Guide for the Process of Managing Risk on Rapid Renewal Projects (2012) / Chapter Skim
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Pages 92-104
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From page 92... ...
90 INTRODUCTION Objectives The primary objective of risk management planning is to optimize future project performance, specifically with respect to risks. Value engineering has a similar objective of optimizing project performance, but generally focuses on improving the base rather than reducing risks (e.g., through changing project design, project delivery strategy, and construction means or methods)
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From page 93... ...
91 GUIDE FOR THE PROCESS OF MANAGING RISK ON RAPID RENEWAL PROJECTS of each step in the process is essential for effective planning efforts. Decisions on the investment of resources in risk management alternatives should ultimately be made through a cost–benefit analysis.
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From page 94... ...
92 GUIDE FOR THE PROCESS OF MANAGING RISK ON RAPID RENEWAL PROJECTS Residual risks are those future risks that the team cannot avoid or completely eliminate. Risk reduction, by definition, does not completely eliminate the risk, and in fact, new risks may surface during the reduction efforts.
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From page 95... ...
93 GUIDE FOR THE PROCESS OF MANAGING RISK ON RAPID RENEWAL PROJECTS Risk Reduction The goal of risk reduction is to proactively and cost-effectively reduce (mitigate) individual risks.
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94 GUIDE FOR THE PROCESS OF MANAGING RISK ON RAPID RENEWAL PROJECTS The implementation materials for this guide provide instructions and tools for how to calculate the cost–benefit analysis for each option. The example below provides a format for conducting these analyses.
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From page 97... ...
95 GUIDE FOR THE PROCESS OF MANAGING RISK ON RAPID RENEWAL PROJECTS The companion Simplified Risk Management Training course addresses risk reduction in more detail, including a form (Figure 8.1; see also Appendix C) and a spreadsheet workbook template for conducting evaluations of cost-effectiveness (including automatic analyses)
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From page 98... ...
96 GUIDE FOR THE PROCESS OF MANAGING RISK ON RAPID RENEWAL PROJECTS Figure 8.1. Forms (Appendix C)
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From page 99... ...
97 GUIDE FOR THE PROCESS OF MANAGING RISK ON RAPID RENEWAL PROJECTS contingency for possible financial losses or take gambles in an extremely competitive bidding environment. Inappropriate risk shifting from the owner to the contractor can result in higher prices, misaligned incentives, mistrust, and an increase in disputes.
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From page 100... ...
98 GUIDE FOR THE PROCESS OF MANAGING RISK ON RAPID RENEWAL PROJECTS • Objectively, to achieve a specified (DOT policy) level of confidence (e.g., 80th percentile)
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99 GUIDE FOR THE PROCESS OF MANAGING RISK ON RAPID RENEWAL PROJECTS contingency. If the purpose and need of the project are met, this policy ideally would ask the project team to return the unused contingency to the overall program (for use on other less fortunate projects)
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From page 102... ...
100 GUIDE FOR THE PROCESS OF MANAGING RISK ON RAPID RENEWAL PROJECTS Risk Management Plan A structured risk management process will result in a formal risk management plan (RMP)
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From page 103... ...
101 GUIDE FOR THE PROCESS OF MANAGING RISK ON RAPID RENEWAL PROJECTS the uncertainty that remains, even after the best risk reduction planning efforts. The process of risk management planning generally involves proactive risk reduction, risk allocation, contingency management, and the development of recovery plans.
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From page 104... ...
102 GUIDE FOR THE PROCESS OF MANAGING RISK ON RAPID RENEWAL PROJECTS QDOT then determined the revised base and residual risks (assuming that the selected risk reduction actions were actually implemented) , from which they determined approximate mitigated mean project performance (i.e., for completion date and escalated cost)
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