Risk Analysis in the Construction Industry
RISK ANALYSIS
Risk is a major part of any investment. The major drive behind investment is to gain profit. If there was no risk on a project that had a 20% return on it then everyone would be investing. The amount of risk a project faces comes down to the nature, scope of works, market need, and future predictions. The more investigation of the preliminaries and exploration of all options will generally see more risks becoming assessed and contingency plans in place. A risk analysis can be used across all areas of this development and broken down to smallest of details. We will only be exploring the major aspects relating to the financial returns in this analysis that may have a major impact on LSC Projects return if they were to occur.
Risk Matrix
The following risk matrix below, in Table ?, extracts the major issues that could adversely affect this development. This risk matrix has been produced to cover all the main aspects of the project, other variables that can be included are preliminaries, construction phases, builder and/ or client variations, etc. As this report is predominantly aimed at assessing the feasibility of our development, we will only be touching on major issues that could potentially cripple the development and its returns if they were to emerge.
Table ? - Risk Matrix covering major components relating to the development
|Risk |Risk Rating |Impact |Mitigation Process |
|Global economy decline. |High |Financial impacts. |Extensive research and analysis of the|
| | | |current Global economy and forecast |
| | |Sales will not reflect those |the expectancy of a decline in the |
| |
Risk is a major part of any investment. The major drive behind investment is to gain profit. If there was no risk on a project that had a 20% return on it then everyone would be investing. The amount of risk a project faces comes down to the nature, scope of works, market need, and future predictions. The more investigation of the preliminaries and exploration of all options will generally see more risks becoming assessed and contingency plans in place. A risk analysis can be used across all areas of this development and broken down to smallest of details. We will only be exploring the major aspects relating to the financial returns in this analysis that may have a major impact on LSC Projects return if they were to occur.
Risk Matrix
The following risk matrix below, in Table ?, extracts the major issues that could adversely affect this development. This risk matrix has been produced to cover all the main aspects of the project, other variables that can be included are preliminaries, construction phases, builder and/ or client variations, etc. As this report is predominantly aimed at assessing the feasibility of our development, we will only be touching on major issues that could potentially cripple the development and its returns if they were to emerge.
Table ? - Risk Matrix covering major components relating to the development
|Risk |Risk Rating |Impact |Mitigation Process |
|Global economy decline. |High |Financial impacts. |Extensive research and analysis of the|
| | | |current Global economy and forecast |
| | |Sales will not reflect those |the expectancy of a decline in the |
| |
References: Mohammad Baydoun. (2011). A Risk Management System for Preconstruction Phases of Large Scale Development Projects in Developing Countries. Available: http://www.mbaworld.com/blr-archive/8DBA/2/index.pdf. Last accessed 11th November 2012. Flanagan, R. and Norman, G. (1993) Risk Management and Construction, Victoria: Blackwell Science Pty Ltd, Australia. SCU. (2012). The Risk Management Process. Available: http://www.scu.edu.au/risk_management/index.php/8/. Last accessed 12th November 2012. Julia Silvers. (2004). Probability/Severity Analysis. Available: http://www.google.com.au/imgres?imgurl=http://www.juliasilvers.com/embok/Risk/RiskAssessmentMgmt/ProbabilitySeverity.gif&imgrefurl=http://www.juliasilvers.com/embok/Risk/RiskAssessmentMgmt/probability. Last accessed 13th November 2012. IOMosaic. (2009). Designing An Effective Risk Matrix. Available: http://www.iomosiac.com/docs/whitepapers/risk-ranking.pdf. Last accessed 13th November 2012. TP. (2012). Traditional Project Management. Available: http://www.tutorialspoint.com/management_concepts/traditional_project_management.htm. Last accessed 17th November 2012. BIBLIOGRAPHY: Bayu Aditya FIRMANSYAH; Alin VERONIKA, and Bambang TRIGUNARSYAH. (2006). RISK ANALYSIS IN FEASIBILITY STUDY OF BUILDING CONSTRUCTION. Available: http://eprints.qut.edu.au/6551/1/Trigunarsyah_EASEC_10_5.pdf. Last accessed 17th November 2012.