Risk Management – How to Avoid the Construction Wheel of Misfortune

Risk management is everywhere. The principles, definitions, and plans involving risk management can be applied to almost any industry or endeavor. Depending on the industry, the sources of risk and the consequences of a particular risk, the approach to risk management will vary. Some risk management is mandatory. For instance, the EPA requires facilities that use extremely hazardous substances to submit a risk management plan (RMP) every five years to be in compliance with Sec. 112(r) of the 1990 Clean Air Act Amendments. On the national level, the Department of Homeland Security developed a National Infrastructure Protection Plan outlining, “how government and private sector participants in the critical infrastructure community work together to manage risks and achieve security and resilience outcomes.” Some risk management plans are recommended by government agencies as industry standards. The US DOT Federal Highway Administration published a guidebook, Risk Assessment and Allocation for Highway Construction Management, concluding that, “(t)he business case for including risk assessment and allocation as a standard project management component of major capital projects is unambiguous: The ability to better understand potential risks and how to manage them yields benefits far in excess of the costs of adopting risk management practices.” CalTrans has …

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