select the Team
Define Who is leading the project, and who will make up the teams executing the plan? Who
are the contractors?

Construction Planning Documents

After you’ve objectively answered the above questions, you’ll create the following documents
for your construction plan.
1. Scope Documentation: The scope of a construction project is a list of goals, delivera-
bles, features, functions, tasks, deadlines and costs. It’s the overall needs of the project,
as well as detailing the benefits among the milestones you’ll track to reach them.
2. Work Breakdown Structure (WBS): This is the document that visualizes the key
project deliverables and organizes all the work activities your team will do when the
project is started into manageable sections.
3. Communication Plan: To effectively implement various aspects of your project plan,
you must articulate them clearly and deliver them efficiently. You need to define your
goals and objectives, then decide on what methods you’ll use to deliver them.
4. Risk Management Plan: All projects have risks, but construction projects are prone to
even higher risks to varying degrees. You’re going to have to provide safety manage-
ment, which will include a thorough assessment of what might go wrong and how you
envisage to resolve it.
5. Visual Plans and Renderings: These are construction specifications, project render-
ings and other drawings that can be shared with stakeholders, local officials, etc.

Scope of the Construction Project and Team Roles, Responsibilities

Creating a successful plan requires a thorough understanding of the project scope. The scope
of your construction project refers to all the activities that will be completed and the delivera-
bles and milestones that will be achieved with that work. Defining your project scope is essen-
tial for the construction planning process. Once you’ve defined what will be done, you can
think about everything you need to execute the work including the resources, budget, activity
durations, scheduling, the team, etc. To help you determine your scope, examine project time-
lines, historic data and even other projects that are being executed nearby that might siphon
resources from your project. Some other data to explore would be any site photos to get a layout
of the land, weather patterns to help you determine the scheduling of various project compo-
nents that would be delayed because of rain, strong winds, etc.
The size of the construction project will determine, to some extent, how many people are work-
ing on the project team. The project plan needs to outline these roles and define their responsi-
bilities in relation to the project. For example, there is usually a general manager that oversees

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the project. Various assistant general managers are responsible for specific aspects of the pro-
ject and report to the general manager. There might be an environmental construction compli-
ance manager to make sure regulations are being satisfied, a program controls and support
group manager responsible for scheduling tools and resources, etc.
Question: Organisation structure of construction projects
The best way to define these roles and responsibilities is by including the team in the process.
When creating this part of the plan, you’ll have a general idea of the various team members
you’ll need to complete the project. Team participation is important in construction planning,
as the details can be more fully fleshed out by using your team, who have the skills and expe-
rience to help you make the right choices.

RISK MANAGEMENT PLAN

You identify them, record them, monitor them and plan for them: risks are an inherent part of
every project. Some project risks are bound to become problem areas—like executing a project
over the holidays and having to plan the project timeline around them. But there are many risks
within any given project that, without risk assessment and risk mitigation strategies, can come
as unwelcome surprises to you and your project management team.
That’s where a risk management plan comes in—to help mitigate risks before they become
problems. But first, let’s recall what project risk management is:
Risk management is an arm of project management that deals with managing potential project risks.
Managing your risks is arguably one of the most important aspects of project management.

The risk management planning process broadly encompasses these four main steps:
1. Risk Identification: The first step to manage project risks is to identify them. You’ll
need to use data sources such as information from past projects or subject matter ex-
perts’ opinions to estimate all the potential risks that can impact your project.
2. Risk Assessment: Once you have identified your project risks, you’ll need to prioritize
them by looking at their likelihood and level of impact.
3. Risk Mitigation: Now it’s time to create a contingency plan with risk mitigation ac-
tions to manage your project risks. You also need to define which team members will
be risk owners, responsible for monitoring and controlling risks.
4. Risk Monitoring: Risks must be monitored throughout the project life cycle so that
they can be controlled.
If one risk that’s passed your threshold has its conditions met, it can put your entire project
plan in jeopardy. There isn’t usually just one risk per project, either; there are many risk cate-
gories that require assessment and discussion with your stakeholders. Risk management needs
to be both a proactive and reactive process that is constant throughout the project life cycle.
What Is a Risk Management Plan? A risk management plan defines how your project’s risk
management process will be executed. That includes the budget, tools and approaches that will
be used to perform risk identification, assessment, mitigation and monitoring activities.

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A risk management plan usually includes:
1. Methodology: Define the tools and approaches that will be used to perform risk man-
agement activities such as risk assessment, risk analysis and risk mitigation strategies.
2. Risk Register: A risk register is a chart where you can document all the risk identifi-
cation information of your project.
3. Risk Breakdown Structure: It’s a chart that allows you to identify risk categories and
the hierarchical structure of project risks.
4. Risk Assessment Matrix: A risk assessment matrix allows you to analyze the likeli-
hood and the impact of project risks so you can prioritize them.
5. Risk Response Plan: A risk response plan is a project management document that ex-
plains the risk mitigation strategies that will be employed to manage your project risks.
6. Roles and responsibilities: The risk management team members have responsibilities
as risk owners. They need to monitor project risks and supervise risk response actions.
7. Budget: Have a section where you identify the funds required to perform your risk
management activities.
8. Timing: Include a section to define the schedule for the risk management activities.

How to Make a Risk Management Plan

1. Risk Identification
Risk identification occurs at the beginning of the project planning phase, as well as throughout
the project life cycle. While many risks are considered “known risks”, others might require
additional research to discover. You can create a risk breakdown structure to identify all your
project risks and classify them into risk categories. You can do this by interviewing all project
stakeholders and industry experts. Many project risks can be divided up into risk categories,
like technical or organizational and listed out by specific sub-categories like technology, inter-
faces, performance, logistics, budget, etc. Additionally, create a risk register that you can share
with everyone you interviewed for a centralized location of all known risks revealed during the
identification phase. You can conveniently create a risk register for your project using online
project management software. For example,
iD Description of Risk Impact Risk Response Risk Level Risk owner Comment
1. Supplier delay Pushes launch Confirm delivery dates by Phase 2 High Peter L ………….
2. Factory availability Cost overruns Stakeholder trip to China Low John S ………….
3. Heavy rains Time delays Alternative day-work Moderate Mark K ………….
4.

n.
Sample Risk Register

2. Risk Assessment
In this next phase, you’ll review the qualitative and quantitative impact of the risk—like the
likelihood of the risk occurring versus the impact it would have on your project—and map that
out into a risk assessment matrix. First, you’ll do this by assigning the risk likelihood a score
from low probability to high probability. Then, you’ll map out your risk impact from low-
medium-high and assign each a score. This will give you an idea of how likely the risk is to

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impact the success of the project, as well as how urgent the response will need to be. To make
it efficient for all risk management team members and project stakeholders to understand the
risk assessment matrix, assign an overall risk score by multiplying your impact level score with
your risk probability score.
A sample project risk assessment matrix

 Identify Risks: Start by looking at the entire risk landscape. That is, view the whole
project and discuss things that could potentially impact the project with your team.
Don’t be afraid to seek out historical data from previous projects, as well. Break down
the identified risks into four categories: strategic, operational, financial and external.
 Set Risk Criteria: Once you identify risks, the next step is to determine their probability
and their impact, assigning values to those variables. Risk criteria let you place the risk
on the risk assessment matrix. Spend time on each decision, and get feedback from your
team to make sure your placement is accurate.
 Assess Risk: Next, analyze the risk according to your risk criteria. This is a three-tier
assessment; high, medium or low. The more detail, the better the analysis of the risks
to your project.
 Prioritize Risk: Now that you have this data, prioritize the risks that are most dangerous
to the success of the project. This is also the first step in developing a risk assessment
plan and figuring out what to do if these risks occur.
3. Create a Risk Response Plan
A risk response is the action plan that is taken to mitigate project risks when they occur. The
risk response plan includes the risk mitigation strategies that you’ll execute to mitigate the
impact of risks in your project. Doing this usually comes with a price—at the expense of your
time, or your budget. So you’ll want to allocate resources, time and money for your risk man-
agement needs prior to creating your risk management plan. The benefits of an action plan are
simple: you’ve now outlined what action steps and what resources are needed to achieve goals.

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4. Assign Risk Owners
Additionally, you’ll also want to assign a risk owner to each project risk. Those risk owners
become accountable for monitoring the risks that are assigned to them and supervising the
execution of the risk response if needed. When you create your risk register and risk assessment
matrix, list out the risk owners, that way no one is confused as to who will need to implement
the risk response strategies once the project risks occur, and each risk owner can take immedi-
ate action. Be sure to record what the exact risk response is for each project risk with a risk
register and have your risk response plan it approved by all stakeholders before implementa-
tion. That way you can have a record of the issue and the resolution to review once the entire
project is finalized.
5. Understand Your Triggers
This can happen with or without a risk already having impacted your project—especially dur-
ing project milestones as a means of reviewing project progress. If they have, consider reclas-
sifying those existing risks. Even if those triggers haven’t been met, it’s best to come up with
a backup plan as the project progresses—maybe the conditions for a certain risk won’t exist
after a certain point has been reached in the project.
6. Make a Backup Plan
Consider your risk register and risk assessment matrix a living document. Your project risks
can change in classification at any point during your project, and because of that, it’s important
you come up with a contingency plan as part of your process. Contingency planning includes
discovering new risks during project milestones and reevaluating existing risks to see if any
conditions for those risks have been met. Any reclassification of a risk means adjusting your
contingency plan just a little bit.
7. Measure Your Risk Threshold
Measuring your risk threshold is all about discovering which risk is too high and consulting
with your project stakeholders to consider whether or not it’s worth it to continue the project—
worth it whether in time, money or scope. Here’s how the risk threshold is typically determined:
consider your risks that have a score of “very high”, or more than a few “high” scores, and
consult with your leadership team and project stakeholders to determine if the project itself
may be at risk of failure.