MASTER OF CONSTRUCTION MANAGEMENT

MCM4433 PROJECT RISK MANAGEMENT

SEMESTER 1, Session 2023-2024

ASSIGNMENT 2
SUBMISSION DATE: 9 JANUARY 2024

Lecturer:
SR DR. KAN FOCK KUI

STUDENT NAME: DAWN SIM XIAO QIAO (MCM23090001)

Table of Content
No Item Page
1.0 Introduction 1
2.0 Bukit Assek Redevelopment Plan 2
2.1 Client’s Risk Tolerance and Prioritize the Risk Based on 2-3
Impact
2.2 Risk Response Plan 3-5
2.3 Project Risk Management Tools 6-7
2.4 An Owner for Each Risk 7-8
2.5 Possible Triggers for Each Risk 8-9
3.0 Conclusion 10
References 11 - 13
1.0 INTRODUCTION
Embarking on a redevelopment project is a complex endeavor fraught with
challenges and uncertainties. As urban landscapes evolve and infrastructural needs
shift, the redevelopment process involves navigating a myriad of potential risks that
can impact timelines, budgets, and overall project success. In recognizing the
dynamic nature of redevelopment initiatives, the adoption of a robust Risk
Management framework becomes not only prudent but essential for ensuring the
resilience and success of the project.
Risk Management for a redevelopment project encompasses a systematic
and proactive approach to identifying, assessing, and mitigating potential threats and
uncertainties that may arise during the project lifecycle. Whether reimagining an
existing structure or revitalizing an entire urban area, understanding and managing
risks play a pivotal role in making informed decisions, optimizing resource allocation,
and safeguarding against unforeseen challenges.

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2.0 BUKIT ASSEK REDEVELOPMENT PLAN
2.1 Client’s Risk Tolerance and Prioritize the Risk Based on Impact.
2.1.1 Government Political Risk Tolerance
Regarding the Bukit Assek redevelopment project, it can be asserted that the
government exhibits a low risk tolerance for political risk. Government cannot afford
the political risk and also pressure from the public if the project fail. This is because
political stability is closely linked to economic growth. A stable political environment
provides a conducive atmosphere for businesses to operate, plan for the future, and
contribute to economic development. Moreover, from the public perspective, the
failure of the project has the potential to harm the government's reputation.
Hence, the political risk associated with the project should be given priority as
it will bring greater impact to the nation. Political uncertainties and frequent changes
in government policies can disrupt economic activities, hinder long-term planning,
and negatively impact growth (The Star, 2022).

2.1.2 Government Financial Risk Tolerance

In this project, the client is the Sarawak Government, and the Land Custody
and Development Authority (LCDA) is the designated government agency. In relation
to this project, the government’s risk tolerance is high for financial risk. This is
because the Sarawak Government has a very strong financial background.
Furthermore, the government is actively exploring a collaboration with a private
sector company, a strategic initiative aimed at reducing the risks associated with this
project.
Although the government has high risk tolerance for financial risk but it also
should be prioritize. This is because it could severely affect the project, potentially
leading to a shutdown due to disruptions in cash flow. Besides, construction projects
are susceptible to cost overruns due to various factors such as changes in scope,
unforeseen conditions, and inaccurate cost estimations. A lack of a strong financial
background could impede the smooth progress of the project.

2.1.3 Government Construction Risk Tolerance

As part of the redevelopment efforts, it may be necessary to close a
substantial section of the Bukit Assek road. In this situation, there is a potential for
traffic congestion issues to arise. The government agency like Ministry of Transport
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Sarawak may need to prepare a comprehensive Sibu Traffic Masterplan and
solutions devised by urban planning and traffic experts to address Sibu’s persistent
traffic challenges (TOYAT, 2023). In this scenario, the government's risk tolerance is
deemed high, given that developing a well-planned Traffic Masterplan is not
considered a challenging task.
Nevertheless, if the Traffic Masterplan is not well-executed, it could have
repercussions on the construction works. Poorly planned traffic systems often lead to
congestion, with traffic jams and gridlocks becoming a common occurrence.

2.1.4 Government Environmental Risk Tolerance

The governmental bodies overseeing environmental aspects in this project
could include the Ministry of Environment and Water. Therefore, it can be asserted
that the government exhibits a high tolerance for environmental risk in this project.
This is because the failure of environmental protection measures will not lead to the
shutdown of the project. Additionally, the government can opt to shift the risk to an
environmental consulting company, thereby decreasing the overall risk exposure.
However, the environmental pollution risk can also bring impact to the
construction labour’s health. Exposure to environmental risks, including air and water
pollution, can have direct implications for human health. Respiratory diseases,
waterborne illnesses, and exposure to toxic substances are among the health issues
associated with environmental risks. Climate change can also exacerbate health
challenges by influencing the spread of diseases and affecting food and water
availability.

2.2 Risk Response Plan

2.2.1 Financial Risk
The foremost concern in the Bukit Assek redevelopment project revolves
around the risk associated with finances. This is attributed to the predicted contract
sum for the project, which is estimated to reach billions in Malaysian Ringgit. The
substantial project sum will contribute higher risk.
Avoiding the risk associated with inflation rates in a project is a challenging
task.

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In order to avoid the risk of inflation, a viable strategy involves procuring construction
materials, machinery and equipment well in advance. By buying materials earlier,
construction stakeholders can secure lower prices, potentially saving a significant
amount of money compared to purchasing the same materials later when prices may
have increased (Team, 2022).
In addition, risk mitigation strategy involves implement stringent cost control
measures. Proactively managing and controlling costs helps prevent budget
overruns and financial strain. Besides, conduct market analyses for construction
materials to anticipate potential cost fluctuations. By understanding market trends
helps in negotiating favourable prices and avoiding sudden increases in material
costs. Collaborating closely with financial experts, including project financiers or
investment advisors, is advisable to formulate strategies for mitigating financial risks
linked to inflation. Explore alternatives such as hedging instruments, inflation-
indexed financing, or risk-sharing arrangements to reduce the project's vulnerability
to inflation.
As part of a risk transfer strategy, clients may choose to shift the risk to the
contractor by adopting a turnkey contract. In this case, the client will shift the risk to
the contractor. Under a turnkey contract, the contractor is obligated to complete the
construction work within the specified completion date, adhere to the agreed-upon
project cost, and ensure the functionality of the plant. Conversely, the contractor can
implement a risk transfer strategy by securing contracts with suppliers. This
approach helps mitigate the risk of material rate inflation, effectively transferring that
risk to the suppliers (NEEKHRA, 2022).

2.2.2 Construction Risk

Construction risk like project schedule delay also will bring higher impact to
the project. Project schedule delays can lead to various undesirable consequences
for both the project and its stakeholders. For instance, unexpected weather
conditions, supply chain disruptions, unforeseen changes in scope or unforeseen
technical and accident issues are examples of factors that can cause delays in a
project schedule (A. Assaf et al., 2006).
The strategy taken to avoid the project schedule delay can be achieved by
engage experienced architects, engineers, and construction professionals.
Construction professionals with experience in project management contribute to
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accurate scheduling. Their knowledge allows for realistic timelines, considering
various project complexities. Besides, an accurate scheduling helps set achievable
milestones and avoid the risk of overcommitting to timelines that cannot be met. Next
would be setting realistic goals for the project. The scope encompasses the
acceptance criteria, constraints, exclusions, and the detailed requirements of the
necessary deliverables. A well-defined scope not only aids in adhering to the
schedule but also contributes to the smooth execution of the project (Iqbal, 2023).
However, the risk mitigation strategy involves regular monitoring and tracking.
The project manager may employ project management software to consistently
monitor progress. This helps identify any potential delays early, allowing for timely
intervention. This practice enables the early detection of possible delays, providing
the opportunity for prompt intervention (Team, 2023).
The selected risk transfer strategy involves passing the risk to a third party,
such as an insurance company. Acquiring insurance is typically for areas beyond the
control of the project team. If an accident occurs at the construction site, resulting in
project delays, the losses can be claimed from the insurance company.

2.2.3 Environmental Risk

Environmental risks may affect the construction project, although the impact is
generally not as significant as construction related risks. The environmental pollution
can be reduced if the project team can follow the environmental control plan and will
not cause delay to the project schedule (Environmental Risk Professionals, 2020).
The risk avoidance and mitigation strategy entail minimizing the discharge of
contaminants at the project site. Construction sites can help protect the environment
by minimizing ways contaminants can leach into the surrounding soil and water.
Avoid dumping chemicals near the construction site by sending them to a facility that
can treat and safely dispose of them. Next, implementing erosion control measures
can be one of the strategy used to control the environmental pollutant risk (WebFX,
2023).
From part of risk transferring strategy, to safeguard against subcontractor
errors, project owners and contractors can mandate subcontractors to secure their
liability insurance. Furthermore, they can shield themselves from liability issues
arising from subcontractors by implementing contractual risk transfer mechanisms.
Additionally, the project owner has the option to transfer the risk to the environmental
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consultant firm. These professionals are deemed capable of addressing such
concerns.

2.3 Project Risk Management Tools

2.3.1 Risk Matrices
The risk matrix is considered to be one of the most fundamental and
commonly employed techniques in straightforward risk analysis. A typical risk matrix
is constructed by following procedures that involve identifying the risk, evaluating its
impact, assessing its likelihood, and calculating the financial implications
(Boussabaine & Kirkham, 2006).
A risk matrix can be particularly useful in a redevelopment project to visually
prioritize risks based on their potential impact on the project's success and the
likelihood of occurrence. It helps stakeholders focus their attention on high-priority
risks, ensuring that resources are allocated to address the most critical challenges.
In conclusion, it offers a straightforward way to communicate risk levels to
stakeholders. Nevertheless, it furnishes a qualitative evaluation and might lack
detailed information on the probability and impact of individual risks. So, if the Bukit
Assek redevelopment project emphasis more on the impact then risk matrix
technique can be avoided.

2.3.2 Risk Registers

The risk register, also referred to as a risk log, falls under the category of
qualitative risk analysis. A risk register is crucial for a redevelopment project to
systematically identify and document potential risks associated with the demolition,
construction, and redevelopment processes.
Risk register should be considered an important component of the
organisation’s risk management framework. It encompasses issues or events that
could potentially have an adverse impact on the project's success. Moreover, it is
suitable for projects with a moderate level of complexity and uncertainty. The risk
register provides a structured way to document and track risks and facilitates
communication and collaboration among project team members. Allows for the
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assignment of ownership and responsibility for each identified risk. While it helps
identify and categorize risks, it may not provide a quantitative analysis of the
likelihood and impact (Boussabaine & Kirkham, 2006).

2.3.3 Monte Carlo Simulation

Monte Carlo simulation is a practical tool used in determining contingency and
can facilitate more effective management of cost estimate uncertainties. The project
team may utilize Monte Carlo simulation for a quantitative analysis of project
uncertainty, considering various variables and their probabilistic distribution (Anthony
J., 2011).
As Bukit Assek redevelopment project is acknowledged as a complex
undertaking, Monte Carlo Simulation technique can be adopted. Monte Carlo
Simulation is suitable for complex projects with a high level of uncertainty and where
a more detailed risk analysis is required. It offers a more accurate and detailed
understanding of the range of possible project outcomes.
This technique incorporates probabilistic distributions for key variables,
allowing for a more nuanced analysis. Furthermore, it helps in identifying areas
where contingency planning may be necessary. However, the considerations of
adopting Monte Carlo involves of it requires more data and expertise in statistical
modelling. It may be more time-consuming and resource-intensive compared to
qualitative approaches (Boussabaine & Kirkham, 2006). Consider the availability of
data, time, and expertise. Monte Carlo simulation requires more resources compared
to qualitative approaches.
In conclusion, for less complex projects with lower uncertainty, a risk register
or risk matrix may suffice. For highly complex projects with significant uncertainty,
Monte Carlo simulation may be more appropriate.

2.4 An Owner for Each Risk

2.4.1 Owner for Financial Risk
The ownership of financial risks may vary depending on the contractual
arrangements, project structure, and the specific nature of the risks. However, in the
case of the Bukit Assek redevelopment project, the Sarawak Government serves as

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the project owner or client and holds the ultimate responsibility for ensuring the
financial success of the redevelopment initiative.
The onus of financial risk lies with the Sarawak Government, given that it is
the primary source of financial assistance for the project. If the government lacks a
strong financial foundation to support the project and cannot make payments to the
main contractors, it may potentially result in the suspension of the project. In this
case, the Government's crucial role involves having a solid financial standing and a
regular monthly release of payments to the main contractor to ensure the seamless
progress of the project (Abdul-Rahman et al., 2009).
2.4.2 Owner for Construction Risk
During the construction phase, the contractor is responsible for executing the
construction work according to the project specifications and within the agreed-upon
budget and timeline. In such a situation, if there is a project schedule delay, the
responsibility falls on the contractor.
Contractors wield significant control over the progression of projects, and it is
their responsibility to minimize interruptions to the best of their ability. The contractor
can prevent the delay by assigning the roles and responsibilities and coordinate
labour and materials to the job site so jobs are completed on time (Who is liable for
projects taking longer than estimated? 2021).

2.4.3 Owner for Environmental Risk

Responsibility for environmental risk during construction is typically shared
among multiple stakeholders involved in the construction project. Contractors are
often responsible for implementing construction activities in a manner that minimizes
environmental impact. This includes following best practices for waste management,
erosion control, and pollution prevention. Contractors may also be responsible for
compliance with environmental permits and regulations.
Furthermore, project owners or contractors may hire environmental
consultants to assess and manage environmental risks associated with the
construction project. When engaged, environmental consultants shoulder the
responsibility of identifying potential risks, devising mitigation strategies, and
ensuring adherence to environmental regulations.

2.5 Possible Triggers for Each Risk

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2.5.1 Triggers for Inflation Risk
Throughout recent history, numerous instances of elevated inflation can be
identified, with war or conflict frequently emerging as the common thread. Happen of
war or geopolitical tensions can disrupt global supply chains, affecting the availability
and cost of construction materials. Trade disruptions, increased transportation costs,
and interruptions in the production and transportation of raw materials can lead to
higher prices (University of Gothenburg, 2023).
Moreover, during times of war, demand for certain materials and equipment,
especially those related to defense and infrastructure repair, may increase. This
heightened demand can drive up prices for construction materials and equipment
across the industry.

2.5.2 Triggers for Project Delay Risk

Occasionally, unexpected alterations in project scope, stemming from sudden
client requests to modify the building design, can result in delays as the project team
adapts plans and timelines to accommodate these changes.
The next triggers will be adverse weather conditions, natural disasters, or
environmental restrictions can impact construction activities. Extreme weather
events, such as heavy rain or hurricanes, may force work stoppages and lead to
delays. Furthermore, the sudden of equipment failures, or issues with technology
implementation can disrupt project timelines. Unanticipated technical problems may
require additional time for resolution.
The sudden occurrence of events such as labour strikes, disputes, or other
forms of industrial action can bring construction activities to a standstill, causing
notable delays in the progress of the project. Moreover, the global COVID-19
pandemic and related measures, such as lockdowns and travel restrictions, have
significantly impacted construction projects worldwide (Esa, 2020).

2.5.3 Triggers for Environmental Pollution Risk

Various events and activities during a project can lead to environmental
pollution. The triggers for causing environmental pollutant risk including accidental
spills or leaks of hazardous chemicals, oils, or other pollutants can occur during the
handling, transportation, or storage of materials on a project site.

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 Besides, operations which involving heavy machinery, vehicles, or certain
industrial processes can release substantial volume of smoke that can cause air
pollution. Apart from air pollution, construction site activities such as pile driving and
the frequent beeping of heavy machinery can also contribute to noise pollution in the
area (Davda, 2023).

3.0 CONCLUSION
In conclusion, effective risk management is the linchpin of success for any
redevelopment project. As we traverse the complexities of urban redevelopment, it
becomes evident that uncertainties and challenges are inherent aspects of the
process. However, it is in the strategic identification, assessment, and mitigation of
risks that the resilience and triumph of the project lie.
The culmination of our exploration into risk management for redevelopment
projects reveals that the proactive management of uncertainties is not merely a
safeguard against potential setbacks; it is an integral component of strategic
decision-making. Through a thorough understanding of the intricacies involved, from
financial considerations and regulatory hurdles to unforeseen technical challenges,
project stakeholders can fortify their endeavours against the unpredictable nature of
redevelopment.
As we move forward into an era of transformative urban development, the
lessons gleaned from effective risk management in redevelopment are pivotal. By
integrating risk considerations into every phase of the project lifecycle, stakeholders
can not only protect their investments but also contribute to the creation of
sustainable, resilient, and thriving urban spaces. In this synergy of foresight,
adaptability, and strategic planning, the conclusion emerges: robust risk
management is not just a mitigation strategy; it is a catalyst for the success and
longevity of redevelopment projects.

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