Pm 595 Part 1

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PM 595
Project Risk Management

Project 1
Empire State Building Risk

April 8, 2011

Table of Contents:
In part one of the project I focused on two potential risks, power outage and work stoppage. As a contractor constructing a facility as massive as the Empire State Building, I would need to be aware of many other risks in order to prevent them from becoming events. Anytime an event occurs, it requires resources to be realigned in order to fix the problem and get the project back on track. This results in a slip in the schedule and unnecessary funds being expended. If I am able to appropriately determine potential risks and build an effective Risk Management Plan, I can minimize the effect the risk could have on a project. The Risk Management Plan is a document that is created which outlines potential risks, the potential of those risks occurring and what response plans can be put in place to mitigate them.1 The steps included in developing a Risk Management Plan include: Identification of risk, Quantification of risk, responding to risk and monitoring risk.2 In the early planning stages of a project it is critical that you identify what risks could occur during the project as well as what the source of the risk is. The creation of this list could take many forms from brainstorming to creation of checklists. The important thing is that risks are identified. Once risks are identified, they must be quantified to determine the probability of the risk occurring as well as the impact the occurrence will have. This quantification allows the PM to prioritize resources to hedge the risk impact. The third step is listed as responding to the risk. It includes developing a list of actions that could be taken to mitigate the risk, determining the best approach and documenting it so it can be referred to in the event the risk does occur. The fourth step is monitoring the risk. This step includes monitoring the project to identify the risk trigger points in order to implement the mitigation actions before the risk becomes a full blown event/issue. All this information will be placed in the Risk Register. When considering the risk, there are five basic approaches one can take. First they could prevent or avoid the risk to reduce the likelihood of the risk occurring. This things like changing procedures, developing more detailed plans, preventative maintenance or putting in place safety systems. Secondly, a person could plan to minimize the impact of the risk should it occur. This includes incorporating risk mitigation in contract terms, developing a quality assurance program or conducting regular audits to check for compliance. Thirdly, one could share the risk, albeit at a higher cost. This approach is favorable when another agency is better able to control a risk. It is important to note that the risk is not transferred but the risk is shared with another entity. Fourthly, a Project Manager (PM) could insure against the risk. This is beneficial when the probability of the risk occurring is low but the impact if it does occur is high. An example is earthquake insurance. The probability of a catastrophic earthquake occurring in New York City may be low but if it did occur it could have high effects on the project. Lastly, the PM could choose to retain the risk and accept any consequences it brings. This could occur in an agency that has the inherent expertise to manage the risk or if the cost of avoiding or transferring the risk is too high that it adversely affects the return-on-investment.3

Sources of Construction Project Risk:

Force majeure: earthquake, tornado, lightning strike,

Systems to Address Construction Project Risk:

Catastrophic Failure Fault Tree:

Discussion of Fault Tree:
Reduce risks:
Mitigate risks:
Avoid risks:

Course Project Part 1:
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