Value and Risk Management - Essay Example

? Good risk management Introduction The number of financial based risks associated to construction engineering may eventuate into the experience of increased expenses during even before the contract period. This is with nature of the anticipated risks especially towards construction engineering. The possibility of registering unforeseen losses or expenses during the period of execution the contract is always eminent. This implies that severe precautions necessitate to be observed with regards to the details of the presumed contract. These precautions will ensure the smooth transition of the contract placed and the observation of sincere approaches to the execution of the project. In addition, possible contractual disputes deserve to be resolved timely in order to avert possible financial losses that may be annexed upon their eventuality. On that note, it is wise to examine the possible risks that may amount to financial losses will undertaking a construction contract. Evaluation However, prior to venture into this quest, a reflection of the activities that comprise of a construction-engineering venture is essential for the provision of an insight on the study matter. Construction engineering entertains a fleet of events, including the assembly of materials from the sources or suppliers to the field of construction. This is a rather demanding activity since it involves the development of a safety store in the construction area prior to the establishment of the real facility described under the project. Apparently, a significant proportion of possible financial losses that may be annexed to construction contracts are built on the grounds of safety compromise. The assessments of the possible risks that may be associated to this development include the loss of the facilities/ equipment utilized in construction. Such loss is realized under incidents such as theft and natural calamities; an eventuality that may cause severe dents to the financial archives of the proposed project (S.C.P.C.U. (2000). Subsequently, construction engineering involves the development of the designs that are to see the realization of substantial buildings with regard to their durability. This formulates the central reasons upon which the project contract is developed. All these elements amount to platforms that may eventuate to serious occurrence of significant financial risks during or before the contract period. This assertion calls for the development of ultimate measures towards their address. Subsequently, the involvement of a spree of diversified experts in the acquisition of the mentioned tasks, for examples the raw materials, implies that the process of construction is a mammoth task by its own self. Challenges amounting to logistical concern can lead to serious financial losses while procuring the contract. The details of the contract make a sincere effort towards the address of the possible risk that may eventuate from the execution of the project, including accidents to the deployed employees. However, the provided cover cannot be described as sufficient for the whole construction project in terms of the expenses that may be accrued from the occurrence of the anticipated risks. This observation prompts the evaluation of the possible risks that may be associated to construction in terms of the expenses they may annex to the whole exercise. The nature of risks associated to a construction-engineering project is grossly pegged on the magnitude of the project. This assertion can be utilized in the categorization of the whole concept, in that various projects can be characterized in accordance to the stipulations of the exercise. On this regard, the projects can be classified as either high financial risk or low financial risk projects. High financial risk projects involve the projects pursued under public environment, for example, road construction, stadia establishment and events of such relation. The financial risks that may be associated to such projects proceeds beyond the captions that may be availed under the contract. This implies that while performing such a project extreme precautions deserves to be deployed. A significant of these project are funded by governments or international bodies. This implies that their execution is parceled with increased financial auditing. On this note, possible but non contract-relevant losses encountered while pursuing the project are most likely to be pushed to the account of the contractor. The other category of construction projects refers to the reduced projects in terms of capacity and location. Reduced location simply refers to setting that point on improved safety to both the equipments and the staff or employees. This points a possibility of reduced financial losses that may be annexed to the concern. Apparently, the primary concerns on safety-based financial losses befall between the employees and the equipments. The two can be described as vital resources that determine the success of the undertaken project. Subsequently, they can be described as the central concerns that determine the success of the whole project. In addition to this assertion, contractual disputes can be suffered upon the encounter of such risks. This is while in reference to the execution of any construction based project. The perceptions deployed under this notion include the identification of the possible scenarios that may amount to its compromise. On these grounds, safety can be listed as the leading element of consideration when evaluation of financial risks involved in construction is viewed. Several elements assist in the identification of the appropriate channels upon which the address of such risks can be achieved. An evaluation on these losses call for an appraisal of each risk that may eventuate from the undertaking a construction project. Several aspects of consideration may be presented upon the deliberation of the various aspects of risks that are associated from the financial concerns. In the identification of a series of happenings that can amount to risks may be calculated from events such as the acquisition of the raw materials. The intensity of the materials used in constructions arises with complication related to its movement and eventual transportation. There rises an increased number of risks pertaining the safety of this material. Such concern can easily translate to financial losses. On the other hand, its exposure to unprotected natural environment is also associated to a set of risks all together. This is in accordance to the eminent development that may lead to the development of undesired damage to the materials and resources (Edwards, 1995). Eventually, the arrival of the material at the construction site still does not imply substantially on their safety. This is in regards to the subsequent losses that may be associated to the tools upon their storage. Such events include theft of the equipment due to reduced security, as well as other safety inconsideration that may be acknowledge. Such an eventuality may sting deep into the financial scoffers of the contractor. This implies that there need to be devised a way of controlling such an eventuality. Apparently, such risk may occur to the contractor way prior to the enacted of the contract. On this regard, the instructions on the appropriate model of handling such essential inputs need to be spelt with clarity. This regards the addition of subsequent measures that may seek to ensure that the eventual financial loss is averted slowly. This includes the provision of taking precautions via avenues such as risk management. Such steps include the call for the utilizations of ultimate caution while addressing the transportation of the elements. In subsequent findings, it is also essential to ensure that the storage of the raw materials is first ascertained prior to the deployment of the materials from the manufactory firm. This implies that the logistics steps identified for the movement of the equipments and resources to the site of construction should be first to seek the development of a safe for the storage of the essential raw materials (Lyons, 2003). Subsequently, the movement of the raw materials to the construction site needs to be guided on their essence in terms of utilization. This may be evaluated against the prospected transport cost that is set to be encountered upon the relocation of the materials periodically. However, when this average cost is compared to the possible loss that may be engaged due to the lack of sufficient safety measures, the cost may be sidelined. On this regard, the effort of only delivering the essential resources at the construction site until the safety of the facility is assured may be deemed as a measure of ensuring the prospected risk is managed way prior to the initiation of the project. Subsequently, such measures may be of the significant contribution to the eventual realization of reduced risks occurrence upon the adoption of the contract. In addition to the highlighted measure, a proposal of ensuring the security of the resources at the site of construction would go a long way in the maintenance of safety. This can be achieved via the deployment of a safety officer at the site who will monitor the safety of the resources. This can be realized via outsourcing such officers prior the relocation of these vital equipments to the site of construction. These measures are accorded in regard to the safety if the site of construction in that the safety of the undeveloped regions is not always confirmed. This assertion drives in to the subsequent point that seeks to note effective risks that may be pegged on this understanding. Here, the safety of the staff employed by the constructor for the realization of the task at hand is also vital. Apparently, the contribution pegged to the staff with regard to the success of the whole project is eminent. The failure of the staff contribution would simply imply the crippling of the project. Subsequently, the failure of the staff contribution would imply an increase in the financial expenses oriented to the nature of the construction contract under exercise. Some contracts stipulate a period upon which the undertaken exercise is anticipated to be completed. This implies that the contractor may foot the eventual cost that is incurred in the latter phase of the project. In addition, the contractor may be subjected to legal channels following the failure of honoring the stipulations of his or her contract (Dallas, 2006). On this regard, it is essential to ensure the safety of the staff is always assured. The observation of this request calls for an appraisal on the situation that may be vied as possible risks grounds to the staff. This includes the safety measures exercised in at their site of occupation, as well as in their execution of their prospected duties. This implies that the eventual safety of the staff is solely rested on the provisions of safety subscribed by the contractor, as well as their professional safety measures. This narrows the role of the contractor to rather reduced margins. On this assertion, the contractor is anticipated to proceed with the adoption of the project in line with the safety measures stipulated in his or her professions (Staveren, 2006). Such measures involve the invoke of essential recruitment skills that steer at ensuring that only competent persons are recruited for the task of executing the task at hand. In case of incidents where unskilled labor is necessitated, it is essential to ensure that the training of the staff is always achieved prior to their recruitment in the exercise. These measures can be simply identified as risk management measures that should be deployed at the managerial levels. The realization of effective measure in ensuring client safety seeks to ensure the reduction of possible losses that may be foreseen. These losses may eventuate upon the lack of sufficient personnel to assist in the realization of the contract. Such a development implies that there lies a set of improved grounds upon which possible risks against the safety of the staff can be minimized (Wu, 2011). Upon the certification of the possible security for the staff, the eventual task of the project is subsequently evaluated. This is in accordance to the purpose of the undertaken project. The contractor needs to ensure the safety of the facility is always ascertained. This will reduce the possible financial obligations that may be annexed on the eventuality of either of the risks. This regards the eventual utilization of the facility as well as the exercises that may revolve around the facility prior to its utilization. A good example of such an incident may be fetched from several incidents. Amongst them is where the contractor is tasked with the role of performing a project that is detailed on public facilities in use. This may be a road modernization project or an event of similar magnitude. The preparation of such a period rises little interest of subsequent safety, especially during its development. The only concerns nurtured by the contractor at this moment include the risk of involving the public into the dangers of the project upon completion. The subsequent financial obligation that may be aligned to the occurrence of such concerns is highly visible. However, during the execution phase, there exists a wide pool of risks that may be associated with the public in regards to safety. This includes issues such as accidents due to non-committed guidance (Cretu, 2011). Such incidents can cause significant financial loses to the contractor. Apparently, the provision on the risk management procedures focuses on the reduction of the possible risk rates, or subsequent elimination of the foreseen risks. Exercises that seek to reduce the occurrence of such events are identified as the possible occasions upon which the cost, that may be incurred while addressing the risks, may be reduced. It is essential to consider all the possible solution that may lead to a reduction of possible losses. This drives the evaluation of the central purpose of the project. Upon the factored aspects is the safety of the construction upon finalization (the completion of the project). This is critical towards ensuring that the possible financial loses that may be annexed to such eventuality are regulated. It also implies that possible repercussions upon the failure to honor the safety stipulation as narrated by the contract. This assertion points on situation whereby the construction suffers fates that involve loss of lives. In such incidence, if the subsequent appraisal points on failures by the contractor then there were some failures in the risk assessment process for the project. In some contracts, the bound period stretches up to the occupation of the premises. Others have a warrant period upon which the credibility of the project can be evaluated independently. On this regard the contribution of the mentioned risk towards profitability it is evident. This implies that there rises the desire to identify the various options that may witness its reduction. Apparently, the observation of effective risk maintenance practices may eventuate into the arrest of such an eventuality. Conclusion The provisions on risk management focus on the development of an opportunity where the contractor will narrow on the possible risks that may be associated to the project undertaken. There rises an increased interest in reducing the cost that may be annexed to the occurrence of various risks in the construction industry. It is essential for contractors to ensure that the precautions focusing on this quest (that is risk management) are observed in order to ensure the reduction of possible risks. The essence of this step extends deep into the execution of the contract as well as during the period when the contract was developed. This implies that there exists a possibility of arresting the foreseen risks upon the observation of the appropriate measures. Reference Cretu, O., Stewart, R. B., & Berends, T. (2011). Risk Management for Design and Construction. Hoboken: John Wiley & Sons. Dallas, M. (2006). Value and risk management: A guide to best practice. Oxford: Blackwell Pub. Edwards, L. (1995). Practical risk management in the construction industry. London: T. Telford. Lyons, T., & Australian Institute of Quantity Surveyors. (2003). Project risk management in the construction industry: A review. Canberra: Australian Institute of Quantity Surveyors. Society of Chartered Property and Casualty Underwriters. (2000). Risk management in building construction: A risk management and insurance handbook. Cincinnati: National Underwriter Co. Smith, N. J. (1999). Managing risk in construction projects. Oxford: Blackwell Science. Staveren, M. . (2006). Uncertainty and ground conditions: A risk management approach. Oxford: Butterworth-Heinemann. Wu, D. D. (2011). Modeling risk management in sustainable construction. Berlin: Springer. Read More