Lecture 2 - Definitions and Statistics (SS21)

L2 – SS2021
Wirtschaft
Risk Management in Construction and Real Estate Management
Definitions and Statistics

Dr. rer. nat. Wolfgang Eber
Lehre
Forschung
Technische Universität München

Construction Management and Real Estate Development
exprt Cardano
L2 – SS2021
Wirtschaft

Lehre
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the written permission of the originator.
Forschung

L2 – SS2021
Wirtschaft

Welcome to the second lecture...
According to the last lecture, the actual task of Risk Management is to

Lehre
bring multiple interacting elements to an order, allowing to understand

the behaviour of these smaller subsystems theoretically or statistically
as well as their interaction and therefrom derive an understanding of the
behaviour of the complete system. The complete lecture will be about
this…
Forschung

L2 - 2021 Definitions and Statistics Construction Management and Real Estate Development
Risk Management – Definitions and Statistics
RedTh ClassAppr TA
SLIDE 4
© Protected by copyright law
Therefore, we’ll have to investigate some given definitions. Discuss them within your
team, probably criticise them and in the end find your own understanding.
Risk Management – Definitions and Statistics
SLIDE 5
Definition
Entrepreneurial risk is the threat that a result differs from the expectations
respectively goals due to not considered or falsely appraised interfering factors.
???
Taken from Jean-Paul Thommen, Ann-Kristin Achleitner „Allg. Betriebswirtschaftslehre“, 6. Auflage, Gebler 2009, Wiesbaden
SLIDE 6
This common definition sounds fairly accidental…
...vaguely given… - Is this hope?

Definition
Entrepreneurial risk is the threat that a result differs from the expectations
respectively goals due to not considered or falsely appraised interfering factors.
May it happen, that something is not considered?
…a result might positively as well as negatively differ from

expectations. Thus, risk as well as chances are implied.
Is man expecting asymmetrically always the best outcome?
???
Could this mean, considered, but ignored?
Does this refer to blind hope?
What about uncertainties, where “probabilities” are

given - purely out of gut feeling? SLIDE 7
Definition
The entrepreneurial risk is the uncertainty of an assumption as to its ability to fulfil

future requirements and comprises depending on the degree of certainty the potential
of hazard as well as of chances […]
!!!
E:dur
Taken from: LBI, Vernetzte Strukturen WS 09/10, München
SLIDE 8
This definition (LBI) is more neutral…
An assumption is made in advance, i.e. prior to knowing

Definition the outcome (i.e. duration of an activity).
The entrepreneurial risk is the uncertainty of an assumption as to its ability to fulfil

future requirements and comprises depending on the degree of certainty the potential
of hazard as well as of chances […]
“Uncertainty” in this context is just colloquial, not to the definition
The question here is whether the assumption will do in

the given but unknown future, i.e. what will be the
consequences of this assumption if situations develop
differently, positive chances as well as negative risks.
!!!
How can these consequences be limited (right now) in a
way that we will be able to live with the result in the end.
Taken from: LBI, Vernetzte Strukturen WS 09/10, München
SLIDE 9
Definition
Risk Management is the entirety of all activities, processes, structures and

instruments implemented to master the companys' risks.
Actively!
id-an(ev-cl) ctrl
Taken from: Jean-Paul Thommen, Ann-Kristin Achleitner „Allg. Betriebswirtschaftslehre“, 6. Auflage, Gabler 2009, Wiesbaden
SLIDE 10
Therefore, “Managing Risks” is to deal professionally with

the unknown…
Definition
Risk Management is the entirety of all activities, processes, structures and

instruments implemented to master the company’s risks.
This clearly means to play an active role insteadActively!

of waiting
passively for an unknown future…
The next slides discuss the classical approach of Risk

Management according to literature….
SLIDE 11
Phases in Risk Management
1. Identification and analysis of risks
4. Monitoring Risk 2. Evaluation and

and reporting Management Classification of
Risks Risks
3. Activities of Risk Control
SLIDE 12
Phases in Risk Management
1. Identification and analysis of risks
4. Monitoring Risk 2. Evaluation and

and reporting Management classification of
Risks risks
Remark: It is not clear why in

this approach a closed loop is
used. For sure, the mentioned 3. Activities of Risk Control
four steps need to be done
again and again, but certainly
not repeatedly on the same Let’s discuss these steps (phases) …
Taken from: Jean-Paul Thommen, Ann-Kristin Achleitner „Allg. Betriebswirtschaftslehre“, 6. Auflage, Gebler 2009, Wiesbaden
issues.
SLIDE 13
First Phase: Identification and Analysis of Risks
• Market Risks
... arise in the relevant markets of the company, particularly the delivery market (e.g.
dependency on one big client), the job market (e.g. specific employment
qualifications), the procurement market (e.g. dependency on raw materials) and the
financial market (e.g. offers on own and debt capital). Furthermore, risks arise from
social, political, technological, economical and ecological development.
T: SYS-NSYS
RE big/loc
Taken from Jean-Paul Thommen, Ann-Kristin Achleitner „Allg. Betriebswirtschaftslehre“, 6. Auflage, Gabler 2009, Wiesbaden
subcontr
fin-profit-wages
solar/nuclear/ greece/pollbadge/scPrem
SLIDE 14
• Market Risks
... arise in the relevant markets of the company, particularly the delivery market (e.g.
dependency on one big client), the job market (e.g. specific employment
financial market (e.g. offers on own and debt capital). Furthermore, risks arise from
social, political, technological, economical and ecological development.
In Construction and Real Estate, projects are of large volume and

inevitably local. So, market risks play a significant role. This concerns the
markets to sell and purchase the objects as well as subcontractor and
job markets. Furthermore, profit margins are tight and the markets in no
way perfect.
On top of this, in particular they are subject
Taken from to many
Jean-Paul Thommen, social
Ann-Kristin and
Achleitner „Allg. political 6. Auflage, Gabler 2009, Wiesbaden
Betriebswirtschaftslehre“,
changes…
SLIDE 15
Definition:
• Market Risks
... arise inSystemic Risks
the relevant are originating
markets from theparticularly
of the company, systems where the project
the delivery is (e.g.
market
dependency embedded
on one in.
bigThey can
client), probably
the be described
job market in statistical
(e.g. specific employment terms.
Non-systemic
financial market Risks
(e.g. offers onare originating
own and debtfrom the project
capital). itself. Therefore,
Furthermore risks arise from
these are
social, political, not describable
technological, by statistical
economical methods since
and ecological the law of large
development.
number is not fulfilled for a single project. However, these can be
decided upon and they are within the scope of being handled by the
decision-makers of the project.
SLIDE 16
• Management Risks:
...arise from failures in the management system. Could be on the one hand
deficiencies in the planning and the supervisorial system and on the other hand
personal misconduct of executive managers. Corporate Governance deals with such
areas of conflict.
• Strategic Risks:
...referring to the chosen business strategy, e.g. the risk of a product-/market-strategy,
a competition strategy or a specific core competence.
struct/rep/contr
turnk/structw/ppp Taken from: Jean-Paul Thommen, Ann-Kristin Achleitner „Allg. Betriebswirtschaftslehre“, 6. Auflage, Gabler 2009, Wiesbaden
SLIDE 17
This is a matter of structure, reporting, controlling…

• Management Risks:
...arise from failures in the management system. Could be on the one hand
deficiencies in the planning and the supervisorial system and on the other hand
personal misconduct of executive managers. Corporate Governance deals with such
areas of conflict.
• Strategic Risks:
...referring to the chosen business strategy, e.g. the risk of a product-/market-strategy,
a competition strategy or a specific core competence.
… a particular task of the management. Make sure
you know what you are doing, and the more, you
have the competence to do so…
SLIDE 18
• Operative Risks:
...arise from ongoing operational business in various activity areas (e.g. marketing,
materials logistics, production). ...caused by inefficient processes and systems or by
personal mistakes. These are faults, malfunctions and accidents.
• Financial Risks:
...basically referring to financial goals. The focus is on liquidity (e.g. risks of cash-
flows) and profitability (e.g. risk of borrowed capital).
miscalc/QA/hinge
Not cost/vacancy-opcost
RE: real/fin
SLIDE 19

… these are certainly no risks as they are a consequence of quality
assurance and management. Such may happen, but there need to be
mechanisms installed to deal with them.
• Operative Risks:
...arise from ongoing operational business in various activity areas (e.g. marketing,
materials logistics, production). ...caused by inefficient processes and systems or by
personal mistakes. These are faults, malfunctions and accidents.
• Financial Risks:
...basically referring to financial goals. The focus is on liquidity (e.g. risks of cash-
flows) and profitability (e.g. risk of borrowed capital).
Real Estate is in particular both, a matter of real economy, where
requirements of people or a society need to be answered, as well as a
matter of finance where items are traded for reasons of rent.
SLIDE 20
Specific areas:
• IT Risks:
... importance of the IT risks derives from the fact that they support and connect
numerous key managing and value-adding processes. Mistaken decisions in this area
therefore often have huge and long-term impact on success.
• Ecological Risks:
... can appear throughout the whole ecological life cycle of a product, i.e. from the raw
materials production to disposal. Therefore subject to intense eco-controlling,
responsible for planning, monitoring and control of all ecological activities as well as
the mastery of risks.
work/supp
Soilcont (evt systemic?)
miss tech risk: soil class
SLIDE 21

This issue just represents services which are just required
Specific areas:
to function flawlessly, thus their details are of no
importance, however their malfunctioning would cause
• IT Risks: disastrous consequences.
... importance of the IT risks derives from the fact that they support and connect
numerous key managing and value-adding processes. Mistaken decisions in this area
therefore often have huge and long-term impact on success.
• Ecological Risks:
... can appear throughout the whole ecological life cycle of a product, i.e. from the raw
materials production to disposal. Therefore subject to intense eco-controlling,
responsible for planning, monitoring and control of all ecological activities as well as
the mastery of risks.
Typical systemic risks.
SLIDE 22
Second Phase: Evaluation and Classification of Risks
• Damage Potential: What would be the potential hazard?
• Occurrence Probability: What is the probability of the occurrence of a damage?
Weyl
Taken from: Jean-Paul Thommen, Ann-Kristin Achleitner „Allg. Betriebswirtschaftslehre“, 6. Auflage, Gebler 2009, Wiesbaden
Soilcl: equip-dispo-dely
Bas: die – large#
r vs uc
>RPortf SLIDE 23
After identifying the possible risk, as a second step, the

potential consequences and the probability need to be
investigated.
• Damage Potential: What would be the potential hazard?
• Occurrence Probability: What is the probability of the occurrence of a damage?
Keep in mind that only true risks possible allow for judgement based on
given probabilities. “Probabilities” for uncertainties have no meaning.
Weyl
Soilcl: equip-dispo-dely
Bas: die – large#
r vs uc
>RPortf SLIDE 24
Risk Portfolio:
• Area I comprises minor risks that are negligible because they would cause only little
damage.
• Area II: Low probability of occurrence, but in case of occurrence the company's
existence is highly threatened. Particularly these improbable risks are likely to be
underestimated or ruled out.
Smith
Chancellors Office
P
III IV
I II H
SLIDE 25
Risk Portfolio: Based on the probability of occurrence and possible hazard

four scenarios are described:
e.g. a particular employee reports sick this morning.

• Area I comprises minor risks that are negligible because they would cause only little
damage.
• Area II: Low probability of occurrence, but in case of occurrence the company's
existence is highly threatened. Particularly these improbable risks are likely to be
underestimated or ruled out.
e.g. a final activity on a building goes wrong and may ruin

the whole floor surface.
SLIDE 26
Risk Portfolio:
• Area III comprises minor risks which often cause little damage. These risks
nevertheless must not be underestimated because they often indicate the upcoming
of greater risks and hazard.
• Area IV indicates the highest degree of threat for a company. It mostly concerns
fundamental strategic risks (e.g. loss of a core competence).
delayed act
ruinous prj
P
III IV
I II H
SLIDE 27
Risk Portfolio:
e.g. a slight delay of an activity might not mean much, but as
this happens often, any schedule might prove meaningless
and may therefore lead to problems…
• Area III comprises minor risks which often cause little damage. These risks
nevertheless must not be underestimated because they often indicate the upcoming
of greater risks and hazard.
• Area IV indicates the highest degree of threat for a company. It mostly concerns
fundamental strategic risks (e.g. loss of a core competence).
e.g. a ruinously rated singular project will doubtless be

ruinous and this will for sure bear unmanageable hazard…
SLIDE 28
Risk Portfolio:
Probability of Occurrence
high
existence-threatening
fatal
med
acceptable
low no importance
Hazard
low med large very large
Risks relevant for report as top management is held reponsible

for control
Risks relevant for report as strategic units are held reponsible for
control
SLIDE 29
Risk Portfolio:
Probability of Occurrence
high
existence-threatening
fatal
med
acceptable
low no importance
Hazard
low med large very large
Risks relevant for report as top management is held reponsible

for control
Plotted on a graph seems to indicate that the product of possible hazard and probability of
Risks relevant for report as strategic units are held reponsible for
occurrence pictures the course
control of constant risk (hyperbola). Based on this idea, in many
papers the term “Risk” is defined as this product.

Remark: The next lecture will have to investigate this concept for validity on singular projects.
SLIDE 30
Third Phase: Activities of Risk Control
• Accepting Risks:
The risk is completely accepted including possible consequences in case of a hazard
(e.g. the costs of a accident).
• Avoiding Risks:
Designated plans are cancelled in order to avoid possible hazard (e.g. decision
against developing a product, conquering a new market, resigning from „going
public“).
blind/hope/smallpartsWar
Stop Piano
SLIDE 31
Consequently, knowing about a risk implies dealing with

this knowledge which is risk control.
Some well-known concepts here:

This is possibly ignoring a risk, based on blind hope, but could as
well be well-intended, e.g. in manufacturing very small and cheap
items, where a simply replacement on demand of a customer is
more advantageous than implementing costly quality assurance.
• Accepting Risks:
The risk is completely accepted including possible consequences in case of a hazard
(e.g. the costs of a accident).
• Avoiding Risks:
Designated plans are cancelled in order to avoid possible hazard (e.g. decision
against developing a product, conquering a new market, resigning from „going
public“).
e.g. don’t accept a project you can’t handle due to your financial
limits or limited knowledge.
SLIDE 32
• Cutting Risks:
The attempt to reduce a given risk respectively its consequences by appropriate
measures. This may be achieved for example by a Joint Venture or by raising of own
capital contribution.
• Transferring Risks:
Risks can be transferred completely or partially to another unit, usually possible with
insurance (e.g. product liability insurance) or coverage (e.g. forward exchange
dealing). (See below!)
prop only
traff vol Croatia/Sydney(Purch-sell
SLIDE 33

…in the end, this is “activity-based risk management”,
which is discussed with the next lecture.
Remark: a joint venture reduces a risk only proportionally!
• Cutting Risks:
The attempt to reduce a given risk respectively its consequences by appropriate
measures. This may be achieved for example by a Joint Venture or by raising of own
capital contribution.
• Transferring Risks:
Risks can be transferred completely or partially to another unit, usually possible with
insurance (e.g. product liability insurance) or coverage (e.g. forward exchange
dealing). (See below!)
e.g. with a major PPP motorway project in Croatia, the state

supported the contract by issuing a traffic volume guarantee.
from Jean-Paul Thommen, Ann-Kristin Achleitner „Allg. Betriebswirtschaftslehre“, 6. Auflage, Gabler 2009, Wiesbaden
Remark: Risks can be sold and Taken
purchased, however not without a
respective equivalent. (See later.)
SLIDE 34
Fourth Phase: Risk Control/Reporting
• …permanently monitoring/observing identified risks

• …identification of new risks
• …frequently collecting crucial information
• …continuously keeping decision makers informed.
come-go
soil classes
perc of rented volume
market change
Bt: DecMk?!
SLIDE 35
As risk develops from unknown to partly and then

completely known, with the development of contracts also
rise to awareness, risk observation and investigation
Fourth Phase: Risk Control/Reporting
remains a continuous task.
…this should not be possible, otherwise the identification

process was incomplete.
• …permanently monitoring/observing identified risks

• …identification of new risks
• …frequently collecting crucial information
• …continuously keeping decision makers informed.
This is self-evident, however, consider yourself as the

decision-maker. So, the question is, how to manage this in
the end.
SLIDE 36
Definition
Risk Management System is an Integrated Management System comprising not only

Risk Management but also Risk Strategy, Organisation of Risk Management and Risk
Culture.
control processes
actively/cont
Org/Cult/Strat
SLIDE 37
Definition
Risk Management System is an Integrated Management System comprising not only

Risk Management but also Risk Strategy, Organisation of Risk Management and Risk
Culture.
Risk Management System is the formalized structure of

processes to deal with not completely predefined issues.
This is identical to control processes …
(See GPPO lecture.) control processes
Beyond the actively managing part (=“Organization of Risk Management”), the

issues “Risk Strategy” and “Risk Culture” are also understood as part of the
Risk Management System. Therefore, they are described in short after that…
SLIDE 38
Designing the Organisation Operating the Organisation
Actual construction substance and context/conditions
Monitor Evaluate Adjust

Risk Coordinate
Management-
System terminate
Initiate
Target construction substance and context/conditions
Inform
Record/dokument
[Coord: Collt inf, incons, inf voids]

/Prob+Haz
SLIDE 39
© Protected by copyright law Recapitulation GPPO
The respective processes of control are to

Then, these processes are just operated,
be implemented and set up in advance,
expecting perfect control within the given
including e.g. target situation, resources of
range and resources to the given accuracy.
control, responsibility etc.
Designing the Organisation Operating the Organisation
Actual construction substance and context/conditions
Monitor Evaluate Adjust

Risk Coordinate
Management-
System terminate
Initiate
Target construction substance and context/conditions
Inform
Record/dokument
Remark:
Terms like “Probability” or “Possible Hazard” are not used in this context!
SLIDE 40
© Protected by copyright law Recapitulation GPPO
Risk Management System
Risk Strategy comprises the basic principles defining how to operate entrepreneurial
risks and chances.
In particular:
• permitted risks,
• a minimum ratio of chances vs. hazard in particular areas of activity,
• a maximum acceptable loss,
• the hazard limit to trigger activities of Risk Control,
• covering measures respectively instruments to be used in Risk Control.
entrep.dec.
overview
loss daughter
SLIDE 41
Risk Management System
Risk Culture • Risk awareness

• Sensitizing for possible hazard to
• human beings
• goods
• environment
• property
• success
• Key role of the top management
• Targeted and frequent information
• Exchange of experiences
sweep
prj results
Taken form: Jean-Paul Thommen, Ann-Kristin Achleitner „Allg. Betriebswirtschaftslehre“, 6. Auflage, Gabler 2009, Wiesbaden
skip Contextfactors
SLIDE 46
Risk Management
To watch out like a hawk…
…have a plan B
Plan B
exp: past -- fut SLIDE 50
Risk Management
To watch out like a hawk…
…have a plan B
On this background the core of this term’s

lecture – in short words – is first to make
sure you know what can be known at any
Plan B
time and secondly to have options ready
for any cases which limit the outcome to
what you are able to deal with… This always implies to draw conclusions
from what we know (= experience) in the
past (unfortunately) in order to predict the
future (unfortunately) as perfectly as
possible.
Mathematically this isSLIDE
… 51
Statistics is describing reality by a reduced

set of parameters, i.e. investigate
structures and generalize results…
Stochastics is the art of qualifiedly

guessing what will happen for a future
scenario, probably based on statistics
inherited from the past…
A little bit of statistics – or was it stochastics?
Probably you are familiar with these principles, however, do? know?
exp (struct/gen)
let’s just briefly go through it and see… stoch: guess qual
SLIDE 52
Example:
Duration of a tunnelling drift step
SLIDE 53
Example:
Duration of a tunnelling drift step
SLIDE 54
A tunnel boring machine fixates itself

strongly to the position by extending the
red feet and pressing them firmly towards
the surrounding rock.
Then, the drilling head is ready to do a
step of e.g. 1.5m of progress before the
system is completely extended and
needs to be repositioned accordingly.
The consumed time for drilling one step Example:
is given by many local parameters and Duration of a tunnelling drift step
serves as an example here…
SLIDE 55
Determined value
#n measurements lead always to the same value (100%)
Measuring e.g. 1000 steps theoretically
always (100% of the measurements) lead
frequency (rel):
Rel. Häufigkeit to the very same value.
1
0
Transportzeit
measured duration
In reality: In reality a different, in particular varying frequency is measured…
• Many parameters with little effect: e.g. state of the driver and cutter, tensions.
• Uncontrollable parameters, e.g. geology, hydrology excav remov
geologist/power/derail
…due to e.g. geological reasons, power-down, derailing cars etc. SLIDE 56

The histogram visualizes the number of measured incidents where a value (= duration)
between t and t+Dt was measured as a share of the total number of incidents
Distribution of the drift durations over many measurements.

Percentage of the measurement results located within the period [t, t+Δt]?
H (t , Dt )
In order to smoothen this curve it is transposed into frequency density, which is lim
Dt →0 Dt
[t, t+Δt]
Then, the Rel. Häufigkeit
frequency (rel) im
Zeitintervall
within [t,t+Dt]:
frequency can
be read from
the plot by
integrating the
density over the
interval in
question.
0
Transportzeit
measured duration
lim H/Dt
Freq->prob; meas->pred; Mod
SLIDE 57
The probability density looks absolutely identical, however, implies a very fundamental
Distribution of the drift durations over many measurements.
change:
Percentage of the measurement results located within the period [t, t+Δt]?
“Frequency” is renamed “probability”, where frequency is taken as a measurement,
while probability is a prediction for a future behaviour. Therefore, the former description
is believed to provide a proper model for prediction.
This is only true if the future scene is assumed to [t, bet+Δt].

exactly like the measured past, i.e.
all circumstances are Rel. Häufigkeit
identical
frequency (rel) im
and if all the details of description are correctly reflecting
Zeitintervall
the measured situation.within [t,t+Dt]:
Thus, a measurements parameterized description is deliberately turned into a model
0
Transportzeit
measured duration
SLIDE 58
Then, the model is to be described by a set of information-reducing parameters.

Make sure to be aware of the reduction of information.
Probability density: limit value for Δt=0
• Probability as an integral over the probability density

• Normalization: probability of the whole distribution = 1
• Small intervals: interval probability = probability density * interval length
Probability density
Wahrscheinlichkeitsdichte
0
Transportzeit
measured duration
SLIDE 59
A large number of individual measurements are believed to be represented

accordingly by e.g. mean value, variance, skewness, kurtosis etc. …
Basic characteristics of distributions

• Normalization  P(t ) dt  = 1
0

• Mean P=  t  P(t ) dt 
0
(expected value)
• Variance 
 2 = (t − P) 2 P(t ) dt  „width of distribution “
0
• Skewness Third statistical moment…

• Kurtosis Fourth statistical moment…
…the number of statistical moments describing the behaviour with sufficient
accuracy is not trivial and needs to balance against the detailed characteristics of ##? Distrib?
the individual measurements.

SLIDE 60
Gaussians are used a lot, but often lack any explanation. If there is not
mathematical reason, any distribution serves just as a fit.
Excursus: …e.g. for the duration of an activity, a Gaussian is certainly
not appropriate, since modelled characteristics like negative
durations or infinite durations are not realistic…
Reason for using a distribution Probably you are looking just for a fit…
• Modelling frequency (The central limit theorem leads to the Gaussian cumulating
(nearly) all types of distributions, however, only if an infinite
• Parameters of the model number of elements are cumulated).
• Fitting a model
• Gaussian distribution?
Centr LimTh
SLIDE 61
The BETA distribution is used as a mere fit where strict upper and
lower limits are given. Then, the respective parameters may be
BETA distribution computed from the frequency parameters.
Durations:
• Minimum duration
C ( t − a )p−1 ( b − t )q −1  a  t  b
f (t) =  • Maximum duration
 0 otherwise • reason?
f(t)
C t p−1 (1 − t )q−1  0  t  1
f (t) = 
 0 otherwise
p −1
t extreme = (= m)
p+q−2
p
t expected = (= t e )
q+p
a m pq
te b t
 =2
(q + p + 1)(q + p) 2
SLIDE 62
Mean values vs. distribution

• Mean values as determined facts lead to determined results
• Loss of the distribution information
• Faulty results on div. distributions (e.g. with boundaries)
Blackbox
• More difficult/computing time required Qual: Dur/Cst: RM
probability density
Randbedingung
boundaries
0
Transportzeit
duration
SLIDE 63
Ignoring distributions leads to the believe of determined results.
If values are distributed the knowledge about a

possible risk is lost.
Mean values vs. distribution
• Mean values as determined facts lead to determined results
• Loss of the distribution information
Ignoring the width of
• Faulty results on div. distributions (e.g. with boundaries) distributions might
• More difficult/computing time required have catastrophic
results:
This should not play a role. e.g. duration of a
project, where the
probability density mean value sits
boundaries
perfectly in time,
Randbedingung
however 50% of all
situations violate the
deadline significantly.
(see e.g. also QA)
0
Transportzeit
duration
SLIDE 64
Keep in mind! No prediction for singular situations!
Remarks:
• Probabilities do not contain information on the single case, „anything is
possible“
• Use of distributions: e.g. tunnel boring drift steps
• No other information available
• Large number of procedures of one type (balancing)
• Construction (operative/technical): results/procedures/instructions need
to be definite
…in the end, strict and valid instructions need to be given.
SLIDE 65
Assignment
Investigate and understand the production of pre-manufactured components or
formwork elements.
For simplicity only one parameter for quality is given, the lateral size (or „score“).
The target would be: 1681.0
Two different sets of measurement from the past for two respectively different scenarios
are available (separate files).
The required tolerance is set to +/- 0.3%. What surplus production is required to
face the risk?
SLIDE 67
Assignment
Investigate and understand the production of pre-manufactured components or
formwork elements.
For simplicity only one parameter for quality is given, the lateral size (or „score“)
The target would be: 1681.0
Two different sets of measurement from the past for two respectively different scenarios
are available (separate files).
The required tolerance is set to +/- 0.3%. What surplus production is required to
face the risk? What if the target is <=1684.0?
Recommended Proceeding: • Analysis of distributions

(MATLAB, MS Excel) • Parameters of distribution
• Character of distribution (model)
• Missing information
• Remaining risk
• Different distributions
What does this mean for a client who just needs four stairway elements?
SLIDE 68
L2 – SS2021
Wirtschaft

Lehre
Forschung


Lecture 2 - Definitions and Statistics (SS21)

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L2 – SS2021

Risk Management in Construction and Real Estate Management

Definitions and Statistics

Technische Universität München

Risk Management in Construction and Real Estate Management

Definitions and Statistics

Technische Universität München

Risk Management in Construction and Real Estate Management

Definitions and Statistics

According to the last lecture, the actual task of Risk Management is to

bring multiple interacting elements to an order, allowing to understand

Technische Universität München

Risk Management – Definitions and Statistics

Risk Management – Definitions and Statistics

This common definition sounds fairly accidental…

...vaguely given… - Is this hope?

May it happen, that something is not considered?

…a result might positively as well as negatively differ from

What about uncertainties, where “probabilities” are

The entrepreneurial risk is the uncertainty of an assumption as to its ability to fulfil

This definition (LBI) is more neutral…

An assumption is made in advance, i.e. prior to knowing

The entrepreneurial risk is the uncertainty of an assumption as to its ability to fulfil

The question here is whether the assumption will do in

Risk Management is the entirety of all activities, processes, structures and

Therefore, “Managing Risks” is to deal professionally with

Risk Management is the entirety of all activities, processes, structures and

This clearly means to play an active role insteadActively!

The next slides discuss the classical approach of Risk

Phases in Risk Management

1. Identification and analysis of risks

4. Monitoring Risk 2. Evaluation and

3. Activities of Risk Control

Phases in Risk Management

1. Identification and analysis of risks

4. Monitoring Risk 2. Evaluation and

Remark: It is not clear why in

First Phase: Identification and Analysis of Risks

First Phase: Identification and Analysis of Risks

In Construction and Real Estate, projects are of large volume and

First Phase: Identification and Analysis of Risks

First Phase: Identification and Analysis of Risks

First Phase: Identification and Analysis of Risks

This is a matter of structure, reporting, controlling…

First Phase: Identification and Analysis of Risks

First Phase: Identification and Analysis of Risks

First Phase: Identification and Analysis of Risks

First Phase: Identification and Analysis of Risks

Second Phase: Evaluation and Classification of Risks

• Damage Potential: What would be the potential hazard?

• Occurrence Probability: What is the probability of the occurrence of a damage?

Second Phase: Evaluation and Classification of Risks

After identifying the possible risk, as a second step, the

• Damage Potential: What would be the potential hazard?

• Occurrence Probability: What is the probability of the occurrence of a damage?

Second Phase: Evaluation and Classification of Risks

Second Phase: Evaluation and Classification of Risks

Risk Portfolio: Based on the probability of occurrence and possible hazard

e.g. a particular employee reports sick this morning.

e.g. a final activity on a building goes wrong and may ruin

Second Phase: Evaluation and Classification of Risks

Second Phase: Evaluation and Classification of Risks

e.g. a ruinously rated singular project will doubtless be

Second Phase: Evaluation and Classification of Risks