Classification of risks in construction projects

Classification of risks in construction projects

Classification of risks in construction projects
Classification of risks in construction projects

Project risk is defined by PMI as, "an uncertain event or condition that, if it occurs, has a positive or negative effect on a project’s objectives.

Project risk management remains a relatively undeveloped discipline, distinct from the risk management used by Operational, Financial and Underwriters' risk management. 

This gulf is due to several factors: Risk Aversion, especially public understanding and risk in social activities, confusion in the application of risk management to projects, and the additional sophistication of probability mechanics above those of accounting, finance and engineering.

With the above disciplines of Operational, Financial and Underwriting risk management, the concepts of risk, risk management and individual risks are nearly interchangeable; being either personnel or monetary impacts respectively. Impacts in project risk management are more diverse, overlapping monetary, schedule, capability, quality and engineering disciplines. For this reason, in project risk management, it is necessary to specify the differences (paraphrased from the "Department of Defense Risk, Issue, and Opportunity Management Guide for Defense Acquisition Programs"):
  1. Risk Management: Organizational policy for optimizing investments and (individual) risks to minimize the possibility of failure. 
  2. Risk: The likelihood that a project will fail to meet its objectives. 
  3. A risk: A single action, event or hardware component that contributes to an effort's "Risk."
An improvement on the PMBOK definition of risk management is to add a future date to the definition of a risk. Mathematically, this is expressed as a probability multiplied by an impact, with the inclusion of a future impact date and critical dates. This addition of future dates allows predictive approaches.

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