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Chapter 2
Identification and Analysis of Risk

Excerpt

Risk management contains the elements of identification, analysis and control. The focus of risk management must be on communication (and, therefore, understanding) by each party of the issues and risks involved. Each party must begin the project with an understanding and respect for each other's objectives and risks such that a risk management “process” can be implemented. Tools must be in place to evaluate completion progress against the initial, or “baseline” plan, to the satisfaction of each party. While this process is described in the context of design and construction projects (capital investment as opposed to maintenance projects), the application to product development and systems or manufacturing design can be developed by the reader.

In addition to individual (direct) risks to the three variable goals of scope, cost and schedule, it is important to recognize how the interrelationships between all goals introduce additional (indirect) risks. For example, a change in scope for safety related issues (e.g., because students are occupying part of a building intended to be vacated) may introduce a risk to the cost or schedule goals. The relationships of key goals is discussed in Section 2.2.

At the start of a project certain risks are easily identifiable. Those that are not acceptable, are to be avoided. For example, if underground conditions could pose a risk to cost or duration, a detailed geotech report may be in order prior to starting design. Similarly, introduction of a new product element, without adequate testing would be avoided. Beginning with a design concept, identification of risk begins with evaluation of variances from the baseline plan, at the smallest definable task. For example, tasks such as the work of an engineer include the labor means and methods to develop a drawing, specification, etc. These tasks can introduce risks to timely completion by changes to the scope of work or to the planned design sequence.

  • 2.1. Risk Management Process Overview
  • 2.2. Project Triangles
  • 2.3. Contracting/Delivery Methods
  • 2.4. Scope Definition
  • 2.5. Project Cost or Budget
  • 2.6. Project Schedule
  • 2.7. Resource Allocation

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