Nowadays, risk management is one of the most important determinants of the project success because of increasing attention to actual quality, time and cost. There are also constant attempts to reduce time and costs. It is stated that in some industries such as construction this situation is exacerbated due to big investments, long processes, many investors and unstable economics (Cagliano, Grimaldi, & Rafele, 2015). Therefore, it is important to assess and control risks thoroughly throughout the process of construction.
Risk management can be described as a process of identifying, evaluating, and controlling the risks which may occur during the process of construction to achieve the project success. The given project deals with top five risks such as technical, cost, schedule, safety, and labor, which were defined as crucial. The main goal of the project is to perform a qualitative and quantitative risk analysis and complete the corresponding matrixes.
Project Risk Analysis
It is possible to classify techniques of project risk analysis into two categories named qualitative and quantitative. The qualitative risk analysis presents results in the form of descriptions and determinations of qualitative scales for the probability of risk and the impact of its consequences. Thereafter, the quantitative risk analysis deals with numerical data prioritizing risks for further analysis by assessment or combination of the probability of their occurrence and their impact based on a number of available data. The following two tables present the results of the performed qualitative and quantitative risk analysis according to top five risks defined in the project.
Qualitative Risk Analysis
The table below shows the results of qualitative risk analysis performed using the data of the project according to defined top five risks. It also presents risk ranks such as ‘high,’ ‘middle,’ and ‘low’ for each of the chosen risks. The table gives an overall understanding of the probability of occurrence and potential impact.
|Risk||Probability of Occurrence||Potential Impact||Risk Rank|
Quantitative Risk Analysis
It is recommended to select a risk management technique considering the risk maturity of the company that is involved the project (Cagliano et al., 2015). There are a variety of quantitative techniques including decision tree analysis, expert judgment, creating probability distributions, performing sensitivity analyses, using expected monetary value (EMV) analysis, modeling and simulating. For the given project, expert judgment technique has been chosen. The mentioned technique is based on the opinion of experts towards the evaluation of the detected risks, failure rate, and success chances for the given project.
The table below shows the results of quantitative risk analysis performed using the data of the project according to top three risks with ‘high’ rank and priority. The numerical data for these three risks are presented and estimated in the appropriate numerical value according to an expert judgment technique. The table gives an overall understanding of potential consequences of the presented risks.
|Risk||Numerical Value (dollars, days, etc.)|
While performing a qualitative and quantitative risk analysis, the corresponding matrixes were filled with the data on the defined top five and top three risks. After filling in the probability and impact matrix, the risk rank was detected for each of the risks. The main techniques for the quantitative risk analysis were also detected, and the appropriate technique was chosen for the analysis of the risk factors.
Cagliano, A. C., Grimaldi, S., & Rafele, C. (2015). Choosing project risk management techniques: A theoretical framework. Journal of Risk Research, 18(2), 232-248.