The third section of this module has to do with risk assessment and how risk assessment plays a role in the planning phase of the project and the scheduling of the project. Going back to our reading of table of treatment options. The last option we have for treating risk is accepting them. So once you have exhausted your avoidance and mitigations and allocation, you may say this residual risk are going to be accepted and we're going to plan for them. Plan for them means that we're going to budget whether it's cost or schedule or plan, proactively plan for any occurrence of these risks. So how does that work? That typically is done near or during the procurement phase. At that point in the life cycle of the project, the allocations have been done, the scope management have been done, and what you're left off is a project that you can very pragmatically itemize and quantify and assess risks so that you can budget for them. Going back to our process, this is a cycle process going back to our process. Once you define that the risk treatment have been exhausted and you retain risk, you go back into the risk assessment box again and do a refresh of identification of the risks that we're retaining and were accepting, and how do we quantify those and plan for them? [COUGH] We talk a lot about having a holistic process, and a holistic process can only be guaranteed if you create a structure that will see the project through the entire life cycle. We call that risk breakdown structure. And in this case a risk breakdown structure will have requirements, design, procurement, construction. It could have commissioning, could have operations, a maintenance, it could have phases in between funding requirements and so forth. And each one of the sections have categories where we're going to explore the risks of this particular project so that at the end of the day we can look at all theses categories and say okay we are convinced that we have seen this project from all different faces, from all different scenarios, and we have a good understanding of the entire life cycle of the project. [COUGH] For the risk assessment we have number of risk identification tools that we can use. To name a few, you can do document review, you can do design review, concept review. You can do environmental impact assessment reviews. You can look at the jurisdictions, the permitting requirements the regulatory frameworks. You can do interviews with subject matter experts or stakeholders over people that have been involved in the early phases of the project. You'd typically want to do workshops because, Is as much as risk has to do a lot with perception and what the workshop does is co-locate all the different perceptions and all the different points of view on a project. And you get a consensus and you can clearly see how one becomes more important than others. Whereas if you talk to them individually, everybody will make their case to be the bigger and more important one. But when you put it in a workshop context, it's much more clear to make comparisons and boil down what's really important in a project. When we move to the analysis part, we can do a quantitative analysis. It has to do with probabilities of curious, an actual impact or we can do a qualitative. And when we do a qualitative, it would only [COUGH] compare risk as it relates to one another. But it's equally effective and each one of them will be effective in at different points in the project. Typically, if we're doing a quantitative risk analysis, you want to have input materials that are minimum to the project. You need to have a project cost estimate as high level or detail level as it can be available at the point, you want to know what are we talking about for major items or elements of the project and how those costs relate to each other. I can't justify a high risk of an element that only constitute 0.5% of the overall project in terms of cost. So we need to understand how these different elements play into the overall estimated cost of a project. [COUGH] you want to have some sort of logic for a schedule, and once you have a start and finish date or reference point. And the tool that we use to capture risk events is called risk register, and we'll go through that in a second. In this case, will be a quantitative risk register [COUGH]. The modelling approach will follow a Monte Carlo simulation. There is historically number of different ways of doing this. In the past, expected values were used, paired analysis were used. Nowadays, it's very easy to do simulations, because the computer software are relatively available, are cheap and [COUGH] virtually does not take any time to do it. And the outputs of this analysis have to compare cost and schedule milestones with confidence levels. So you can set your confidence level and budget for those specific elements. And because you have a model now, you can sort of what your top risks are on a more quantitative way. In the sense that the top risk are the risks that drive either the cost or the schedule to be greater than your reference. [COUGH] The integrated risk model has three elements, the schedule, cost estimate, and the risk register. In this module we'll talk about risk register as it relates to schedule and how we plan the schedule [COUGH] based on this model. But the same concept is applicable to budgets. So let's explore risk register for a second. Risk registers, as you know [COUGH] are just a log that if we categorize them could be very useful and very systematic. So in this case, based on the risk breakdown structure, we have category for this risk. This particular risk we're looking at is a risk that the landscaping requirements could change after the contract is awarded because a stakeholder will look at their input afterwards. Now, why is that important? It's important because if you already awarded a contract that has a price for certain landscaping requirements and as requirements change that price that you contracted for will change and someone will have to take care of that. To finance or pay for that. Now depending on the timing of that change does not only become a commercial transaction, but it also affects your schedule. So it could, depending of the change it could affect your planned schedule. So you only had 30 days to complete this activity, and now it becomes a monster activity that takes anywhere from 60 to 90 days, it could change to add another 30 or 60 days to your original duration. And again someone will have to give a break to the contractor to allow for that. So this is a quantitative register, and the quantitative register, like its name says, quantifies the probability of occurrence and in this case 10% chance that this change will happen. And if it occurs, only if it occurs it could change the schedule from a minimum of ten additional days to a maximum of 30 additional days with the most likely in the middle. So that's the way you capture risk and you capture it for every single category, you capture a number of them. Now what do we do with that risk? We understand that is uncertain. So it's not, if it was an issue and if we were sure that this issue would happen, we would include it as part of our schedule development with an activity bar, with a fixed duration, with a start and finish date. But this risk has his uncertainty and has a likelihood or probability of occurrence and it could be in percentage points. So how do we account for this particular risks in the project? Well, we also have to understand if we look at these schedule only that its duration may not be fixed. It may be a range. That its impact may be associated with one activity or with multiple activities in the project schedule. And it may come from different places, it may be an external event, it may be an owner-led event or it maybe a contractor event. Nevertheless when we're talking about schedule the time cannot be reimbursed to the owner, the time is always lost. So we need to figure out how we plan for schedule impact even if that risk does not come from our control but it comes from a third party that is out of our control.
