Risk Analysis in Construction Management
Risk Analysis in construction management can be basically summed up to the elimination of uncertainty. This of course is not as simple as it sounds as uncertainty engulfs everything at the start of the planning phase. We can surpass the associated difficulties by putting our meticulous pre-execution planning and previous construction management experience to work. Of course, to this endeavor, we enjoy the support of sophisticated software tools and management platforms that can unify multiple elements of construction, associate teams and work tasks, locate overlaps, and identify risks beforehand.
Using our Procore custom platform as well as other quality and risk management tools that we utilize in the field, we ensure that all construction data is collected and taken into account from the planning to the execution phases. In KEN, we believe that tracking the performance on all levels is key to identifying risks early on and taking proactive action to mitigate their effects or to completely eliminate them. Through vigorous monitoring, we pinpoint the problems and resolve even the most complex of issues. In this context, our data reporting is truly in-depth, and the trends analysis is incorporated into it for justification and improvement proofing. Following our standard approach on being completely transparent with our clients, these reports reach them in the same time that they are generated by our software tools, and all live data is available to them at any time.
Identifying a risk is the first step in the process of risk management. After we complete the pre-execution planning, copies are distributed to our team of experts and then they are all asked to contribute their predictions and outcomes. We are using databases of previous projects containing previously identified risks, associate similarities and finally identify the most expected risks.
The next step after having identified and pinpointed the risks is to analyze them. To maximize our efficiency in this step, risks are grouped into three categories, underpinning a.) time, b.) cost, and c.) the scope of the project. These risk categories will determine how each risk item will be further evaluated in the next step, as our team members now undertake one of the three categories to speed up the process. From there on, categories are further broken down to subcategories, including occupational risks, financial risks, contractual risks, project risks, stakeholder risks, natural disaster risks, and competition risks.
Evaluation and Ranking
Having identified and categorized the risks, we proceed to the determination of their magnitude or importance. Here, we evaluate the risks by using visuals like diagrams that associate the risks with the negatively affected areas. Some risk items have greater damage potential than others, and some are more likely to occur than others. This process enables us to identify which is which, and rank the items accordingly. Impact and probability are both considered in this phase, as both play a critical role in the ranking of a risk item. For example:
• How likely is the construction site to suffer from a flood during the designated construction period, and what would be its impact in the project work schedule and additional costs?
• What is the chance of a sudden increase in the price of construction steel, and what would the percentage of that increase be in the worst case scenario? What would be the maximum damage to the profit margins in this case?
In this step, we are taking proactive action to either eliminate the risk item entirely, or mitigate its effects as much as possible. Through in-depth analysis, we can evaluate the potential outcomes of our treatment/mitigation strategies, and how this will place a specific risk item in the ranking. Sometimes, risks can be avoided entirely by changing the planning as required. Others, risks can be transferred to other parties through insurances or relevant contractual agreements. Mitigation of risk items is mostly achieved with the training of the personnel and the construction of additional protective elements. For the risks that cannot be handled in any way, like natural disasters, we accept them and simply strengthen the depth of our construction planning so as to accommodate unforeseen changes as we go. Of course, in this phase, we do not just mitigate negative risks, but we also look into opportunities and ways to enhance their effects as well.
Monitoring and Reviewing
Finally, having done the risk management planning as described above, we closely monitor the risk items in every step that encompasses them. This allows us to evaluate whether our measures were indeed adequate or not, and how a risk item develops throughout time and in relation to the project goals. Thanks to this methodical work, this stage is when our predictions are confirmed instead of a time of surprises and missed opportunities.