Construction Risk Summit "benefit and pits of Construction Risk Management"

Conducting Risk Management on Major Projects

Bronwyn Friday

Group General Manager, Enterprise Risk Management

2 April14

Pitfalls and Benefits?

›Who we are

›6,5000+ people on 100+ projects› delivering contracting, engineering and services

solutions

›Revenue

›$4.75 billion

›Regions

› Australia

› New Zealand

› South East Asia

› Middle East

Who is John Holland

Work in hand

Approx. $5.56bn

Why do Risk Management on Major Projects

Achieve objectives successfully

Protecting Balance Sheet

All stakeholders focus what is critical

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Risk Management Changes

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What has changed in the Construction Industry

› Physical work has not changed a great deal

› New systems and process have been introduced› Risk Modelling› BIM – modelling of building information

› Stakeholder expectations have changed› They expect more certainty!!!

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What has changed at John Holland

› Some project objectives not fully achieved

› Senior Management and Leighton Holding’s governance

requirements

› Clients requiring more advance risk management

› Varying Delivery models

› More complex risk sharing setups

› New concepts like BIM

What is Risk Management at John Holland

Strategic & Business Planning

Prospect Analysis

Approval Processes

Contract Reviews

Safety, Quality & Environmental (SQE)

Risk Management

Qualitative Risk Rating

Quantitative Risk Costing

› Including Risk Modelling

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Risk Management & ToolsBenefits

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Benefits of Risk Management

› Focus the team on the objectives of the projects› 80/20 rule, focus on top 20% to deliver 80% of your success

› Early identification and understanding of Key Risks

› Alignment on the Key Risks

› Pro-active management of them

› Resources focused on these risks› Finally, know the Residual Uncertainty related to a project

for your business

Use of Probabilistic Cost Risk Modelling

› Used in our large valued, complex tenders / projects

› Models both› Discrete Risks› Uncertainty

› Estimate Uncertainty

› Design Development Scope Growth

What does the cost modelling give you?

› Confidence level of delivering a project within a budgeted amount

› What risk events to focus on to achieve success

› Portfolio protection› Overall portfolio risk profile

› Project’s impact on the business

Mean $9,119,415Std Dev $1,455,996

P5 $6,768,486P10 $7,234,656P25 $8,068,267P50 $9,096,837P75 $10,117,001P90 $11,009,943P95 $11,564,512

Percentiles

Use of Probabilistic Time Risk Modelling (SRA)

› Schedule Risk Analysis

› Used across are wider range of tenders and projects

› Models both› Discrete Time Risks› Duration Uncertainty

What does the time modelling give you?

› Confidence level of delivering a project within a specific timeframe

› Stress tests the schedule› Drives better methodologies› Understand of the likely delays and resulting costs

Risk ModellingPitfalls

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What are some of the pitfalls?

›Time

› In Tender there is so little time to get the core stuff complete

› Risk Management is seen as a distraction

When risk management is done the right way, it will drive the Tender Team to focus on the key issues and not get lost in the detail that has low impact.

Do not let risk management become a compliance task!!!

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What are some of the pitfalls?

›Data

› The risk process gets lost in all the data› 80 / 20 is not used so everything is managed› Management never focuses on the key risks

Do normal business practices already manage these risks?

Always question whether the risk could stop you achieving your objectives?

What are some of the pitfalls?

›Tool Selection

› Using advanced resource rich risk modelling tools when they are not needed

If a simple risk tool can achieve the desired outcomes, then use it!

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What are some of the pitfalls

›Decision Makers

› Risk Management processes are not involved with Decision Making processes› Risk information not being used

› Decision makers do not understand the outputs› Ignoring the information; or› Not questioning the logic to find out if it is sound

Get the risk information to decision makers and make sure they understand it. Coach them if they do not.

Make the most of Risk Management

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John Holland has revised its Risk Management processes

›Stronger approval processes›Stricter commercial / contract reviews›More detailed Risk Management›Risk Modelling›Peer Reviews

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Understand what the Decision Makers want

Match your risk tool to the profile of the project and output required

Remember it is about 80/20 and stay focus on the Key Risks

Do it early and get the benefits

How do you make the most of Risk Management

Questions

?

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