One of the most important aspects to put into consideration when taking up a project is project risk management. A project risk is an event / condition, which is uncertain that, upon it occurrence brings either a positive or a negative impact on the project. A positive manager should consider this as one of the ten knowledge areas where competence is highly regarded. Risk management is critical, especially to organizations working I multi-project environments and the maturity for risk is high. A wide range of risks is apparent when working in projects involving construction among other engineering work. These risks are mostly attributed to government policy, diversity in stakeholders’ aspirations and the challenges of adding multiple projects. For a good risk management process, there must be a clear statement and understanding of roles and responsibilities, proper skills on technical analysis and the prevailing organizational factors should support the project. Project risk management involves identifying, assessing and prioritizing of risks: and thereafter putting resources to use in order to reduce, monitor and control those risks that could affect the project negatively and increase realizing of opportunities. This report seeks to outline the knowledge acquired on management of risk in projects.
All organizations exist for their own different purposes, and that of public engineering organizations in the construction business, the purpose is to deliver a service, which brings a beneficial result in the public/ stakeholders interest. Decisions to pump resources into investments on capital infrastructure are prompted by needs that are meant to enhance the achievement of the major purpose. According to Flanagan and Norman (1993), the benefits of efficient risk management are evident especially in projects involving capital infrastructure because they are dynamic in nature and bring positive cost implications from the construction related decisions. Risk management should be taken as an intrinsic part of capital infrastructure investment decisions mainly because, as project ventures get more elaborate, the role of risk management is exemplified. In regard to this realization, some countries have enacted government policies on constructors emphasizing on the need to incorporate risk management in capital infrastructure schemes. Risk is therefore, in many occasions, viewed as a condition or event whose occurrence will have adverse effects on the project and may hinder the attainment of set objectives. Hence, risk management relates decisions to such probable harmful effects.
This philosophical approach to risk management enables the process to be broken down into four fundamental sub-processes. These involve identification, analysis, response and monitoring. The former step of identification is the most critical step because it has the biggest effect on decisions emanating from the process of risk management. Reviewing risk management, in his article, Williams (1995), notes that there is little structured work in publication about typical risks. According to Chapman (1998), as much as risk identification is critical on the risk assessment and response phases, very little empirical evidence is available at this early phase. The heavier task in risk management remains in the analysis and response to the risk, yet the reasoning stands that unless the risks are identified, they cannot be analyzed and responded to.
For most engineers, the need to have a set out program is critical for it provides an umbrella under which all current projects fall so that an outcome can be delivered massively in general, and greater than the total sum of all others. A program is usually temporary, and flexible; created to direct and oversee the implementation of a set of related projects and activities for the deliverance of beneficial outcomes that relate to the organization’s strategic objectives. Several projects are undertaken under this umbrella. This explicitly differentiates between program management outcomes and project management outputs. However, there is a link between projects and strategy through the program. Risk management is becoming an increasingly important process due to external pressures in existence. However, good risk management is seen as a critical attribute of organizational success in the field of engineering. The assumption that programs are merely extensions of projects should cease to exist because many will tend to reflect program risk management to project risk management (Allan, 2008). Program management is a broad extension of the varied, yet related, projects.
On projects, it is important to define one or more objective functions like capital expenditure and completion time to represent it to measure the probability of achieving the set targets. Risk management then goes on to model the project’s objectives against the projects variables like costs and the quantity of inputs. These variables are usually uncertain as time goes on, hence the uncertainty of a hundred percent achievement of the objectives set. The most ideal situation would be identifying and characterizing the variables in advance providing that they will remain unchanged by time. This would make it easy to estimate the possible risks and the consequent variance of the project’s objective(s). However, not all project variables can be identified as new variables might surface as the project goes on while the probability of occurrence of the initial variables may vary. The impacts of the initial variables, both positive and negative, may change too hence making risk management even more hard (Drummond, 1999).
Certainty and uncertainty of realizing a project’s objectives are measurable, only ideally. The possibility of a project not breaking even could be considered as a representative of the whole project, and then used in turn to evaluate against variable and try and reduce the risks involved as well as become a basis for decision-making. Some projects may proceed normally in a stable environment, hence making the uncertainty high at the time it is conceptualized. Pro-active planning and making prudent decisions will see the uncertainty reduce. However, uncertainty in complex projects within a changing environment will not necessarily reduce/ diminish as time goes by Chapman (1998). It is necessary to keep on checking on the project’s variables and re-evaluating of the objective function’s status to facilitate adjustments in the project’s strategies. Uncertainty surrounds many parts of a project; hence early resolution of variables may not be possible always. Variables change over time leading to exposure to new threats and risks along the way. This fact should not be refuted and a lot of work is required in the planning evaluating phases, where most of the critical work is done. In spite of all the uncertainty and complexity surrounding risk management and project management, it is important to seek methods of improving the project’s base value (Drummond, 1999).
Conceptualization, planning, and implementation of a project is a complex process that requires management based on set strategic objectives, which vary from time to time. The objectives should be integrative and holistic in the sense that it caters for social, political, environmental, and community aspects. Traditionally, planning in project management should form the basis of planning, alongside other functions of project management including; human resource, time, scope, integration, quality and procurement. These should be the fundamental factors f consideration along each phase. A variety of guidebooks, protocols and codes of practice in the engineering field have been made available for use in risk management in project management. In the United Kingdom, the ‘Orange book’ is a framework that is set to offer guidance on basic risk management concepts and as a resource for developing risk management processes and implementing them I the public sector. It is also aimed at using a risk based decision-making on investment. There have been many more publications and publications aimed at dictating hoe risk management should look like. These guidelines have offered a basis upon which projects are appraised and their investment viability tested. This has enhanced the process and shifted its reception and perception from project risk management to a risk management strategic level (Melton, 2011).
In engineering and construction professions, program management and project management came to existence due to the changing procurement environment. In the United Kingdom, procurement of infrastructural assets was done in a sequential manner, which involved a clear differentiation in the project life cycle phases. Currently there are three major procurement systems, that is; prime contracting, Design and Build procurement and Private Finance Initiative. These methods were because of the need to adopt integrative and collaborative project delivery methods. The procurement systems have features like framework agreements, the use of specifications that are output based, and more importantly, emphasis on the lifelong value of the structures (Shehu and Akintoye, 2009). The office of Government Commerce has facilitated the change in construction procurement in the public sector too. The agency’s main agenda is to ensure that policies are followed and enhancing promotion of the best performance practices. These systems ensure that the project undertaken are of high quality and are in regard to the set policies and guidelines. These sanctions in the public works and construction sector have acted as strategic risk management tools for they ensure quality assurance as well as proper quality management.
Project management should incorporate the use of a strategy-based management approach. This will facilitate the integration of planning, risk management and decision-making hence ensuring real time real time realization of an optimum of the project’s strategic objective against its variables. The project’s promoters are not always the investors. Investors are not always actively involved in the management of the project, but invest resources into the project hoping to get dividends. The promoters’ objective, on the other hand, is to deliver a facility that will ensure a long term balanced and financially viable business entity. The project is therefore a compromise between the attainment of investors’ interests and that of the community. Project development should be based on a set of strategic objectives, which stamp the project as a business and entwining project decisions to strategic business decisions. Amid all risks, the project should be planned proactively with regards to its variables and with a focus on the life cycle objective functions (Westland, 2007).
The life cycle objective functions are functions such as: financially related functions- such as the project’s net worth, satisfaction of customers- those affected by aspects such as safety, project utility, operability, and quality, lastly, due diligence must be adhered to- that is, statutory concerns and policies should be observed especially when the project is located in highly populated areas or is adjacent or near ecological systems deemed to be sensitive (Janet & Tammy, 2005). This factor also goes hand in hand with the ethical code that is supposed to guide the execution of projects. Proactive planning of the project ensures that project uncertainty is minimized in real time. Effective risk management ensures that there is typical conceptualization of projects and their subsequent implementation using strategic objectives. It also ensures any further variables are assessed and managed accordingly to optimize the project’s strategic outcome, that which of a business entity. Since projects are subjected to changes in objectives and variables due to external factors, it is important to incorporate a continuous risk management process that involves continuous risk and uncertainty management process conducted in real time to bring value to the project manager. Strategies made from risk analysis should be seen as a basis upon which decisions are made going forward. Objectives of the life cycle should be used as the vessel for analysis.
Engaging in exhaustive personal research and involvement of the same with groups has incapacitated adequately with sufficient knowledge on managing projects as an engineer. I have come to evolve from a mediocre project manager, thinking that technicalities were all I needed, to a project under-taker equipped with the relevant skills. Undertaking projects with my group and alone was not like undertaking them with my professor. Comparing personal projects and those done in groups, with those guided by the professor, flaws are clear to point out. In my first group project, our then project leader, whose name I will not disclose for discretion purposes, was too impulsive at times and objectives were not achieved as expected because of poor decision-making, even on the most obvious issues. The project resulted in high costs in execution unlike what had been anticipated and took longer. However, it is from the mistakes that my group and I learnt the importance of risk management in project management as an important tool to facilitate proactive planning, rather than responding to results. Another lesson learnt from that experience was the need to incorporate continuous analysis as a way of implementing risk management to ensure real time solutions. However, it is through solving these and other hurdles that the learning process in the field has been enhanced and increased my knowledge. The short yet detailed experience coupled with the many articles and critiques I have encountered have inspired me to get to want to explore more on the field by undertaking and managing more projects to experience more than I have. By initiating and overseeing projects as well as assuming responsibility for achievement of objectives and integration will boost my intuition and judgment on decision-making for future projects and for professional expertise. I know trying to venture into projects of high magnitude is a risk, but the ability to tackle the risk itself is way beyond the risk management of the process and a success would ultimately mean victory on both ends.
Allan, N., Davis, J., 2006. Strategic risks — thinking about them differently. Proceedings of ICE 159
Drummond H 1999. Are we any closer to the end Escalation and the case of Taurus? International Journal of Project Management
Flanagan, R., & Norman, G. (1996). Risk management and construction. Oxford [u.a.], Blackwell Science.Means, J. A., & Adams, T. (2005). Facilitating the Project Lifecycle the Skills & Tools to Accelerate Progress for Project Managers, Facilitators, and Six Sigma Project Teams. Hoboken, John Wiley & Sons. http://www.123library.org/book_details/?id=9130.
Melton, T. (2008). Real project planning developing a project delivery strategy. Amsterdam, Butterworth-Heinemann.
Shehu, Z., Akintove, A., 2010. Major challenges to the successful implementation and practice of programme management in the construction environment: a critical analysis. International journal of project management
Westland, J. (2007). The project management life cycle: a complete step-by-step methodology for initiating, planning, executing & closing a project successfully.
Williams, T., 1995. A classified bibliography of recent research relating to project risk management. European Journal of Operational Research