Risk Reduction

Service Focus Areas

Risk Assessment, Mitigation and Contingency Planning

Murphy’s Law –

    "If something can possibly go wrong, it will."

Corollary to Murphys Law –

    "Murphy was an optimist."

Risk always exists in the design, procurement, construction and operation of large, complex projects, particularly those involving underground works. There are significant potential threats which, if they occur can cause catastrophic events, such as loss of life, damage to facilities and large cost increases.

Risk reduction through assessment, mitigation and contingency planning is therefore, a necessary and prudent management task.

Reasons to investigate potential threats:

  • Reduce risk to goals and objectives of safety, schedule, budget.
  • Demonstrate that options were comprehensively and rationally evaluated
  • Process will reveal useful information even if threats do not eventuate
  • Will clarify internal project goals, objectives and priorities

Risk assessment, mitigation and contingency planning can:

  • Identify potential threats
  • Identify measures which can reduce or eliminate these threats
  • Quantify the cost and benefits of these measures
  • Decide a prudent course of action

Risk reduction processes are used to evaluate potential high-level risks. They are not specifically intended to reduce cost or accelerate schedule – although they may have this effect. They are essentially low cost insurance policies with potentially dramatic results.

Risk workshops allow the project team to quickly identify, quantify and evaluate potential threats, develop possible mitigation or risk reduction strategies, determine cost/benefits for these strategies and decide a prudent course of action. They work to:

  • Identify potential threats to the project
  • Examine related linkages and causal drivers
  • Quantify the impact of such threats if they should occur
  • Evaluate the probability of the threats occurring
  • Determine risk – defined as the product of impact and probability
  • Prioritize risks for action
  • Determine action plans for top-ranked risks
  • Determine cost and cost/benefit for each action plan
  • Decide which plans to implement

First Inversion of Murphy’s Law:

    "If things can ever go right, they might"

Characteristics of Complex Infrastructure and Underground Projects

  • Complex projects with many variables
  • Expensive – many stakeholders involved
  • High media and political attention
  • Uncertain and variable ground conditions
  • Construction sensitive to means, methods and ground conditions
  • Laws and regulations may be restrictive
  • Similar projects show great variation in different locations

Key risks for Infrastructure and Underground Projects

  • Risk of injury or failure with loss of life, extensive property
    and economic damage

  • Risks of significant increase of cost
  • Risks of a significant delay to completion
  • Risk of not meeting design, operational, maintainability
    and quality standards

Seeds of risk. Risk events do not "just occur" in the construction phase – their seeds are sown in the planning and design phases and subsequently in the choice and approval process for underground construction means and methods.

Seeds of risk events include:

Stable and known processes:
   "If this, then that"

Chaotic systems – highly variable within bounds:
   "If this, maybe that, but not that"

Chain-of-events, linkage:
  "Because of this, associated with that, then that"

Events caused by intent – directed threats:

Impact of rare and unusual conditions. A major consideration is that an unusual or extreme condition, with a very small chance of occurring, may cause catastrophic problems. Projects tend to discount such low-probability events, but their impact on construction has been very significant. Better decision aids and methodologies are required for this possibility.

Risk based mitigation processes. Analytical methods have been developed to address risk for complex, underground and infrastructure programs. These methods, when applied with compatible management and procurement approaches, can significantly assist the project by reducing uncertainty and improving our ability to plan, design and construct at lower risk.

Application of the method.
One of these methods, being developed by an Associate, is an economic model, which considers expected construction costs, time schedules and addresses variance. By using such a model it is possible to better define probable completion time, probable costs and to evaluate the most promising alternatives for mitigating extreme risks to the project.

Probability of Total Construction Cost

1. Probable "optimistic" Cost
2. Cost of Risk Events
3. Probable Cost Including Risk Events

We have access to specific risk mitigation and decision aids, working with specialist consultant firms and academics.

For specifics about risk reduction, evaluation, mitigation and modeling, – or if you have a project that would benefit from this work – please click here to contact John Reilly.