VALUE AND RISK MANAGEMENT

Value and Risk Management

Value and Risk Management

Construction industry continues to suffer poor performance of projects due to risks, despite attracting much attention in literature. With increasingly complex nature and dynamics of project, along with new procurement methods, current trend is to use risk measurement and modeling more as the means to promote communication, teamwork and risk response planning among members of multidisciplinary team of project. However, disclosure of risks of construction project is inadequate, incomplete and inconsistent throughout supply chain of construction. (Tah 1999 15) Team members take the different terminology to describe risks, use of different methods and techniques for dealing with risk analysis and management, and produce different results and contradictory. Where risks have been identified, evaluated and approved corrective measures, they do not often communicate effectively across supply chain. Consequently, project members do not have the common understanding of issues facing project, are not able to implement effective early warning systems and contingency plans to adequately address problems arising from decisions taken elsewhere chain. (Malhotra 1998 28) On other hand, do not allow risks, problems, corrective measures and lessons learned from previous projects to be captured and reused in development of new projects, facilitating organizational learning and continuous improvement. (Fowler and Scott 1997 49)

work presented in this paper is part of the larger project aimed at developing the framework of global risk management and continuous, which could increase likelihood of success of project, and leading industry practices to establish self-sustaining and continuous improvement, based on continued effective knowledge capture, reuse and learning. Objectives are to develop the common language to describe risks throughout construction supply chain, covering life cycle of building entire project, to develop the risk management paradigm: identification, classification, evaluation, analysis, action planning, monitoring, control and risk communication on an ongoing basis and proactively with common language, and to develop use of technical tools for knowledge-based systems to support framework. (Chapman 1997 75) In this paper, shortcomings of current process of project risk management, tools and techniques are identified and if application of knowledge management philosophies and techniques for risk management of projects are made. THE common language for describing risks based on the hierarchical breakdown structure risk has been developed and is basis for developing the common approach based on knowledge of risk management. These have been implemented in the management system database to act as the repository of knowledge. THE prototype system developed to support framework of risk management is discussed briefly. It is expected that approach will facilitate effective management of risks, while allowing all project participants to develop the shared understanding of project risks resulting in better performance. (Perry and Hayes 1985 102)

Evidence from literature suggests that current software packages do not handle subjectivity inherent in effective risk assessment. Assessment of what is or is not the risk is very subjective and decisions are influenced by management view of future, and their desire to avoid poor performance, based on knowledge of past ...