The plan drawn to manage the occurrence of risks is one the most important considerations that should be taken notice of if any engineering project is to succeed. In any project, risks are probable and possible to happen but this can be of less impact or consequence if they are identified, managed and plans are drawn prior to implementation of the project. In general, to deliver the defined scope on time within the budget that was originally planned for a project to succeed, it is important to make a well-defined and designed project plan. However, success plans are not normally achieved due to risks and mostly for big projects that can be affected, both by influences externally or internal requirements. As an engineer, any project undertaken, there is always a probability of a risk in any kind of engineering projects. This therefore means that risks are a part of any project and comes with an effect which may either be positive or negative to the project that is being undertaken (Stevenson, & Hojati, 2007)
If the risks are not planned for in the project, it may result into a collapse of the project and spoiling the reputation of the engineer or the engineering company. The risk management plan should be drawn to cater for any possible risks that may arise in the course of the project (Tang, & Musa, 2011, p.30)
As said earlier, in any engineering project, there is a probability of a risk arising, however, this should be managed by a risk management plan drawn to cater for this situation when the risk occurs (Thun, & Hoenig, 2011, p.242).
Most of the recent studies have shown that the risk management plans are adapted continuously as projects are being implemented because it is relevant for the success of projects. Various literature have shown that poor forecasting and planning is the main cause of risks in projects. Insufficient resources allocated, its inefficiency and the poor methods of mitigating risks have made most projects to fail (Waters, 2011)
Risk management plan is one of the main ways to reduce losses that may come inform of operation costs, administrative costs and management costs in the project. The risk management plan also enables the project to keep within the budget even when a risk occurs because it was budgeted for. The monetary evaluation and analysis concerned with management of risks are divided into two variables namely; the probability of a risk to occur and the losses incurred when the risk occurs. The summery drawn from various reports show that the act of managing risks is a necessary and important practice that should be put in place to ensure a high probability of success of a project (Aven, & Renn, 2010, p.121)
Project managers and engineers need to be able to identify and manage these risks as they come. Engineers and contractors have a technological view of what a risk is and how the risk is most likely to affect the project. Many different authors have defined risks in different ways; a risk is a probability that may be caused by an action taken, which literally means that any engineering action or decision taken comes with a risk, and a plan must be in place to solve that risk in case it arises (Van et al., 2009). A risk is a property in any decision, it is intrinsic and is measured by a combination of different factors like exposure to, severity, occurrence and many others but the most common it is limited to generally two factors; severity and the frequency of occurrence. The risk combines likelihoods of hazardous occasion or exposures to danger and severity that is caused by the occasion. This context clearly brings out two questions: 1. at what probability is a hazardous occasion likely to occur? 2. What level of impact will it cause if the hazardous event occurs? A risk can also be defined as a circumstance that is uncertain to occur and should it occur, will affect the goals and objectives that were to be achieved in the project and many other definitions, perspectives which are endless (Cohen & Kunreuther, 2007, p.540). Risks can be categorized or divided into different types according to how it will affect a project and the environment when it occurs. For example:
The types of risks that may occur before or during the execution of a project and the list of risks is endless since there may exist other smaller or bigger risks that have never been known. These risks normally originate from the organization, network relations and external environment. These therefore, means that project managers and engineers are supposed to have a project management plan to help them identify and manage these risks to mitigate the losses and meet project deadlines (Craighead, et al. 2007, p.155)
This concept “risk management” has rapidly developed over the past decades and has also become an important aspect to project success. It is defined as a continuous process to identify, analyze, prioritize and mitigate risks that may threaten the success of a project in terms of schedule, costs, quality, safety performance and technical performance. It can also be defined as a set of coordinated activities that is used to control the risks that may affect objectives (Klibi et al., 2010, p.290). The main objective of a risk management plan is to understand the project risks, lessen its possibilities of negative occasions and maximize the positive possibilities on projects outcomes. This is a continuous process that starts during the planning phase of a project and ends when the project is successful. The process of risk management can be executed in five steps:
Strategy and planning; this sets the baseline and the foundation for risk management and determine whether the initiative will succeed or not. Organizations will determine how to address and manage risks in the strategy and planning phase of the project and it should consider the following: guidelines for risk management, the resources available, reporting and communications protocols and the organization’s main strategic objective which outlays the big picture of the organization. These activities include assigning roles and responsibilities, categorize the identified risks and develop a risk matrix and rate risks.
Risk identification; this is the ability to identify all possible risks that can affect the project both before and during the execution of the project either positively or negatively. This should tell the type of risk, its description, cost impact, its probability of occurrence, the risk level, possible responses (Pahl-Wostl, 2007, p.50)
Analysis; this is the phase that determine the possibilities and the likely impacts of each identified risks and prioritizes attention towards the risk. Analysis is done in two approaches: qualitative analysis which involves assignment of priority levels like high, medium or low to every risk identified. These priorities must be in line with organization objectives and the risk management plan, analysis is also done through quantitative analysis where the most likely cost value is assigned to the risks identified (Van, 2008, p.781).
Response planning; this where response actions and alternatives are developed to reduce project risks. In response planning, there are four alternatives which include, risk avoidance, risk transfer, risk mitigation and risk acceptance. However, this should take into consideration the available resources and the repercussions that is likely to arise. Avoidance means to dodge the potential condition or occurrence, transference means shifting the responsibilities of the risk to another party, mitigation means to take preventive measures to reduce the chances of risk occurrence and acceptance means accepting whatever outcome of the risk (Lawrence, 2008, p.781)
Monitoring and control; this where the organization is able to track risks, to oversee how risk plans are being implemented and also evaluate how effective the management procedures are. This has to be done throughout the course of the project.
Taking a critical analysis of the various literatures review ((Waters, 2011), It has been noticed that risk management process, has proved to be of high importance in project management process and one of the core determinants of project success. When risk planning and mitigations are well executed, it is highly probable that risks are controlled and in some circumstances of control failure, the impacts can be reduced. However, its important to have a core understanding of the process involved by the personnel who undertake these tasks in the project execution. It is therefore a way of reducing operational costs, administrative costs and managerial costs. If a plan is designed to control the costs that may arise due to uncertainties, the project schedule will be followed in line and hence the project deadline will be met (Pettit, Fiksel & Croxton, 2010, p.20). The evaluation and analysis of risk management is divided into two variables which is the probability of the risk to occur these means the possibilities of risk occurrence in the project. This should be able to understand the future trends in relation to the past experiences from other projects executed. Another question that evaluation and analysis asks is what losses are likely to be incurred when the risk occurs. This question enables the project manager to understand the positive and negative effects of the risk existence and how it can be avoided or controlled (Gregor & Jones, 2007, p.312)
Since engineers and managers have a technological view of what these risks are and the effects they most likely to cause. This will help to control this risks or reduce if it can’t be controlled and also enable that enough resources can be allocated to cater for such risks (Pearson, 2009, p.44). There are various methods that can be applied to treat the various types of risk associated to projects as listed in the review and they are termed as risk treatment methods and they include:
This is when the project manager chooses not to take the risk by avoiding any circumstance that may result into the occurrence of that risk, dodging it as it comes or foregoing any activity leads to the risk.
Transfer of risks
This when the third party is involved in the project and the risk can be transferred to the third-party. This done by two methods of outsourcing or insurance against the risk.
Reduction of risks
This when the project manager chooses to reduce the effects that may be caused by mitigating the risk.
Acceptance of risks
This refers to ability of the project manager to accept all the effects of the risks but this should be done in consideration of the resources available.
Although there has been a tremendous adaptation of risk management as a cost reduction strategy and improving project success there has been no definite system or strategy selected for conducting such. According to the findings of the reviews, there are many different ways in which the risks are undertaken yet there is no any one specific method recommended as the most effective. In other words, there is a gap in the identification of the most effective risk management method. Research is therefore needed to this in this area in order to correlate a given definite method with different project sizes and types. Furthermore, there is need to provide appropriate precautions on the type of method to be selected when designing a risk management plan.
Conclusions
The existence of possibilities of risk occurrence is one important reason why a risk management plan needs to be considered when planning to or executing a project because this enables progress in the project and deadline will be met. Most studies show that this risks can be controlled. This project will therefore help the engineers and project managers to reduce and control risks in any project they may choose to undertake since it evaluated other reviews and the future trends to come
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