Project Risk Management Today
August 12, 2021
In construction, “risk” is defined as anything that disrupts the budget, schedule or scope of work. The larger and more complex the projects, the more opportunity there is for risks to occur.
When the COVID-19 pandemic hit — even though construction was quickly deemed an “essential service” — the pandemic all but redefined the word risk for the industry, disrupting material sourcing and labor forces the world over. Project managers were left dealing with altered schedules and costs, stalled supply chains for materials whose production was halted, and the management of ever-changing health protocols.
Yet because of this new adversity, we also learned how the capabilities of today’s software technology could help smooth some of the rougher project areas. This lesson is why more and more construction companies are now turning to project risk management software to help them better plan for and respond to both the anticipated and the truly unexpected.
Identify risk factors before construction has begun and create backup plans around them.
Software helps alleviate a bit of the pressure on those who are responsible for project risk management. For example, risk identification, perhaps one the most challenging parts of the job, becomes more manageable and less overwhelming. How? Risk management software enables you to input what-if scenarios that may occur, including those that surfaced during prior builds. With that information, the software adjusts the data so you can assess the degree of impact of each scenario on project timelines, budgets, labor and material resources — and your ROI. But it can go a step further, not only identifying through artificial intelligence the potential risks beyond what you’ve input but suggesting ways to mitigate the consequences of those risks. Knowing these consequences are a key part of what informs contingency planning around them.
Collect and make use of historical project data when creating those plans.
The best-laid plans are backed by qualitative and quantitative data. Especially those you’ve assembled from similar past projects. Construction companies are seeing the value of the actionable insights to be gained from all that rich data and experience. Those what-if scenarios from above? Plug those into the project risk management software and let it adjust for current material and labor costs, for example. Your backup plans become more rooted in firsthand experience, rather than guesswork, making estimating costs and timelines of each of your contingency plans even more accurate.
Get comfortable understanding and using project performance metrics.
For large builds such as infrastructure projects, there’s going to be a lot of data generated. How do you know what data to keep track of? And how do you know whether or not there’s cause for concern in what the numbers show? This is where earned value management (EVM) metrics come in.
EVM is a common method used to monitor project performance throughout the life cycle of a build, tracking where things currently stand against the estimate at any given point in time. Because of its ability to flag potentially negative trends and sudden cost and schedule deviations, it’s also regarded as a strong project risk management strategy.
Two EVM metrics in particular — schedule performance index (SPI) and cost performance index (CPI) — are especially responsive to changes. But this where truly understanding the metrics comes in. The numbers will naturally fluctuate up and down. It’s when they fall outside of their acceptable operating ranges (determined before the project starts) that you should pay extra attention and determine whether corrective action is necessary.
The easy way to track this? Software with dashboard and reporting capabilities can serve up these metrics in visually understandable formats so you don’t have to sift through endless amounts of details.
Collaborate for advanced and real-time decision making.
Of course, risk management isn’t just about analyzing data. It’s about collaboration. Sure, the data does the talking as far as showing progress and what may need extra attention as a potential or real risk. But there’s talking required about what to do with that data, particularly when creating contingency plans.
Project risk management software with a communication platform allows everyone access to the same data from which to base those discussions and decisions. That kind of collaborative decision making is more effective and strategic when it’s data-driven rather than emotion-driven. Especially when you’re able to involve team leaders from key risk areas, including safety, operations and environmental, those plans become more well-rounded, addressing the risk impact and mitigation options unique to those disciplines.
Gain more project certainty when things seem most uncertain.
There’s a comfort level, isn’t there, in knowing that you’ve accounted for all you can, all backed by objective data?
And it doesn’t require an event as severe and truly unpredictable as the pandemic to see the value of project risk management software. Even though risk occurrence is inevitable, using such software to account for them upfront adds a layer of certainty at the project estimate stage as well, removing the surprise factor for when the inevitable “what if” scenario does play out and affects project timelines and budgets.
Though it is difficult to predict and plan for every single possible risk factor that might disrupt your projects, it is possible to better manage through and around them. Construction-specific solutions like InEight’s risk management software empower you to not only confidently plan ahead by creating what-if scenarios and contingency plans for anticipated risk factors, but also make critical decisions on the fly using real-time data analytics. Schedule an InEight demo today to learn how to make it part of your project risk management tech toolbox.