Underground Investigation and Risk Management Part 1: What is Risk?
Introducing the first in our Guest Article Series on Risk Management
In the construction industry, risk management has always been a major priority, but what truly is risk management, and how can we better mitigate it?. There are many stages in the systematic approach and philosophy when it comes to risk management in the construction industry. The high risk related to construction affects all of those involved in a project; while operational analysis and management of construction-related risks remain an enormous task for many of us in the industry. Through this series, we aim to demystify the topic of risk management and how to better manage it in the field of construction.
– Mark Tigchelaar, P.Eng.
Part 1: What is Risk?
When you embark on a project in any capacity (Owner, Contractor, or Designer) what are the most important issues that keep you up at night? The answer is Cost, Schedule, Performance, and safety. These items, directly or indirectly, are tied to your Money….
When the construction cost goes beyond the original estimate, parties involved in the project face financial loss. This could extend to the point that the owner of the project, such as a developer, does not get the minimum expected return on the investment. A construction that goes beyond planned schedule naturally translates to financial impact for the project either as higher construction cost (more time on site) or delayed returned profit (delayed completion of the project). Any issue with the performance of the project (e.g., your building cracks) also results in financial loss, either in the form of lawsuits/claims or costly post construction repairs and sometimes liquidated damages. What about safety? Safety and the subjects related to protection of life have their own special place and should be addressed first without the burden of finances. That being said, the financial losses resulting from safety issues cannot be over-emphasized.
Any construction project has a target for cost, schedule, safety and performance. We try to achieve these targets through proper design and construction planning. However, absolute confidence in engineering design and construction planning is unattainable. There will always be a risk of deviation from our objectives.
So, what is Risk? People use the word “risk” with different meanings in mind. A clear and universal definition of the risk is required such that all the team members can communicate and assess what is best for the project consistently. For engineering purposes, risk is not simply any unfavourable phenomenon (threat) that could occur. “Risk is the effect of uncertainties on an objective.” There are two angles on this definition by the International Organization for Standardization (ISO). First, the Risk is tied to the effect of the threat, not only the presence of it. Risk is a factor of hazards and consequences. Hazards are defined as a probability of a threat against an element of a project. The consequence of the threat depends on the vulnerability of the element at risk and the value (or utility) of the element. If you want a simple formula, it would be:
Risk = Hazard X Consequences
Risk = Hazard X Vulnerability X Value
Therefore, a threat which could potentially cause $1,000,000 damages with the probability of 1% is less risky than another threat which could potentially cause $100,000 damages with the probability of 50%.
Wrapping our head around this definition of the risk is essential. Sometimes, a threat can seem more significant than it is, other times it’s grossly underestimated. The technical definition of the risk, as noted above, helps to better understand and prioritize our plans. The ISO definition of risk also touches on the source of the risk. Uncertainties are the source of the risk. Uncertainties which lead to risk could be caused by natural variation, lack of understanding, and insufficient or inaccurate data.
There are several types of risk to a cost-effective and trouble-free project including geotechnical/environmental risk, inadequate design, poor planning, poor construction practices, third party relation, and other subsurface risks (e.g., utilities). This article focuses mostly on the geotechnical risk, as one of the most significant types. The geotechnical uncertainties which are the source of geotechnical risk can be categorized into: natural complexity and heterogeneity of the geological environment; testing uncertainty; estimation uncertainty, and; approximation of engineering models to the physical world. In short, the physical world underground is often variable, unpredictable, and has complex behaviour.
Uncertainties are part of life and cannot ever be eliminated entirely. How then, do we live with risk? Risk management is how it’s done – it is the variety of actions that an organization or company intentionally undertakes to better understand and reduce the effect of risk (ISO definition). The goal of risk management is to quantify uncertainties and to learn how to manage them consistently. These actions can always help to reduce, but not eliminate risk. Risk management does not fundamentally remove uncertainty, and also does not alleviate the need for sound judgment in dealing with the problem at hand. Unfortunately, some organizations think that by having a risk management plan along with protocol, they can retain anyone to do the projects work. Hiring poor engineers, and not actively seeking good contractors is a significant source of risk on its own.
And of course, the project always starts with a geotechnical investigation (or should!). Doing that right is the best first step to managing risk.
Masoud Manzari is a senior geotechnical and hydrogeological engineer with 23+ years of experience and has been involved in a wide range of civil engineering projects, specifically for structures built on challenging soil sites. He has also worked as a University Lecturer during his doctorate study. Masoud has worked on many different phases of projects, including site investigation, analysis and design, construction, forensic engineering and remedial measures. He is the past chair of the Canadian Geotechnical Society-Southern Ontario Section and the geotechnical lead for the design of the Eglinton Light Rail Transit since 2010.