**8. Risk identification, analysis and response**

The whole process of risk management was implemented for three different projects. Regardless of the project scope, cost, schedule, location, type of funding, etc; the same steps were followed in order to determine the overall risk cost 8cost contingency). Figure 7 shows

**Figure 7.** Risk identification

the risks identified for each project; it can be observed the source of risk, which in Caltrans relates to the functional units (e.g. environmental, right of way, design, project management, construction etc.)

Project A was a Historical Bridge, Project B a Direct Access Ramp (DAR) with a Transit Station (TS) and Project C a standard bridge. The main goal of the risk analysis for each project was to determine the cost risk contingency associated to each project risk register. Figure 10 shows the critical risks obtained for each project once the qualitative analysis was performed. The qualitative assessment matrix (Figure 9) used for ranking the risk criticality, forms part of Caltrans standard process for risk management.

The risk sources indicated in Figure 7 are: design, right of way (rw), environmental (env), program project management (ppm), construction (const), exterior (ext), engineering (eng) and organizational (org).


**Figure 8.** Risk matrix (Caltrans, 2007)

420 Risk Management – Current Issues and Challenges

parameters that describe that variability.

team focused in talking only about risk.

**Figure 7.** Risk identification

**8. Risk identification, analysis and response** 

The uncertainty in subjective estimates has two components: the inherent randomness of the variable itself and the uncertainty arising from the expert's lack of knowledge of the

In cases where there are no subject matter experts available, it is recommended to even hire external experts for obtaining the uncertainty ranges per variable or risk. Caltrans's practices towards project management and the project delivery process use a Project Development Team (PDT) which changes alongside the phases of the project. These teams are rather big in size and usually integrate stakeholders, subject matter experts and individuals coming from the same or different functional units (right of way, environmental, design, construction, etc.). Firstly, the downside of using such a team like the PDT is the size since it could be complicated for the RM to facilitate the meetings for obtaining better results towards assessing the uncertainty. In addition, the team members should feel free to talk about risk and in some cases having more than one member coming from the same division of

In general, risk teams are rather small in compare with the traditional project teams. As a general rule, to invite a representative from each department or division is recommended. This approach definitely will help the whole process and will assist the RM to maintain the

The whole process of risk management was implemented for three different projects. Regardless of the project scope, cost, schedule, location, type of funding, etc; the same steps were followed in order to determine the overall risk cost 8cost contingency). Figure 7 shows

functional unit, can cause some limitations for discussion and brainstorming.

The RM was responsible for educating the RMT along each phase of the risk management implementation. For the qualitative risk analysis in particular, it was useful to provide tangle examples to the team before and during the meeting.

As can be observed, the critical risks are only a few ones in compare with all the risks identified at the initiation phase. The purpose of the qualitative risk analysis was to select those risks that represent a major negative or positive impact into the project objectives. A critical part for performing the qualitative analysis was to define the probability and impact ranges. The impacts were defined in terms of cost only for these projects. In addition, construction, engineering and organizational risks were not part of the quantitative risk analysis, since there were not scored as critical in the qualitative risk analysis.

Project and Enterprise Risk Management at the California Department of Transportation 423

at Caltrans to assign a merely flat rate for risk contingency, without referring to specific

For each project, a set of risk responses were developed by the RMT and placed with the Risk Register. A Risk Owner was named for implementing the responses. It is recommended to match the risk owner with the source of the risk. In other words, if the risk has a source in

The whole risk management implementation, including the risk identification, analysis and response was conducted in three meetings with the RMT. This is a standard set at Caltrans. The time and effort invested from the RM is not included since most of this work is done

It was not common at all at Caltrans to have risk management meetings for the PDT members and even for executives. What is a reality is that those meetings are critical for performing in depth thoughts about what can go wrong with the project. The most critical of the meetings is the planning meeting; which usually includes educating the RMT. Questions like: why a risk management exercise is needed? What could be the possible project risk contingency? What are the restrictions? What is the overall project uncertainty rate? Need

The following aspects are quite relevant in order to keep an order and sense within the risk

It was interesting to notice along the meetings that when the meetings were held, the invitees were already prepared just to talk about risk. In some cases, critical project issues

The risk management meetings were properly planned, one for the identification, analysis and results. No meeting took more than two hours and instead of meeting minutes, the Risk

Risk monitoring and control has been mentioned as one of the most common failures of risk management. In part because the follow up process is usually forgotten by the project and

Rank the questions that need answering from "critical" down to "interesting"

project risks or by justifying the percentage upon a formal risk management study.

construction, then the best suitable risk owner should come from that division.

outside the meetings.

**9. Risk management meetings** 

answers for properly doing a risk management study.

 Discuss with the risk analysis the form of the answer Explain what arguments will be based on these outputs

Explain whether the risk analysis has to sit within a framework

Register was used as the deliverable for discussion and follow up.

Decide on how regularly the decision-maker and risk analysis will meet

management planning meeting (Vose, 2008):

Discuss any possible hostile reactions

were discovered thanks to the risk discussions.

**10. Risk monitoring and control** 

Explain the target audience

 Figure out a timeline Figure out the priority level

**Figure 9.** Qualitative risk analysis

The output of the qualitative risk analysis formed the basis or inputs for conducting the quantitative risk analysis. A set of cost ranges where developed for each project for matching the impact value selected. A model was built for running the Monte Carlo Simulation technique for obtaining the risk cost contingency for each project. Figure 10 shows the contingency values obtained per project. It is important to notice that instead of assigning a randomly selected contingency percent, these values are based directly on the critical risks identified with the Risk Registers.

**Figure 10.** Quantitative risk analysis

The cost contingency per project assessed with the quantitative analysis provides a substantial support for justifying the overall project uncertainty. It was a common practice at Caltrans to assign a merely flat rate for risk contingency, without referring to specific project risks or by justifying the percentage upon a formal risk management study.

For each project, a set of risk responses were developed by the RMT and placed with the Risk Register. A Risk Owner was named for implementing the responses. It is recommended to match the risk owner with the source of the risk. In other words, if the risk has a source in construction, then the best suitable risk owner should come from that division.

The whole risk management implementation, including the risk identification, analysis and response was conducted in three meetings with the RMT. This is a standard set at Caltrans. The time and effort invested from the RM is not included since most of this work is done outside the meetings.
