It is well known that unforeseen events may happen during life of any project and may damage partially or totally the objectives that project found for them . These are called risks . Risk Management is an approach used for avoiding , reducing , absorbing or transferring risks . There are many factors affect achieving goals of Risk Management . From these factors the four ones are the most important :
1- Management attention , motivation and insight among project personnel
2- The qualifications and knowledge within the project
3- The experience (practice) within the field of risk managing
4- The personality of the manager /analyst leading the process
As it is seen Risk Management is related to personnel attitudes . In general there are risk takers and risk avoiders that is two main categories of people . For example those who invest in financial markets are risk lovers while those who work under construction projects are risk averse . Risk takers usually underrate risk and risk avoiders take in consideration all obstacles and hence overrate risk . These two kinds of people exist , in fact , together in project teams and it is important for management to distinguish between them clearly in selecting personnel for the process of managing risks . There is another problem existing usually in construction project management regarding managing risks . It is the reason on which the analysis of risks performed . The common case is performing the analysis on request of other party , say the government , the partner or the client in general . Working on these basis , in hurry and without understanding why and what benefits there are the work will start going wrong . Finally it is useful to indicate here that the judgment of high skilled individual is often more accurate than combined group judgment
The type of approach followed in managing risks in construction projects affects directly the entire process and hence is a key factor in it .There are generally two types that is two approaches one of them is informal and the second is an informal one . In the first approach the organization implements methods of managing risks but does not relies that they operate a kind of risk management . The contingency funds either lump sum or percentage may be considered as an example of the informal approach . Discussion with an expert on similar project and outlining possible risks is another example . This approach , by experience , has lower value than the second and it is dangerous to build results on its basis especially in large projects . Formal approach usually consists of procedures to be followed by organization in managing risks . This does not mean a unique method but a framework leading to formalize the suitable method to be followed in each one project . The type and size of the project affect the process and it is thought that every project needs a special technique . However , there are standard steps which must be followed . Among these steps is the assessment of risks either in a qualitative or quantitative manner .
There are many methods used in managing risks in construction projects . Risk Management practitioners developed their own methodologies each in his type and nature of the project . However there is a standard model which is a Risk and Value approach which is divided into four parts :
1- Risk identification
2- Risk analysis
3- Risk response
5- Risk review
It is essential for the process to be success that many trials should be done to consider all possible risks . Various techniques usually used for this purpose like brainstorming and checklists . A number of authors have listed sources of risks in construction projects . Following an example of a checklist which can be derived .
Financial risks
Legal risks
Political risks
Social risks
Environmental risks
Communications risks
Geographical risks
Geotechnical risks
Construction risks
Technological risks
Demand/product risks
Completion risk
Commissioning risk
Supply risk
Natural force risk