RISK

MANAGEMENT

What is risk management

Risk management entails an analysis of all

your business exposures to the possibility
of loss and determining how best to handle
those exposures.
This can be done by avoiding risk (removing
the exposure), reducing the risk (with loss
control measures),vtransferring the risk
(with insurance), or retaining the risk (with
deductibles or selfinsurance strategies).
You say youre very careful and know how
to avoid risk and you dont need to worry
about it.

Well its good to be careful but you

better worry about risks that could
damage you and your business and
your reputation.
Application of sound risk management
practices will help you control your
exposures and associated costs and
add more profit to your bottom line.
You need to manage your risks and
not let your risks manage you.

Risk Management
Technique

Risk management is asking yourself a bunch of

what if questions and trying to answer them.

Risk management is about care, quality and

professional excellence.

First, you start by identifying and assessing the

risks that you as a Land Surveyor face every
day (dam-age to or theft of valuable equipment,
field injuries, auto accidents) and some that you
may never see (loss from earthquake, flood or
fire).

Next, you have to determine your ability to deal

with the risks youve identified. How much can you
afford to lose? How much can you spend to replace
or repair the anticipated damage? How much
insurance do you need and can you afford it? Is
there insurance to cover your risks?

Look carefully at your operations. Consider your

property, inland marine, crime and premises liability
exposures along with your professional liability
(E&O), automobile liability, workers compensation
and health insurance exposures. Dont forget
watercraft and aircraft exposure, either. Succession
and retirement planning are worthwhile, too.

Avoid the risksdont take the

job or use a well
insured
subcontractor
to do the work

Monitor the
results-with
cost/benefit
analysis to see
if your is
successful.

Transfer the
risks-using
insurance or
indemnity
agreements

How
to
handl
e risk

Real careful
how you work,
implement
safety training,
know who you
work for and
who works for
you, review you
losses and
claims to
prevent them
from happening
again

Retain the riskswith self

insurance or
large insurance
deductibles

Make sure your risk management and insurance

program is being properly implemented
Always keep your insurance applications, summaries and
policies handy.
Make sure your subs carry adequate liability insurance.
Always use written agreements. Make sure you have
limitation of liability clauses in those agreements.
Implement your own quality control and safety
procedures.
Do drug testing. Get motor vehicle reports (MVRs) on your
drivers.
Have in-house continuing education programs.

QUALITATIVE RISK ANALYSIS VERSUS

QUANTITATIVE RISK ANALYSIS

QUALITATIVE RISK ANALYSIS

A qualitative risk analysis prioritizes the identified project

risks using a pre-defined rating scale.
Risks will be scored based on their probability or
likelihood of occurring and the impact on project
objectives should they occur.
Probability/likelihood is commonly ranked on a zero to one
scale (for example, .3 equating to a 30% probability of the
risk event occurring).
The impact scale is organizationally defined (for example,
a one to five scale, with five being the highest impact on
project objectives - such as budget, schedule, or quality).
A qualitative risk analysis will also include the appropriate
categorization of the risks, either source-based or effectbased.

QUANTITATIVE RISK ANALYSIS

A quantitative risk analysis is a further analysis of the

highest priority risks during a which a numerical or
quantitative rating is assigned in order to develop a
probabilistic analysis of the project.
A quantitative analysis:

Quantifies the possible outcomes for the project and assesses

the probability of achieving specific project objectives
Provides a quantitative approach to making decisions when
there is uncertainty
Creates realistic and achievable cost, schedule or scope
targets

In order to conduct a quantitative risk analysis, you will

need high-quality data, a well-developed project model,
and a prioritized lists of project risks (usually from
performing a qualitative risk analysis)

Summary
QUALITATIVE

QUANTITATIVE

risk-level

project-level

subjective evaluation of
probability and impact

probabilistic estimates of time

and cost

quick and easy to perform

time consuming

no special software or tools

required

may require specialized tools

Risk Response Planning

Input

Risk management plan.The risk management plan

describes how risk identification, qualitative and quantitative
analysis, response planning, monitoring, and control will be
structured and performed during the project life cycle. The
risk management plan does not address responses to
individual risksthis is accomplishedin the risk response plan
Data precision ranking.Qualitative risk analysis requires
accurate and unbiased data if it is to be helpful to project
management. Data precision ranking is a technique to
evaluate the degree to which the data about risks is useful for
risk management. It involves examining:

Extent of understanding of the risk.

Data available about the risk.
Quality of the data.
Reliability and integrity oh the data.

STRATEGIES FOR NEGATIVE

RISKS OR THREATS (tool and technique)

Mitigate

Transfer

In transfer risk response strategy, you transfer the risk to a third party to
manage it. Please note that the transfer of risk does not eliminate the risk; it
only transfers the responsibility of managing the risk to the third party.

Avoid

In this type of risk response strategy, you try to minimize either the
probability of the risks happening or the impact.

Here you try to eliminate the risk or its impact on your project objective. You
do this by either changing your project management plan, by making some
changes to the project scope, or by changing the schedule.

Accept

This risk response strategy can be used with both kinds of risks, i.e. either
positive risks or negative risks. Here you dont take any action to manage
the risk but you do acknowledge it. You can accept the risk either by actively
acknowledging it or passively acknowledging it. In active acceptance you
keep a separate contingency reserve to manage the risk if it occurs, and in
passive acceptance you do nothing except note down the risk.

Output

Risk Management Plan

Inputs to other processes

Contingencies and plans must be feed back to other processes.

Contingency plans
Reserves

This documents the procedures to be used to manage risk throughout the

project. It should cover who is responsible for managing various areas of
risk, how the initial identification and quantification outputs will be
maintained, how contingency plans will be implemented and how reserves
will be allocated.

Examples are management reserve, schedule reserve, and contingency

reserve.

Contractual agreements

May be entered into for insurance, services, and other items as appropriate
in order to avoid or mitigate threats. Contractual terms and conditions will
have a significant effect on the degree of risk deduction.