Risk Management Software Utilised In The Construction/Infrastructure Industry
According to The Chartered Institute of Building (CIOB) in the UK, the construction industry accounts for about 6% of the economic output of the UK and provides jobs for 2.3 Million People, about 7.1% of the UK Total Population. According to Invest India (National Investment Promotion and Facilitation Agency of India), By 2025, the Construction Market in India is expected to emerge as the third-largest globally as well as the Construction output is expected to grow on average by 7.1% every year. The Construction Industry worldwide plays a major role in infrastructural development increasing productivity and enhancing the economic development of a nation. The risk management systems in construction will help the project participants to meet their commitments and minimize negative impacts on construction project performance concerning cost, time and quality objectives.
The Construction Industry includes three divisions:
- Building Construction
- Civil Engineering (E.g., Road, Railway, Utility Projects, etc.)
- Specialized Construction Activities (E.g., Electrical, Plumbing, Painting, Joinery, etc.).
A Typical Construction Project involves multiple stakeholders (depending on the Project) but mainly consists of:
- Client: Organization for whom the project is carried out
- Project Management Consultant (PMC): Organization appointed by the client responsible for managing the project lifecycle
- Turnkey/Main/Principal Contractor: Organization responsible for the execution of all construction activities with the necessary workforce.
Risk Management plays an important role in Construction Projects as various types of risks in construction projects can be identified at all stages of the project lifecycle from Design & Planning to Construction to the Operational Phase. Construction Project Risk Management involves the identification, analysis, mitigation, response, and communication of risks across the project lifecycle reducing the risks to an acceptable level ensuring the project activities are progressing in adherence to the client’s requirements within the expected timeframe.
Stakeholders at Construction Projects face several risks that are dynamic and evolving with time and to manage the lifecycle of such risks requires a more analytical and efficient method like computerized technological instruments and Risks Software such as Active Risk Manager (ARM), Primavera Risk Analysis, @Risk, etc. Such Risk Software enables organizations to effectively integrate risk management into their activities across the project lifecycle. Some of the Risk Software are as follows:
- Active Risk Manager (ARM)
Active Risk Manager (ARM) is a risk management software construction solution that combines Risk Management, Cost Management, and Schedule Management to demonstrate the true impact of risk, allowing for better-informed decisions and the capacity to use risk to gain a competitive edge. It is the Enterprise Risk Management (ERM) Software Solution developed by Sword GRC that addresses the risk management needs for the entire organization. From managing risk through to strategic business planning, ARM is utilized to identify, analyse, control, monitor, mitigate and report on risk management across a lifecycle. Risk management underpins the entire business in the organization, from strategic decision making through to daily operations and governance.
ARM, from Sword Active Risk, was utilized as one of the major support tools to provide a flexible, robust risk management approach to manage risks and meet financial, legislative and operational targets throughout the project.
In the Construction Industry, it enabled to address the needs at all levels of the business to understand the strategic risks as well as Construction Project Risks involved and have the assurance that these are being proactively and effectively managed. ARM is mainly used within the verticals of:
- Incident/Accident Investigation: ARM is utilized to report and record Incident/Accident Events that occurred within the Construction Project premises.
- HSE Planning & Audit Management: ARM is utilized to Plan, Conduct, Report and Monitor of the HSE & Risk Audit Process for compliance against ISO 45001/OHSAS 18001, ISO 14001, ISO 31000 and ISO 9001
- HSE & Risk Performance Analysis & Management Reporting: Reporting of Audit Findings, recommendations and key improvement as well as in Gathering key performance data and project risk management evaluation.
@RISK (pronounced as “at-risk”) is a software solution developed by Palisade to perform risk analysis using Monte Carlos simulation as an add-in to Microsoft Excel. It is mainly utilized to plan effective Risk Strategies,
Monte Carlos Simulation is an automated mathematical methodology that allows individuals and organizations to critically analyze and evaluate risk in quantitative analysis and decision making. Monte Carlos Method is practised in diverse disciplines such as Oil & Gas, Construction, Transportation, Energy, Insurance, etc. The simulation involves an algorithm that utilizes repetitive random testing to obtain the likelihood and possible outcomes of an uncertain event.
Monte Carlo simulation is a risk analysis technique that involves creating models of probable outcomes by replacing a range of values, a probability distribution, or any other component with inherent uncertainty. It then repeats the process, using a different set of random values from the probability functions each time. Monte Carlo simulation generates probabilistic distributions of alternative outcomes.
- Primavera Risk Analysis
Primavera Risk Analysis is a software solution developed to. The solution is mainly used to provide rapid and simple methodologies for designing and developing Risk & Contingency Response Plans as well as managing the entire full risk management lifecycle in an organization integrating cost & schedule management providing a more effective method to manage the Risk Management System in an organization. It is also used for the following activities:
- Risk Management: Primavera Risk Analysis is utilized to analyze, mitigate and treat risks connecting directly with project schedules as well as cost estimates to model risks and uncertainty, giving Primavera project portfolio management systems and Microsoft Project a full-lifecycle cost and schedule risk analytics solution.
- Contingency Planning: Primavera Risk Analysis is utilized as a decision-making instrument to design and develop from a strategic viewpoint on the Business Continuity & Contingency Planning for the organization.
- Risk Analysis: It is also utilized to formulate and develop an effective risk modelling analysis for the organization.
It is said that Risk Management is the business of everyone in the organization. A construction project involves multiple stakeholders such as the Client, Project Management Consultant (PMC) and Turnkey Contractors who are responsible to identify and respond to risks that pose potential harm in achieving the project objectives as well as strategic organizational objectives. Such Risk Software Systems enable the organization in achieving these objectives, set risk priorities and use Risk Management in their day-to-day working environment. Utilizing such software will help the organization effectively take advantage of opportunities and respond to threats to the project objectives.
- gov.in. (2018). Infrastructure In India – Construction & Real Estate | Invest India. [online] Available at: https://www.investindia.gov.in/sector/construction.
- ciob.org. (n.d.). The Real Face of Construction 2020 | CIOB. [online] Available at: https://www.ciob.org/industry/research/Real-Face-Construction-2020?gclid=CjwKCAjwmeiIBhA6EiwA-uaeFeDPoWiQt-e9sWj63q0iDOMTSv5cFT04eClSgQH7MvMpvW2BJUmh7BoCHvAQAvD_BwE [Accessed 16 Aug. 2021].
- Sword GRC. (n.d.). Active Risk Manager. [online] Available at: https://sword-grc.com/active-risk-manager/ [Accessed 29 Nov. 2021].
- Palisade (2019). @RISK: Risk Analysis using Monte Carlo Simulation in Excel and Project – Palisade. [online] Palisade. Available at: https://www.palisade.com/risk/default.asp.
- emerald-associates.com. (n.d.). Oracle Primavera Risk Analysis (Pertmaster®) | Software. [online] Available at: https://www.emerald-associates.com/software/oracle/oracle-primavera-risk-analysis-pertmaster/oracle-primavera-risk-analysis-pertmaster.html [Accessed 29 Nov. 2021].
Blog Author: Kartik Unnikrishnan – Member, Student Risk Committee (IRM India Affiliate)