ASSESSMENT TASK
RISK MANAGEMENT
Refer to attached material as a Guide
Business Study
You run your own medium size organisation set up as a Company structure with
your own office premises external to your home.
The organisation employs: three (3) site supervisors; two (2) foreman; two (2)
carpenters; two (2) labourers; one (1) estimator; two (2) admin staff and you as
the owner are the construction manager.
The organisation constructs in any one (1) year:
▪ 6 x 3 bedroom up market cottages – cost valued at $ XXXXXXXXXXeach
▪ 3 x renovations – cost valued at $120 000 – $ XXXXXXXXXXeach
▪ 5 x shed/warehouse (maximum size 2000m²) – cost valued at $80 000 -
$ XXXXXXXXXXeach
▪ A group of 6/3 bedroom units/villas as a development block.
Remember you are the builder and hence you are responsible for
everything that happens on your sites. Do not consider yourself as a
subcontractor or employee.
You must prepare this task based on the fact that you own the business. “The
uck stops with you”! This task will assist you to prepare your contracts and all
the necessary documents that is required for any size project.
THE PROJECT Hypothetical Multi storey complex refu
ishment
3 Storey Building with Basement Carpark:
Basement Carpark – cu
ently flooded each time it rains.
Ground floor of office fitout to be converted to specialty shops.
Remaining floors of office fitouts to be converted to apartments.
Rear Carpark cu
ently full of ru
ish, access to rear carpark only through front of
uilding off main street.
Existing concrete tiled staircase to all floors.
The views from this building are quite spectacular.
This is an existing building in a derelict state, which was built in the 1970’s and has been
vandalised. All the windows on front and rear are smashed. Each floor has been
vandalised by squatters, vagrants etc. As a result of the smashed windows the pigeons
and other bird life have desecrated the whole building.
The property survived an earthquake in 1989, the internal was only slightly damaged
and the foundations were slightly damaged. The property escaped a demolition order
ut the true damage to the foundations is unknown. It appears to be structurally sound.
The property is located on a busy city street. The front of the building faces north over
the ha
our and the rear of the building faces south with commercial buildings and a
new car dealership directly behind it with heritage buildings and a Cathedral behind to
the south east.
ASSUME THE BUILDING WILL REMAIN AT 3 STOREYS AND BE REFURBISHED
THE PROJECT IS SEPARATED INTO STAGES
To refu
ish this building the following needs to be considered.
1. Interior Fit out of second and third floor of residential apartments. Including the
demolition and removal of ru
ish from interior.
2. Internal Fitout of Commercial Shops & Offices on ground floor including
demolition and removal of ru
ish from interior.
3. Dewater and refu
ishment of Basement Carpark and Outside Rear Carpark
installation.
4. Exterior, Windows, Cladding, Roofing, Awnings etc.
5. Commercial fitout of Air-conditioning, Fire escapes, security systems, sprinkler
and smoke alarms.
Set out a policy and procedure in relation to the PROJECT’S Risk Management. –
This is not to only involve Safety Risk. You must consider the Risks su
ounding
the WHOLE PROJECT from inception of the project to completion.
Encompass the following areas:
1. Risk Identification at all stages of the project
2. Risks Quantification at all stages of the project
3. Risk Response at all stages of the project
4. Risk Monitoring and Control at all stages of the project
Provide copies of relevant forms, documents and/or checklists to support each
of the above sections.
RISK MANAGEMENT
RISK MANAGEMENT
After 5 years of development, the Risk Management Standard, AS/NZS 4360:2004 was been superseded
y AS/NZS ISO 31000:2009, Risk management - Principles and guidelines.
AS/NZS ISO 31000:2009 can help you achieve:
• organisational resilience;
• proactive management;
• stakeholder confidence and trust;
• reliable decision making and planning; and
• more certainty in today's market conditions.
AS/NZS ISO 31000:2009 vs AS/NZS 4360:2004
Elements of Risk Management Standards
How AS/NZS ISO 31000 builds upon AS/NZS
4360:2004
Application of framework for risk management
Expands the framework and further develops
the 2004 framework
Principles for managing risk Far more clear and explicit
Enhanced risk management attributes New addition included in the Annex
Guide to establishing and implementing effective risk
management process
New addition included in the Annex compared
with previously supplied in HB 436:2004
Risk management context Also applicable across all industries to any
entity implementing organizational objectives
which may involve uncertain outcomes
Source: Standards Australia
From Wikipedia, the Free Encyclopaedia
DEFINITION OF RISK MANAGEMENT
Risk management is the identification, assessment, and prioritisation of risks
(defined in ISO 31000 as the effect of uncertainty on objectives, whether positive or
negative) followed by coordinated and economical application of resources to
minimise, monitor, and control the probability and/or impact of unfortunate
events or to maximise the realisation of opportunities.
Risks can come from uncertainty in financial markets, project failures, legal
liabilities, credit risk, accidents, natural causes and disasters as well as deliberate
attacks from an adversary.
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Several risk management standards have been developed by several
organisations, including the Project Management Institute, the National Institute
of Science and Technology, actuarial societies, and ISO standards.
Methods, definitions and goals vary widely according to whether the risk
management method is in the context of project management, security,
engineering, industrial processes, financial portfolios, actuarial assessments, or
public health and safety.
The strategies to manage risk include transfe
ing the risk to another party,
avoiding the risk, reducing the negative effect of the risk, and accepting some or
all of the consequences of a particular risk.
Certain aspects of many of the risk management standards have come under
criticism for having no measurable improvement on risk even though the
confidence in estimates and decisions increase.
PRINCIPLES OF RISK MANAGEMENT
This section provides an introduction to the principles of risk management. The
vocabulary of risk management is defined in ISO Guide 73, "Risk management.
Vocabulary."
In ideal risk management, a prioritisation process is followed whereby the risks
with the greatest loss and the greatest probability of occu
ing are handled first,
and risks with lower probability of occu
ence and lower loss are handled in
descending order.
In practice the process can be very difficult, and balancing between risks with a
high probability of occu
ence but lower loss versus a risk with high loss but
lower probability of occu
ence can often be mishandled.
Intangible risk management identifies a new type of a risk that has a 100%
probability of occu
ing but is ignored by the organisation due to a lack of
identification ability.
▪ For example, when deficient knowledge is applied to a situation, a
Knowledge Risk materialises.
▪ Relationship Risk appears when ineffective collaboration occurs.
▪ Process-Engagement Risk may be an issue when ineffective operational
procedures are applied.
These risks directly reduce the productivity of knowledge workers, decrease cost
effectiveness, profitability, service, quality, reputation,
and value, and earnings
quality.
Intangible Risk Management allows risk management to create immediate value
from the identification and reduction of risks that reduce productivity.
Risk management also faces difficulties in allocating resources. This is the idea
of opportunity cost.
Resources spent on risk management could have been spent on more profitable
activities.
Again, ideal risk management minimises spending and minimises the negative
effects of risks.
Method
For the most part, these methods consist of the following elements, performed,
more or less, in the following order.
1. Identify, characterise, and assess threats.
2. Assess the vulnerability of critical assets to specific threats.
3. Determine the risk (i.e. the expected consequences of specific types of
attacks on specific assets).
4. Identify ways to reduce those risks.
5. Prioritise risk reduction measures based on a strategy.
Principles of Risk Management
The International Organization for Standardisation (ISO) identifies the following
principles of risk management.
Risk management should:
▪ Create value.
▪ Be an integral part of organizational processes.
▪ Be part of decision making.
▪ Explicitly address uncertainty.
▪ Be systematic and structured.
▪ Be based on the best available information.
▪ Be tailored.
▪ Take into account human factors.
▪ Be transparent and inclusive.
▪ Be dynamic, iterative and responsive to change.
▪ Be capable of continual improvement and enhancement.
Process
According to the standard ISO 31000 "Risk management -- Principles and
guidelines on implementation, "the process of risk management consists of
several steps as follows.
Establishing the context
Establishing the context involves:
1. Identification of risk in a selected domain of interest.
2. Planning the remainder of the process.
3. Mapping out the following:
▪ The social scope of risk management.
▪ The identity and objectives of stakeholders.
▪ The basis upon which risks will be evaluated, constraints.
4. Defining a framework for the activity and an agenda for identification.
5. Developing an analysis of risks involved in the process.
6. Mitigation or Solution of risks using available technological, human and
organisational resources.
Identification
After establishing the context, the next step in the process of managing risk is to
identify potential risks. Risks are about events that, when triggered, cause
problems. Hence, risk identification can start with the source of problems, or
with the problem itself.
▪ Source Analysis - Risk sources may be internal or external to the system
that is the target of risk management.
Examples of risk sources are: stakeholders of a project, employees of a company