Indeed, risk management is one of the most crucial parts of a construction manager's job. If Laing's managers had controlled the risks involved with building the Cardiff Millennium stadium, Laing might not be up for sale today. With the benefit of hindsight, the risks were enormous: a guaranteed maximum price contract combined with a tricky site and a neighbour who was in conflict with the client. There were no controls to handle the relationship between the client and neighbour. So when the relationship interfered with work, the contractor had no way to buy time or speed up work later without penalty. Laing lost almost £30m on a £100m contract.
The risk register
With the stakes so high, Alan Boswell has taken a stand at Balfour Beatty. He has devised a formal method for managing risk that will be rolled out throughout the company's 10 operating companies by the end of this year.
An in-house team of 20 managers from different parts of the group have taken 18 months to develop the method under the stewardship of Boswell. And Boswell is so taken with the result that he thinks it will give the company competitive advantage over its rivals.
While Boswell is keen to keep details of his system secret, he allowed Construction Manager a sneak preview.
The method starts with self-assessment. Boswell explains that all managers analyse the risks managed by their teams. This is done in a brainstorming session that throws up common risks such as site accidents or delivery delays. It also identifies risks that are not usually considered. For instance, says Boswell, who you bank with can be very important. "What would happen if your bank goes bust?" he warns.
You should also assess the financial and corporate impact of the risks. For instance, multiple deaths on site would cost the company millions of pounds in lost work from wary clients and also tie up a lot of management time.
The next step is to identify viable risk controls. Employing a full-time safety officer, for example, controls the risk of accidents, and banking with more than one company distributes the risk of all of your money being lost in a banking disaster.
If clients can see the risks more clearly, they are happier that their money is being spent wisely
After these two steps, you should be able to identify the residual risks. Now ask whether you can control the risk, whether it is worth passing the risk onto others - like insurance companies – or whether you can take the risk on and price for it in your contract or service.
Once the method has been worked through, you can write the risks, the controls and the consequences down. At Balfour Beatty this document will be called a risk register.
Balfour Beatty introduced the method at the beginning of the year, and board level risk registers have been created for all of the group's operating companies. Now, says Boswell, the method will be cascaded through the companies to junior management levels. Boswell expects that a complete risk register will be prepared for the group and its companies by the end of this year.
By formalising the way risk management is dealt with, Boswell expects to generate a leap in performance as best practice risk control is written down and disseminated throughout the company. "Some parts of the company have best practice ways of dealing with risk that are not known to other parts of the company," he says. "The risk register will make sure that these practices can be seen and used by all."
Benefits
Boswell is clear that the method is not designed to eliminate risk. "We manage risk. That is our job. But if we can identify the risks and their consequences more intelligently, then we can price them better," he says. The plan also has benefits for clients, whose confidence is actually increased by methodical analysis of the risks involved in a project. "If clients can see the risks more clearly, they are happier that their money is being spent wisely," Boswell adds.
To help the process along, Balfour is training 40 of its managers from all over the company to be risk management facilitators. According to Boswell, Leeds University is training 20 managers to be facilitators now and another 20 will be trained soon.
The process need not be cripplingly bureaucratic, says Boswell. For a risk register with 11 issues it takes about three working days to complete.
Source
Construction Manager