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Risk Management, Its Methodologies and Standards Report

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Introduction

Risk management is an integral part of any organisation. The efficiency of risk management determines organisational success. The construction industry is where risk management is applied widely as a principle.

According to Chapman and Ward (2003), risk management can be viewed as the process of risk identification, assessment, and prioritisation. During a risk identification process, people who are responsible for its control in organisations can proceed with the process of mitigating the hazard.

Risk minimisation or management is only successful through a well-coordinated process that involves maximisation of the available resources (Vose 2000).

There are different sources of risks in any market such as financial uncertainty, failure in the undertaken projects, and accidents in the line of work (Vose 2000). Other risks in organisations include legal liabilities within the project and the possibility of natural and fabricated disasters (Bennett 2003).

These risks can cause negative effects on the organisations if they are unpredicted and/or unplanned for by the concerned parties. Organisations need to ensure that they have adequate risk management strategies in place to ensure that they are able to curb the threats posed by any possible risk.

Through many studies in risk management, several standards have resulted such as the ISO standards (Harris & McCaffer 2006). This paper looks at risk management and methodologies that are used to achieve these standards.

Methodologies

The management of threats to the normal functioning of an organisation or any project can take a number of routes. As a result, many methods of risk management have been identified. One way of threat management involves the transfer of the threat to another party that is equipped to handle the threat (Harris & McCaffer 2006).

Organisations or project managers and other people who are entrusted with threat management can also avoid the perceived threat as another way of threat management (Vose 2000).

If the threat is unavoidable, the effects of the threat can be reduced through proper control of the threat. Threats are associated with negative effects. A way to ensure that they are mitigated is to plan adequately and/or set up structures to control the perceived threats.

The method of risk management involves five basic processes, namely threat identification, threat assessment, risk determination, risk reduction assessment, and prioritisation of the reduction measures (Vose 2000). The first step of threat identification involves a number of intricate processes that vary from one organisation to another.

In this process, potential threats are identified according to the field or line of business that an organisation is operating. Threats are considered those events that pose potential harm to the organisational processes or structure.

The sources of the potential threats are then identified using the available structures in the organisation as a whole. In the analysis of the sources of risks, categorisation into internal and external sources is possible to dictate the best methods of handling the threats and risks (Bennett 2003).

In the construction industry, some of the sources of threats and risks include poor weather and the employees within the industry. In this case, employees act as the internal risk while the weather is an external risk. Risk identification takes different forms in organisations.

The process is dependent on culture, the practice in the particular industry, and training for the risk assessment managers (Vose 2000). Once identified, the perceived risks are then subjected to the next step of assessment (Bennett 2003).

The assessment of risks involves estimating their severity, the estimation of the probability of the risks occurring, and the period in which they may occur (Harris & McCaffer 2006). The risk management plan is a product of adequate risk assessment.

Therefore, adequate resources must be put into the risk assessment to ensure that the developed plan is adequate to forestall any threat. Various researchers have described the methods applied in risk assessment. However, these methods are not always positive to the overall organisational performance.

Expert Audit

An expert audit is important in the determination of the impeding risks and developing of adequate means and measures of mitigating them. In this section, an expert audit is provided on the risks involved when joining a university.

It is crucial to classify and rank the risks in order, with an assessment of the usefulness of measures to communicate the risks to the newer students. Several risks are associated with joining university. One major risk is the probability of doing a course that is not marketable in the job market.

A student can join the university with inadequate knowledge of the marketability of the course that he or she is about to do. The result of this situation is unemployment once he or she completes the course. Another risk is the failure to complete the university education. Students encounter hardships along the way such as lack of fees to pay for the services.

Another risk on joining university is poor performance, which may lead to redoing a year or sitting for supplementary papers. This case is a common incidence in many institutions. Students who join these institutions are at the risk of the same occurrences.

The fourth risk upon joining the university is the possibility of being involved with the wrong company, with the result being disciplinary measures because of misconduct. Peer influence is a significant part of any learning institution.

Students are constantly under the threat of being involved in peer relationships that are likely to be a negative influence on their studies. The fifth risk on coming to campus is the probability of being involved in drug abuse.

Many of the students have found themselves in groups that influence and/or cause them to abuse drugs, with disciplinary measures often working against their favour.

The evaluation of risk management for the stated risks will be beneficial in assessing the risks for the students joining the university since it enables them to develop adequate ways of avoiding the risks. Some of the ways that the new students can use include adequate choice making on the company that they need to keep.

It will be important to communicate these risks to new students to the institutions. This strategy will help them assess their interactions and habits.

The risk assessment will also enable these students have the right measures in place to help them avoid situations that might influence their academic life and performance negatively. In this scenario, risk assessment is not only important but a requirement (Bennett 2003).

Health and Safety Risk Management

The Construction Design and Management (CDM) regulations of 2007 have been a common term in the construction industry since their inception. However, there is the need to change these regulations based on the assessments done on them by a number of researchers and construction managers (Harris & McCaffer 2006).

The HSE statistical data shows that the efficacy of the regulations may not be originally designed (Vose 2000). The main concern in these regulations is how they were working in practice, as stated in many forums (Vose 2000).

According to reviews carried on them, these regulations are serving their intended purpose in guaranteeing safety and health management in the construction industry.

However, people who are tasked with these reviews had concerns with the way the regulations were less effective in the minimisation of bureaucracy and competence evaluation in the construction practice (Chapman & Ward 2003).

A review of the regulations and processes provided an overview of the poor competence and training in the construction industry in matters relating to health and safety. There were also concerns over the proliferation of accreditation schemes, which also had overlapping roles (Vose 2000).

The Approved Code of Practice (ACoP) of the CDM regulations of 2007 also lacked any pre-qualification measures for the accrediting authorities (Chapman & Ward 2003). Recommendations can be based on the established weaknesses and problems.

One of the recommendations is that there is the need to revise the guidelines that are set by the regulations. However, the revision needs to be consultative. Another recommendation is that the HSE should evaluate the CDM effectiveness and ensure that the duties expressed here are clear and that there is the presence of little if any bureaucracy.

Besides, appropriate guidelines can be formulated for smaller projects that are considerate of project scale (Hartmann, van Meerveld, Vossebeld & Adriaanse 2012,). There is also need to carry out consultative interactions between authorities and stakeholders to oversee proper utilisation of the guidelines that are already in place before new ones can come into effect.

Any of these proposed changes should keep with the prevailing standards while also serving as an improvement of health and safety regulations in the construction industry (Harris & McCaffer 2006).

BIM as a Tool for Risk Management

Building Information Modelling (BIM) is an important methodology in the management of construction risks. It mainly applies in the management of managing procurement risk (Eadie, Browne, Odeyinka, McKeown, & McNiff 2012). BIM allows managers to coordinate events in the construction process from start to finish (Chapman & Ward 2003).

Over the next ten years, the use of 2D in modelling will be obsolete with the development of BIM (Vose 2000). The future models will be 3Ds, which offer better resolutions and ability for the construction designers and managers to plan and put in place measures that are aimed at improving their projects and reducing costs and risks in the construction process (Chapman & Ward 2003).

Clash identification is important in project design and in the utilisation of BIM in the construction process. One way in which clash identification assists in risk identification is through allowing appropriate measures to be put in place before the actual construction process can take place (Harris & McCaffer 2006).

Risk identification in BIM is possible through the advanced processing models that have been developed through trial and error. Learning about BIM is important since it carries some advantages while working on a construction process. BIM has allowed the creation of very advanced designs in the construction industry. This situation has created competition.

BIM has also improved the safety of projects through subjecting designs to appropriate tests while they are at the design phase. The construction costs have also been reduced through adequate planning that is possible with BIM.

A 3D model that is produced in the software allows managers to make any changes in the construction process to ensure that they minimise the materials to be used in the construction process (Chapman & Ward 2003).

It also contributes to safety at the workplace due to the development of standards and estimation of the areas that might be a challenge to the construction workers.

In the training, especially in relation to the course, BIM is important in that it allows students to have a better grasp of the construction process and planning for such events (Bynum, Issa & Olbina 2013).

In the future interviews, BIM will be important in demonstration of skills that are acquired through training. Having competencies in BIM will be an added advantage at the workplace. Interviews require one to be acquainted with the use of the software.

In the work situation, BIM will be important since it will bring added advantages such as stated above. BIM has had an impact on design in several ways. For instance, designs have become complicated, as designers are able to evaluate the different methods of design and test them on the planning phase (Bynum, Issa & Olbina 2013).

BIM has also revolutionised designing of construction projects by ensuring that they are adequately tested for safety in the development stage. Designers also have more time and resources available to them while using BIM (Vose 2000).

The BIM execution plan has been a significant part of the design. Developers can now assess the various parts of the project accurately (Bynum, Issa & Olbina 2013). The execution plan is simple for the construction designers. It only requires basic knowledge in design.

Risk Management of Infrastructure

Investment in infrastructure over the last two decades in the UK has changed significantly. Some of the changes in the infrastructure projects include the rate at which the tendering, procurement, and the actual construction process take place (Park & Kim 2007). The design of infrastructure has improved with improvements in the designing software and knowhow (Harris & McCaffer 2006).

The observed changes have also taken place because of the new regulations in government procurement and tendering processes. The introduction of stricter measures in the industry means that the construction companies have to comply with higher standards than previously considered.

The difference with infrastructure financing and investment in the UK is evident. Infrastructure financing is the actual financial input into infrastructure projects, while infrastructure investment looks at the overall number and size of the infrastructure projects. Risks in infrastructure investments can attract massive losses in the industry, with finance being lost this way.

The risks in this area include financial risks, legal risks, and environmental risks. The financial risks include the poor financing that may be evident as the prices of goods in the industry escalate. The poor weather and other environmental forces such as storms may be a risk for the infrastructure too.

Conclusion

Risk management is an integral part of any organisation. The efficiency of risk management determines organisational success.

The construction industry is where risk management is applied widely as a principle. Different sources of risks in any market include financial uncertainty, failure in the undertaken projects, accidents in the line of work, legal liabilities within the project, and the possibility of natural and fabricated disasters.

These risks have been identified as causes of negative effects on the organisations if they are unpredicted and/or spontaneous. The paper looked at some of the risk management methodologies. It has provided an audit into the risks associated with joining the university besides looking at some ways that are used in risk management.

References

Bennett, F 2003, The Management of Construction: A Project Life Cycle Approach, Butterworth-Heinemann, London.

Bynum, P, Issa, R & Olbina, S 2013, ‘Building Information Modelling in Support of Sustainable Design and Construction’, Journal Of Construction Engineering & Management, vol. 139 no. 1, pp. 24-34.

Chapman, C & Ward, S 2003, Project Risk Management: processes, Techniques and Insights, John Wiley and Sons Ltd, London.

Eadie, R, Browne, M, Odeyinka, H, McKeown, C & McNiff, S 2012, ‘BIM implementation throughout the UK construction project lifecycle: An analysis’, Automation In Construction, vol. 36 no. 1, pp. 145-151.

Harris, F & McCaffer, R 2006, Modern Construction Management, Blackwell, London.

Hartmann, T, van Meerveld, H, Vossebeld, N & Adriaanse, A 2012, ‘Aligning building information model tools and construction management methods’, Automation In Construction, vol. 22 no. 1, pp. 605-613.

Park, C & Kim, H 2007, A framework for construction safety management and visualisation system’, Automation In Construction, 33, Augmented Reality in Architecture, Engineering, and Construction, pp. 95-103, Routlege, London.

Vose, D 2000, Quantitative Risk Analysis: A Guide to Monte Carlo Simulation, John Wiley and Sons Ltd, London.

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