Risk Management 1

RISK
MANAGEMENT
What Is Risk
Management?
◼ RM – is the human activity which
integrates recognition of risk, assessment,
developing strategies to manage it.
Why is risk management
important?
Financial vs. nonfinancial industries
Processes can be applied to managing positive risks:
1. Top-down, bottom-up
2. Risk by categories.
• strategic risk (e.g., reputation, customer relations, technical
innovations);
• financial and reporting risk (e.g., market, tax, credit);
• compliance and governance risk (e.g., ethics, regulatory,
international trade, privacy); and
• operational risk (e.g., IT security and privacy, supply chain,
labor issues, natural disasters).
• Four basic risk types for businesses: people risks, facility risks,
process risks and technology risks.
• The final task in the risk identification step is for organizations
to record their findings in a risk register. It helps track the risks
through the subsequent four steps of the risk management
process.
Risk management standards and
frameworks
1. COSO ERM Framework - the importance of embedding risk into business
strategies and linking risk and operational performance.
• governance and culture
• strategy and objective-setting
• performance
• review and revision
• information, communication and reporting
2. ISO 31000. - a framework to help organizations apply risk management mechanisms to
operations, and a process for identifying, evaluating, prioritizing and mitigating risk.
3. British Standard (BS) 31100. - including functions like identify, assess,

respond, report and review.
4. The Risk and Insurance Management Society's Risk Maturity Model
(RMM). - framework helps risk professionals assess their programs in five
categories: strategy alignment; culture and accountability; risk management
capabilities; risk governance; and analytics
What are the benefits and
challenges of risk management?
Benefits of risk management include the
following:
• increased awareness of risk across the organization;
• more confidence in organizational objectives and goals because
risk is factored into strategy;
• better and more efficient compliance with regulatory and internal
compliance mandates because compliance is coordinated;
• improved operational efficiency through more consistent
application of risk processes and control;
• improved workplace safety and security for employees and
customers; and
• a competitive differentiator in the marketplace.
The following are some of the challenges risk management teams
should expect to encounter:
• Expenditures go up initially, as risk management programs can require
expensive software and services.
• The increased emphasis on governance also requires business units to
invest time and money to comply.
• Reaching consensus on the severity of risk and how to treat it can be a
difficult and contentious exercise and sometimes lead to risk analysis
paralysis.
• Demonstrating the value of risk management to executives without being
able to give them hard numbers is difficult.
How to build and implement a risk
management plan
ISO 31000's seven-step process is a useful guide to follow:
1. Communication and consultation. - risk leaders must also develop -
communication plan to convey the organization's risk policies
2. Establishing the context. defining -risk appetite and risk tolerance
3. Risk identification. - risk scenarios - positive or negative impact on the
organization's ability to conduct business.
4. Risk analysis - Making a risk heat map
5. Risk evaluation.
o Risk avoidance
o Risk mitigation
o Risk sharing or transfer
o Risk acceptance
6. Risk treatment.
7. Monitoring and review - Monitoring activities should measure key
performance indicators and look for key risk indicators that might trigger a
change in strategy.
Risk management best practices is ISO 31000's 11 principles of risk
management.
• create value for the organization;
• be an integral part of the overall organizational process;
• factor into the company's overall decision-making process;
• explicitly address any uncertainty;
• be systematic and structured;
• be based on the best available information;
• be tailored to the project;
• take into account human factors, including potential errors;
• be transparent and all-inclusive;
• be adaptable to change; and
• be continuously monitored and improved upon.
Risk management limitations and
examples of failures
Poor governance
Overemphasis on efficiency vs. resiliency
Lack of transparency
Lack of risk analysis expertise
Illusion of control
Construction Risk
Management
Construction risk management is the process of evaluating and
implementing procedures to reduce the impact of risks in construction
projects.
Project management software like Project Manager makes the risk

management process much easier.
What Are the Types of Risk in Construction Projects?
•Safety Risk
•Financial Risk
•Legal Risk
•Project Risk
•Environmental Risk
The Construction Risk Management Process:
1.Identification
2.Assessment: Not all risks are equal
3. Mitigation
4. Monitoring
5. Reporting .
How ProjectManager Can Help
You Mitigate Risk?
Construction Disputes: How to
resolve them?
How do construction disputes transpire?
• Issues with contracts
• Behavior
• Project Uncertainty
How do construction disputes transpire?
• Issues with contracts
• Behavior
• Project Uncertainty
Common types of construction disputes

• Change of finish date
• Delays
• Design
• Goals
• Quality of materials
• Difficult projects
How to resolve a dispute
• Negotiation
• Mediation
• Arbitration
• Litigation
How to resolve a dispute
• Negotiation
• Mediation
• Arbitration
• Litigation
Preventing disputes
• Clear payment terms
• Communication
• Keep records
• Follow the contract
END

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RISK

3. British Standard (BS) 31100. - including functions like identify, assess,

Project management software like Project Manager makes the risk

Common types of construction disputes

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