P3-VALUE: Risk Assessment Tool User Manual
April 19, 2013
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Chapter 4. Risk Identifications
The first step of the risk assessment process is to identify risks.
Agencies may identify risks through a workshop process that engages key project stakeholders and team members with diverse skill sets, perspectives, and experiences. Workshops should include, but not be limited to, experts in design, engineering, right-of-way, construction, tolling, operations and maintenance, law, finance, environmental and geotechnical review, materials, and project management. Examples of risk identification strategies include:
- Assumption Analysis: Risks are identified by considering the assumptions made in the analysis of project delivery options, such as initial cost estimate assumptions. Unreasonable assumptions pose potential risks to a program/project.
- Experience-Based Risk Assessment: Risks are identified by the project team and field experts, drawing upon their collective experience.
- Analysis of Lessons Learned: Risks are identified from an analysis of issues encountered by similar programs/projects in the past.
- Checklist: A checklist of common project delivery risks is reviewed to identify an initial set of risks and then other methods are applied to identify project-specific risks.
Once an agency identifies risks, it should describe those risks to include:
- Category: Categories are defined for commonly identified risks. The 'Definitions' tab of the Risk Tool, Appendix B of this User Manual, and Chapter 3 of the Primer provide a representative list of risk categories and their descriptions. The list is not exhaustive and does not encompass all risks that project sponsors should consider.
- Impact Phase: When managing risks and conducting risk assessments, it is important to understand a project's exposure to different types and degrees of risk throughout a project's life cycle. By allocating risks across a project's various development and operational phases, it is possible for project teams to view the risk profile of the project over its entire life cycle. For more detailed information about risk timing, see below.
- Type: Risks might have a potential positive (opportunity) or a negative (threat) impact on the project. The impact or benefit of the risk can be described in the risk consequence (refer below) or on its own.
- Description: Descriptions can include the key causes of the risk, which helps identify what can trigger the risk event and supports the approach to allocating risks and developing mitigation strategies.
- Consequences: It is important to include the effect of potential damages / costs / delays or benefits that a project may realize if the risk event were to happen. Risk consequences can assist in determining the quantified values of the risk as well as its allocation and options for mitigation. The value of the consequences is entered in the Risk Register in real dollars.
Using the Risk Assessment Tool
Once an agency identifies a project's risk categories, phases, types, descriptions, and consequences, it should input this information into the 'Risk Register' tab under the section labeled "Risk Identification." Note that all cells shaded light-blue are editable. The user can select the risk category, phase, and type from a drop-down list and manually enter the risk description and consequences. The model includes sample descriptions and consequences for the 19 listed risks, though not every project has the same risks and similar risks may have different consequences in different project contexts.
The timing of risks and mitigation measures are important. When identifying a risk, it is important to articulate what project phase it may impact (i.e., when during the project schedule the risk would potentially occur). In including information about timing, the user can refine the description of the risk and assess the causes and consequences. Risks can overlap and occur in multiple phases of a project, but the mitigation of that risk may be different across those phases. It is important that the agency assess the risks associated with each project phase. The expected costs of risks may vary as the project moves between phases, as may the appropriate mitigation strategies.
A project's life cycle consists of multiple phases, from inception to contract close-out. Typical phases for a highway project include planning, design, construction, commissioning, turn-over, operations, and handback. The example risks provided in the Risk Tool are assigned to specific phases. While some risks may carry over into multiple phases, the Risk Tool allows each risk to be allocated to only one impact phase. Risks that occur over multiple phases should be broken down into individual components for each phase in which the risk may occur and entered in the Risk Register. This can result in a risk being repeated several times, with each entry in the Risk Register assessing the risk during one specific impact phase. Table 3-1 of the Primer offers a sample breakdown of risks by project phase. The example phases in the Risk Tool are:
- Planning Phase: Tasks in this phase can include financial and technical feasibility studies, environmental review, development of budget and schedule estimates, public involvement, and an assessment of existing assets for replacement or renewal.
- Design Phase: This phase involves the development of detailed construction documents and project management plans, issuance of permits, and development of detailed cost and schedule estimates.
- Construction Phase: This phase involves the construction of the physical asset.
- Commissioning Phase: This phase is where the facility is prepared for operations.
- Turn-Over Phase: In this phase documents such as warranties, license information, and operations and maintenance (O&M) manuals are turned over to the operations team.
- Operations Phase: This may include ramp-up, mature operations, and handback. In the ramp-up phase, the facility is complete and operations and maintenance activities are undertaken to meet expected service levels. Revenue generation, in the form of tolls, may also commence. Depending on the type of P3 project (whether the project is a "greenfield" new construction project, a managed lane project, or a "brownfield" asset monetization project), there may be a transition period for the project where uncertainties are higher as new processes are implemented and traffic levels adjust to demand. In the mature operations phase, the facility has been open for sufficient time to allow for operations and maintenance processes to become more efficient and traffic levels more certain. The handback phase occurs in the final years of a concession when processes are implemented to transition the facility to public control.
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