Risk Management – An Intuitive Process, an Emerging Discipline (From a Design Consultant’s Perspective)

All humans are familiar with risk management. An intrinsic part of nearly every daily activity, risk management is at work each time someone sees an opportunity—no matter how significant or trivial—and intuitively identifies the impediments to securing that opportunity. In the context of everyday activities, this process is almost never formally recognized or referred to as risk management. By whatever name it is known, though, this process is risk management. Risk management has long been utilized as a formal process (some would contend as a discipline) in the insurance industry, the world of finance, and in the military. Only recently has it been recognized as an effective management tool in the execution of projects in the architectural, engineering, and construction (AEC) domain. Risk management developed much earlier in other industries because they each recognized a primary need to respond to unique business challenges that required managing exposure to loss (risk). Until recently, the need to manage exposure to loss has not been so immediately obvious to practitioners in the AEC domain. This paper discusses the rationale behind the formulation of the DMJM Harris risk management program, and it also presents several lessons learned from its implementation. The fact that risk management is a familiar, intuitive process played a key role in the successful development and application of the risk program, as did the AEC domain’s increased sensitivity to exposure to loss. Several important elements of the risk management program are covered in this paper, including the methods used to focus the risk identification process and assess the effectiveness of mitigation efforts; a case is presented for recognizing and managing risks that are outside the standard set of cost and schedule risks; and the process used to execute a cost-and-schedule risk analysis and the subsequent treatment of those outputs to provide project owners with real value. Further utilization of the risk management process in the AEC domain will naturally mature the process until it becomes a recognized discipline. This paper includes a brief discussion of several issues that need to be addressed before the risk management process can become an effective, standalone discipline.