Risk management is the process of identifying, assessing and controlling the risks that could affect the cost, programme or quality of a construction project.
Quantity surveyors are involved at every stage. Early in a project, risks are recorded in a risk register and assessed, either by simple scoring of likelihood and impact or by quantitative methods such as Monte Carlo analysis, to set a risk allowance in the cost plan. During delivery, the register is reviewed regularly and the allowance is drawn down or released as risks occur or pass. Under NEC4 contracts, the early warning process and the Early Warning Register (called the Risk Register in NEC3) are used to manage risks jointly. Typical responses to a risk are to:
- avoid it, for example by changing the design
- reduce it, through further investigation or survey
- transfer it, through the contract or insurance
- accept it and hold an allowance
Related terms: risk register, contingency, early warning, Monte Carlo analysis.
