Project Risk Management in Construction, Research Paper Example

Project management in construction incorporates many tools and techniques to facilitate the opportunity for the success of a project implementation. Projects have inherent risks associated to them and there are multiple methods and techniques to monitor and control those risks. The goal of the risk management plan is to outline and provide clarity to what the risks associated with the project are and what their impacts potentially could be. There are tools to qualitatively and quantitatively measure the risks associated with the project. There are also tools to take those measurements and incorporate the information from the risk measurements and incorporate those into the project planning activities.  These tools include the Earned Value Management tool as well as project tollgates and tolerance checks.

Risk

Risk is the possibility of a deviation from the expected result.  The result of a risk can be associated to specific outcomes or costs associated with the risk.  This is heavily dependent upon the variables of the risk such as probability or likelihood of occurrence, level of deviation from the intended plan and the breadth or impact of the risk.  A risk that could shut down the entire facility working on the project would have a high level of deviation from the objective but it may also have a very low likelihood of occurrence.  Each type of risk would be measured, monitored and controlled through different types of risk mitigation.

Assessing risk within construction entails assessing the probability of a specific outcome to occur.  This assessment can be accomplished through the application of the basic probability theory. This theory is a mathematical theory that models specific events with different variables or risks to the outcome. This theory allows the user to derive outcomes based on the inputs of variables to the situation. This is extremely useful when trying to develop a picture of what could potentially occur when multiple risks are associated to the same project. With any type of construction project management activities in which risk is defined it then needs to be measured in both a qualitative and quantitative perspectives. There are also different tools for measuring the types of risks and inputting those results into the project.  For qualitative risk management the first important tool is the risk management plan. This pulls together all the findings, risks, mitigation plan, and other pertinent information required for the project team to perform their duties regarding to project scope, schedule and cost.  Other tools that help facilitate the qualitative risk assessment include a risk probability and impact assessment, assessment on the risk data, risk urgency assessment as well as incorporation of a probability and impact matrix.  All of these tools would be executed and documented in the risk management plan.  The qualitative risk management tools and techniques all provide the insight into the risks and allows for a prioritization of those risks which facilitates risk planning.

Development and Management of Risk

During the course of the construction project there are certain inputs that go into completing tasks along the project schedule.  The project manager can utilize certain tools to understand how much cost and effort is required to accomplish the tasks and also understand if the costs inputted into the project are providing the rate of return needed to meet the schedule. Ultimately the project manager needs to know if the resources allocated to the project are being fully utilized and returning favorable results.  The tool that could provide the most insight and clarification on this would be the Earned Value Management, EVM tool.  This tool provides the monitoring and controlling aspects of managing a project or program but also provides a level of accountability for the project and program managers (Fleming & Koffleman, 58).  The EVM tool allows the measurement of the three project constraints of scope, schedule and cost while analyzing the performance of the triple constraints against what is being accomplished on the project.  In a complex environment such as implementing new construction solution across an entire business the utilization of agile methodologies has been decided.  The use of trending planned value (PV), or the value of work planned to be completed, versus earned value (EV), value actually accomplished in the project, allows insight into the actual work being performed against the expected results.

The project manager would utilize the risk management tools as well as the estimation tools to create work breakdown structures to understand what level of effort will be required to accomplish specific tasks (Magal, 25). This would allow for the use of the risk information to mitigate the potential risk and alleviate the negative ramifications. Once the planning phase of the project is complete and the project plan is created, scope is define, estimations of resources is completed and the associated plans regarding communications and risk are initiated the project manage would utilize monitoring and controlling tools such as earned value management, EVM.  EVM would measure the performance and progress of the project within the parameters of scope, schedule and cost. This provides the project manager with the information to know what has been accomplished, the amount of resources utilized and if the project is in line with the estimations (Fleming and Koffleman, 69).

Monitor and Controlling Risk in Construction

There are various triggers that can raise the awareness of certain risks associated with a construction project. These include project slips, budget overruns, and scope changes.  They may also include areas of concern such as the extremely high value of a structure, the variables of structural integrity, intricacy of design or other structural factors. These are major areas that are impacted by the results of risks coming to fruition.  Other areas that can be used to monitor risk can be more proactive in nature and allow the mitigation of the risk to occur as opposed to allowing the result of the risk to occur.  Toll gates in projects places specific requirements on the project to ensure certain aspects of the project is being achieved and if not the status of the project can be addressed.  The project team would then have the ability to adjust their trajectory and work on the areas that need attention to get the project back on track.  Each area of the project would have its own inherent risks and there could also be thresholds and tolerances built into the project that would allow visibility into the project’s approach to these defined tolerances.  If the project approaches certain tolerances the project team can adjust the course and focus resources to mitigate the risk of going outside of the parameters of the project.  This could contain parameters set on budget, schedule or scope changes

Development and Management of Contingency Allowances

Managing risk is vital to the project’s success.  It is necessary to develop the risk management plan and incorporate all of the outlined risks that resulted in the risk analysis.  These risks would then align with the mitigation plan that the project manager develops with his or her team based upon the resources provided to his or her project. In order to mitigate all of the risks associated with a project there would be a tremendous devotion of time and funding. It is up to the project team to develop a prioritization of risks and build a contingency plan based upon those risk measurements and prioritization.  Managing the resources devoted to the mitigation of risks is just as important as managing the resources solely devoted to the project’s progression toward completion. There needs to be a balance between risk acceptance and the benefits provided by expending resources toward the negation of those risks.

Successful projects incorporate the best practices framework as well as the tools and resources that are gathered and utilized throughout a project manager’s career.  The project scope must align with the expectations of the stakeholders as well as the cost estimates, established budget and the proposed schedule of the project.  These tools and techniques provide the project manager the timely and accurate information to make project management decisions while taking the appropriate project actions to meet the expectations of the stakeholders while delivering the requirements on time, on schedule and on budget.

Works Cited

Fleming, W. Project procurement management, CA, FMC Press. 2003. Print.

Fleming, Q. W., & Koffleman, J. M. Earned value project management. Project Management Institute. 2010. Print.

Magal, S. R., & Word, J. Integrated business processes with erp systems. RRD/Jefferson City: Wiley. 2011. Print.

Project Management Institute. A guide to the project management body of knowledge. (4th ed.). Newtown Square: Project Management Inst. 2008. Print.