Project Risk Management in the Combined City of Perth - Case Study Example

Project Risk Management Name Institution Date of Submission Table of Contents Table of Contents 2 Project Description 2 Risk Identification 3 Project risks 5 Qualitative Risk Analysis: Likelihood Vs Consequence 7 Risk Matrix 11 Risk Register 12 Risk Treatment 12 References 17 Project Description Combined City of Perth, the Botanic Garden and Parks Authority hold that the capital city of Western Australia is Perth. Perth is a hub for transport, business, culture and entertainment in the metropolitan area. This city has an influx of myriads of visitors, tourists and workers. The area of Perth city is approximately 8.75 square kilometres with an estimated population of 13,439. The dwellings are around 9000 entailing high density construction and apartments. The city is the fastest growing area in Australia. To add, Perth city is bordered by Swan River and the Local Government Authorities. Perth is one of the most isolated cities worldwide. It is a destination popular for international and domestic travellers. One of the most advanced transport system is public transportation system. It is punctual, clean, economic and friendly to the environment. Besides, it is also well-structured and modern in a way that reduces traffic7. Perth public transport is always nearly on time. Many buses are new models and the system is advanced. Transperth is the public transport system of Perth Metro area and Central Area Transit entails the free bus network which serves the East Perth, CBD, Northbridge and West Perth. It also offers a ferry service to South Perth foreshore from Barrack St Jetty. Esplanade Busport is commonly referred to as Busport. It was previously known as Perth City Busport. It was opened in 1991 November 30 on a Saturday. It is found in Western Australia on the South of Perth CBD. It is close to Esplanade Railway Station and the Perth Convention Exhibition Centre. Most major services of buses begin and end at this Busport (Wikipedia, 2014). Risk Identification According to Pcubed (2003) regarding management of a project, identification of risk starts at the beginning of the project and sustains throughout the cycle of the project. Anticipating these risks is critical for project prosperity. Risks can either be threats or opportunities. Identification of risks focuses on reducing the chances and effect of a threat while enhancing chances and impact of opportunity. The State of Queensland holds that one needs to know the scope of the probable risks to develop a cost-effective, realistic risk management strategy for addressing those risks. There are numerous kinds of risks. Financial Risks These entail internal and external risks. Internal risks include cash flow shortages, asset depreciation and payment delays while external risks include changes in product prices and interest rates. Legal Risks These entail not complying with the regulations and policies such as fiscal policies put in place or contractual breaches. Environmental and Operational Risks These include resource risks (human, material or system) such as retirement of key figure in an organization, breakdown of facilities, natural hazards and disasters as well as failure of software. Strategic Risks These entail the strategies employed by the project manager in relation to the achievement and success of the project. This may include adopting a new advanced technology to increase the competition of the project against a competitor. Information and Privacy Risks These risks are associated with not complying with national privacy rules on storing, disposing and recording information of the beneficiaries of the project. Project risks (Pcubed, 2003) Causes of project risks Internal risks such as inadequate resources, cost overruns and delays are caused by failure in organization of the project, poor team coordination and poor technology of the project. The design, construction and operation of the project’s facility might also result to these risks. Lack of commitments to the project can also cause cost overruns and resources risks due to failure to achieve the required performance level (Pcubed, 2003). Moreover, external project risks such as technical risks, environmental factors and social factors are caused by aspects not in control of the project manager. In this case, these can be caused by fiscal policies enforced in the city of Perth by the local government which would tamper with prices causing high taxation and inflation. Environmental risks may be caused by climate change leading to changes of weather in the city thus affecting the running of the project. Nonetheless, social aspects such as traffic jam, vehicle accident may impede the operation of the project (Pcubed, 2003). The following is a guide diagram and past emergency reports to identify risks around Esplanade Busport in the Perth metro area. Risk Assessment (City of Perth, the Botanic Garden and Parks Authority Report, 2008) An analysis was conducted of risks facing Perth city and so Esplanade Busport both transient and residential. These risks will be categorized according to their level of damage. These include: which risks threaten life, environment and property which risks require extensive emergency response which risks need the response of the local government which risks are too severe to require recovery strategies to bring the community of Perth back to a sustainable level Additionally, other risks such as car accidents, fires and crimes would be considered. Such risks are considered day to day risks and they need day to day response. The identified risks around Esplanade Busport include aircraft accident on the Busport, failure of electricity, major road accident, technological fires, structural collapse, infrastructural failure, terror attack, communication breakdown, rail accident, environmental related risks such as floods and storms4. Qualitative Risk Analysis: Likelihood Vs Consequence The standard of Risk management utilizes the equilibrium of likelihood against consequence to determine the level of risk. This paper uses the criteria of the guide of Emergency Risk Management. Likelihood Descriptor Description Almost certain (1) This is likely to take place in most circumstances; and/or high level or incidents recorded or evidence that is strong anecdotal. There is also strong chances that the event will recur or/and high opportunity, means or reason to occur. It may occur once annually or more. Likely (2) In most circumstances, this will probably occur or/and recorded incidents regularly. There is strong anecdotal evidence and considerable opportunity, means or reason to occur. It may occur once after five years. Possible (3) This might occur sometimes and/or few random, infrequent incidents recorded, or little anecdotal evidence. There is very few incidents in comparable organizations, communities or facilities. There exists some opportunity, means or reason to occur. It may occur once in every twenty years. Unlikely (4) This is not expected to happen. There is neither recorded incident nor anecdotal evidence and/or lack recent incidents in associated facilities, organizations or communities; and/or minimal reason, opportunity or means to occur. This may occur once after one hundred years. Rare (5) This occurs under exceptional circumstances and may occur once after every five hundred or more years. (City of Perth, the Botanic Garden and Parks Authority Report, 2008) Consequence Descriptor Description Insignificant (A) there is no measurable effect on the environment there is minimal or no financial losses little or no individual support (financial, in-kind or material) needed no fatalities or injuries minimal or nil number of people displaced and only for short duration little or no damage or disruption to community Minor (B) Minimal number of injuries but nil fatalities First aid services are needed There is displacement of people but for less than twenty four hours Some personal support is needed There is some damage and disruption Small short-term impact on the environment Some financial losses Moderate (C) Medical services required but no fatalities There is some hospitalization Short-term localized displacement that would be restored within twenty four hours There is local arrangements for personal support Localized damage which would be rectified by routine arrangements There is normal community functioning associated with some inconveniences Some short-term impact on the environment or no long-term effect Significant financial losses Major (D) Injuries are extensive with significant hospitalization Massive displacement lasting for more than twenty four hours There are fatalities Personal support is not enough thus need for external intervention Measurable damage that require external resources The community functions partially with few services available Some long-term impact on the environment Measurable financial losses requiring external assistance Catastrophic (E) Extensive number of severe injuries thus large numbers needing hospitalization Massive displacement for an extended period of time Measurable fatalities Extensive personal assistance Extensive damage that paralyses the community requiring external support Significant effect on the environment and sometimes permanent damage to the environment Risk Matrix The standard levels of the risk range from very high to high to moderate to low. This can further be elaborated in the probability- consequence risk matrix table. Likelihood Label Consequences Label A B C D E 1 Medium High High Very High Very High 2 Medium Medium High High Very High 3 Low Medium High High High 4 Low Low Medium Medium High 5 Low Low Medium Medium High (City of Perth Report, 2008) Risk Register Risk Statement Likelihood Rating Consequence Rating Level of Risk Action Priority Major Road Accident 1 E Very High 1 Failure of electricity 2 C High 2 Aircraft Accident 3 C High 3 Technological Fires 3 D High 4 Collapse of Building 3 D High 5 Terror Attack 3 D High 6 Communication Breakdown 2 D Medium 7 Rail Accident 3 D High 8 Floods 3 E High 7 Risk Treatment The State of Queensland states that treatment of risks entails working through hours to address unacceptable risks to a project. There is level of risk severity when it comes to risk treatment. There are those risks that need immediate treatment and those that can be treated later. A project manager needs to collect information before deciding on which risks to treat. The project manager needs to collect information on costs incurred, the team responsible for executing the treatment, the treatment method, advantages of the treatment, the means for analyzing risk treatments and the possibility of success. Neeraj and Jha contend that after risk evaluation, effective risk treatment strategies need to be formulated. The objectives of strategies of risk management are to increase risk control and to minimize the potential effects as much as possible. There are various strategies of risk treatment including: Avoidance The project manager may decide not to execute the activity that would spur risk. They may anticipate on an alternative way to achieve the same results (Queensland Government, 2014). Moreover, Neeraj and Jha hold that this strategy is fairly common. By avoiding the risk the pros and cons of associated with the risks are also not encountered. For instance, tunnelling projects result to many risks, a project manager would thus choose not to venture into such a project. Besides, the gains associated with such a project will also not be reaped. Risk Reduction Risk can be controlled by minimizing the likelihood of occurrence such as complying with the legal or standard laws, training the project teams, regular project organization or change of strategy. Similarly, risk can be reduced by limiting the impact of the risk if it occurs. Other scholars call this mitigation. This may include putting in place emergency procedures and response teams (Queensland Government, 2014). For example after assessment of the Esplanade Busport area, there may be incidents of reported theft cases. This risk can be prevented by building security-based costs in a company’s bid (Neeraj and Jha). Also, a company that does not implement risk prevention programme or with a minimal level of reduction of loss may be highly charged in premium by an insurer unlike another company that enforces the programmes445. Acceptance of Risk When a risk cannot be mitigated, transferred or avoided, it can be accepted. However, a project manager would need to put in place plans for funding and managing the risks if it happens. Risk Transfer (contractual or Non-insurance Transfer) Some or all risk responsibility may be shifted to an external party. This entails transferring the risk to other project participants like vendor, specialists, or subcontractors. This means that the team undertaking the project goes into contractual arrangements with vendors, specialist contractors and subcontractors. The fundamental principle is that the external party who is more capable of maintaining control takes the risk. For instance, if the project entails pile foundation construction, a specialist contractor in works of piling would be more capable of handling that and would thus bear the risk. Transfer of risk is different from insurance such that risk is not transferred to an insurance company, rather, it is transferred to a specialist contractor who has sufficient heuristic information and is able to evaluate and bear the risk. Insurance According to Neeraj and Jha (2011), this is a strategy in which the risks of two or more individuals or companies are merged through promised or actual contributions towards a fund from which claimants are paid. This means that insurance is a relationship involving contract and which exists when a single party, in consideration, accepts to reimburse another party for loss that is caused by contingencies which are designated. The first party is referred to as underwriter or insurer while the second is the policyholder or the insured and the contract is the insurance policy. To add, the legitimate consideration is the premium; the property loss or life loss is the exposure and the contingency is referred to as the occurrence of the insured event. Nevertheless, insurance is one of the critical strategies of tackling risk. In fact, in the industry, it is considered a synonym for management of risk. Most construction firms rely on policies of insurance for various scenarios of risks. A company purchases significant insurance policies based on the project requirement or contractual conditions. The company in question should consider severity of impeding risk, the probability of risk occurrence and the already existing risk mitigation strategies it has in programme. RISK TREATMENT The likelihood for road accident around Esplanade Busport is high and so is the consequence. This is because many vehicles find their destination around this area thus rating the risk as first priority. This risk may be reduced by the strategy of the available police and emergency services. The City of Perth Report attests that the treatment options be the enforcement of road traffic code, education of the public, planning of main roads as well as campaigns of road safety. The responsible agencies may include Road Safety Authority and the Local police (City of Perth Report, 2008). There can be a collapse of a structure around the Busport whether the building is under construction or is old or temporal. This can be rated as a possible risk whose consequences can be major. The city of Perth has a significant number of facades with some buildings under construction projects whether commercial or public. The collapse of these building could lead to a major consequence or even catastrophic effects. In this case, there should be implementation of building codes, education of contractors and local builders, monitoring of construction activities, good construction plan, strengthening of response teams and creation of a safe working area. Additionally, terroristic attack is a risk that most social places face since terrorists tend to target myriads of civilians in social arenas such as bus stops, people in traffic jams, airports among others. In this case, security is the most important aspect to ensure the safety of civilians and hence for smooth and efficient running of a country. This calls for the necessary agencies to install closed circuit television systems and employ security personnel to patrol around the city especially in places that attract many people such as Esplanade Busport. Also, terror attack can be addressed through promoting Federal Anti-terrorist Awareness Programs (City of Perth Report, 2008). Rails accident can be addressed through proper maintenance of Rail System and arrangements of response teams. The roof of buildings including that of the Busport should be maintained and strongly rebuilt to sustain destruction from storms or flood waters from Swan River when it heavily rains. Public awareness programs about these risks should also be implemented. References City of Perth, the Botanic Garden and Parks Authority Report. Emergency Risk Management. Retrieved 21st May 2014 from www.perth.wa.gov.au/ema. 2008. Neeraj, Jha and Jha, Neeraj. Construction Project Management: Theory and Practice. Delhi: Pearson Education India. 2011. Pcubed. About Risk Identification. Retrieved 22nd May 2014 from http://office.microsoft.com/en-us/project-help/about-risk-identification-HA001141314.aspx. 2003. Prowse, Danielle and Desert, Sea. Hip Pocket Guide Perth: HPG Series. Perth: Hip Pocket Guide Perth. 2013. Queensland Government. Business and Industry Portal: Managing Risk When Starting Up. Retrieved 22nd May 2014 from http://www.business.qld.gov.au/business/starting/starting-a-business/managing-risk/treating-risks. The State of Queensland. 2014. Read More