Risk management processes accompany all the main stages in the life cycle of construction and infrastructure projects, i.e., statutory and preliminary design, detailed design, tendering, construction and Handover.
There are substantial differences in the content of the risks, the nature of the contribution of the risk management process and its impact on the project process, as well as the modalities of dealing with the risks:
In the Statutory and Preliminary Design stages, the risk management process helps focus the design team on the pros and cons of various design alternatives. Risk management is a tool [in addition to other tools] used by the design team to define, evaluate and examine the significance of alternatives [for example, risks arising from anticipated difficulties in expropriations may affect design alternatives for work sites, mobilization areas or rail/road alignment].
During Detailed Design, the risk management process helps in detecting and identifying weaknesses and threats to the project goals, with an emphasis on engineering and technical aspects, aspects of permits and authorizations, impact on the environment, health and safety aspects, constructability, maintainability, and so on. The treatment of risks at this stage focuses on engineering solutions and their integration into the design products; other ways of handling risks identified during the design phase – dictating the execution methods to be implemented during construction. Also, additional data is collected and
surveys are conducted which reduce the level of uncertainty from which risk is derived and which supports the design process; and more.
During the Tendering phase, the risk management process assists in defining the division of responsibility and risk sharing between parties, as well as supporting the contractor selection process. In many projects it is customary that as part of the tender documents, the bidders are also given a list of risks that the employer has determined are to be considered as the responsibility of the contractor; the bidders are then required to include in their proposals methods and solutions they intend to implement to deal with these risks. The contractors are also required to accept full responsibility for these risks and price their proposals accordingly. When the bids are reviewed for consideration, along with other criteria, attention is paid as to the response they offer to these risks.
During the Construction and Handover phases, risk management processes are used to identify “mines” that lie along the execution path. These can cause budget overruns, prolong the project schedule, and/or result in the project not meeting quality and/or performance requirements, creating an exposure to claims. Some of the risks of these stages are of a logistical nature, risks arising from an interface with third parties, management and even political risks, residual risks deriving from changes and variations, and more. During the implementation phase it is crucial that there be a tight integration of all components of the Project Controls – schedule management, budget control, site supervision/quality control and risk management.
The above description is a generalized one, and depends on the project’s business model and risk manager’s perspective.
The reference point can also vary significantly between different types of project models, such as DBB, DB, PPP or EPCM and the like; of course, the perspective of the employer’s risk manager and the contractor’s risk manager are not identical [in quite a few cases, the employer’s risk is an opportunity for the contractor and vice versa].