In any industry, for a project to be a success, a defined strategy is critical. Construction and development are no different. Building a plan gives the team a focus, an understanding of the end-goal: why are we building what we are building and what are our metrics for success?
Having these metrics and purpose crystal clear allows you to focus on achieving this and planning to mitigate the risks of achieving success.
One of the first things you need to think about is: what can go wrong?
It sounds negative, but pragmatic professionals know this type of thinking is imperative. Anyone who has worked on construction projects knows that issues will inevitably come up, and you need a mitigation strategy in place to understand how to manage risks on your project.
But how do you work towards resolving the unknown?
It sounds like a philosophical paradox, but don’t worry – there are practical steps you can take. In this article, we discuss how to build a project Risk Register. It may seem an annoying bureaucracy, but it will pay dividends if done right.
What is a Risk Register?
A Risk Register is a written response to:
“What problems could occur that would prevent me from successfully achieving the objectives of my activity?”
I always advocate for creating a Risks and Opportunities Register. Too often, we only look at risk when there’s real value to be made by opportunities.
Sports pundits always say that the best form of defence is attack – I use the same principle. Win the game 2-1 rather than losing 1-0. There are many risks on a project, and one will likely occur, but we’ve offset the risk if we also score an opportunity.
Therefore, I advocate for creating value in the project using opportunities.
Why create one?
Identifying, sharing, and disclosing risks transparently means the team collaboratively manages, mitigates, and eliminates risk to reduce surprises. It might sound straightforward, and that’s because it is: discuss risks and opportunities, talk about who and how you will manage them as a team and do this regularly: this is project risk management, and the best companies do it.
Equally, the identification of opportunities brings benefits. Often, teams are so focused on risks that they don’t give proper consideration to opportunities. But opportunities can offset risks and create a pool of money to improve profits. Having an actively managed Risks and Opportunities Register encourages the project team to collaborate and think outside the box to increase project profitability.
What should you include on the Register?
The Register records details of all the risks identified for the construction and the development. There are many templates for a register, and I want to focus less on the best template and more on the process.
You should grade risks on the likelihood that they occur and the seriousness of their impact, with a probability of occurring and, in the best templates, a cost estimate for each item. The document could accumulate into a collective monetary amount of the potential risks and opportunities. By creating this, you can identify and assess issues early, allowing the team to apply intellect to avoid risks and stimulate opportunity.
Generally speaking, you can break risks into three headers:
Technical risks in our field are more construction-focused: it could risk ground contamination to the risk of unknown construction costs in the substructure. Managerial risks are more team-focused: who is going to coordinate the design or manage the site? What happens if key members of the team leave? Mitigating against these risks is so important and often paid lip-service. The commercial is usually where a lot of energy goes as money matters. Risks here include questions like – do we have appropriate funding? Do we have the means to manage cash flow and budget best?
To give an understanding of the layout of a necessary register, I’ve included the following examples:
This is a rudimentary risk register. Still, you can already see that just be identifying certain risks at the outset, identifying a risk owner, and discussing the mitigation, you can go some way to start managing risks on a scheme.
The Risks Register is a moving beast too. It should be something you review each month, update, add risks, move risks, and tweak probabilities as things become more or less likely to happen.
Examples of Opportunities
Opportunities work in the same way as the risks: split into managerial, technical, and commercial. With opportunities, the principle is the same except that we are trying to increase the chance of something happening rather than reduce it.
Project opportunities are specific to your scheme, but let’s look at some examples:
As with the risks, opportunities should be worked on, and if you do, it’s quite likely that you can extract hidden value in your scheme and make it even more profitable.
How do you manage the Risks and Opportunities Register?
My suggestion is that you review the Register as part of your monthly project review. I think you should be monitoring the Register from the very outset and, if possible, doing this pre-funding as this will only support the funder’s view that you are capable of managing the project with aplomb.
Create the document early and as a team: this way, everyone will feel they own it. Incorporate it as early as possible – too often; risks aren’t identified until they’re already problems. For example, if there is a 5% risk that the Architect will be late, flag the risk early so the appropriate team members can begin thinking about potential solutions or alternatives.
Teams are often not used to thinking rigorously about the opportunity and instead focus only on risk. It requires practice to become a routine part of thinking but involve all the key team members and encourage all to contribute. It could be that a QS has a Value Engineering opportunity, or a Site Manager sees an upcoming potential variation – the key point is, everyone can add value to the conversation.
My final thoughts
When reflecting on the drafting of Risks and Opportunities registers during my career, I realise the most critical issue was not the format but rather the dialogue created by the Register. It’s the conversations that make the Register useful: yes, having a template to communicate them is essential, but having the conversation is half of the battle.
The Risks and Opportunities register is something that only brings benefits. Yes, it does take time, yes it does take focus, but so do risks when they occur, so better to spend your energy on mitigation rather than rectification.
What’s more, I believe that many projects are leaving money on the table by not carrying out an opportunity’s analysis. There is value to be generated throughout the construction process through intelligent assessment and value engineering. You can generate increased profits through this.
Finally, there is something in having a standardised register at the outset of each project. Although all schemes are unique, it is possible to have a standard template produced for the early stages, which will show funders and potential JV partners that you are serious about project delivery and are the right fit for them.
In short, there is absolutely no reason not to have Risks and Opportunities register in place – my experience is that it will bring with it only positives.