Risk and Risk Management

The successful completion of a business project is dependent on the development and implementation of an effective risk management plan. The risk management plan is developed basically for identification, analysis and mitigation of the risk that can impact the project execution and completion. The mitigations of the risks in advance before their actual occurrence enhance the chances of the successful completion of the project. In this context, the present report describes the risk management plan for a selected business project. The report describes in detail the management process used for identifying, categorizing, quantifying, and overcoming the risks that a project can face while its execution. The project selected in this context is ‘Research Support Building and Infrastructure Modernization (RSBIM)’ at Central University of California undertaken by the Turner Construction Company in the US. The company operates on a global level and is recognized as a leading builder for undertaking complex infrastructure projects and completing them through the use of innovative construction processes. The plan addresses the financial, managerial and technical risks associated with the selected project. The risk management plan helps in prioritizing the risks and thus provide an assessment of the risks that helps in their effective resolution. The prioritization of the risks significantly led to development of the risk management process for their mitigation for ensuring that all the possible chances of failure of the project are identified and effectively managed.

The term ‘Risk’ in the context of the business project refers to any event that has the potential to negatively impact the chances of its successful project completion. It is a definable event with a high probability of occurrence having negative consequences in the event of its occurrence. The severity of the risk can be assessed in multiplication of its probability with its impact that helps in determining the type of mitigation plan for its overcoming.  The risk mitigation plan helps in identifying, managing, reviewing and controlling the risks for reducing its severity to an acceptable level. Thus, the process of risk management can be defined as the method used for forecasting and evaluation of all the managerial, technical and financial risks associated with a project for minimizing their impact on the outcomes to be achieved (Loosemore et al., 2012).

The risk management process details out the strategies and the methods to be implemented by project manager for dealing with the risks identified. The different stages in the risk management process can be described as follows:

• Risk Identification: The step involves identification of the risks that impact the successful completion of the project.
• Risk Assessment: The step involves carrying out a quantitative assessment of the impact of the risks and their chances of occurrence.
• Risk Handling: The strategy adopted by the business entity for eliminating, transferring or mitigating the risks identified.
• Control Actions: Implementing the actions to reduce the occurrence of the risks through the help of risks handing strategies
• Risk Reporting and Tracking: Reviewing the effectiveness of the rinks management strategies adopted in reducing the impact of the risks on the project completion (Andresen, 2007).

4.1: Risk identification

Risk identification is the complex process and it requires methodical method in order to identify all the risk associated with in the project in comprehensive manner. For this process, person such as risk project manager, integrated project manager, project engineer, all the experts and other managers are asked to review their respective areas and find all the risks. The project RSBIM is the complex process and it has following inherent risks (Edwards & Bowen, 2013).

Risk Priority on the basis of impact and cost	Major risk Areas found in the Project	Risks identified in each of selected areas
Very High Risk	Project Cost	· High fluctuations in the cost of raw material · High certainty that project cost will rise in future
Very High Risk	Time Schedule of project	· There is no proper funding to the project as funds are provided in unplanned manner · Resources requirement are not met at time · Schedule time is not based on realistic approach
High Risk	Testing Requirement, Evaluation and carry on simulation	· Testing plan has made at initial stage · There is no testing planning for operating environment · Testing procedures defined does not completely evaluate the performance of project · Time availability for testing is very minimum · No proper tools to carry out the testing
Moderate risk	Suppliers and vendors	· There are very less number of suppliers in the project area and transportation cost is above the market price
Moderate risk	Facility arrangement and fixed assets (Equipment)	· Vendor support and long term planning for long lead items · Failure to acquire assets and proper leasing arrangement
Low risk	Design	· Improper design as design relies on immature technologies · Cost effective design cannot be achieved
Low risk	Requirements in the project	· Requirement are not clearly stated · If Requirements are not met in decided price and on time
No such risk involved but if any of listed risk quantify can lead to some increase in cost and duration	Technical matter	· No major technical risks · High end technologies is used but limited to the given set of requirements by the client (Kendrick, 2015)
No or very negligible risk	Management	· Requirements and work flow are divided as per of project requirements not on the basis of management classification and respective roles · Management people are not assigned the project on the basis of the experience, skills and stability (Hillson, 2017)

4.2: Risk Assessment and Quantification of each level of risk

Risk assessment is very important phase in the risk management plan and it is processed by identifying the probability of occurrence, cost taken, and schedule impacted through each risk. So it can be said that consequence of each risk can be through making the cumulative impact due to cost, project scope and time schedule. So looking at the size of project and schedule of project, following three assessment levels has been decided:

• Technical Consequence level
• Schedule Consequence level
• Cost Consequence level (Raydugin, 2013)

Brief overview of risk management process

The matrix of risk assessment is provided below:

	Risk Level 0 (Zero or no risk)	Risk Level 1(Low or minimum risk)	Risk Level 2 (Moderate or considerable Risk)	Risk Level 3 (High and significant Risk)
Technical	No or Negligible risk	Lower level of degradation	Degradation at significant level	At this level technical performance is of no use in attaining the project objectives
Schedule	No potential even for Negligible risk	It can delay the project duration up to 1month	It can delay the project duration up to 3 month	It can delay the project duration by more than 3 months
Cost	If cost impacted is under or up to 10,000 US dollars	If cost impacted is under or up to 100,000 US dollars	If cost impacted is under or up to 500,000 US dollars	If cost impacted is more than 500,000 UD dollars

4.3: Risk Probabilities and Risk severities matrix

After risk assessment has been performed and risk are broadly divided into four major levels (Level 0 to 4). For each level of risk following the risk probability identity on the analysis:

Level of risk	Percent of Probability that risk will quantify
Level 0	Less than 1 % probability that risk consequences will quantify
Level 1	Less than 10 % probability that risk consequences will quantify
Level 2	Less than 25 % probability that risk consequences will quantify
Level 3	More than 25 % probability that risk consequences will quantify

Risk Severity Matrix on the basis of probability identified

Risk Matrix	Risk Consequence Level
Probability Level			1	2	3
P0	0	0	0	0
P1	0	1	2	3
P2	0	2	2	3
P3	0	3	3	3

5.1: Risk management method to manage the identified risks

The project RSBIM has various risks that have been identified in above section of the risk management plan. After identification and analyzing them in detail under the risk management plan is now followed by the risk handling through applying risk mitigation strategies. Risk mitigation strategy is the management approach and it is broadly divided into four categories. The four risk mitigation strategies are risk avoidance, risk transfer, risk reduction or mitigation and risk acceptance. All these risk strategies are mainly used to manage the identified risks up to maximum extent (Cretu, Stewart & Berends, 2011).

In order to handle the identified risks in the RSBIM project, risk management strategy of risk handling has been used as it is best method available to manage the risk in any kind of project. Below table will show the risk management strategies in detail that are applied in the RSBIM project to manage the overall risk.

Risk Management method	Its Objective	The main features
Risk Avoidance	· Risk can be eliminated or avoided through changing various parameters of the project	· Under this risk management method project plan can be change to eliminate the risk that are creating the risk. For example, Risky requirement, working conditions, technology and contractor agreement.
Risk Transfer	· Under this method risk remains the same but it gets shifted to some other project or company. This is why is called as risk allocation	· Full transfer or partial transfer is possible here · Cost and funding risk are best to transfer
Risk Mitigation	· This method reduces the likelihood and consequences of the risk identified that cannot be transfer or eliminated.	· It is performed using the risk control measures · Here the control measures are comprehensive and hard to implement · The risk mitigation action can affect the project duration, cost and scope
Risk Assumption	· Risk is recognised and it is accepted	· No feasible option is available to mitigate the risks · Only controls can be placed but it is not sure that they will be helpful or not

5.2: Risk Impact Determination

Under this process effect of risks is evaluated and quantified that impacts the project. Risk makes an impact on the project into two different ways:

• Risk management strategy plan implementation: In case when the risk reduction and risk mitigation strategies used to reduce the impact of risk on the RSBIM project, than there certainly there will impact on the project duration and cost. So it has been decided to include the cost associated and project duration impact due to risk management strategy plan, in the overall cost of project and project schedule.
• Residual Risk: Even after the successful implementation of risk management strategy plan there remains certain risk that cannot be avoided and it can bear some cost and also impact the project duration. So the cost and schedule variance (the estimated figure) has been included in the project cost and duration on contingency basis in order to avoid any future cost and lag in the project due to unidentified risk (Smith, Merna & Jobling, 2013).

5.3: Risk abatement strategies

Risk manager is responsible for planning the risk abatement strategies that are needed to accept or mitigate the risk identified in the RSBIM Project. Under the risk management plan manager will develop risk abatement strategies for each of the identified risks of the project. The risk abatement process is the general risk manager process that has complete in order to develop the actions plan of specific activities that are taken up to reduce the risk impact on the project (Lambeck & Eschemuller, 2008). The below table is developed to the risk abatement strategies for each of the identified risks under the RSBIM project.

Common risk abatement strategies
	High	Moderate	Low
Project Cost	· In this Situation there is need to closely monitor the cost and spending of the project · Obtain the cost estimates from the vendors using bottom up method · Value management process	· In this Situation there is need to closely monitor the cost and spending · Cost estimations of vendors at least two using bottom up method	· Simply monitor the cost and how the spending are taken up
Project Duration	· Try to increase the lead as maximum it is possible through making the arrangement of procurement 6 to 8weeks early · Regular vendors visit and lookout	· Try to increase the lead as maximum it is possible through making the arrangement of procurement 2 to 4 weeks early · Regular vendors visit and lookout	· Have the look the project duration and if any major fluctuation noticed must be reported (Smith, Merna, & Jobling, 2013)
Project Performance	· Need to perform major redesign process · Need to apply the alternate technology · Testing must be strictly followed	· Redesign at moderate level is required · Technology can be altered if required · Testing must be performed thoroughly	· Testing must be overlooked by the manager daily

6.1: Risk monitor and status follow up

It is important to monitor the risk management plan and take the follow up of status for each of the process. The RSBIM project is critical project and there is need to regular tract and monitor each of the risk management process. This process include the process of checking the probability and consequences of each of the risk identified (pre and post risk mitigation plan). The risk control measures or actions are checked on schedule basis so that proper assurance can be made. As the RSBIM project will be taken on long duration basis there is need to make the risk registry on schedule basis so that risk management plan can be successfully implemented and controlled (Molenaar, 2010).

In the process of risk plan review, the RSBIM Risk Manager, RSBIM Project Manager and the Integrated Project Team of RSBIM will together review and update the project risks and management actions by monthly basis so that any new risks can be identified and proper actions can be taken as and when needed. The risk manager of RSBIM project is responsible for maintenance of risk registry and to ensure that all the team members of the risk management monitor and reassess the risks regularly. Risk manager is also responsible for maintenance risk management strategies and to ensure that risk management plan is implemented in timely and effective manner (Simon & Gunn, 2017).

6.2: Risk Documentation

It is important to maintain the risk documents for the RSBIM project as it helps to get the information as and when required by the risk management team. All the identified risks must be document in the risk assessment worksheet. The risk consequences and risk probabilities must be defined and explained in detail so that it supports the level of assessment. The risk management strategies and abatement strategies for each of the risk must be documented in planned manner so that it can be easily understood (Simon & Gunn, 2017).

7: Conclusion 

Risk management plan of RSBIM project has been successfully completed using the best management approach and this plan helps to identify the risks associated with the project and also provide risk mitigation strategies to avoid the risks. The risk management plan contains series of steps that need to be properly followed in order to develop best risk management plan. 

8: References

Andresen, M. 2007. The process of risk management for projects. GRIN Verlag.

Cretu, O, Stewart, R.B. & Berends, T. 2011. Risk Management for Design and Construction. John Wiley & Sons.

Edwards, P. & Bowen, P. 2013. Risk Management in Project Organisations. Routledge.

Hillson, D. 2017. Managing Risk in Projects. Routledge.

Kendrick, T. 2015. Identifying and Managing Project Risk: Essential Tools for Failure-Proofing Your Project. AMACOM Div American Mgmt Assn.

Lambeck, R. & Eschemuller, J. 2008. Urban Construction Project Management (McGraw-Hill Construction Series). McGraw Hill Professional.

Loosemore, M. et al. 2012. Risk Management in Projects. Routledge.

Molenaar, R. 2010. Guidebook on Risk Analysis Tools and Management Practices to Control Transportation Project Costs. Transportation Research Board.

Raydugin, Y. 2013. Project Risk Management: Essential Methods for Project Teams and Decision Makers. John Wiley & Sons.

Simon, A. & Gunn, B. 2017. Risk and Financial Management in Construction. Routledge.

Smith, N.J., Merna, T. & Jobling, P. 2013. Managing Risk in Construction Projects. John Wiley & Sons.

Smith, N.J., Merna, T. & Jobling, P. 2013. Managing Risk in Construction Projects. John Wiley & Sons.