Results of Literature Review
In the process of reviewing academic literature, it was found that the risk identification stage is perhaps the most important stage in the entire risk management process, as well as perhaps the least understood. Risk classification is a part of the risk management process, which is carried out in conjunction with the risk identification stage. Identification and classification of risks constitute a qualitative examination of project risks. The purpose of developing a taxonomy or classification of risks is to inform stakeholders about risks involved in the project and to aid contractors in developing suitable strategies to mitigate risks. The process of classification is very important as it enables structuring risks that may affect the project.
A review and analysis of selected articles from relevant academic journals over the period of last four decades was conducted in order to identify and describe relevance and effectiveness of methods of risk identification used in construction and infrastructure projects. Types of risk identification methods most commonly used in infrastructure projects were identified as per table below.
Checklists:
Checklists are perhaps the most widely used method of identifying project risks in construction and infrastructure industry. Essentially, risks checklists take the form of nomenclature of risks that could affect the objectives of the project. Risk checklists can be predefined on the historical data knowledge. Many projects rely largely on the use of checklists in identification and subsequent assessment of risks. This approach, however, is not considered to be ideal as involves professional experience of project managers and stakeholders involved, who may not have enough expertise to account for all possible risks relevant to a particular project. A study on risk identification techniques used by risk management practitioners in the UK showed that 76% used checklists as technique for risk identification. Risk checklists or calatogues are commonly used in PPP/PFI projects.
Historical data:
Historical knowledge on risk is the original source of information that is obtained in the process of direct exposure to the risks encountered at various stages of implementation of past projects. Some authors distinguish between explicit and tacit historical information on risk management used in infrastructure projects. It allows for reducing the amount of rework and sharing of valuable knowledge. Risk event histories are used as part of knowledge-based or «lessons learned» databases in organisations to assess risks leading cost overruns of infrastructure projects. Accumulation of historic knowledge of risk in an organisation can lead to improvement for risk management performance in the long-term perspective.
Expert judgement:
Expert judgement is a valuable source of information in risk management. It allows project managers to access information that may not be available within the organisation. It is tacit knowledge stored in the minds of industry experts who have a wealth of knowledge acquired from working on various types of infrastructure projects. Engagement of expert judgement and experience may take various forms, including interviews, consultations, Delphi techniques, etc. Expert judgement may be particularly useful in situations where historical data is limited or not directly applicable and help in handling uncertainty at the early stages of the project. Early involvement of experts in the project can help in defining a coherent risk management strategy and increase the likelihood of successful project completion.
Selected articles from relevant academic journals were additionally analysed on the subject of sources of risks inherent to infrastructure projects in order to establish common risk categories based on identified risk sources.
It was found that the most frequently the infrastructure projects face risks in of financial and economic nature. The other two most common categories of risks are contract and procurement as well as design and engineering. While further analysis of academic literature is required prior to making any conclusions on the acquired data, it could be preliminary stated the the first three categories indeed inlcude common types of risks in infrastructure projects.
1. Financial and economic risks:
The inherent complexity of many infrastructure projects makes cost estimation and budgeting a challenging task. Projects' initial budget and schedule resources are systemically underestimated largely due to incomplete information or uncertainty about the projects at early stages and optimism bias embedded in project estimations, for instance, during the appraisal stage of the project, that frequently result in inaccurate initial project estimates.
2. Design and engineering risks:
Errors detected during the design phase can have a profound impact on the overall project quality, including budget and schedule performance. Moreover, design and engineering risks have the potential to trigger sequences of additional issues that contribute to project failure. Parties involved in the design process often face communication issues that result in stakeholder misalignment and lead to design and engineering discrepancies.
3. Contract and procurement risks:
Procurement risks can have several underlying reasons, including unrealistic bid preparation timeframes, insufficient due diligence and documentation of procurement decision-making, as well as incomplete information on project scope, increasing uncertainty of the processes. Contractual risks are associated with flaws in contract documents, inappropriate documents, or improper contractual relationships. The implications of contractual risks include claims and disputes, disruption of work, stoppages of work, lack of coordination, delays, and inflated project costs.
Interview Data Collection
Upon completion of the semi-structured interviews, findings acquired in the review of academic literature will be compared with the expertise shared by industry practitioners in order to establish alignment and discrepancies in the data regarding risk identification methods used in practice, common sources of risks by the risk categories outlined above as well the nature of the use of risk registers in the risk management process, and use of knowledge bases to form contingency plans for the infrastructure projects.
If you are interested in contributing your knowledge and expertise to the project's cause by participating in the interview, please use contacts below for further details.