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WHAT IS RISK MANAGEMENT?

IF EVER there was an industry that needed to provide its clients and customers with greater certainty and fewer surprises, it is construction. For everything in the business is subject to change.

Risk management is a process that deals with decision-making under conditions of uncertainty. All projects call for some means of quantifying the magnitude of the risks involved.

Risk management is coming to be recognised as a critical factor for the successful management of construction projects. Customers have a right to know what to expect when they lay their money on the line.

The structured approach to risk management is divided into five sections: identification; classification; quantification; response; and review.

Identification is the most important phase of the process, as no action can be taken on a risk that has not been recognised. Identification of risk is usually achieved through risk workshops attended by all project team members.

Risks are then classified by their potential impact on the project and likelihood of occurrence.

The major risks are then quantified to measure their effect and to provide the client with the most likely cost of the project, including the risk items, should nothing be done to reduce them.

The procedure continues by recommending actions to reduce all risk items, with each risk allocated to a team member to co-ordinate the response.

The process is reviewed at all stages throughout the project to ensure risks are being managed effectively and economically, and to identify any new risks.