Add a risk profile to your toolbelt

By HAROLD DORBIN and JACK DIGNUM
Nielsen-Wurster Group

Effective project risk management has three steps: identification, evaluation and mitigation.

The ground rules of risk

1. Elements of project risk exist in every document of the contract document set, from the formal signature page to the last cited code or exhibit.

2. Elements of risk exist independent of the protections or limits of liabilities within the contract document set. In developing a risk profile, risks should not be ignored because of the protections or limitations of the contract. Neither the owner nor the contractor should manage a project to a contractual limit of liability; projects should be managed to control risk.

3. No one person is competent to identify or evaluate all of the risk elements contained in all of the pages of a contract document set. (Nor is any one person competent to develop all of the avoidance and mitigation plans necessary to address those risk elements.)

4. Communication of risk among all members of a project team is critical. If the appropriate actors do not know of the existence of a risk, they cannot act to avoid or mitigate that risk.

5. The profile must be developed to suit the peculiarities of the project and needs of the personnel assigned.

6. The project must be audited against the risk profile with the risk profile updated periodically to include new risks that occur during execution, and to address changes that may occur to those risk elements originally identified.

A risk profile is one of the tools used to guide effective risk management on engineering and construction projects. It may be used in every project stage, from inception to completion, growing and changing as the project life cycle is played out. It is an “evergreen” document, one that is expected to change through each phase of the project lifecycle.

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