Claim Reduction is a monthly series by the ASCE Committee on Claims Reduction and Management designed to help engineers learn from problems that others have encountered.
The performance of professional engineering services comes with inherent risks, as projects involve challenges that require engineers to use their skills and knowledge to find successful solutions. For example, during the design phase, decisions are made by various stakeholders, including the project owner, the engineering consultant, specialty subconsultants, and sometimes a contractor. These decisions result in cost, function, and other trade-offs, leading to risks.
To mitigate these risks, engineering consultants have tools that can be implemented both before and during project execution. This article discusses key elements of risk registers and responsibility assignment charts, two of the most common risk mitigation tools that you can start using immediately on your projects. Utilizing these tools promotes discussions about project risks among team members, including the owner. When used effectively, these tools will help identify risk mitigation approaches that lead to more positive project outcomes.
Risk registers
The first tool is the risk register. At the proposal stage where the engineering consultant is submitting a statement of work/fee, the risk register is developed by the proposal champion with input from the project team. During execution, the client service manager and the project manager use the risk register as an ongoing, living document to measure progress, accountability, and next steps.
A risk register is a good tool during any phase of a project. It can be used in the study that goes back to the original decision that something should be designed in the first place. Risk Registers also help the project team identify which design and other key decisions have the greatest impact on the overall project outcome. Key stakeholders collaboratively develop a list of the highest-risk design and construction decisions and outcomes from their perspective. In some large, diverse projects, these lists can include hundreds of line items. However, for typical projects, the most critical risks will probably be fewer than 15 to 20.
A risk register is most effective when created at the project outset and reviewed and revised routinely as the project progresses. It benefits the engineering consultant by encouraging proactive mitigation of risks to meet scope, schedule, budget, and quality requirements. It benefits the client by facilitating identification, analysis, response, and management of risk execution, which informs team decisions.
Writing down the list in plain English as opposed to technical jargon facilitates understanding by the entire team and completes the first step in developing the risk register. Once the list of issues is documented and agreed upon, a two-step process is used to rank the list. This ranking involves understanding the magnitude of the impact and the likelihood (or probability) of occurrence. These two factors of the risk issue are developed separately to avoid unintentionally skewing the results and then multiplied together to obtain a risk score.
Begin with the magnitude of the financial impact and rank each risk on the list with a numbering system from 1 to 5, with 5 representing the highest impact. Consider the order of magnitude; a risk with a rank of 2 has a 10 greater impact than a risk with a rank of 1. For instance, if a risk item has a potential $10,000 impact on the project, it would be assigned an impact of 1, whereas another item with a potential impact of $1 million would result in an impact rank of 3. Assign an impact score to each listed risk.
The next step is to understand the likelihood (or probability) of occurrence for each risk. A risk that has the potential to occur 1 out of 100 times would get a higher score than a risk that would occur 1 out of 1,000 times. Using a similar range of assigned scores from 5 to 1, with 5 being the most likely to occur and 1 being the least likely to occur, each risk can be scored for frequency.
Once the risks are scored for impact and frequency, multiply the impact score by the frequency score. The risks with the highest likelihood of affecting the project will get the highest score and will provide a ranked list of risks by score also.
Applying this methodology, the real value of using a Risk Register to manage and mitigate project risk can be realized. With a ranked list of the risks that may have the greatest impact on the project, the engineering consultant, owner, and contractor can engage in discussions on how to either reduce the probability of occurrence or minimize the financial/schedule impact if that specific risk does occur.
Regular risk reduction decisions (with no guarantees), can then be made by accepting, transferring, mitigating, or insuring the risk.
Accepting or transferring risk: Certain risks are well-suited to be accepted by individual parties in the project. Contractor means and methods are common examples. Some risks may truly belong with the owner. The risk register and rankings will facilitate those discussions.
Mitigating risk: In many cases, the design engineer can perform additional design services to help mitigate a potential risk. While this comes at a cost for the services, it may have such a significant impact on the project that the team determines it is worth the investment.
Insuring risk: Insuring risk is done through employing a variety of insurance policies, including but not limited to general liability, professional liability practice policies, project-specific policies, or within the builder’s risk policy.
Responsibility assignment charts
A responsibility assignment chart promotes and establishes collaboration among team members who need to be consulted and informed, as well as those who hold responsibility or accountability within the project decision-making process. These charts are also known as “RACI” matrices – RACI stands for Responsible, Accountable, Consulted, and Informed. An essential element of an RACI matrix is to improve collaboration among project participants. Improved collaboration means greater consistency in the decision-making process, as well as more effective and efficient teams.
As an example, an RACI matrix can also be applied as another tool to help mitigate risks for project pursuits and task orders, with a threshold of over $100,000 in engineering consulting labor. At the proposal stage, the RACI matrix is developed by the proposal champion with input from the project team, and the client service director drives accountability for compliance.
To create an RACI matrix, begin first with reviewing the risk register. The project team should list key items impacting the project. This list may be longer than the risk register list since, in many cases, the broader risk may have subsections that need to be dealt with individually.
To further develop an RACI matrix, place risk items on the left axis of the chart and names of key parties on the top. Assign R, A, C, or I in each box. This serves as a communication tool that designates the party responsible or accountable for each risk. There should be only one R and one A per risk. Consulted means there was an affirmative effort to seek input on the risk items, and Informed means communication was sent.
Other key considerations in completing the RACI matrix are to identify the client, the project, and what other steps or processes need to be, or have been, performed. For example, the project team should review whether the project requires an additional risk committee review or whether the appropriate legal review has been solicited or performed. These additional considerations are critical for a thorough process.
Conclusion
The performance of professional engineering services inevitably involves risks because of the various challenges that arise during project execution. Remember that every project, however small, has some elements of risk. Proper risk mitigation is critical and involves the coordinated efforts of the project owner, the engineering consultant, specialty subconsultants, and a contractor. By making well-informed decisions using the above risk mitigation tools effectively, stakeholders can achieve a balance between cost and function trade-offs. The risk register and RACI matrix not only help reduce risks but also contribute to more successful project outcomes and positive experiences for all involved.
Learn more at ASCE’s Risk Management Hub.
Read more helpful insights from the committee’s Claim Reduction series on the Civil Engineering Source.
