The risk management system

Is a system that must be practical, realistic and cost effective. It must be simple. Not complicated. Is just about common sense, analysis, judgement, intuition, experience, gut feel and willingness. You can think at risk management like a discipline for living and when you are planning for the future must have in account about the possibility of some adverse effects to have place. It is something like cause and effect. A rule that governs the nature.

How to developing a risk management framework?

– Risk identification: Identify the source and type of risks

– Risk classification: Consider the type of risk and its effect on the person or organization

– Risk analysis: Evaluate the consequences associated with the type of risk, or combination of risks, by using analytical techniques. Assess the impact of risk by using various risk measurement techniques

– Risk attitude: Any decision about risk will be affected by the attitude of the person or organization making the decision

– Risk response: Consider how the risk should be managed by either transferring it to another party or retaining it

Risk identification

You must know that an identified risk is not a risk from then on. Because it is a management problem.

Possible sources with possible effects:

– lack of safety provisions: death of workman

– inadequate safety checks on site: serious injury to workman: prosecution and fine by statutory authorities

– specialist contractor not familiar with the system of working: project being stopped by the Health and Safety Officer with the issuing of a prohibition notice

– defective equipment: project being delayed

– inexperienced workforce not suitable for the type of work to be undertaken: loss of morale and poor labour relations amongst the workforce

– unforeseen weather conditions: project being delayed

– lack of care by the workman: cost of loss production

Controllable versus uncontrollable risk

There are 4 types of risks:

– those factors that are within your control;

– those in the control of others with whom you are forced to interact, for example the demands of the Planning Officer, Building Inspector, Fire Officer, Bank Manager;

– those that are a function of government action, such as a change in the Planning Regulations, Building Code or the rate of taxation;

– those factors that are outside of control, for example the weather.

Sources and effects

Souces of risk:

– inflation rising above the allowance in the estimate;

– unforeseen adverse ground conditions;

– exceptionally inclement weather;

– late delivery of crucial materials, for instance after a fire at the suppliers’ works;

– incorrect design details, such as the wrong size beam being shown on the architect’s drawings;

– insolvency of the main contractor;

– no co-ordination, for instance between the mechanical services contractor’s drawings and the suspended ceiling specialist’s drawings.

Most serious effects of risk:

– failure to keep within the cost estimate;

– failure to achieve the required completion date;

– failure to achieve the required quality;

– failure of the project to meet the required operation needs;

– damage to the property as a result of fire or flood;

– injury to a worker due to an inadequate system of working.

Risk classification

You can classify the risk in three ways: identifying the consequence, type and impact of risk.



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