Project Risk Management
Construction is one of the world’s biggest industries. Whilst the industry has made giant strides technically over the last few decades, in equipment, materials and techniques, it has surprisingly not made similar advances in effective risk management and projects continue to run off the rails worldwide every year and go disastrously wrong, both in developed and emerging nations.
So from a practical standpoint, there are two obvious questions:
- “Why do project disasters continue to occur all over the world on a regular basis in this age of much more advanced management training?”
- “High quality risk management systems are available, so what is going wrong with the application of these systems to prevent disasters and what can be done about it?”
We have not learnt from our mistakes over the years and continue to mess projects up badly.
The ramifications of ‘disaster’ projects are widespread and include:
- Significant delays in the delivery of the proposed services
- Reduced returns on investment
- Claims and disputes, which are costly in both time and money
- Substantial losses for tenants and services contractors
- Breakdowns in business relationships
- Disruption to community services
- Political fallout and reputational damage
- High cost over-runs with heavy financial losses for investors, government clients, lenders, developers, contractors and insurers; and at worst,
- Bankruptcies for construction companies, subcontractors and suppliers
With all projects that get into trouble the real causes invariably reflect a failure of the planning, structuring and project management. The risk management systems should have been able to anticipate or expose the problems and rectify or mitigate them to an acceptable extent, but clearly this does not happening effectively.
Common factors with ineffective risk management include:
- Human behaviour, with people being the problem in many instances, not a lack of effective risk management systems;
- A breakdown in communications and collaboration between stakeholders.
Risk management covers any potential issue that is likely to jeopardise the project at any stage of its life.
Risk Management Consulting
Our team has extensive international experience on major projects and we offer:
- Risk management advice
- ‘Early warning’ processes
- Advice on BIM as a risk management tool
- Independent project reviews
- Training workshops
The real value of risk management comes from starting early in the project life with the initial concept and feasibility and identifying and quantifying future potential risks all the way through design, construction and commissioning and into operations.
Construction companies generally say they have these processes in place internally and therefore don’t need external reviews, however many large projects keep getting into trouble.
It is not always easy to convince project and construction managers that they benefit either way from external risk reviews. The reviews should be seen as ‘safety first’ low cost risk management. The upside is confirmation that everything is in order, but if the external reviewer unearths some potential problems and they are rectified or mitigated before they get out of hand then the managers still get the credit.