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CONSTRUCTION WORLD
JUNE
2015
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MARKETPLACE
The context of this article is the consulting services sector,
in which risk management is virtually mandatory on most
capital projects. Have you ever considered that the risk
management profession relies on various approaches,
methodologies and analysis tools, which are either informed by inter-
national best practice standards such as ISO 31000: 2009, with tools
and techniques as contained in ISO 31010: 2009, of which clients have
varying levels of exposure and understanding? This question spawns
a fundamental and critical view that risk consulting services often run
the risk of not meeting client expectations.
To address the disparity, this article seeks to provide some guiding
questions that could be considered when engaging clients, to ensure
a common alignment at the onset of a new project or service offering.
The disconnect – think before you consult
Synapse is defined as ‘a junction between two nerve cells consisting
of a minute gap across which impulses pass by diffusion of a neuro-
transmitter’. In layman’s terms, this means a structure that permits
information to flow from one nerve cell to another. As this definition
suggests, a connection is made via impulses and it can be stated that
the same phenomenon applies when engaging in risk consulting
services across multiple clients.
Stephen Covey famously quoted ‘start with the end in mind’. This
basic yet powerful point of departure is viewed as a fundamental step
towards mapping the appropriate application of risk management
services which a client/project may require. The ‘disconnect’ becomes
evident when a risk consultant applies a vast wealth of knowledge to a
particular project which may still be construed as inadequate viz. the
proverbial
throwing of the book at the problem
. This disconnect can be
illustrated below (refer to Figure 1).
This illustrates the potential disparity between what a client may
want versus what risk consultants may deem necessary (subject to
project context). The figure represents the myriad available tools and
techniques that could be used to identify and assess risks, as opposed
to what the client needs to consider prudent to the project context.
The complexity becomes evident when engaging clients within
different markets. In some instances, risk management forms part
of their way of doing business, whereas other clients use different
methodologies such as Cost/Benefit Analysis, hence the analogy of
reflecting a level of balancing.
Establish optimum risk service
Optimal Risk Service (ORS) delivery needs to be mapped and a mutual
agreement ought to be found between the risk consultant and the
client. ORS is a state in which the level of risk service provided meets
both client and best practice demands.
As stated earlier,
throwing the book at the problem
does not equate
to the best practicable risk solution viz. optimisation may be way off.
Risk consulting organisations have a benefit to offer in that they have
an array of technical expertise, best practice knowledge and experi-
ence, which should be leveraged in the correct way to benefit client
and projects alike. In order to achieve ‘risk optimisation’, it remains
crucial to determine exactly what clients need and then to advocate
best practice tools and techniques to meet the demands of sound risk
management for their project.
The basic principles that one may consider to achieve an ORS are
as follows:
1. Establish the client’s expectations – engage to determine what
‘they’ really want.
2. Establish the client’s level of risk maturity – apply Synapse
Risk Engineering.
3. Make the connection between ‘what is needed’ and ‘what adds
genuine value’.
4. Fill in the gaps to arrive at best practice levels.
Don't over analyse
Based on a specific need, risk management makes use of several value-
adding tools and techniques that can be utilised to provide metrics that
are needed to inform sound decision making. Generally, two views are
taken: qualitative assessment and quantitative assessment.
The qualitative assessment is used to inform an order of risk
ranking typically using two sets of criteria, such as Consequence/Like-
lihood and/or for process orientated applications Frequency, Proba-
bility and Severity/Impact can be considered. Quantification of risk
relies heavily on sophisticated modelling programmes and methods
such as Monte Carlo Analysis (e.g. @Risk), which provides a proba-
bilistic view around the level of uncertainty against a preset criterion
running repeated algorithms.
These ‘traditional’ approaches are very useful in assisting clients
with information upon which to take key decisions, however it has
SYNAPSE
RISK
ENGINEERING
Risk Management as a discipline is often construed as
‘highly technical’. More often than not, clients and end
users of risk management reports are left confused or
unsure in terms of the value risk management can add at
virtually any level viz. corporate and/or project application.
In this thinking piece, a philosophical view is considered
in terms of the ‘missing link’ between the vast body of ‘risk
management’ knowledge and that of tangible value add.
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Figure 1: Conceptual view depicting the disconnect between a client’s
expectations and that of a risk consultant.
By Simon van Wyk,
an expert in risk
management at Aurecon.
He is an associate
member of IRMSA, a
corporate member of the
Disaster Management
Institute of Southern
Africa (DMISA), as well
as a Professional natural
scientist with the
South African Council
for Natural Scientific
Professions (SACNASP).