Design risk assessment

Design risk assessment
See also

Design risk assessment is a process that consists of estimating the magnitude of the likelihood and consequences of the occurrence of risk factors identified at the identification stage. It is to enable the hierarchy of identified factors according to their potential impact on the achievement of the project objectives, indicating the priority risk (according to the criterion adopted, e.g. level of risk, likelihood or severity of effects) for further analysis by the project leader [1].

Design Risk

Every action taken by a human being, and therefore also the planning and implementation of a project, will be subject to the risk of failure (H. Kerzner 2009., pp.664). This is due to human nature, i.e. the inability of man to control and/or measure certain causal factors of events and limited possibilities of information processing by him, as well as to the very essence of the project - it concerns the future, and the effect of its implementation is to create a unique service or product [2]. Project risk is an undesirable event which may cause delays in the project, cost overruns, unsatisfactory results, risks for safety or the environment, or even the complete failure of the project . Because total elimination of risk is impossible, so during project management it is important to taking action to help reduce the impact of identified impacts; and potential risk factors for achieving the objectives of the project. In other words, there is a need for project risk management, and one of the main elements of this process is qualitative risk analysis [3].

The determinants and methods

The risk assessment should take into account [4] :

  • the impact that the occurrence of the risk will have on the project,
  • the likelihood of the hazard occurring.

There are 3 methods of risk assessment:

  • quantitative method
  • qualitative method
  • mixed method.

Qualitative risk assessment

Qualitative risk analysis, also known as risk classification, consists in estimating the size of probability and the effects of risk factors that have been identified at the identification stage. Subsequently, it enables the following hierarchy to be made identified factors according to their potential impact on the achievement of the project objectives. It is important to be aware that the hierarchy is a subjective activity, carried out using non-numerical methods. In the process of risk classification, besides the list of factors (risk register), it may be useful:

  • the risk management plan,
  • determining the stage of advancement of design works,
  • taking into account environmental factors of the conducted activity (e.g. project stakeholders' tolerance towards risk, information on industry risk studies or risk databases),
  • taking into account the assets of organisational processes (including, among others, guidelines concerning the reliability and availability of data on the basis of which the risk was identified, as well as rules and procedures for assessing the scale of probability and effects, risk assessment system, adopted by the organisation implementing the project) [5].

Tools for qualitative risk assessment

The basic tool used during the analyzed process related to the project risk is the probability and impact assessment matrix. For ease of reference, the applied probability and impact scales may be as follows the most simplified. The probability of a risk materialising may therefore be, for example, the following low, moderate or high; the severity of the effects may in turn be determined by the effects mild, moderate or severe. By using this tool, it is possible to easier visualisation of the division of factors into those with low, medium and high risk levels.

Benefits of a qualitative risk assessment

A qualitative method is based on an individual risk assessment based on experience and good practice. The method uses subjective measures and assessments such as descriptive values of levels (low, medium, high). The benefits of qualitative methods are [6] :

  • no need to quantify the effects and frequency of hazards,
  • indication of the general risk areas to which attention must be paid,
  • the possibility to take into account such as e.g. the company's image, organisational culture, etc.
  • possibility to use in the absence of specific information and quantitative data or resources.

Effects of qualitative risk assessment

The final result of the qualitative risk analysis should be an update of the project documents (in particular the risk register), based on the hierarchy of risk factors for a specific project, indicating to the project manager the priority risk (due to the adopted criterion, e.g. risk level, probability or severity of effects) for further analysis. The result may also be a general ranking of the project in terms of risk, enabling comparison of risk levels of various projects - in the case of several projects implemented in the company at the same time, on the basis of the general ranking, it is possible to take decisions, e.g. on the allocation of resources [7].

Quantitative method for design risk assessment

The quantitative method consists primarily in the assessment of the probability and effects of the occurrence of risk, giving them specific parameters. The effects can be described by evaluating the results of events and expressed in various categories (monetary, operational, technical). The advantages of quantitative methods are the objectivity of the results, thanks to which they can be compared and the results have a financial and percentage dimension [8]. Quantitative methods include, among others, techniques [9] :

  • Events Tree Analysis, is based on the evaluation of a given effect as a result of a sequence of events. It starts with the initiating event and then presents all possible sequences of events. The probability is obtained by multiplying the probabilities of all events created in the tree.
  • Faults Tree Analysis is built in the opposite direction. It starts with effect and develops into a tree in the direction of preceding events.
  • FMEA, where risk is assessed in terms of probability of occurrence, difficulty in detecting an error and impact on the project/customer.

Mixed method of design risk assessment

The mixed method is a combination of quantitative and qualitative methods. It is used most often because it is possible to use the advantages of both methods [10].

Disadvantages of the design risk assessment techniques

Most of the risk analysis methods used have weaknesses such as [11] :

  • incompleteness of risk categories
  • insufficient data
  • failure to take account of secondary risks
  • failure to take account of a deliberate threat
  • the difficulty of interpreting the results unequivocally.

Footnotes

  1. H. Kerzner (2009), p.663
  2. H. Kerzner (2009), p.664-668
  3. E.H. Szafranko 2017, pp. 312
  4. K. Eldash et all. (2006,) p. 1-4
  5. E.H. Szafranko (2017), p. 312-320
  6. S. Medonos (2010), p.99-100
  7. S. Medonos (2010), p.104-106
  8. J. Oehmen et all. (2010), p. 7-10
  9. E.H. Szafranko (2017), p. 319-320
  10. C. Mcmahon J., Busby (2005), p.286
  11. C. Mcmahon J., Busby (2005), p.289-230

References

Author: Bartosz Wojak