Project Risk Management

9.1 Introduction

Earlier in Chapter 3, risk assessment was discussed from the standpoint of the overall economic prospects, positive and negative, of a project proposal. This chapter discusses how to define, control, and mitigate risks that emerge during project execution.

When studying risk assessment for a project from an economic point of view, the probabilistic studies and Monte-Carlo simula­tion techniques are key in this assessment, which is called quanti­tative risk assessment. But this method of analysis and assessment requires special software with specialized skills. On applying risk assessment in the execution phase using qualitative risk assess­ment tools, as we will describe in detail in this chapter. This assessment method is not required a special skills or software. Risk management during project execution is a combination of experience and qualitative skills, deployed usually by a team involved in the project’s execution, led by someone experienced in qualitative risk assessment strategies from other similar proj­ects. One of the greatest sources of risk to be managed is poor, shoddy or otherwise inadequate execution of some programmed

task(s) whose correction will increase project costs, time or overall output quality.

Risk potential is less at the end of the project than at the outset.

The risks can be classified in two categories:

• Project risks are the risks that can happen during a project due to technical mistakes that can occur during construction.

• Process risks are the risks that can occur during the proj­ect due to procedural mistakes, poor communication between the project team, or poor team performance.

Figure 9.1 Sources of uncertainty.

In general, there are many sources of uncertainties, especially in the main elements of a project, which are cost, time, quality, and HSE as presented in Figure (9.1). Our target is to control these uncertainties, try to predict what could happen, and avoid it in a reasonable time.

As shown in Figure (9.1), the uncertainty involved is like the black box, in which no one can know what will happen. Objectives are things that must happen; uncertainties things that might.