Risk,

Risk Management,
Risk Management Process
Submitted to: Submitted by:
Mst. Sanda Khatun “Team Dynamic”
Lecturer
Department of Public • Mst. Halima Khatun – 750
Administration, • Labonno Rahman – 753
Jahangirnagar University • Nuzhat Tamanna – 767
• Sadika Afrin- 773
• Nagib Mahfuz Kabbo – 776
• Mohammad Inan Ahmed
Chowdhury – 780
• Abu Hanifa – 794
• Munshi Mohammed Ehsan
Amin - 796
 Risk
Risk refers to any uncertain event or condition
that, if it occurs, can have a positive or Example: During the initial phase of
negative effect on the project’s objectives. construction, there is a possibility of encountering
These risks can impact the project’s scope, unexpected soil conditions, such as unstable soil
schedule, cost, and quality. or hidden underground utilities.

Risk Management
Risk management involves identifying, As a proactive approach to reduce risk, the team
assessing, and mitigating potential risks that will conduct thorough geotechnical surveys and soil
could impact the successful completion of the testing before finalizing the construction plan.
project.
 Risk Management Process

Step 1: Risk Identification

• Analyze the project to identify sources of risk

Step 2: Risk Assessment

• Assessing risks in terms of

• Severity of impact
• Likelihood of occurring
• Controllability

Step 3: Risk Response Development

• Develop a strategy to reduce possible damage

• Develop contingency plans

Step 4: Risk Response Control

• Implement risk strategy

• Monitor & adjust plan for new risks
• Change Management
 Risk Identification
Risk identification is the process of recognizing and documenting potential risks through brainstorming,
problem Identification and risk profiling

Methods used to identify risks Identified risks in a Construction project

 Risk Breakdown Structure  Financial overruns
 Work Breakdown Structure  Unexpected weather condition
 Risk Profile  Delays in material delivery
 On-site accidents
 Unanticipated design modifications
 Sudden labor shortage
 Risk Assessment
Risk Assessment is the structured examination of uncertain situations wherein potential
threats and their potential consequences are identified. Through the assessment process
we can determine appropriate interventions to eliminate or control these risks and
prioritize them based on their likelihood and potential impact.

Risk Assessment Matrix is a visual risk analysis tool used to evaluate and prioritize
potential risks to address first. Team members assess the significance of each risk event
in terms of:
• The Probability (or Likelihood) of a risk to occur (X-Axis).
• The Impact (or Severity) if a risk occurs (Y-Axis).

The formula for the risk rating is as follows:

Likelihood x impact = Risk Score
 Risk Assessment Matrix
5. Severe Moderate 5 Moderate High 15 Extreme 20 Extreme 25
Impact of the Risk 10
4. Major Low 4 Moderate 8 Moderate High 16 Extreme 20
12
3. Low 3 Moderate 6 Moderate 9 Moderate High 15
Significant 12
2. Minor Very low 2 Low 4 Moderate 6 Moderate 8 Moderate
10
1. Very low 1 Very low 2 Low 3 Low 4 Moderate 5
Insignifican
t Probability of the Risk
1. Rare 2. Unlikely 3. 4. Likely 5. Almost
Example Scenario Moderate Certain
Risk Probability (1-5) Impact (1-5) Risk Score (P×I)

Imagine we’re managing a Delayed Material 4 3 12

construction project. Here are three Delivery
identified potential risks: Worker Injury 2 5 10
 Risk of Delayed Material
Budget Overrun 3 4 12
Delivery
 Risk of Worker Injury Risks with high scores (e.g., Delayed Material Delivery and Budget Overrun) should be
 Risk of Budget Overrun
prioritized first for mitigation.
Step 3: Risk Response Development:
A risk response plan is a document that explains the strategies that would be taken to mitigate negative project risks. It’s
part of the larger risk management plan that is subsequently part of any project management plan.

Types of Risk Response Development Strategies: A project risk is an uncertain event that can potentially impact a
project, either positively or negatively. A risk response plan is a way to reduce or eliminate any threats to the project. It can
also be used to increase the opportunity offered by positive risk. That is, if there are positive risks that can help the project, a
well-thought-out plan sets up how to quickly gain as much advantage from it as you can. In project management, negative
risks are commonly referred to as threats, while positive risks are known as opportunities.

 Negative Risks (Threats)

 Positive Risks (Opportunities)
• Risk Response Strategies for Negative Risks (Threats):
• Mitigate: Risk reduction is typically the first option examined. There are two risk mitigation strategies: (a) reducing the possibility of an
event occurring and/or,(b) minimizing its impact on the project. Most risk teams prioritize minimizing the likelihood of risk occurrences
since, if successful, this may remove the requirement for the possibly costly second method. For example: A small business is concerned
about potential property damage due to a fire, so their mitigating risk policy would be installation of a state of the art fire sprinkler
system
• Avoid: This risk response strategy is about removing the threat by any means. Risk avoidance is changing the project plan to eliminate
the risk or condition. Although it is impossible to eliminate all risk events, some specific risks may be avoided before launching the
project. For example: Choosing to move a concert indoors would eliminate the threat of inclement weather.
• Transfer: Passing risk to another party is typical; yet, this transfer does not alter risk. Passing risk to another party nearly always entails
paying a fee for the exemption. For example, a small business owner concerning about potential lawsuits related to customer injuries on
their premises, so they should purchase comprehensive general liability insurance, they would be able to transfer the risk.
• Accept: There are situations where accepting the possibility of something happening is a deliberate choice. Certain hazards, like an
earthquake or flood, are so great that it is not practical to think about moving or lessening the event.
• Risk Response Strategies for Positive Risks (Opportunities):
1.Exploit:This strategy aims to remove any doubt surrounding an opportunity in order to guarantee that it materializes. Here are a few
examples: reworking a design to allow for the purchase of a component rather than its internal development, or allocating your finest staff to
a crucial short-term task to finish it faster.
2.Enhance: In this strategy, there is need to increase the chance of a positive risk occurring in a project. Enhance is the reverse of mitigate
in that it involves taking steps to raise the likelihood that an opportunity will materialize or have a positive impact. Examples include,
selecting raw materials whose prices are projected to decrease or locating a site in accordance with good weather trends.
3.Share:This tactic entails giving another party—who is most likely to seize the opportunity for the project's benefit—some or all of the
ownership of the opportunity. Creating incentives for joint ventures or outside contractors to improve continuously are two examples.
• What If There’s Both a Positive and a Negative to a Risk?
Sometimes risk can have both a threat and an opportunity embedded within. In that case, there are a couple of risk response strategies you
can apply:
1.Accept: Here you accept the risk and wait until an adequate response can be determined, such as a contingency plan or allocation of time
and cost. This decision must be shared with stakeholders.
2.Escalate: If the risk cannot be monitored and is beyond the management of the project, it is escalated to a higher level, such as program or
portfolio management
• Contingency Planning:
Contingency Plan: A contingency plan is a backup plan that will be implemented in the unlikely event that a potential risk
event materializes. The contingency plan outlines steps to lessen or lessen the adverse effects of the risk occurrence.

Risks of not having a contingency plan: Having no plan may slow managerial response; Decisions made under pressure
can be potentially dangerous and costly.
• Risk and Contingency Planning:
1.Technical Risks:
• Backup strategies if chosen technology fails.
• Assessing weather technical uncertainties can be resolved
2. Schedule Risks:
• Use of slack increases the rise of a late project finish.
• Imposed duration date( absolute project finish date)
• Compression of project schedules due to a shortened project duration date.
3. Cost Risks:
• Time/cost dependency links: costs increase when problems take longer to solve than expected.
• Price protection risks (a rise in input costs) increase if the duration of a project is increased.
4.Funding Risks:
Changes in the supply of funds for the project can dramatically affect the likelihood of implementation or successful
completion of a project.
• Contingency Funding and Time Buffers:
Contingency Funds:
• Funds to cover project risks—identified and unknown.
• Size of funds reflects overall risk of a project.
• These are identified for specific work packages or segments of a project found in the baseline budget or work breakdown structure.
Budget reserves:
• Are linked to the identified risks of specific work packages..
• The project team should be informed of the budget reserve. This transparency promotes strong cost performance and conveys a sense of
confidence.
Management reserves:
• Are large funds to be used to cover major unforeseen risks (e.g., change in project scope) of the total project.
• Technical contingencies that are placed in the management reserve are an exception.
• Determining potential technical (functional) hazards is frequently connected to novel, experimental, and creative processes or products.
Time Buffers:
• Amounts of time used to compensate for unplanned delays in the project schedule. For example, buffers are added to:
A. activities with severe risks.
B. merge activities that are prone to delays due to one or more preceding activities being late.
C. noncritical activities to reduce the likelihood that they will create another critical path.
D. activities that require scarce resources to ensure that the resources are available when needed.
 Risk Response Control

• Risk control involves executing the risk response strategy, monitoring

triggering events, initiating contingency plans, and watching for new
risks.

• Establishing a change management system to deal with events that

require formal changes in the scope, budget, and/or schedule of the
project is an essential element of risk control.
 Change Control Management
Scope changes in the form of design or additions represent big
changes: for example, customer requests for a new feature or a
redesign that will improve the product.
Categories

Implementation of contingency plans, when risk events occur,

represent changes in baseline costs and schedules.

Improvement changes suggested by project team members represent

another category.
 Change Management System

Most change management systems are designed to accomplish

the following:

• Identify proposed changes.

• List expected effects of proposed changes on schedule and
budget.
• Review, evaluate, and approve or disapprove changes
formally.
• Negotiate and resolve conflicts of change, conditions, and
cost.
• Communicate changes to parties affected.
• Assign responsibility for implementing change.
• Adjust master schedule and budget.
• Track all changes that are to be implemented.
Change Management System

There are several consecutive steps in a change control

procedure:
• Requested change comes from you or project team (in any form).

• Project manager, with the help of system analyst and project team, analyzes
the impact. The impact is estimated in staff-hours (Cost) and business days
(Schedule).

• You approve or reject the estimation.

• New Specification is developed by the project team.

• Changes to Schedule, Risks, and Budget and are estimated and presented.

• You approve or reject the changes.

 Portfolio of Risk Management (4Ts):

Portfolio risk management is the process of identifying, analyzing, and

mitigating risks associated with a collection of investments, or a portfolio. The
primary goal is to protect the portfolio’s value and achieve desired returns
while managing potential losses from risks.
 “4Ts” for Risk management:

The "4Ts" concept in portfolio risk management has roots in general risk
management practices, but its structured form began gaining traction in the late
20th century as companies began formalizing risk management strategies.
To determine risk control strategy is to use the four T's Process:
1. Treatment of risk (Treat) (Mitigation, Redaction)
2. Transfer of risk (Transfer)
3. Tolerance of risk (Take) (Retention)
4. Termination of risk (Termination) (Avoidance)
 Example of the 4Ts in Bangladesh
Context:
In Bangladesh, the Ready-Made Garments (RMG) industry provides a clear
example of the 4Ts approach.

This structured risk management approach helps Bangladeshi companies

strategically plan their operations, stay competitive, and secure their position in
international markets.
 Importance of Risk Management :

• Risk Management Has Financial Benefits.

• Using Risk Management in order to
Ensure Safe Working Conditions.
• Risk management protects the brand's
credibility.
• Business planning can be enhanced by
risk management.
• Risk management improves the standard
of decisions undertaken.
 Conclusion:

In a nut up, risk management is crucial for

finding, assessing, and minimizing
possible risks to a project or organization.
It improves decision-making by offering a
methodical way to deal with ambiguities,
reduce losses, and grab opportunities. By
incorporating risk management into all
stages of preparation and execution, a
proactive culture is promoted, risks are
lessened, and overall performance is
improved.
Thank
You!!