Terms of risk management

Instructions for the new paper:
• Edit the previous report to include the new methodology that includes looking at risks and putting them into the excel sheets and then analyzing them and include information about wafraa project in terms of scope and risk register
• Analyzing both projects Wafraa road and first ring road in terms of risk management plan and how to integrate EVM – earned value method with the excel sheet. I have attached papers that I have read about the methodology of PMI risk management process and earned value methodology.
• Report to be clear and concise the length is not important, but the analysis, conclusion, and recommendations are important.
• Please rewrite anything that is not structured properly. You do not have to stick with what is written if you have a better and concise way to say it.
• You can use a similar excel sheet like ones that are uploaded but that does mean that the data is correct. You will need to look at the documents and extract data from them and add them to the excel sheet.
Main Goal:
In the previous report, we made quantitative evaluation of risks by standing in a certain point in time in the project, look ahead and perform an estimation of risk probability and risk impact with very little or none statistical data and many assumptions and estimations. This made the quantitative evaluation work, but with uncertain accuracy compared to real project. In addition, the verification or recalculation of the quantitative evaluation in each period would have additional taken time and effort to the PM.
EVM is a technique that stands in the same point in time, looks back int the project performance to date, calculates parameters and indexes, and based on these calculations it provides estimations about final project cost.
The idea in this paper was to combine both techniques in a way that the “manual” quantitative evaluation of a risk (probability – impact) could be replaced by “automatic” valuation based on EVM data, so that if in a new project EVM could be implemented, quantitative risk valuation could be obtained, measured and managed more easily.
Additionally, the combination of EVM with risks, is that the risk value cold be increased automatically if the project performance of the specific group of activity was poor (CPI and/or SPI < 1), or could be reduced (mitigated) automatically If the performance was superior (CPI and /or SPI >1).
After a series of steps with the EVM math, it could be assumed that the quantitative risk of any section of the project could be calculated as the difference between EAC3 and EAC1, for that specific section of the project.

Reference papers:
All are good to read and provide useful information.
If short in time, do please read carefully EVM References 1, 2, 7 and 10.

METHODOLOGY Steps for each project:

• Basically you will have two spreadsheet for each project one containing the risk statements and the other EVM data.
  Step 1: reconstruct EVM data for each project, breakdown into “subprojects”, defined by the group of activities defined at the Bill of Quantities, and reported in each payment record.
  Step 2: in the “risk file”, make combinations of “Risk Statements” and “Groups of activities”. The total project risk would be the addition of the risk value of each “Group of activity”. The risk statements would be the topics to be discussed and review if the risk value of a group of activity got high at any time along the project. You can use the potential claim documents to help with the risk statements along with the cpm schedule and the bill of quantities.
  Step 3: analyze the results, different impacts of CPI, SPI, automated mitigations. Suggest project WBS and control accounts layout for better cost and risk tracking and EVM calculation.

EVM Files
1) EVM source data for each project was obtained from:
a. Payments Records
b. Bill of Quantities
c. Planning Records:
i. Project 02: S-Curve in excel file
ii. Project 02: Late dates included in project schedule file in PDF format
2) EVM calculation of parameters and indexes were included for each “subproject” or “group of activities”, for each payment installment or quarterly report installment.
3) The CPI is not a parameter than could be extracted from the project files, as it would come from internal cost records from the company. Therefore, it was left open to be defined for each period. The files right now take a constant CPI value of 0.9, but the idea was to make it variable between 0,75 and 0,95, almost randomly, along the length of the project.

Approach to Integration of Earned Value Management to Risk Management Processes in Construction Project Management. Application to Case Studies

By:
Saqer Al Ghanim

Supervised by:
Dr.Khaled Al Rasheed

Submitted on 20/01/2022

TABLE OF CONTENTS

Introduction 1
i. Objectives 2
ii. Introduction to Risk Management 4
iii. Introduction to Risk Management Processes 4
iv. Introduction to Earned Value Management 6
v. Case Study 1 – RA/121 Contract: First Ring Road 9
vi. Case Study 2 – RA/239 Contract: Sabah Al Ahmed and Khiran Road 10
Literature Review 10
i. Review of Research on Risk Management 10
ii. Risk Management Processes using PMI and PMBOK 12
iii. Plan Risk Management 18
a. Risk Identification 19
b. Qualitative Risk Analysis 20
c. Quantitative Risk Analysis 21
d. Plan Risk Responses 22
e. Implement Risk Responses 23
f. Monitor Risks 24
iv. Review of Research on Earned Value Management 25
a. Earned Value Management Fundamentals 25
b. EVM Aritmetics 27
c. Estimations based on EVM parameters and indexes 27
d. EVM application to construction projects. 27
e. EVM integration to Risk Management 27
v. Review of Research on Blockchain Technology 27
a. Blockchain applications to supply chain in construction projects 28
b. Blockchain applications in cost tracking and collection systems 28
vi. Forms of Management Specialization 28
Methodology 30
i. Data Collection 30
ii. Risk Management Processes 31
a. Risk Management Planning 32
b. Risk Identification 33
c. Qualitative Risk Analysis 36
d. Quantitative Risk Analysis 39
e. Risk Response Planning 41
f. Risk Response Implementation 42
g. Risk Monitoring 42
iii. Earned Value Management 44
a. Data sourcing for EVM calculation 44
b. EVM Parameters and indexes 44
c. Integration of EVM indexes into Quantitative Risk Analysis process 44
Results and Discussion 44
Conclusion 50
Recommendation 51
Appendices 54
Appendix A: Assumptions made for the risks 54
Appendix B: Case Study 1: RA/121 Contract Risk Registry 70
Appendix C: Case Study 1_ RA/121 Contract Project Overall Risk vs. Accumulative Earned Value Curve 71
Appendix D: Case Study 1: RA/121 Earned Value Management parameters and indexes 72
Appendix E: Case Study 2: RA/239 Contract Risk Registry 73
Appendix F: Case Study 2_ RA/239 Contract Project Overall Risk vs. Accumulative Earned Value Curve 74
Appendix G: Case Study 2: RA/239 Earned Value Management parameters and indexes 75
References 76

ABSTRACT
Proper project risk management is the basis of all successful construction projects. It helps to estimate ahead for possible negative outcomes that can affect project completion and provide an overview to help solve these risks. This research paper reviews the implementation of project risk management practices in the construction industry, with dedicated attention to the integration of Earned Value Management Methodology to risk management.
The applied research work was divided into two parts. First, research on state-of-the-art methods and techniques for risk management was performed through a literature review. Second, the practical application of selected methods was conducted on two finished construction project (RA/121 Contract: First Ring Road, in Kuwait City, and RA/239 Contract:Sabah Al-Ahmed and Khiran Road).
The Risk Management Process suggested by the Project Management Institute, a worldwide recognized institution, and exercised the implementation of a risk management plan for the selected project. Risks involved in the project were identified, qualitative and quantitative risk analysis was performed, risk management documents were prepared and supported by an extensive review of the documentation of each project
The Earned Value Management methodology implementation was recreated by reconstructing the different parameters and indexes used by EVM analysis based on planning and payment documentation. Once obtained, EVM data was used to estimate risk impact value in a more direct and automatic approach, reducing the subjective aspects of risk impact valuation.
The main outcome of this research is the clear understanding of the importance and complexity of Project Risk Management as a tool to make decisions for the success of a project. Another result is the understanding of the relationship between risk and earned value of a project. The natural trend for fixed project work is that the monetized overall risk of projects reduces as the accumulated project’s earned value increases. It was also demonstrated that the introduction of the additional scope of work causes transitory peaks and later reductions in the overall project risk value after additional work is formally contracted and supported by budget and schedule. By means of integrating earned value indexes to risk management practices, it was possible to perform risk impact estimations in a direct and less subjective form, alleviating the workload for the project manager. Finally, conclusions and recommendations were suggested for the use of digitalization in the implementation of risk management processes.
i. Objectives
In principle, this study seeks to fulfill the following objectives:

1. To present the Risk Management (RM) as a relevant knowledge area within the Project Management function.
2. To introduce the Risk Management Process, as the sequence of activities that allow the Project Manager to identify and evaluate risks, to plan mitigation and control actions, to monitor the risk status and to activate the necessary actions to reduce the risk exposure of the project.
3. To introduce the Earned Value Management System (EVMS) methodology for project management, evaluate its benefits and requirements, and evaluate its contribution to the project risk management process within the overall project management responsibilities.
4. To propose, on the basis of current research, a methodology to combine Earned Value Management System (estimations, parameters and indexes) with the Risk Management Process, pursuing to develop a suitable set of practices to provide the Project Manager with a valuable risk evaluation based on field-collected data, reducing the influence of subjective or theoretical estimations.
5. To demonstrate a practical application of the combination of EVMS and RM Management tools and techniques based on case studies of infrastructure projects, providing valuable insights on the relationship between risk, cost and schedule.
6. To describe other methodologies, techniques, or tools with potential innovative application to project risk management, such as the blockchain technology, considering their implementation requirements and their potential impact in risk management.
7. To develop conclusions and formulate recommendations for the future successful management of infrastructure projects.