*6.3.3 Decision tree*

Decision tree analysis is commonly used when there is sequence of interrelated possible courses of action and future outcomes in terms of time and cost. This method of analysis is commonly used when certain risks have an exceptionally high impact on the two main project objectives, i.e. time and cost. Where probabilities and values of potential outcomes are known or can be estimated, they are used for quantification to provide a more informed basis for decision making. Each decision process expected value (EV) which forms the basis for decision making process. A sample problem on decision tree is given in **Table 6**.


#### **Table 6.**

*Problem on decision tree.*

This can be depicted in the form of decision trees and the expected value (EV) in terms of time for each of the three scenarios is furnished. The least of this i.e. construction management will be preferred since it consumes less time.

### *6.3.4 Multiple estimating using risk analysis*

Multiple estimating using risk analysis (MERA) attempts to provide a range of estimates. These are presented as risk free base estimate, average risk estimate (ARE) and maximum likely risk estimate (MLRE). ARE is the sum of risk free base estimate and average risk allowance and MLRE is the sum of ARE and maximum risk allowance.

MERA attempts to finds a level i.e. the estimate that has a 50% chance of being successful. This is known as average risk estimate (ARE) which is found out by multiplying the average allowance with average probability of occurrence. Maximum risk allowance is found out by multiplying the maximum allowance with maximum probability of occurrence of that risk. This is added to ARE to get MLRE which is the estimate that has 90% chance of not being exceeded.

#### *6.3.5 Quantitative risk assessment: outputs*


**193**

**Table 8.**

*Strategies for mitigating negative risks.*

*Process of Risk Management*

(**Tables 8**–**10**).

**Table 12**.

**Risk mitigation strategy**

Risk avoidance

Risk reduction

Risk acceptance

**6.4 Risk response planning**

*DOI: http://dx.doi.org/10.5772/intechopen.80804*

**6.5 Monitoring and controlling risks: inputs**

**Description**

*6.5.1 Monitoring and controlling risks: tools and techniques*

The risk response will be in the form of mitigation by adopting necessary strategies in respect of positive and negative risks which is furnished below

Inputs to monitoring and controlling of risks are presented in **Table 11**.

Tools and Techniques for monitoring and controlling risks are furnished in

rise of any material or dealing with extra quantum of work. Risk transfer Risk transfer requires shifting some or all of the negative impact of a threat along with

ownership of the response to a third party. Examples are

loss in Turbines and Generators, Unforeseen Risks, etc.

Design Risk, technical Risk and Foundations for all major structures

• **Risk transferred to Consultant**

mitigated. **Examples are**:

an estimate was prepared. • Contingency planning

• Design as per standards

• **Risk transferred to Insurance Company**

• Preparedness to tackle any natural disaster

• Removal of engineering/structural barriers • Strengthening the quality assurance procedures

Risk avoidance involves changing the project management plan to eliminate the threat entirely. The project manager may isolate the project objectives that are in jeopardy. **Examples: (**a) Extending the schedule of an activity; (b) Changing the strategy or reducing the scope of work; (c) Changes in clauses of contract regarding abnormal price

Security of materials at site, Fire Hazards, Boiler operations, safety of electrical rooms,

Risk reduction implies reduction in the probability and consequence of an adverse risk event to be within acceptable threshold limits. Conducting detailed tests or choosing a more stable supplier are some examples. Risk reduction is adopted where the resultant increase in costs is less than the potential loss that could be caused by the risk being

• Detailed site investigation where adverse ground conditions are known to exist but the full extent is not known. A detailed ground investigation was performed upon which

This strategy is adopted when it is not possible to eliminate all risks from a project. This strategy indicated that the project team had decided not to change the project management plan or is unable to identify any other suitable response strategy. This requires no action except to document the strategy leaving the project team to deal with risks as they occur

• Paying higher amount than recommended by Govt for land acquisition

The output of quantitative risk assessment is presented in **Table 7**.

#### **Table 7.**

*Quantitative risk assessment: outputs.*
