Risk Management Plan for Engineering Projects

This project study is purposed to guide project managers and engineers in preparing a risk management plan to control and manage risks that come along the project execution. The plan drawn to manage the occurrence of risks is one the most important considerations that should be taken notice of if any engineering project is to succeed. In any project, risks are probable and possible to happen but this can be of less impact or consequence if they are identified, managed and plans are drawn prior to implementation of the project.

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RISK MANAGEMENT PLAN FOR ENGENIREEING
By (Name of student)
Student’s Course
Name of the Instructor
Institutional Affiliation
The City and State
The Date

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Abstract
For the past few decades, project managers and engineers have been adopting a risk management
plan in order to achieve success in projects. Literatures and different scholars pointed that failure to
allocated resources and draft a risk management plan have made engineers to record poor results in
projects or even fail in project execution.
This project study is therefore purposed to guide project managers and engineers in preparing a
risk management plan to control and manage risks that come along the project execution.
Introduction
The plan drawn to manage the occurrence of risks is one the most important considerations that
should be taken notice of if any engineering project is to succeed. In any project, risks are probable and
possible to happen but this can be of less impact or consequence if they are identified, managed and plans
are drawn prior to implementation of the project. In general, to deliver the defined scope on time within
the budget that was originally planned for a project to succeed, it is important to make a well-defined and
designed project plan. However, success plans are not normally achieved due to risks and mostly for big
projects that can be affected, both by influences externally or internal requirements. As an engineer, any
project undertaken, there is always a probability of a risk in any kind of engineering projects. This
therefore means that risks are a part of any project and comes with an effect which may either be positive
or negative to the project that is being undertaken (Stevenson, & Hojati, 2007)
If the risks are not planned for in the project, it may result into a collapse of the project and
spoiling the reputation of the engineer or the engineering company. The risk management plan should be
drawn to cater for any possible risks that may arise in the course of the project (Tang, & Musa, 2011,
p.30)

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Project objectives
As said earlier, in any engineering project, there is a probability of a risk arising, however, this
should be managed by a risk management plan drawn to cater for this situation when the risk occurs
(Thun, & Hoenig, 2011, p.242).
 The project is therefore intended to provide a risk management plan that to help solve the
occurrence of the risk in the project.
 The risk management plan is to enable that the project completion time comes to pass by
doing away with the delays caused by the existence of the risks.
 The risk management plan is to enable the identification and control of the risks that may
arise during the course of the project.
Literature review
Most of the recent studies have shown that the risk management plans are adapted continuously
as projects are being implemented because it is relevant for the success of projects. Various literature
have shown that poor forecasting and planning is the main cause of risks in projects. Insufficient
resources allocated, its inefficiency and the poor methods of mitigating risks have made most projects to
fail (Waters, 2011)
Risk management plan is one of the main ways to reduce losses that may come inform of
operation costs, administrative costs and management costs in the project. The risk management plan also
enables the project to keep within the budget even when a risk occurs because it was budgeted for. The
monetary evaluation and analysis concerned with management of risks are divided into two variables
namely; the probability of a risk to occur and the losses incurred when the risk occurs. The summery
drawn from various reports show that the act of managing risks is a necessary and important practice that
should be put in place to ensure a high probability of success of a project (Aven, & Renn, 2010, p.121)

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Project managers and engineers need to be able to identify and manage these risks as they come.
Engineers and contractors have a technological view of what a risk is and how the risk is most likely to
affect the project. Many different authors have defined risks in different ways; a risk is a probability that
may be caused by an action taken, which literally means that any engineering action or decision taken
comes with a risk, and a plan must be in place to solve that risk in case it arises (Van et al., 2009). A risk
is a property in any decision, it is intrinsic and is measured by a combination of different factors like
exposure to, severity, occurrence and many others but the most common it is limited to generally two
factors; severity and the frequency of occurrence. The risk combines likelihoods of hazardous occasion or
exposures to danger and severity that is caused by the occasion. This context clearly brings out two
questions: 1. at what probability is a hazardous occasion likely to occur? 2. What level of impact will it
cause if the hazardous event occurs? A risk can also be defined as a circumstance that is uncertain to
occur and should it occur, will affect the goals and objectives that were to be achieved in the project and
many other definitions, perspectives which are endless (Cohen & Kunreuther, 2007, p.540). Risks can be
categorized or divided into different types according to how it will affect a project and the environment
when it occurs. For example:
 Strategic risks which affects the implementation of a strategy in any engineering project
and they normally long term in nature.
 Operations risk which arises as any operation in the engineering project is being executed
and it normally affects the internal ability of engineering company to execute the project.
 Other smaller risks include customer risks that comes when the customer places an order
that comes with factors like obsolescence in the market (Ferraro, 2008, p.820).
 Asset impairment risk which arises when the engineering asset is not able to generate
more income or reduction in its work rate.

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 Competitive risks which arises when a competitor comes with another method to
overtake the market and this affects the ability to differentiate the services from that of
the competitor.
 Reputation risks which may erode the value of the services offered due to loss of
confidence of the engineer.
 Financial risks which may arise due to engineering company’s inability to complete the
project due changes in the financial markets or when debtors default payments. This leads
to service delays and even failures (Aloini et al., 2007, p.550)
 Fiscal risks which arises due to changes in taxation before or during the project
execution.
 Regulatory risk which is caused by the changes in regulations and this affects the
environment of the engineering company
 Legal risks which arises from the stakeholders like customers, suppliers, employees and
shareholders of the company and this leads to exposure to litigation.
The types of risks that may occur before or during the execution of a project and the list of risks
is endless since there may exist other smaller or bigger risks that have never been known. These risks
normally originate from the organization, network relations and external environment. These therefore,
means that project managers and engineers are supposed to have a project management plan to help them
identify and manage these risks to mitigate the losses and meet project deadlines (Craighead, et al. 2007,
p.155)
The risk management plan
This concept “risk management” has rapidly developed over the past decades and has also
become an important aspect to project success. It is defined as a continuous process to identify, analyze,
prioritize and mitigate risks that may threaten the success of a project in terms of schedule, costs, quality,
safety performance and technical performance. It can also be defined as a set of coordinated activities that

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is used to control the risks that may affect objectives (Klibi et al., 2010, p.290). The main objective of a
risk management plan is to understand the project risks, lessen its possibilities of negative occasions and
maximize the positive possibilities on projects outcomes. This is a continuous process that starts during
the planning phase of a project and ends when the project is successful. The process of risk management
can be executed in five steps:
Strategy and planning; this sets the baseline and the foundation for risk management and
determine whether the initiative will succeed or not. Organizations will determine how to address and
manage risks in the strategy and planning phase of the project and it should consider the following:
guidelines for risk management, the resources available, reporting and communications protocols and the
organization’s main strategic objective which outlays the big picture of the organization. These activities
include assigning roles and responsibilities, categorize the identified risks and develop a risk matrix and
rate risks.
Risk identification; this is the ability to identify all possible risks that can affect the project both
before and during the execution of the project either positively or negatively. This should tell the type of
risk, its description, cost impact, its probability of occurrence, the risk level, possible responses (Pahl-
Wostl, 2007, p.50)
Analysis; this is the phase that determine the possibilities and the likely impacts of each
identified risks and prioritizes attention towards the risk. Analysis is done in two approaches: qualitative
analysis which involves assignment of priority levels like high, medium or low to every risk identified.
These priorities must be in line with organization objectives and the risk management plan, analysis is
also done through quantitative analysis where the most likely cost value is assigned to the risks identified
(Van, 2008, p.781).
Response planning; this where response actions and alternatives are developed to reduce project
risks. In response planning, there are four alternatives which include, risk avoidance, risk transfer, risk

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mitigation and risk acceptance. However, this should take into consideration the available resources and
the repercussions that is likely to arise. Avoidance means to dodge the potential condition or occurrence,
transference means shifting the responsibilities of the risk to another party, mitigation means to take
preventive measures to reduce the chances of risk occurrence and acceptance means accepting whatever
outcome of the risk (Lawrence, 2008, p.781)
Monitoring and control; this where the organization is able to track risks, to oversee how risk
plans are being implemented and also evaluate how effective the management procedures are. This has to
be done throughout the course of the project.
Evaluation
Taking a critical analysis of the various literatures review ((Waters, 2011), It has been noticed
that risk management process, has proved to be of high importance in project management process and
one of the core determinants of project success. When risk planning and mitigations are well executed, it
is highly probable that risks are controlled and in some circumstances of control failure, the impacts can
be reduced. However, its important to have a core understanding of the process involved by the personnel
who undertake these tasks in the project execution. It is therefore a way of reducing operational costs,
administrative costs and managerial costs. If a plan is designed to control the costs that may arise due to
uncertainties, the project schedule will be followed in line and hence the project deadline will be met
(Pettit, Fiksel & Croxton, 2010, p.20). The evaluation and analysis of risk management is divided into
two variables which is the probability of the risk to occur these means the possibilities of risk occurrence
in the project. This should be able to understand the future trends in relation to the past experiences from
other projects executed. Another question that evaluation and analysis asks is what losses are likely to be
incurred when the risk occurs. This question enables the project manager to understand the positive and

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negative effects of the risk existence and how it can be avoided or controlled (Gregor & Jones, 2007,
p.312)
Since engineers and managers have a technological view of what these risks are and the effects
they most likely to cause. This will help to control this risks or reduce if it can’t be controlled and also
enable that enough resources can be allocated to cater for such risks (Pearson, 2009, p.44). There are
various methods that can be applied to treat the various types of risk associated to projects as listed in the
review and they are termed as risk treatment methods and they include:
Risk avoidance
This is when the project manager chooses not to take the risk by avoiding any circumstance that
may result into the occurrence of that risk, dodging it as it comes or foregoing any activity leads to the
risk.
Transfer of risks
This when the third party is involved in the project and the risk can be transferred to the third-
party. This done by two methods of outsourcing or insurance against the risk.
Reduction of risks
This when the project manager chooses to reduce the effects that may be caused by mitigating the
risk.
Acceptance of risks
This refers to ability of the project manager to accept all the effects of the risks but this should be
done in consideration of the resources available.
Gaps

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Although there has been a tremendous adaptation of risk management as a cost reduction strategy
and improving project success there has been no definite system or strategy selected for conducting such.
According to the findings of the reviews, there are many different ways in which the risks are undertaken
yet there is no any one specific method recommended as the most effective. In other words, there is a gap
in the identification of the most effective risk management method. Research is therefore needed to this in
this area in order to correlate a given definite method with different project sizes and types. Furthermore,
there is need to provide appropriate precautions on the type of method to be selected when designing a
risk management plan. v
Conclusions
The existence of possibilities of risk occurrence is one important reason why a risk management
plan needs to be considered when planning to or executing a project because this enables progress in the
project and deadline will be met. Most studies show that this risks can be controlled. This project will
therefore help the engineers and project managers to reduce and control risks in any project they may
choose to undertake since it evaluated other reviews and the future trends to come
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