What Is Construction Risk Management?

Engineering project risk management refers to the use of various risk response measures, management methods, technologies and methods to effectively implement project risks through risk identification, risk analysis, and risk assessment, and to understand the risks of engineering projects Local control, properly handle the adverse consequences caused by risk events, and ensure the management of the project's overall objectives with minimal cost. ^[1]

Engineering project risk management

Engineering project risk management refers to the use of various risk response measures, management methods, technologies and methods to effectively implement project risks through risk identification, risk analysis, and risk assessment, and to understand the risks of engineering projects Local control, properly handle the adverse consequences caused by risk events, and ensure the management of the project's overall objectives with minimal cost. ^[1]

1. Can the contract be concluded on time and whether the relevant quality can meet the requirements?

2,

(1) Objectivity. Various sudden changes in the natural world and various contradictions in social life during the implementation of engineering projects exist objectively and are not transferred by human will.

(2) Uncertainty. Refers to the uncertainty of the occurrence of the project's risk activities or events and their consequences.

(3) Variability. The variability of engineering projects is mainly manifested in changes in the nature of risks and changes in consequences, and new risks or risk factors have been eliminated.

(4) Relativity. The relativity of risk subjects and the relativity of risks in engineering projects.

(5) Periodic. The phase of project risk includes obvious period characteristics in the risk phase, the risk occurrence phase and the consequence phase. ^[2]

^[1] (1) Risk avoidance: refers to taking the initiative to abandon or refuse to implement the scheme that may cause risk loss, taking into account the possibility of the existence and occurrence of risk. Risk avoidance has the advantages of being easy to implement, comprehensive, and thorough. It can reduce the probability of risk to zero, so that it avoids the risk and also gives up the opportunity to obtain benefits.

(2) Risk reduction: There are two meanings, one is to reduce the probability of risk occurrence; the other is to minimize the loss of risk once it occurs. For example, the project manager can reserve a part of the project deposit when making project purchases. If there is a problem with the material, he can use this part of the funds to pay, so that he reduces his own risk. Adopting a risk control method is beneficial to project management and can greatly increase the probability of project success.

(3) Risk diversification: refers to increasing the risk-bearing units to reduce the pressure of overall risk, so that project managers reduce risk losses. If the construction company uses commercial concrete during the construction of the project, the mixed concrete can spread the risk to the material supplier. But while taking this approach, it is also possible to spread profits at the same time.

(4) Risk transfer: In order to avoid risk loss, consciously pass the loss to another unit or individual to bear. There are usually three types of controlled non-insurance transfers, financial non-insurance transfers and insurance transfers. Controlled non-insurance transfer, which transfers legal liability for loss, eliminates or reduces the assignor's liability to the assignee's loss and the liability to the third party through a contract or agreement. Financial non-insurance transfer is the transferor seeking external funds to compensate for its losses through a contract or agreement. Participation in insurance is through special agencies, and according to relevant laws, the law of large numbers is used to sign insurance contracts, and insurance companies can be compensated when risks occur.

(5) Risk retention: It is a measure for the project organizer to bear the risk loss. Sometimes active retention, sometimes passive retention. The funds required to bear the risks can be resolved by establishing an internal accidental loss fund in advance.

For the above-mentioned risk management control methods, project managers can use them jointly or separately. For some large-scale engineering projects, multiple risk control methods are often used in combination. Using a single control method alone will increase the risk of the project. On the contrary, for small projects, a control method may be used. Therefore, risk managers must analyze specific issues and not use them blindly.

Engineering project risk management