Risk Management

Course- GP CBM Course Title- Risk Management in Construction Project Course No. - NCP 35 Assignment no. - 16

Risk Management

CONTENTS1. INTRODUCTION 2. RISK MANAGEMENT 3. THE PROJECT TAKSHASHILA COMMERCIAL CENTER 4. RISKS ANALYSIS 5. POLITICAL RISK 6. PLANNING RISK 7. ENVIRONMENTAL RISK 8. CULTURAL RISK 9. MARKET RISK 10. ECONOMIC RISK 11. SOCIAL RISK 12. CRIMINAL RISK 13. SAFETY RISK 14. MITIGATION OF THE RISKS 15. CONCLUSIONS 16. REFERENCES

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INTRODUCTION
As stated in the Risk management article by James W. Meritt, 2006. Risk management is the entire process of identifying, measuring, mitigating and eradicating the risks affecting a certain project at any given time of a certain project span. The possibility that a future event will have an effect on project objectives including cost scheduled or technical. The effect could be positive, in which case the project manager has an opportunity to improve project performance or mitigate risk. Often, however, the effect is adverse to the objectives. Risk management is a continuous process which: Identifies risk. Analyzes risk and its impact, and prioritizes risk. Develops and implements risk mitigation or acceptance. Tracks risks and risk mitigation implementation plans. Assures risk information is communicated to all project/program levels. Risk management planning. Developed during the program/project formulation phase. Included in the program/project plans. Executed/maintained during the implementation phase. Risk management responsibility.

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Program/project manager has the overall responsibility for the Implementation of risk management, ensuring an integrated, coherent risk management approach throughout the project. (Randy Marchany, conducting a risk analysis, 2003)

RISK MANAGEMENT TOOLS-

(Michael A. Greenfield Deputy Associate Administrator Office of Safety and Mission Assurance Risk Management Tools 2000) THE PROJECTThe project was a commercial building to be constructed. It was a rehabilitation building project. The constructed building was finalized to be a ground upper 6 storeys for commercial building.
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The structure is now registered in the name of Takshashila commercial Center it is situated west of Mulund and just besides the railway tracks in Mumbai, India which is the Central railway line that runs from the Victoria Terminus Station to the Pune station and beyond. This Central line has about four track lines and operates four trains simultaneously. The Project was a rehabilitation project, in which the original building was a completely dilapidated building, a ground upper 3 structure and was completely used for residential purposes and was in operation since 60 years when it was demolished. There were 30 tenants in the building all of which had to be given money in turn for their properties so therefore the building and developing firm were then going to sell the newly constructed building which was supposed to be a ground upper six structure (Kamal Joshi and Associates, 2004). When the deal was finalized it was then taken up for agreements. Therefore all the thirty flats had to be registered under the Registration Office of Mumbai, after which the building and developing firm had to acquire certain permissions for the breaking and demolition of the building, Electric Board permissions for dismantling of the electric meters and all the services such as the water supply connections, gas supplies had to be discontinued, special request regarding the sanction of the new plans had to taken from the M.C.G.M (Municipal corporation of Greater Mumbai) and then the developing firm after getting the plans sanctioned had to apply for the I.OD. (Intimidation of disapproval) and the Commencement Certificate (C.C) and then the firm could proceed with the work. M.C.G.M (Municipal Corporation of Greater Mumbai). The design of the building was an entire glass faade structure and was designed as ground upper six structure. It was a complete reinforced concrete cement structure, and the building construction was scheduled to be completed within a
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span of one and a half year viz. eighteen months. The total estimate for the construction of the project was taken into account as 5.4 crores before the construction of the building started (estimated worked out by the firm Kamal Joshi Construction Division). The soil identification was done up for the society for the site and the structure to be demolished was also considered in for checking and a structural report was made for the existing structure. The building is now the most sort after location in the entire city. But it had to overcome numerous risks.

POLITICAL RISK: - The building was to be constructed in city like Mumbai and more so in a Country like India where from several years now, there have been communal risk in between different political parties. If the communal riots occur in between the span of the construction for the structure the building could go over budget and can result in a delay for the project and if the project is delayed by an year it could see the new government in rule and hence the government budgets will also change the rates could escalate. Mulund is a place where the investors are majorly the politicians and therefore all the money involved would be at stake. Hence these were some of the political Risks that could have an effect on the project. (Source self). PLANNING RISK: - The entire building framework was a reinforced concrete cement (R.C.C) structure and had plinth and seven upper slabs. The Reinforcement design was quite heavy with the columns from plinth having 32mm diameters reinforcement bars and the slab be constructed with the use of T.D.R (Transfer of development rights) after the third floor. The T.D.R. term is defined as, Mumbai has many slums. TDR is generated by developing any slum, the quotient of
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TDR is 1:1 i.e. it any firm develops 1, 00,000 sq.ft of slum they can sell 1, 00,000 sq.ft of transfer of development rights (T.D.R.). This TDR market is determined by market forces viz supply and demand. So if any new building has to be developed in the corporation limits of greater Mumbai, the developer is permitted the use of TDR which is again 1:1. Therefore if the plot area where the TDR is to be loaded is say 10,000 Sq.ft then the TDR which can be loaded is 10,000 Sq.ft which is bought from the developer of the slum at the current prevailing price. Therefore the effective construction on a 10,000 Sq.ft plot is 20,000 Sq.ft. The building in question was designed as a six storied structure. The structure was having heavy beams and columns, as there was only one column in between 40x 40 structure. Now on 7th Aug, 2004 public interest litigation was filed seeking justice on the increase of density created by loading TDR. As the judgment took 12 months the project got delayed by the same amount of time as work had to be stopped. In turn even the development was slow and hence very little TDR was generated. This saw an escalation of prices of TDR. These were the planning risks involved with the building structure. (Municipal Architect N.M..Barai, 2004). ENVIRONMENTAL RISK :-Mumbai in general has a tropical weather where it rains heavy almost every day during the monsoon season which from June until September, the summer seasons is reasonably hot and humid with temperatures going up to 40 degrees centigrade and the winters are pleasant where there the temperatures range from 15 degrees centigrade to 28 degrees centigrade. Therefore if the structure reaches a stage where in rainy season the slab casting is still not done the there would be practically an massive delay in the project schedule for the building structure .More so the rains sometimes are so heavy in Mumbai, that the entire city would be
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shut for at least a couple of days. These are the environmental risk that the project is entitled to. (Source Self) CULTURAL RISK: - India is a country where there are a variety of different people from varied cultures. It is said to be a multicultural country the cultural risk for this project was that the country has many festivals operating all throughout the years and every month there are about these public holiday in India where the government offices are on leave as well therefore the construction phase could see a no work scenario for at least forty days through an year different cultural background people have different festivals and this could result in a delay of works. And hence the project could become off schedule and the project could face delay in its construction. The next cultural risk which was considered in the planning stage, people in India are very spiritual and they follow a science called as vastu shastra something similar to Chinese Fang shui therefore all this had to be kept in mind while designing and planning for the commercial center. (Amit Lamba, An introduction to vastu shastra, 1999). MARKET RISK: - The real estate market in India is like its stock market it rises and falls very quickly within months. It was estimated that if the entire project is an track with fine quality and cost there would be a profit of 7,50,000 GBP for the developers but if the real estate market collapses then the developers would make a lose in their profit or more so just break even. As time passes even the building materials such as cement, Aggregates, bricks, reinforcement bar rates also as per the inflationary conditions which is very high in India. Therefore all this had to

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be kept under consideration while developing a risk analysis plan for the commercial center. (Property Times, Mumbai, 2004) ECONOMIC RISK: - The building structure was to be constructed over a span of one and half years and on a rotation on money. And when a customer buys a property he has to pay the developing firm a certain percentage of money as pre completion of work and these for this money is used up for the further construction of the structure the money obtained at the end possession time of the building is the registered profit for the developing firm. The risk considered in this project was such that if there is virtually no sale for the first there months after the commencement of the structure the developing firm would have to put in money. From different sources and hence the project would result in economic drawbacks. Thus this was the economic risk. (Source - Self). SOCIAL RISK: - The building which already existing and which had to be demolished needed a lot of social attention. There were these building adjacent to the building to be demolished. There was special care required to undertake while demolishing. The structure as the demolition activity would generate a lot of pollution and sound pollution and hence the adjacent buildings would face difficulties and the tenant of these buildings would face difficulties if this increases then they could be forced to being a stop order for the work. Therefore these are some of the social risks that the project would encounter even while construction activities go on the project would be entitled to the same social project risks. (Source- Self)

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CRIMINAL RISKS: - When a structure has to be constructed in Mumbai special care has to be taken for the construction materials as they are most likely to get stolen sometime by the security guards themselves. There are many criminal records registered in Mumbai regarding the same. The most like material that can be stolen is reinforcement bars as steel is easy to sell and the costliest. There have to special care taken for the materials and strict action for the criminals. SAFETY RISK: - The safety of the workers and the many people around the construction site would be a major risk as this could result in lots of lives. Therefore all health and safety rules would have to be followed through how the construction and the demolition phase of the project. Therefore these are some types of the risks that can be faced by the project during the entire demolition and construction phase. MITIGATION OF THE RISKS:1.Mitigating political risk The mitigation of the political risks which the structure could be facing was taken into account and hence the risk was mitigate by bringing in politicians to invest in the building structure by giving them offices on outright basis and hence after the sale of the property offices there was assurance that the project would not stop at any given point of time of its construction this also meant that there was additional security guaranteed for the construction phase of the project. It was noted that then there would be security of the project form the political risk. This is the way that the political risk was mitigated by the developing firm. 2. MITIGATION OF PLANNING RISK: - The planning risk was a quite huge and tremendous ask. The soil investigation was done up to the mark. The reinforcement concrete
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cement design was a heavy one and the glass faade was risky as well. The soil being a weaker quality the design was a heavy built and the footing were also huge. This was how the developing firm mitigated the planning risk by providing such heavy designs but it also needed to execute them correctly as well. There were contingencies charges added to undergo unforeseen expenditures. Then after going through all this the project encountered problems such as during the digging up phase for the footings there was a water well around in the site and during the digging up for the well broke up and the water started scattering all around the site making the site watery and hence the machinery had to be bought in to pour out the water of the site and therefore this was the problem with the planning design of the required structure. The plumbing duct elevation had to be changed and then the designs had to be altered. This designs changes delayed the projects. The changes was because of the fact that the entire building was running split air-conditions and the compressors needed bigger opening the previous design encompassed smaller openings and the air could not move freely. This resulted in a delay in project as well; the next worse thing that happened to the project delayed the project by a year almost. There was a law passed by the government that the use of the total development right (T.D.R.) in the suburbs should be prohibited and therefore the building was to be a three storey building then the law was then again changed after an year therefore the use of T.D.R. (Total Development Right) was then allowed in suburbs but the project was then one year delayed due to the changes in the construction law. 3. MITIGATION & CONSEQUENESES OF ENVIRONMENTAL RISKS- The environmental risks were mitigated by scheduling the project in such a way that the slab casting
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for the project would be completed until the onset monsoon but since the project got exactly an year delayed therefore these was no problems with the environmental risks because the climate before and after monsoon it quite admirable for construction in Mumbai. The next problem was the environmental noise. The fact being that the property was adjacent to the railway track the trains noise would create a problem, therefore the glasses had to be sandwiched with air gaps and hence the project cost increased. 4. MILITIGATION OF CULTURAL RISKS: - The cultural risk were the most works affecting the project to get delayed by 40 days in an years but this were already taken into account and they were mitigated in such a way that the works were asked to work 40 days round the clock for twenty four hours and hence those working days were compensated in workings twenty four hours for forty days. The project was then just on track. 5. MITIGATING MARKET RISK: - As the project was already an year delayed there was an expected fall of rates in the real-estate markets but suddenly after an year the rates boomed and the developing firm which was set at registering a powerful profit of 7,50,000 GBP. Thus this was an advantage for the developing firm after all this drama happening over a span of a year. The entire materials price escalated and the real exact rates escalated as work this was a major risk which results in an advantages for the developing firm. 6. MITIGATING ECONOMIC RISK: - The economic risk was mitigated by the constant sale of the property and the risk of the real estate rates in the Indian real estates market. There were big players who bought offices on outright basis in the building names such as MTNL, ICICI
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BANK, INTEL, AIRTEL, SONYERISSON etc. The developing firm for the construction project, but it did happen so the economic risk was never affected to the building project. 7. MITIGATION OF SOCIAL RISK: - Special care and was taken to involve that every person follows all the health and safety rules on the site. Galvanized iron sheets were fenced all through the vicinity of the property to avoid construction particles to fall out of the property. There was always a health and safety officers present of site during work hours to ensure health and safety of the people. No mishaps took place on the site in the entire construction span. 8. MITIGATION THE CRIMINAL RISK: - There was a constant supervision for the site with the police making round every 2 hours and checking the place. There was an effective plan set up by the risk management team to stop robbery of any sort if rather if it happens how to deal with it thankfully there was no robbery on this site while its construction phase and demolition phase. 9. THE COMPLETION OF THE PROJECT:The project was completed with a 10month delay. It was 10% over budget and the developing firm made a profit of more than 50% then the quantities estimated prior to the best in the locality and were the most sort after property. Therefore the project was a huge success for all the people involved with the project. (All the mitigation and the consequences of the risk analysis have been done by the developing firm, Kamal Joshi and associates Construction Division).
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CONCLUSIONS & RECOMMENDATIONS Risk must be identified to be managed. A poorly defined risk structure will breed more risks. All designs and calculations should be checked before they leave the design office further check calculation should be made by the authority , many errors that escape are picked up and corrected during construction .This often cause a delay to the project and might effect the cost. The goal is to prevent political and business interests from interfering with design and thus to arrive at an outcome as close as possible to the original design drawings. Continually monitor risks to identify any change in the status, or if they turn into an issue. It is best to hold regular risk reviews to identify actions outstanding, risk probability and impact, remove risks that have passed, and identify new risks. Risk management is not one off activity instead; it should be applied continuously through the project life. The best way to control budget is not to proceed with the building unlit you have all the drawings complete. Study clearly identifies the great importance of risk management on construction projects, negligence will lead to an expensive cost affecting the project successes. This indicates that it was a very risky project nevertheless risks were either downplayed or ignored , and not much was done to keep them under control, the project management strategies was only focused on keeping the project going no matter how it is going .

ReferencesPage 14

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Text Book of NICMAR of Risk Management In Construction Project James W. Meritt. (2000). Risk Management. WANG global. 1 (1), 1-2.

Kamal Joshi and Associates Construction Division (2004). Takshashila Commercial Center.

Michael A. Greenfield. (2000). Risk Management Tools.Langley Research Center. 2 (2), 1-2.

Randy Marchany. (2003). Risk Management. James W. Meritt. (2000). Risk Management. WANG global. 1 (1), 1-2. 1 (3), 1-2.

Sanjay Geol. (2004). Risk analysis. University at Albany, SUNY. 1 (1), 1-4.

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