Page 147 - Global Project Management Handbook

RISK IDENTIFICATION AND ASSESSMENT 6-15

This research was an exploratory effort that has expanded the body of knowledge
and research regarding international construction risk management. It offers a sys-
tematic and integrated risk identification, assessment, and management method for
international projects; this method addresses both the full project life cycle and the
portfolio of risks encountered by both owners and contractors. Other efforts to date
within the construction industry have been fragmented and have tended to focus on
country-specific issues or on concerns unique to a given participant. The IPRA tool is
a management tool applicable to all project participants because it focuses on the
life-cycle risk issues proper to international projects.
The development of 82 discrete IPRA risk elements and associated descriptions
and the worksheets that generate a ranking of them provides a unifying process to
organizations involved with international projects; it gives them a common point of
departure as well as a project touchstone once work is underway. No industry-wide
process to evaluate the risks specific to international projects existed previous to the
IPRA tool. Because its structured risk identification and assessment process can rank
the relative importance of a project’s risk, this work also contributes an additional pre-
cursive analytical method to the more vexed process of detailed analysis, quantifica-
tion, and modeling of risk issues that are more elaborate than necessary.
Unique to this effort was the development of baseline relative impact values for
individual risk elements based on data collected from industry experts who were
reporting on recently completed projects. Because few organizations collect and
track information related to risk severity, the baseline values fill a knowledge gap
and can provide some guidance when risk impacts are unknown or when uncer-
tainty is high. This is especially critical during the business and preproject plan-
ning phases because failure to identify risks early in the project life cycle can
cause serious ramifications.

RISK MANAGEMENT TO IMPROVE PROJECT PERFORMANCE

Based on the wisdom collected and organized by this research, we recommend the following
risk response actions as a critical phase of a project’s overarching risk management process:

1. Organize and formalize a risk management process and keep it as simple as possible.
The project manager for an international construction project must create the proper
context and environment for the risk assessment and management process to occur.
2. Begin early to be most effective. Most successful projects take the time and allocate
resources to collectively identify, analyze, and develop risk mitigation and control
approaches during the early, formative stages of the project.
3. Keep a broad perspective to get the diversified input required. It may be necessary to
bring in special expertise from outside the project to get fresh insights and perspec-
tives into the risks. Brainstorming sessions guided by a person trained in conducting
such sessions may be beneficial.
4. Undertake adequate preproject planning, analysis, and engineering. Preproject plan-
ning facilitates a better understanding of the project’s scope of work, thus leading to a
better knowledge of risk. Preproject planning tools such as the CII’s PDRI (project
development rating index) are complementary to the IPRA tool (CII, 1996; CII, 1999).
5. Partner with owner and contractor management. In too many international construction
projects the relationships between the investor, the project sponsor/owner, the project
management contractor, the designer, and the construction contractor are not optimal
for effective risk management.