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Define Risk and Risk Management and explain why a Risk Management Plan is important to a project

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Define Risk and Risk Management and explain why a Risk Management Plan is important to a project.

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Project risk, on the perspective of projects in the building and construction industry, can be defined as an unpredicted or uncertain event that has a positive or negative impact on the progress, completion or outcome of the project. Risks that have a positive impact to the project and its outcome should be maximized while those with negative impact should be minimized.

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Risk management can be defined as the formal process through which risks are systematically identified, analysed, assessed, controlled or mechanisms developed to respond to them. Such mechanisms of responding to the identified risks include risk avoidance, minimization or elimination of unacceptable risks.

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A totally different perspective and approach is given by Wang et al (2004), who in their study assess the importance of proper design management process in mitigating risks. In their findings, they established that proper design process can immensely help in mitigating many risks associated with international projects, more so those carried out in the developing world (Wang et al 2004). With respect to waste reduction also highlighted in the introductory section of this paper, the study by Price et al (2008) admonitions architects to include waste management in the design process since, as the results of the study established, waste management is never a priority in the design process yet over 30% of waste are essentially as a result of design decisions by architects. According to Wang et al (2004) risk management plan is very vital for project management such it should be incorporated into the project from the very beginning stages of the project. Besides these approaches risks can systematically be identified through risk assessment where a set of questions are answered in order to establish the risk level of the project (Voordijk, 2009).

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How would you go about systematically identifying each of the risks or group of risks in a project?

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The most effective method of identifying risks or group of risks in a project is through risk categorisation. During the process of categorising risks, the risks are systematically identified in order to offer a basis for awareness, having a full picture of the risk and taking action or putting in place mechanisms for action. First, all project risks are identified through brainstorming or through an appropriate risk identification method. They are then put in categories of those that have positive impact and those that have negative impact on the project and project outcome. Another way of to systematically identify risks is through the list of stakeholders. Each stakeholder has some responsibility and risks can be identified through stakeholders when they are involved in discussion (Nerija & Banaitis, 2012), planning and action. The risk register is also another vital tool that can help in systematic identification of risks. Through this process, every project with its unique structure will have differences that enable the risk assessment process that is unique to the project or one that is common to all projects based on uniqueness or commonality of project risk categories identified.

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Describe a method you might use to assess and rank those risks and the hierarchy of controls that should be applied to mitigate/eliminate those risks prior to project execution.

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Risk assessment can be achieved through a systematic process of answering a set of questions to determine if the project risk level is high, medium or low based on the analysis of answers generated from the questions. According to Williams (2012) one of the controls that is essential in mitigating risk before a project commences is through conflict resolution and putting in place mechanisms meant to deal with conflicts since conflict over resources crop up during the middle and later stages of the project and they can present a considerable risk to the project progress and outcome if not handled. Another control is by coming up with risk monitoring mechanisms prior to executing the project. This is where a mechanism is put in place to track the identified risks so that at every stage of the project they are under the spotlight of the project risk manager.

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Explain the key elements in a Risk Management Plan.

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DeLoach (2012) identifies four key elements that encompass the risk management plan. These include the process, integration, infrastructure and culture. Since risk management plan provides a framework through which risks are managed, it must give a process with lucid purpose, reliable inputs, well-designed activities and value-added outputs. Therefore, the risk management process typically comprises such activities as risk identification, measurement, assessment, mitigation and monitoring and these are activities that have to be clearly-defined. The infrastructure of the risk management plan is the backbone that makes the risk management possible and it includes communication as an important element. Project management is just part of the wide organizational activities and it has a culture that mirrors the general organization’s approach to risk.

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References

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DeLoach, J. (2012) Key Elements of the Risk Management Process. http://www.corporatecomplianceinsights.com/

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Nerija B. & Banaitis, A (2012) Risk Management in Construction Projects. http://www.intechope.com/download/pdf/38973

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Price, A.D.F. Glass,J. & Osmani, M.(2008)Architects’ perspectives on construction waste reduction by design. Journal of Waste Management Volume 28, Issue (7): Pages 1147–1158

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Voordijk, H. (2009). Construction management and economics: the epistemology of a multidisciplinary design science. Construction Management & Economics, 27 (8), 713-720.

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Wang, S. Q., Mohammed F. D. & Muhammad Y. A. (2004) Risk management framework for construction projects in developing countries. Journal of Construction Management and Economics Volume 22(3): pages 237-252

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Williams, (2012) Project Management: Risk Management. http://www.projectsmart.co.uk/project-management-risk-management.php

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