By

Bob Prieto
Senior Vice President
Fluor Corporation

Rick Rye
Fluor Corporation

Risk is known to be inherent to major capital construction programs. Although many risk events are unpredictable, many risks can exist in response to the actions and decisions that are made when planning the implementation of the program. In a series of papers, we will focus on planning for the mitigation of risk consequences. These consequences can be defined as potential losses, damages, or any other undesirable events – including the loss of opportunities. Capital construction programs have a history of disappointment and failure because of risk consequences. Comprehensive program management and focused attention to risk is critical in achieving capital program success.

Change is inevitable. The best planned and managed capital construction programs experience change as the work progresses, potentially creating deviations or significant impact on the initial estimates of time and cost.

A ten step process can be defined to guide consideration of program risks. Collectively, these interrelated processes contribute to successful strategic risk management. Subsequent papers will touch on each of these steps.

• Plan for Risk – Recognize the need to apply risk management processes during the pre-construction phase or initiation phase of the program.
• Make Realistic Assumptions –Do not allow the program assumptions to be optimistic. Such an approach leads to believing that everything will go to plan.
• Utilize Outside Expertise – A range of expert judgments helps ensure unbiased assessments and analysis. 
• Understand Risk Elements and Their Impacts – Clearly understand the elements of risks and their potential impacts in the early phases of program planning and development.
• Assess and Analyze Risks – Complete the evaluation and analysis of particular risks to the point of determining the impacts they can have on the program goals and strategic business objectives.
• Develop Mitigation and Contingency Plans – Fully develop mitigation and contingency plans sufficient for the degree of impact associated with the risks identified. Recognize the difference between each of these two types of plans.
• Synthesize the risks – Synthesize all programmatic, construction and other risks and determine the cumulative effects.
• Integrate Risk Management Process – Integrate the risk management process with the day-to-day program management framework processes.
• Establish Clear Metrics – Clear and reliable definition of the program performance are essential. Programs need to understand risks common across multiple projects within the program.
• Manage Risk Continuously – Evaluate, continuously, the effects of risks through the progress of the program and intervene as required to mitigate.