Advanced Risk and Uncertainty Management

Question: Describe about the "Melbourne Metro Rail Project". Answer: Introduction: The Melbourne Metro Rail Project which is commonly known as the Metro Rail Capacity Project was a planned infrastructure assignment in Melbourne. The project involves the designing of the twin tunnel to make a way from South Kensington railway station to South Yarra. This project was a master piece out of several infrastructure projects which were designed to increase the pool capacity and also transforming the suburban computer based system to metro style rapid transport system. The project would deliver two rail tunnels of nine kilometres each. In the year 2014, the Andrews Government revived the main Melbourne Metro Rail Project. In this literature review various risk models, the risk associated with the project and its management have been discussed (Hale, 2015). Risk definition: As stated by Carey (2013), every project revolves around d certain risks. Risk related to the financial crisis, human resource, management, material resources, communal risk, ethical issues, etc. Risk can be defined as assess the probability, exposure to all the different hazards and severity of all the activities. For any infrastructure project there exists a chance of risk since everything might not give the same outcome as planned. In this metro project, there is a risk of an architect or design of the project. This risk should be identified, analysed and managed based on certain models and techniques (Drehmann Nikolaou, 2013). Risk analysis models: In order to assess the risk use of certain models are important. According to the Ayyub (2014),the models have the potential to give rise to poor design, disaster due to uncertainty flexibility or inappropriate interpretation. There are various models associated with risk analysis. The first model is the Risk Management model. It is an approach for systematic recognition, analysis and response to the risk of the project. This model suggests the way to deal with the risk associated with the project. Risk control is a part of this plan. Monitor and review of the height of risk and capability to manage the risk is a part of the model plan. Firstly, the context needs to be defined involving the clients need and stakeholders analysis. Secondly, the risk needs to be identified and also the constraints that might affect the project must be recognised. Thirdly, the risk needs to be assessed and the impact and rate of occurrence need to be quantified. Lastly, the responses based on the risk a ssessed needs to be defined and also the implementation (McNeil et al. 2015). The second model is the "Simulation modelling." Whenever iterative simulation is used the Monte Carlo technique is often used along with software programme. The simulation involves the input that reflects the possible risks with proper distribution. The model randomly produces a value in reference to the risk and accumulates them if multiple risks are included in the model. The whole system is computerised. The output refers to the distribution of the grand cost, period and the measurement used to qualify and safety associated with the risk. The result obtained from the output could be used to schedule the durations and complement the budget so that risk associated with the project could be reduced (Fishman 2013). As stated by Gueudr et al. (2014), the Generic Model is associated with six modules which involve project definition, identification of the risk, quantification of the risk, risk evaluation, implementation as a risk response, and monitoring linked with controlling. Figure: Model-based on risk assessment Types of risks in railway Projects: A literature review states a rail project is associated with several risk generally the financial and safety risk involved with the construction of the projects. The risk potentially prevents the project from functioning leading to uncertainty in the cost overruns, delay of the project, issues associated with the safety, system reliability and integrity (Kendrick, 2015). The various risks associated are as follows: Technical risks Commercial and procurement risk Interface risk Financial risk Legal and political risk According to Kendrick (2015), the technical risk involves the risk of completeness of the design. If the design is not according to the clients requirement, then there might be complications and problems. Moreover, if the designing lacks integration and is not according to the intellectual property rights, there might remain a risk. In any constructional project there always remains a risk of communal and labour safety. Even the use of unapproved or outdated technology might cause risk. Geographical location or climatic condition can also sometimes cause hindrance in the project (McNeil et al., 2015). The size of the project if it is long, if there are budget constraints or type of contract, dispute resolution, etc. might cause risk associated with the project. Interface risks are also a significant issue that is associated with the railways. As discussed by Kendrick (2015), the financial risks such as budget constraints and funding can also be a big issue. The funding given by the government should not be restricted or the project might get hampered due to an elevation of the budget that was not predicted. Inflation of the currency and modifications in the exchange rate can also be reasons for risk. The political corruptions and uncertain regulatory atmosphere could be a significant constraint in the railway project. Moreover, literature review reflects that taxation can bring about huge loss to an organisation funding the project. Huge tax charged can, therefore, be a hindrance (McNeil et al., 2015). Risk management in railway project: As stated by Teller et al. (2014), the risk associated with the infrastructure projects should be managed in order to complete the project successfully. This can be done by using risk management which is an ongoing process which is continuous throughout the project and include identification, evaluation, allocation, mitigation and review after monitoring. According to Williams et al. (1997), methods were developed by which risk management was practised. The methods were software intensive programs based on these specific road maps were designed. Such approached helped in conducting the project and make the practices. In a literature review, it was stated that due to the dynamic environments of the designing of the project and the complexity results in high degree of risk and uncertainty. In one of the literature review regarding the Korean high-speed railway states that after eight years of the railway construction, a new Korean train Express was planned. The project was complex thus requires proper planning and management. As stated by Bhattacharya et al. (2012), the risk management involves new high-speed railway system, new technologies, etc. The risk management involved in the project was technical management related to engineering and construction risk management, financial management, social and also political management (Teller et al., 2014). Project risk management" chiefly comprises expenditure and "schedule uncertainties" and risks linked with every activity of the "project network." It has been recognised the main "risk sources" and "quantified the risks" in stipulations to probability, impact and rigorousness in a "complex infrastructure project" for the creation of new and innovative designs related to railways (Bhattacharya et al., 2012). Conclusion: The "Melbourne Metro Rail Project" involves the designing of the twin tunnel to make a way from "South Kensington railway station" to "South Yarra." For any infrastructure project there exists a chance of risk since everything might not give the same outcome as planned. In this metro project, there is a risk of an architect or design of the project. The models have the potential to give rise to poor design, disaster due to uncertainty flexibility or inappropriate interpretation. In terms of the "Melbourne Metro Rail Project," the "Simulation modelling" can be applied. The reason behind this is that the project aims at developing a high-tech metro station with modern amenities which could be fulfilled by the use of computer system analysis and system generated outputs. The output would offer the estimation of the budget, time management and quantify the safety associated with the project. The risks associated with this project can be checked by using risk management which is an ongoin g process which is continuous throughout the project and include identification, evaluation, allocation, mitigation and review after monitoring. Such activities and regulations can lead to the success of the Melbourne Metro Rail project. References: Ayyub, B. M. (2014).Risk analysis in engineering and economics. CRC Press. Bhattacharya, A., Romani, M., Stern, N. (2012, May). Infrastructure for development: meeting the challenge. InCentre for Climate Change Economics and Policy, Londres. www. cccep. ac. uk/Publications/Policy/docs/PP-infrastructure-for-development-meeting-the-challenge. pdf. Consultado el(Vol. 15). Carey, A. (2013). Is road or rail the answer to Melbourne's congestion problems?.Geodate,26(4), 2. Drehmann, M., Nikolaou, K. (2013). Funding liquidity risk: definition and measurement.Journal of Banking Finance,37(7), 2173-2182. Fishman, G. (2013).Discrete-event simulation: modeling, programming, and analysis. Springer Science Business Media. Gueudr, T., Dobrinevski, A., Bouchaud, J. P. (2014). Explore or exploit? a generic model and an exactly solvable case.Physical review letters,112(5), 050602. Hale, C. (2015). Planning Melbourne metro: Why every centimetre and every dollar counts.Planning News,41(11), 16. Kendrick, T. (2015).Identifying and managing project risk: essential tools for failure-proofing your project. AMACOM Div American Mgmt Assn. McNeil, A. J., Frey, R., Embrechts, P. (2015).Quantitative risk management: Concepts, techniques and tools. Princeton university press. McNeil, A. J., Frey, R., Embrechts, P. (2015).Quantitative risk management: Concepts, techniques and tools. Princeton university press. Teller, J., Kock, A., Gemnden, H. G. (2014). Risk management in project portfolios is more than managing project risks: a contingency perspective on risk management.Project Management Journal,45(4), 67-80. Williams, R. C., Walker, J. A., Dorofee, A. J. (1997). Putting risk management into practice.IEEE Software,14(3), 75. Advanced Risk and Uncertainty Management Question: Discuss about the Advanced Risk and Uncertainty Management. Answer: Introduction The construction industry is categorized as a service industry. The industry provides employment to many people and market for industries manufacturing cement, iron, steel, bricks among other material used in construction. It is among the industries that play a great role in the development of any country, considering that any country needs to develop infrastructure for it to grow economically.(construction Industry Development Council of India, 2014) Establishing a construction company Establishing a construction company needs a huge capital base which makes it be a high-risk industry. While starting construction, one needs to consider the start-up cost and think of how they can be met. Marketing your company is also another important factor that one should think of. (Li, P2017). The following are steps starting a construction company. Write a business plan Like any other business starting a construction company requires a written business plan. This acts as a guide since it includes your goals and the way these goals will be attained. It also outlines the financial plan of the business, the clients, suppliers , and way of advertising your company. Source for funds According to Li, P(2017) A written formal business plan can be used in sourcing funds from banks in case you do not have enough start-up capital. Explain why you have chosen to start the business and the opportunities that make you believe it will succeed. Consider the option that the bank may give you for instance types of loans, interest rates and the duration given to pay back the loans. Consider legal requirements for a construction company According to Beesley, C (2012) For any company to operate in the country, it requires seeking legal licensing and permits for it to operate. A construction company also requires business insurance and surety bonds. Business license and permits- most construction companies require special licensing to operate beside the general business licenses. It is important to seek for assistance inform the government departments dealing with licensing of businesses. Surety bonds- construction bond is a legal requirement for the operation of any construction company. Surety bonds serve as a cover in case the contract obligation between the company and the client were not fulfilled. The regulations governing the issuance of surety bonds varies from country to country.Insurance- the company requires different types of business insurances such as workers compensation, property and vehicle insurances among others. Come up with occupational health and safety plan It is a requirement that a contraction company should create a safe and healthy working environment for its workers to protect them from dangers posed by construction work. (Beesley, C ,2012) Purchase the required tools and equipment Tools and equipment are basic requirements for any construction company. Different construction work requires different tools and equipment and therefore considering the services you have planned to offer in your company purchase the required tools to work with. Find labour There are four sources of labour for a construction company that is employees, subcontractors, labour brokers and independent contractors. One should consider the best option among the ones given above. (Beesley, C, 2012) Advertise your new construction company The advertisement is a basic requirement for any business to grow. It is a way of creating awareness about the existence of your company. It also gives information about the services that your company offers thus connecting you with your targeted clients. Advertisement can be started in through informing people close to you about your business, and they can spread the information to others. (Li, P, 2017) Risks that face a construction company Construction companies are faced with many risks. The stakeholders in this business such as project owners, contractors, consultants, suppliers among others face different fears that come as a result of the possible risks. The risks involved in the construction company can lead to great financial losses to all stakeholders.(construction Industry Development Council of India, 2014) According to Cavignac, J (2009) below are some of the risks that face most of the construction companies. Economic fluctuations This is referred to as seasonal slowness. Economic depression can result in financial difficulties which may affect the progress of the project. This may extend the time that was planned for the completion of a given project which leads to losses. The contractor needs to be prepared in advance in order to cover the extra expenses that may be incurred during these periods. Equipment damage In the construction work, the wearing and tearing of equipment are inevitable. The equipment will need to be repaired from time to time while others need to be replaced. However, some of the equipment are too expensive to be replaced on a regular basis. Such equipment requires insurance to cover them against loss, damage or theft. Accidents at the workplace During construction, work accidents are likely to happen and may involve the workers or third parties. It is important to be aware of such hazards and take necessary steps to avoid occurrences of many accidents. General liability insurance is necessary for any construction company in order to cover the third parties who may be involved in an accident. Faulty work Sometimes the work done by a construction company may not satisfy the client. This may call for reconstruction or other legal steps which may cost the company a lot of money. The construction company must, therefore, comply with the building regulation of the country. Failure to meet deadlines Due to unpredictable reasons which may delay the completion of a project the construction company may fail to meet the deadline of the project. In case there are any inconveniences it is, therefore, advisable to keep communicating with the clients to agree on new changes that may lead to the extension of deadlines. Risk analysis models Risk analysis according to Prince2 (2005) is a guided process of controlling risk. Risk analysis helps in identifying and evaluating events that may have an impact on the project and come up with ways of controlling them. There are various models of risk analysis, but I will focus on Prince2 P-1 Grid for risk analysis model and the DREAD model. According to Czagan D, (2014)The DREAD model in full stands for; Damage potential. Exploitability Affected users Discoverability Both models rate risks from low to highest each with numerical range. Depending on the impacts that a risk may have on the business, every risk is measured and ranked between a given range of numbers, for example, the DREAD risk analysis model has a range from 1 to 15. However Prince2 P-I risk analysis model is used for quantitative risk analysis while DREAD model is used for qualitative risk analysis. In the P-I risk analysis model, the results of the assessment are presented in a graph with x and y-axis. on the x-axis, there is the probability of a risk occurring while on the y-axis there is the exposure. To assess the severity of the risk one find the product of the probability and the impact. While on the DREAD analysis model assessment results are presented in a table according to ranges example from 1-5 low, 8-11 medium, and from 12-15 high. The severity of the risk can simply be determined by checking its rating fall between which ranges. I would recommend the use of the Prince2 P-I model in a construction company since it uses numerical information which is available in construction work. This model would help in giving a more accurate and hence dependable risk analysis. Managing risk in a construction company According to Plato, A (2014), risk management is the process of identifying a risk and then making decisions on how to put the risk under control. Risk management can also be defined as a process of predicting and evaluating risks them coming up with ways to avoid the risk or reduce its effect. As a company there are a number of steps or measures that can be taken to manage risk they are as follows; Risk analysis- this is the first and most step in risk management. It helps in identifying the vulnerability of the company to a given risk. Proper risk analysis of a company can be done through the reference to its documents such as financial documents, contracts among others. Risk control- it refers to laid down plans that will help in reducing the impacts of a given risk. For instance having a well trained human resource is one way of controlling risks. Risk transfer- when the risk facing the company is too much for the company to handle on its own it is considerable to seek for risk transfer, for example, getting insurance cover to cover unforeseeable risks such as accidents. References Bansal, S (2014) , Difference between Quantitative and Qualitative Risk Analysis. Retrieved 13 may 2015: https://www.izenbridge.com/blog/differentiating-quantitative-risk-analysis-and-qualitative-risk-analysis/Beesley, C (2012), How to Start a Small Construction or General Contracting Business. U.S Small Business Administration ArticlesCavignac, J (2009) Managing Risk In a Construction Company, Construction Business Owner, Article Curtis, T (2014), Risk assessment Basics. Retrieved at: https://www.airsafe.com/risk/basics.htm -- Revised: 19 January 2014. Czgan, D (2014), Qualitative Risk Analysis with the DREAD model. Infosec Institutte Articles retrieved May 21, 2014 at: https://resources.infosecinstitute.com/qualitative-risk-analysis-dread-model/ Li, P (2017), How to Start My Own Small Construction Company. Retrieved from: https://smallbusiness.chron.com/start-own-small-construction-company-2257.html National Research Council, (2005), 4 Risk Identification and Analysis, The owners Role in Project Risk Management. Washington DC. Plato, A (2014),Communication Risk to Executive leadership. Prince2 (2005), Risk assessment model assessment .Retrieved at: https://www.stakeholdermap.com/risk/risk- Shah, N (2015), Qualitative vs. Quantitative Assessments. A journal on advisory. Sims, S (2012) Qualitative vs. Quantitative Risk Assessment, SANS Technology Institute Journal.