The Importance of Risk Management in engineering Projects

Introduction

A major current of focus in Project management is the way to improve and optimize the
current projects of engineering that are currently taking place in our country. Poor
feasibility and pre-feasibility are evidence of a lack of qualifies project management skill
in our engineers; also, there is no contingent plans in case of eventualities to solve them
and get back in track. These reasons causes great mistakes such as overpricing, delays
on the deliver and even the cancelation of the project itself. Most of the time, this ends
up on an extension of the delivery date occasioning not estimated costs.

Project management has been taking control of most of the projects nowadays, it is one
of the most important area of matter in the engineering field. The fact of having a proper
schedule to organize the activities of the project ends up on time and cost benefits. Also,
a designated area to take care of risks in case of eventualities in order to stop them to
grow bigger and affect the project on a greater scale. According to MTC (Ministerio de
Transportes y Comunicaciones) and MVCS (Ministerio de Vivienda, Contrucción y
Saneamiento), projects with poor previous studies are up 50% more risky to execute.

In this paper, I will emphasize the importance of risk management in projects. To prepare
engineers to face eventualities causing the minimum possible risk.

Methodology

The key for a successful project is a proper organization of the tasks and teams that will
be involved on it. It is extremely important to properly manage the crews, assigning them
their schedules for the whole project. It is necessary to keep an eye on the deadlines by
means of a general schedule of the project that contains activity times and deliver dates.
Sometimes, it is necessary to take risks and corrective measurements in order to achieve
the delivery of the project on time. Risk management is an area that takes care of this
type of eventualities by solving them with haste and efficiency; and this is why it is always
needed to be implemented in every engineering project. In accordance with Roald &
Heman (2014), there are five steps to properly and carefully organize and control risks.
First, is always good to observe and identify the sources of irregular values or results
that may end affecting the development of the project. There will always problems or
eventualities when working with people. However, it is on the hands of a project manager
to deal with these events, identify the risk source and deal with it applying corrective
measurements to prevent them to happen again. Options such as brainstorming, sticky
notes and procedures charts will always help crews to get back in track.
The next step is assessment. By doing constant training to the crews, people will be
more apt to do their task with more confidence, reducing risk and helping other
members of the crew that may forget a stop or two. Risk is measurable by the following
formula:

Risk = (likelihood of occurring) x (size of impact)

Where the only variable we can control is the like likelihood of occurring. By means of
proper assessment it is possible to greatly reduce this equation input aiming to have
close to nothing casualties. The following step is planning, as mentioned before, it is
always good to have a schedule and when talking of risk management a back-up plan is
essential. In some cases, more than one action is needed, for these scenarios is crucial
to call a meeting with the board and give solution ideas depending on the eventuality.
Most common cases are poor productivity of the crews, constant drops in progress ratio
and delays on the supply materials. To leave the project virtually unaffected, actions
must be taken as soon as the problem is identified to prevent it from getting bigger (size
of impact).

The next two steps are straight forward. Implementation and Monitoring, like exposed in
the previous paragraph, the risk response must be managed in order to execute the
contingent plans correctly. In the implementation part, like it name says, is implement
the corrective measures discussed in the previous step to solve the problems as soon
as possible, and monitor implies to carefully observe these measurements are executed
correctly with the addition of identifying where the plans or measurements can be
optimized. As known, there is always a way to make it better, safer, faster o cheaper.

In accordance with Roald & Heman (2014), risk management, if used efficiently and with
the proper care and execution ends up in a system of continuous upgrade and
development that helps preventing and solving eventualities of any engineering project.
Some studies from 2010 validate that on 67 mega projects recognize the risk
management as a high matter of concern reaching the top 3 priorities on project
managers schedules. (Bosch-Rekveldt, the influence of project front end management
and project complexity on project success, 2010).

Having an area that takes care of risk has become necessary when working with people
as we are no perfect, and these solutions and plans involver humans as well. This is the
reason why the last step is so crucial, to make it better. Inevitable, most of the contractors
not always opt for a risk manager to cheapen cost leading to a poor problem-solution
response and costing more in long therm.

RESULTS

As outlined in the introduction, the aim of this paper is to prevent risk and how to properly
deal with them when they occur. It is known from the literature that a good risk
management plan needs to be considered in the strategy and a way to make it is applying
a Monte Carlo model of probability. Using the method mentioned above, we conclude
that applying a good risk management plan helps controlling the evolution of the project.

As detailed in figures 1 & 2, according to the Monte Carlo Results we find how the most
likely and less likely risks tend to impact in the development of the project. As expected,
in fig 3 we can observe how a project without risk management procedures increases
the cost among the weeks. By applying the method, we managed to match and support
the results obtained by Roald & Heman (2014) reaching up to 90% at efficiency in risk
management.

However, atypical values such as delays in the schedule or thing we directly cannot
control always come to scene and can lead to the project failure if they are no managed
properly. This depends mostly on the experience of the project manager and how fast
he and his team are able to react to the menace.

This could be due to a method failure, poor response time or even lack of experience of
the project manager. All of these reasons imply always that having a proper risk
management plan can make the difference between success and failure.

CONCLUSIONS

As previously stablished, a proper risk management is crucial to any project. We found

that up to 90% of improvement was achieved by applying the presented method. Ending
up in a rise of maturity level of the enterprise and, consequently, representing more
reliability on the projects under their management.

This work compares well with the previous investigations made by Roald & Heman. In
this report we obtain such comparable results with them in the area of risk management.
Corroborating that their theory and methodology leads to a better control of risk at any
project. Also, all the data gathered proves that having a back up plan with a risk budget
is crucial to combat menaces in every project.

This investigation represents a major turn in project management, proving that a better
management of risks improve every single piece of the project. Making an undeniable
improvement in cost managements and price lowering. In addition, it reflects the level of
maturity and reliability of the enterprise which is the showcase for the investors.

A highly experienced project manager is recommended in order to properly apply the

previous method. To implement it a most projects, more trained project managers are
needed. This work leads to wake the interest in this line of the career and eventually we
will have better levels of standards in project management.

ABSTRACT

We examine why many projects in Peru have a lack of experience when dealing with risk
at work. This paper presents the relevance of risk management in nowadays projects. A
detailed comparison is made between projects that does not apply a proper methodology
of risk management procedures and more professional ones that follows standard
protocols. We fin that in projects that successfully apply the theory reach up to 90% of
efficiency when dealing with eventualities. This basis can profitable be implemented at
every project because they will aid to save and prevent contingency costs up to 50%.
These profiles may serve as a model to follow to every enterprise that wants to grow in
maturity and prestige.
TABLES AND CHARTS

FIG 1 & 2
FIG 3

FIG 4
Fig 5