Risk management is key to successful projects, but we could do it so much better by applying digital technology. Rudi Klein and Mike Halsall explain smart risk registers

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With an avalanche of increasingly sophisticated digital tools available, the construction industry remains reluctant to make the most of technology’s potential to improve process efficiencies. Our industry has been found to be the least digitised of all UK sectors, according to a 2016 article by McKinsey & Company. 

We have had “false dawns”; BIM was one. While progress is happening in some parts of the world – in Singapore all new construction projects must complete a BIM representation before work commences on site – progress in the UK remains hampered by industry inertia. BIM in its various levels should be a collaborative data-sharing platform to facilitate more efficient working among all project participants. Instead BIM is being used where it is least disruptive to traditional procurement and delivery, such as logistics, programming and manufacturing activities. 

Last July the government published its construction sector deal. This was a heavyweight initiative to bring construction into the digital age. But it also acknowledged that the industry’s problems were not going to be overcome by simply investing in digital solutions in an attempt to transform delivery processes. Business models had to change, procurement strategies had to be overhauled and, crucially, payment abuse had to be addressed. 

Ownership of the relevant risk, its likely impact, probability of occurrence and measures to manage it will need to be logged into the system. All this activity must take place before any construction begins

Under this deal more than £400m is available (funded by both government and industry) for innovation in digital technologies and processes to transform the industry. How should we spend this money? One priority should be to develop a system for the proper management of risk. Cost plans are almost always unreliable because they are not based on robust identification and management of risk, and yet we have all the necessary tools available to solve this plague of budgetary failure. The answer is to develop a “smart risk register”.

When we use the word “smart” in this context we are referring to a digital tool or platform that is operated using distributed ledger technology (DLT) – data consensually shared and synchronized across multiple sites with no central administrator – combined with machine learning. Despite the rhetoric, machine learning is a practical and well-proven technology with successes including identifying cancers better than human experts. 

The smart risk register would combine the security and integrity of DLT with vast machine learning computation, enabling the industry to learn how best to manage project risk and provide an auditable and transparent ledger of the decisions reached.

Investment in a smart risk register for construction will require the development of a level of machine learning that can engage project participants on, for example, measures taken to address certain risks or whether the highlighted risks were reviewed adequately. The register will need to make assumptions that certain generic types of risk will apply, such as those relating to safety, site conditions, sufficiency of scope, adequacy of resourcing, implementation of design solutions and climate factors. The management of these risks and the extent to which they are addressed will depend on clients’ “success factors”, which will have already been inputted to the platform, including data obtainable from past projects.

This is where the development of the machine learning aspect of a smart risk register should come into its own. A presumption should be made that a collaborative delivery process is most likely to bring about a successful outcome in respect of the client’s objectives. This will require the early appointment of specialists and asset managers in order to work with consultants and planners in contributing to the risk register. 

Matters such as ownership of the relevant risk, its likely impact, probability of occurrence and measures to manage it – such as insurance and project bank accounts (to minimise the consequences of insolvency) – will need to be logged into the system. All this activity involving all the key project participants (key in the sense that their participation is critical to the decisions on design, planning and cost) must take place before any construction begins.

Once all the system has processed all the data inputted by the parties, it should be capable of reaching one of the following decisions:

  • The project is not ready for construction because of failure to address (or adequately address) one or more of the identified risks, or
  • The project is ready for construction.

Where the first decision is made, the client and all project participants would be automatically notified, along with building control authorities; the health and safety executive; project risk insurers and funders.

A smart risk register will help create more efficient and safer outcomes that meet clients’ clearly expressed needs. By ensuring greater transparency in the management of risk it also accommodates Dame Judith Hackitt’s call for a “golden thread” of accountability. Over the longer term it will help give greater certainty in meeting completion dates and keeping within the cost plan. Above all else it will help eradicate the endemic waste resulting from an industry and client mindset that believes added value is generally secured by maximising risk transfer.

Rudi Klein is a barrister and chief executive of the Special Engineering Contractors’ Group and Mike Halsall is an adviser to the government  on distributed ledger technology