Project risk management is a continuous process of identifying, analysing, organizing and moderating dangers that debilitate an activity’s probability of success regarding cost, plan, quality, wellbeing and specialized execution.

Risk management at project, programme or portfolio level must not be conducted in isolation and must interface with the organisation.

It is expected that this ERM moderation may considerably improve corporate performance by determining the strength or weakness of the relationship between board structures and firm performance

(PDF) MODERATING EFFECT OF ENTERPRISE RISK MANAGEMENT ON THE RELATIONSHIP BETWEEN BOARD STRUCTURES AND CORPORATE PERFORMANCE. Available from: https://www.researchgate.net/publication/334540026_MODERATING_EFFECT_OF_ENTERPRISE_RISK_MANAGEMENT_ON_THE_RELATIONSHIP_BETWEEN_BOARD_STRUCTURES_AND_CORPORATE_PERFORMANCE [accessed Mar 29 2020].

Initially companies need an office and manager specializing in managing risk (CRO) to analyze and monitor the main risk factors affecting corporate performance.

📷

In this case, if you want to reduce the time and cost to the minimum possible without affecting the quality.

Simulation models preferred

And the best two models that can be used in your field of work are

1. BROWNIAN MOTIONS

2. ITÔ’S RULE ( Itô's lemma)

Its equations can be programmed on the Matlab

Entering variables for your project will give you the best option you should rely on.

If you have difficulty with that, it is preferable to use linear programming with the Visual Basic program. However, some results will be highly inaccurate but good.

Or use M-Technic.

Although this rarely gets management approval, the PURPOSE of Risk Management is to reduce overall risk, and primarily risk of human injury! Time and Cost are outputs, not inputs to a safety scenario. Now, you can easily see how reducing risk avoidance and mitigation can reduce time and cost of a project. BUT if you include the occurrence of even a low-probability, high-consequence failure due to those omissions, you can bankrupt a company quickly. I can guarantee you that any time that you "mitigate" the "effect" of risk factors with respect to time and money you are heading for a disaster! Get it done safely and correctly FIRST, then you can go back to learn how to improve your time (and thus cost) without reducing risk mitigation.

The relation between risk reduction and cost of controls is of outmost important. Generally speaking Net Cost of Risk = Potential Loss - Cost of Controls. According to ALARP (As Low As Reasonable Practicable), when Potential Loss is bigger than Cost of Controls then Net Cost of Risk is positive which means that Cost of Controls is worthtaking. Otherwise, Net Cost of Risk is negative which means that additional mesures lead to best risk reduction but the cost is too high (this option should only be implemented if specifically required e.g in the case of life in danger or strategic-survival reasons for the company or requirements by an Approval body).

Potential Loss = Rate of Occurence per year * Loss of Harm (money) * Number of years

For example:

- Rate of Occurance of an accident per year is estimated at 4*E-3 per year

- Average loss of harm in case of an accident is estimated to 1 Million €

- Operational time is 10 years

Potential Loss = 4*E-3 * 1 Million € * 10 years = 40.000€

If controls taken costs 30.000€ and reduce the Rate of Occurance to 2*E-3 , then

Potential Loss = 2*E-3 * 1 Million € * 10 years = 2.000€

The risk will be reduced from 40.000€ to 2.000€ with a cost of 30.000€.

Hence benefit: 40.000€ - 2.000€ = 38.000€, cost 30.000€, consequently cost benefit =38.000€ - 30.000€ =8.000€. This option must be compared with other options in order to take the best decision.

(the example is taken from EN ISO 50126-2:2007 - Annex G)

Theodore Vlachos , that is an excellent example. The two critical parts that are often overlooked are that the "acceptable" risks are different for different individuals, organizations and states, and that is compounded considerably when the consequence involves harm (or death) to humans! Other factors related to "Reputation" and "Social Approval" can be difficult to quantify, yet essential to a correct decision on how much to spend on preventive measures.

Project risk management is a continuous process of identifying, analysing, organizing and moderating dangers that debilitate an activity’s probability of success regarding cost, plan, quality, wellbeing and specialized execution.

For further details, please read this article;

Article The moderating role of risk management in project planning a...

Risk is considered as the major concern for professional dealing with projects, especially after the financial crisis that shook the world in 2008. Project risk is usually used to indicate the unfavorable state of the project. There are no guarantees on any project, the most carefully planned project can also run into trouble even the simplest activity can turn into unexpected problems anything that might occur to change the outcome of a project activity, no matter how well you plan, your project can always encounter unexpected problems. Project risk management is also seen as a process that accompanies the project from its definition through its planning, execution and control phases up to its completion and closure.

I would also mention the labor safety factors that are quite crucial especially now in avoiding risks.

Yes cost and schedule risk are both important in construction projects. Also the quality and suitability of the end product, even if the project is delivered on time and on budget. In construction projects, risk management has a special role in understanding the supply chain risks, as most construction is contracted to various external parties.

Article Improving the bottom line: Achieving material cost recoverie...

Risk management in every field, including economics and finance, is not used to eliminate all risks completely. Risk management consists in systemic, objectified, instrumentalized identification, analysis, quantification, control, risk modeling, securing the potential effects of adverse effects of risk materialization and facilitating the verification of the applied risk management process. Risk management in recent years has been improved through the implementation of ICT information technologies and advanced data processing Industry 4.0. Risk management in many different areas, for many risk categories helps in identifying acceptable, optimal levels of specific risk categories for which specific instruments and forms of a high level of protection for potential effects of adverse effects of risk materialization have been diagnosed. The process of improving risk management should be carried out permanently in line with changing risk factors. Risk management systems are underdeveloped in many enterprises and institutions, and this should be complemented. I examine risk management processes on the example of credit risk management in the context of financial system security. The process of improving credit risk management is implemented mainly at the level of a specific commercial bank. Central and supervisory institutions, which mainly include central banking and banking supervision institutions, may affect some aspects of this process, correct possible excessive levels of systemic credit risk, especially in a situation where a specific bank unreliably implements prudential procedures in the field of lending activity or in a deteriorating situation loan portfolio quality caused by the recession in the domestic and possibly global economy. Before the emergence of the global financial crisis in autumn 2008, there was an unwritten rule in some financial environments that a large banking entity could not fail. The declaration of bankruptcy by one of the largest investment banks Lehman Brothers, whose bankruptcy began the global financial crisis, questioned this type of opinion regarding entities of the financial system. In my opinion, financial market security systems and credit risk management processes should be realistically improved in their functioning after 2008 so that a similar global financial crisis does not occur in the future. This should be realized, the international financial system should be reformed in many aspects of its functioning to reduce the likelihood of future emergence and scale of negative effects - the next global financial crisis. Among other things, they should be strengthened by the supervisory institute over international financial systems operating nationally. Credit risk management procedures in financial systems should be improved, especially in investment banks, in the banking segment, which is most responsible for generating the global financial crisis of 2008. Unfortunately, however, this has still not been done on many issues. In line with the above, in my opinion the importance of improving credit risk management processes in the context of analyzing the sources of financial and economic crises has been growing in recent years. An important factor in the need to improve credit risk management processes was to identify the sources of the global financial crisis of 2008. I conduct research in this area. The conclusions of the research I published in scientific publications that are available on the Research Gate portal.

Greetings,

Dariusz Prokopowicz