Project Risk Management: Strategies for Stakeholders, Politics, and Resource Management

Introduction
Project risk management
Project risk management is defined as a structural process that deal with project risks in order to
provide satisfactory balance between prospects and threats risks ( Oztas and Okmen, 2010; ISO
31000, 2009). The success implementation of risk management is banked on understanding the
organization frame work or the respective project and integrates it into a culture of an
organization (ISO 31000, 2009). Positive risk management is more essential when it comes to
international construction projects as compared to the construction projects that are internally
within a country, this is due to the complexity risks the project may be prone to, which may
include political risks that always stand in for any business truncations that are international.
Furthermore, it is openly clear that practicing of project risk management will highly improve
the project performance (Bakker et al, 2012), by focusing on more uncertainty in order to deliver
prosperously project.
The process of managing project risks is dated back as from 1980s when it achieved its
prominence (Bredillet, 2010). The late approval of project risk management on construction
industry has really contributed on the project personnel not practicing effectively the risk
management and that is why the full benefit of risk management on construction projects have
not yet been achieved.
Risk management methodologies
There several outlines of risk management that are used for systematic risk management (Bu-
qammaz et al, 2009), this includes management of risk management of office, project risk
assessment and management, risk analysis of management for project and finally guidelines
principles of risk management (ISO 31000, 2009).
Risk management approach
Assessment of risks involves steps of identifying the risks, analyzing the risks, evaluating the
risk, whereas risk management will involve a processing of planning strategies, implementation,
monitoring and a review to countercheck if the strategies used are effectively working ( ISO
31000, 2009, PMI, 2013). In accordance with Wang et al, (2010), the process of managing the
risk should help the project manager to answer questions that will arise on identifying the risks,
analyzing the risks, evaluating the risk, whereas risk management will involve a processing of
planning strategies, implementation, monitoring and a review to countercheck if the strategies
used are effectively working.
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Political risk management techniques
The outline approaches are achieved effectively by implementing methods that may prioritize
risk management on micro – politics. The assessment risk associated with politics are classified
on two wide categories which includes qualitative which may also be called heuristic and
quantitative which is also referred as scientific method ( Al Khattab, 2011). The category of
qualitative is further subdivided into unstructured method and structured method, more analysis
has shown that while focusing on political risks, the executive practices qualitative technique as
compared to the application of quantitative method (Al Khattab, 2011), this is because the
heuristic method is simple, flexible and requires moderate cost for its implementation as will be
compared to quantitative techniques that will require statistical and modeling training for their
effectiveness in application.
The strategically methods applied on the unstructured qualitative technique while solving risks
associated with politics, the first one is the use of judgment and intuition of the project managers,
where an approach of executive visiting another country for benchmarking is applied. The
construction project managers then direct their identification on political risks and analyses the
risks based on their knowledge they acquired during the benchmarking. The process of judging
and intuition of the management was the best and preferred method in Jordanian multi- national
construction projects (Al Khattab et al, 2011) and also a higher percentage of about 80% was
also applied by the Canadian.
The second approach strategies of unstructured qualitative technique is through applying experts
directives, which will relies on academics, banks, officials from local government and advisory
from foreign construction project management teams, but this is prone with disadvantages from
the experts being bias, the application to this was also used by the Jordanian.
The third method is standardizing by use of checklist which will be used for identifying and
analyzing the risks, where the project manager reviews the risk elements using the lists and
ranking them, but the method too faces some disadvantages where it will ignore other future
events, prevents creativity that could be applied by the decision maker, and the idea of ranking
the risks can be subjective.
The quantitative techniques applies the use of software and input data, where the data will be
derived from statistical of the benchmarked country which will comprise all the construction
expenditures, therefore the experts will be required to run the data on the software and
interpreted them effectively, the main advantage of this method is that they are precise and
depend less on the subjective data.
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Example
In 2004 a foreign company with a given mandate to construct hydroelectric power plant was affected
by hostility and protest by the Brazilians groups under environment, the head of the company who
was a U.S with the responsibilities assign to them, decided to spend more money by compensating
the people who were being resettled and also involved in the mitigation of the environment, in the
process the hostility and protest was stopped.
Stakeholder’s identification on risk management
The term stakeholders involves a group or an individual or organizations who have direct actual
stake and are interested in the performance of the construction project. The stakeholders may
constitute different objectives which may be conflicting to the construction project, it is also
known that the stakeholders decisions may be subjected to their distinctive profiles of risks,
appetite on risks and risks attitudes (Hillson and Murray, 2011).
One of the methods used by the stakeholders on identification of risk management is the use of
SSM (soft system methodology) that applies customer, actor, transformation, worldview, owner
and environmental constrains that is denoted as CATWOE.
Customers The residents or neighborhood communities
that may be affected
Actors This include all individuals that will participate
on the constructions, for example contactors,
consultants and suppliers of the construction
project
Transformation This involves the construction of the respective
project
Worldwide Raising living standard to people by providing
infrastructures
Owners This involves the decision makers
Environmental Reason as to why the project is done
Objective of stakeholders on risk managements
Management of risks is based on ensuring that all the objectives of the proposed construction
project are fulfilled ( ISO 31000, 2009). The objective of the construction project may include
net profit, cash flows, completion time, quality standard and safety. In construction the document
of the contract will specify the risks that each and every party will be responsible for, and in that
context the contract document is a source for achieving the objectives. Since construction project
have several stakeholders and consensus of reaching to a one risk management system of the
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