Building Construction Industry Is One

Building construction industry is one of the key industries that motivate the Australian economy. Apart from generating employment opportunities for nearly one million people in Australia, the building construction industry is also the fourth largest contributors to the Australian GDP (Gross Domestic Product). In 2009, building construction industry accounted to the 6.8% of the Australian GDP. Building construction industry is also one of the largest employers of labour in Australia. In 2009, there were 984,100 people working in the building construction industry representing 9.1% of the total workforce in Australia. (Australian Bureau of Statistics, 2010).

Despite the importance of the building construction sector for the Australian economy, the building construction is a risky industry, and is embedded with uncertainties due to the internal and external factors that could influence the construction process. Project risks are the important factors that could affect the successful completion of a building project. Project risks could elongate the project completion date; bring a project to a standstill as well as escalating the project costs if adequate measures are not implemented to manage the risks. The risk monitoring is one of the effective strategies to manage the risks associated to building projects.

Objective of this project is to investigate the strategy to implement the risk monitoring within a building project. The paper also provides the assessment of the risk management outcomes of completed projects.

1.1: Risk Monitoring within the Building Project

Over the years, there has been a significant demand by stakeholders that project managers need to execute the building projects to achieve the desired outcome. Within a building project, project risks are inevitable, and the project risk monitoring is the effective tool to carry out the risk management. Risk is any factor that may potentially affect and interfere with the successful completion of a project. A risk is the recognition that a problem is likely to occur and by identifying the problem, the project manager will be able to avoid the risks. Project monitoring has been identified as the management tool to be used to achieve the project objectives. Project monitoring is also defined as the process to ensure that actual performances are achieved and any deviation from the project is communicated to management and required action is undertaken to ensure that management restores the project to the original plan. Project plan monitoring is an aspect of building project that should not be avoided if stakeholders want the project to meet the required standard and within time and budget.

"Monitoring is the measurement of the actual performance against planned performance. Effective monitoring will therefore provides management with up-to-date information on the construction project cost, stage of work performance as performed by the contractor from which decisions can be made" (Richard, 2009 P. xiii)

On the other hand, risk monitoring is the systematic procedure to track the identified risks as well as identifying new risks and provide effective procedure to manage the risks. The risk monitoring occurs after the risk planning, mitigation, and allocation processes are implemented. To enhance successful completion of a project, risk monitoring must be carried out throughout the project life cycle since the list of the associated risks is likely to change as the project matures. (Project Management Institute, 2004).

Project monitoring assists in identifying the variances that might occur within the project life cycle. Variance is a measurable change that could occur between what is expected from a project and what is actual accomplished. Variance is an associated project risk that could affect the successful project completion. Variances are identified as follows:

Change in the project costs

Change in the project schedule

Change in the quality of the project

Change in the project scope

There are several strategies that could be used to monitor the project plan and risks associated with building projects.

First, risk identification is one of the effective methods to carry out risk monitoring within a building project. Risk identification is the process to determine that risks are likely to occur and there is a need to document the identified risks. More importantly, there is a need for risk quantification, which involves evaluating the risks analysis and its possible outcome on the project.

Another important technique to be used for the risk monitoring is to implement periodic risk review. Project period risk review involves constant repeating the risk identification, planning, analysis, mitigation and allocation. Typically, there is a need to implement regular risk reviews to ensure that the project meets the entire anticipated project objective. In the process of risk review, a project manager will need to identify the risks that could affect the project outcome and if unanticipated risks emerge, project stakeholders must implement additional response planning to control the risks. (Barber, 2004).

Another procedure to implement the risks monitoring is to develop a comprehensive and consistence reporting procedures. The reporting procedure within the building project involves recording and reporting the risks that emerge within a project. Typically, effective risks monitoring involves maintaining adequate plan to record and document ongoing risk management. Formal documentation assists project manager to implement comprehensive risk assessment than undocumented effort.

Risk monitoring procedure also involves making a comprehensive risk charter that would form the basis of documentation for risk monitoring. TABLE 1 reveals method to document the risk monitoring.

TABLE 1: Documentation of the risk monitoring.

CATEGORY

STATUS

RISK TRIGGER

ASSESSMENT (Quantitative or Qualitative)

MONITOR and CONTROL

Options or Definition

Active = risk that is being actively monitored

Dormant = risks that are not currently within the high priority, but may become active risks in the future

Retired = risks that have been resolved

Event that indicates that risks have occurred. The risk trigger is used to determine the appropriate time to implement the risk response strategy.

Impact and Probability of the risk, and this could be quantitative which involves a percentage of probability of occurrence and its impact in monetary aspect or days).Qualitative (very high, high, medium, etc.)

Responsibility =Manager's name responsible to manage the risk.

Milestone check or Status interval = point of review.

Status, Date and review comments.

Source: United States Department of Transportation (2012).

1.2: Remedial Action used to manage Variances

There are several remedial actions that could be used to manage variances. Trend and variance analysis could be use to identify the difference between the planned and the actual costs of a project to identify unacceptable risks to the budget, schedule, quality, and scope of the project. Trend analysis could also be used to observe the project performances over time to determine if the project performances is improving or getting worse. The use of mathematical model could be used to forecast future performance based on the historical performance.

Moreover, project manager could also carry out TPM (Technical performance measurement) to identify deficiencies in the project requirements. TPM will assist a project manager to identify the technical problems that might arise within a project and provide a warning of the problems, and recommends that there is a need to monitor the technical risks. Moreover, the implementation of the risk management plan could be used to manage variance. Risk management plan is very critical for the successful completion of a project and the purpose of risk management is to achieve better outcome from a project. Major process in the risk management is by identifying the risks associated with a project as well as understanding the potential consequence of the risks. More importantly, there is a need to make a decision on the cost effective strategies for treating the risks. Risk audits should also be carried out to document and examine the effectiveness of risks response and its impact on budget and schedule. Project stakeholders should use a risk auditor to carry out the risk auditing. (Project Management Institute, 2004).

With identification of variances within the project life cycle, a project manager needs to implement the modification of project plan to achieve the remedial action.

1.2: Method to carry out the Modification

There is a need to carry out the required modification of the initial project plan after the identification of variances to ensure that the project meets the required project objectives. The modifications that need to be carried out are as follows:

Updating the Risk Register

Updating organizational process assets

Updating the project management plan

Recommending Corrective Actions

Recommending Preventative Actions

Request changes

2: Assessment the Risk Management Outcomes of Completed Projects

Risk management is the process of identifying the potential risks within a project and estimating the probability of risk occurring and develops strategies to manage the identified project risks. In a building project, effective risk management is essential to identify and evaluate the potential risks as well as using critical analysis to manage and control these risks. Risks assessment is an integral aspect of risk management. Risk assessment is the procedure to identify the potential risk within a project and develop an appropriate response to these risks.

There are many procedures to assess the risk management outcome of a completed project. One of the effective methods to assess the risk management outcome of a completed project is to use quantitative technique to calculate the costs used in managing the risks and compare it with the planned costs allocated for the project risk management. Within the project management process, there are monetary values that stakeholders allot to manage the risks in order to enhance the successful completion of the project. Suppose, stakeholders allot $250,000 to manage the project risks and after completion of the project, a project manager will calculate all the costs used in the risk management. The total costs used to manage the risks will determine the risks management outcome of completed projects. If the planned costs to manage the risks are higher than the actual costs, the risk management carried out for the project is not effective. However, if the planned costs for the risk management are equal or less than the actual costs, there is an effectiveness procedure used in the risk management for the completed projects.

Moreover, overall project costs are another determinant to assess the risk management outcomes of completed projects. The planned costs of a project vs. The actual costs of a project determine the risks management outcome of completed projects. If the planned costs are higher than the actual costs used to complete a project, the risk management used to manage a project is not effective. However, if the planned costs is less than or equal to the actual costs used to complete a project, the risk management process is effective.

More importantly, the project schedule is another method to assess the risk management outcome of completed project. Project schedule is the actual date allotted for the completion of a project. The project schedule for the project must match the actual date to complete project to achieve a quality risk management outcome. If the actual date of project completion is more than the date schedule for the project completion, stakeholders are not being effective in carrying out the risk management procedure.