Part of the process

Is risk management finally being fully embedded in the way projects are planned and managed? Faithful+Gould's John Cowling explains why he believes the industry has come a long way in a short time.

“When our clients commence a project with their eyes wide open they usually have a clearer understanding of the issues, resulting in more informed decisions being made and a lesser likelihood of falling into the normal sort of problems or issues that you might otherwise encounter”
-John Cowling

Without doubt, enhanced collaboration across project teams and disciplines is transforming the construction industry - and nowhere is this being illustrated more clearly in the Middle East region than at Faithful+Gould. Whilst the company - a subsidiary of Atkins - is globally recognised in the construction industry for cost management and quantity surveying services, the firm also offers additional value-added services including project and construction management, strategic facilities management, asset management, risk and value management and sustainability. John Cowling, Head of Risk at Faithful+Gould, believes this depth of service is one of the keys to the firm's success. "Whenever I require assistance, such as an enquiry outside my remit, I know I have this comprehensive knowledge base I can call on from across the broader global Atkins Group," he explains. "I can receive very positive, rapid and accurate responses from across the worldwide Atkins business, which comprises around 16,000 staff."

Risk management is one area that has benefited from this more collaborative approach. Faithful+Gould sees integrating risk management into organisational processes as an important part of any company's continuous improvement cycle; often clients have a need to integrate risk management with value management and value engineering, because the two dovetail really well together. And as the market matures, Cowling believes there is significant potential for clients to further enhance their regional capabilities through the application of risk management systems, tools and techniques.

For many people, managing projects means managing risk. What kind of approach do you take to risk management, and how do you embed that into the project management aspect?
John Cowling. Firstly, it must be said that Faithful+Gould has risk management embedded as a key component of our project management process. However, we also offer complete consultancy services across entire client enterprises. We are grateful that many of our clients consider the benefits that flow from implementing a risk management framework in enhancing their existing business processes and decision-making process. We often talk in terms of the concept that risk management enables you to operate with 'your eyes wide open'.

When our clients commence a project with their eyes wide open they usually have a clearer understanding of the issues, resulting in more informed decisions being made and a lesser likelihood of falling into the normal sort of problems or issues that you might otherwise encounter. We find that as the expatriate community often has a higher turnover of personnel then perhaps in other more established parts of the world, it is more important to have robust processes in place to ensure that there will be a legacy of continuity within the client's operation. It's very important to get these processes embedded early throughout the organisation as the benefits have potential to extend beyond current projects - and by integrating lessons learnt into their processes, their continuous improvement cycle continues, which adds further value to their organisation.

So it becomes a cultural element as opposed to just a project management element?
JC. Exactly. A large part is about change management, and managing the risks inherent in changes to an original project plan. People have been using risk management on their projects for centuries, from the building of the pyramids and the aqueducts in ancient civilizations, to the building of the Burj Al Arab. They all applied risk management in their processes. It's just that in recent years we've developed more sophisticated models that produce more consistent results. These make it easier to determine the likelihood and impact of negative risks, and what we could do subsequently to transform these threats into opportunities. For us here at F+G, it's about how we can do it better, as well as making it easier and more user-friendly. Our client-focused philosophy is for making risk management more of a process driven and scientific model that produces tangible results. This ensures that collaboratively, with our clients and stakeholder, we improve consistency.

Now, obviously, the last 12 months have been tough. Have you seen attitude to risk change during that period?
JC. I look at the construction industry in the last few years as a bucket full of holes, but instead of being filled with water it's been full to the brim with money. But the water or money level never got down as far as the holes because no matter how many holes you had, there was so much money pouring in with the pace of development that it really didn't matter. Well, now it matters. Now, I find clients looking for ways to 'plug the holes', and one of the tools they can use to do this is to employ risk management which proactively assists them to more efficiently use their resources.

Clients are much more receptive to the concept of managing risk now than they were perhaps two or three years ago. They're saying, "We need to work more then smarter, not harder - we need to also stay one step ahead of the rest." And that's what I see as being the opportunity right now. Our risk management philosophy has always been "think, plan, do." When we enhance our 'thinking and planning' stages, we significantly enhance the efficiency of the 'doing' stage.

So really, managing the risk has become a way to drive value and reduce a lot of those inefficiencies?
JC. That's right. Recently in discussions with a client we were evaluating risks in their supply chain and procurement. As they were sourcing their sanitary-ware from an international firm outside the region, we had identified several project risks which included disruption to the manufacturing process, currency fluctuations, and transportation / logistical concerns, all of which could cause delays and increase costs. As we considered how we could mitigate these risks, and balance the function of the required items versus costs, we discovered that there was a local manufacturer who could directly supply the specified quality and quantity within a 30-minute drive. We had effectively mitigated the risks associated with the potential impact of currency fluctuations and the potential impact of transport delays. At the same time, we identified how the client could save a significant amount of his budget, which also allowed him the opportunity to use these funds elsewhere. An additional benefit was that this allowed the client to increase his percentage of locally manufactured materials assisting with the local economy, one of the key drivers of the overall project.

This is one example of why we at F+G prefer to embed risk management with value management (value engineering), as they are not standalone processes and their integration into a project process can have significant benefits for the project as a whole. We believe risk management is about seeking opportunities for solutions.

Our clients often ask us for assistance to further empower their personnel through training and the provision of processes and tools, such as a user-friendly risk register that includes a reporting capability that enables their project teams to track and monitor their progress. In many instances these additional services provide our client's teams with extra competencies that enable them to achieve enhanced management skills.

Now, this region is renowned for the pioneering nature of the projects it undertakes; they're daring and ambitious, both technically and in terms of their scale and scope. And obviously, the industry as a whole needs those innovative approaches in order to grow and to develop further. But, having said that, many firms are understandably wary of embedding innovative new processes if they're not proven; they're wary of jumping into the unknown. So, how do we balance that risk/innovation equation - or better still, take risk out of the innovation process altogether?
JC. When we initiate a project, often in a workshop together with the client and their major stakeholders, we'll look at project objectives, stakeholder engagement, issues and a whole range of defined criteria. This process efficiently assists us all to define the project specifications and provides us with an accurate overview of what the client actually needs and wants - for example, whether they desire their project to be perhaps iconic or purely functional. We find it critically important to thoroughly understand our client's needs, and understanding what our client wants to achieve through this specific project. Communication has to flow across all aspects of the project, and is essential to assist in the mitigation of potential risks.

As the market matures, particularly within this region, clients and developers are increasingly looking for best practice, world-class methodologies. With the publication of the recent ISO 31000, the new international standard for risk management, many industry leaders not only recognise that risk management is a standard international best practice, they also demand that risk management processes be implemented in their businesses.

This region thrives on innovation and new ideas, and often once we demonstrate how implementing a risk management system delivers tangible benefits, such as assisting as a tool for measuring the likelihood of success for innovative options, our clients immediately understand how these processes provide them with greater comfort when making early stage decisions.

The idea of sustainability has been around for a while. What challenges do you think need to be overcome for sustainability to become part of the fabric of everything we do as an industry, rather than as a standalone topic in its own right?
JC. It's interesting. From a risk point of view, if governments regulate the need for sustainability then it becomes part of the project objectives. And it will assist in reducing some of the risk, because right now there's a lot of discussion about whether or not to include sustainable thinking and specifications in your design, and how far to go in terms of implementing standards, of which there are many.

Design standards are, in part, still in the development phase in certain emirates and once all standards are fully enforced, design teams will have no option but to embed sustainable solutions into their designs. This is a good example of where a perceived threat can be turned into an opportunity as innovation in sustainable solutions may impact on desirability of completed projects. A perceived restriction can be turned into a positive outcome in terms of environmental impact, commercial return and brand desirability. Once financiers, clients, developers and designers grasp this opportunity, the challenges may be mitigated somewhat.

How much do you think the region is really embracing the idea of sustainability? Given the huge development that's taken place there over the last 15 years, do you think Dubai, in particular, has missed a trick by not embedding the concept of sustainability into all its processes from an earlier stage?
JC. It would be inappropriate and unfair to focus solely on Dubai in terms of the idea of embracing sustainability, as over the last 15-year period the implementation of sustainability varies broadly across both the developed and developing world. What is clear from our experiences in this region is that sustainability, facilities management and asset management have become far more embedded into design team solutions. There does seem to be a positive shift in thinking towards whole-life appraisal rather than the previous norm of the short-term view.

Many currently consider the financial cost of sustainable or 'green-friendly' items as somewhat prohibitive. Once the cost of such items significantly reduces, then the implementation of sustainability will increase. From a risk perspective, the benefit of a greater focus on sustainability is that we will have less risk attached to the supply of energy, because we'll use more renewable energy techniques, energy-saving processes and materials, etc. Over the long-term the application of sustainable infrastructure will actually reduce risks associated with utilities, which is a positive outcome.

Our in-house sustainability experts are working with several large regional clients to determine the cost benefit ratios attached to a number of sustainable applications, which in turn often leads to life cycle modelling to ensure the most cost efficient solution is implemented.

Do you think it's still the case that if people are given the option of specifying a sustainable product or a cheaper product, then they're still going for the cheaper product? I mean, I guess it's particularly pertinent in the current climate.
JC. It really depends on how people perceive cost and whether a developer, for example, is going to retain the management of the completed asset. Obviously there is the one-dimensional financial cost consideration but this needs to be balanced against the social and environmental savings that can be had. A 'cheaper' option in financial cost terms can in fact be the more expensive option over the whole life cycle and we see more organisations investing in greater strategic long term planning and modelling.

Society as a whole can have a great impact on the built environment if they direct their choices towards developments that can demonstrate 'green' credentials. If we, as a society, strive to make our choices based on strong sustainable principles, the built environment and those responsible for it will have to rise to that challenge.

The client's vision for the project is paramount. In our workshops, defining and confirming with a client what their objectives are is key to defining the terms and direction of the project. We've been called in to help on projects that were experiencing difficulty both with programme and budget - yet when we facilitated a risk and value management workshop with the client and their major stakeholders and defined the client's objectives, we achieved a moment of clarity for everyone in the room. Suddenly you could see all the different stakeholders comprehending what the client wanted and needed from the project, and then we worked with all the participants to ensure an agreed course of action to ensure the project would have a greater opportunity for success. We find these moments exceptionally rewarding as we are actively assisting clients in achieving their goals and objectives.

When client objectives include sustainability parameters, then we can ensure that all stakeholders understand their deliverables and thus we can 'plan, design and enable' accordingly. If the client's objectives don't include sustainability, then obviously those considerations become less important in the overall delivery of the project.

What are the biggest challenges the region faces in terms of its future development?
JC. One of the great regional challenges includes transportation, both domestic and international. Many of the countries in the region are experiencing tremendous growth in population which demands a corresponding increase in their role as a major hub for people and freight to move in and out of the region. Whilst transportation is going to be a huge challenge, the GCC rail proposals will address several of these issues. Currently, the UAE is leading the region, with Dubai one step ahead in the opening of the Dubai Metro.

What opportunities does the transportation sector present to contractors and construction firms within the region?
JC. The opportunity for the F+G/Atkins group is certainly to participate in world-first infrastructure projects, to do things that haven't been done before and to be instrumental in delivering a tangible benefit not only for government, but also for the community. Within the F+G/Atkins group we've had the opportunity to be involved in major transportation projects across the region, including the Dubai Metro here in the UAE, the Makkah Metro in KSA and the Gautrain in South Africa. We're also active in a broad range of coordinated services covering planning, infrastructure, utilities and buildings across a number of market sectors. These all provide us with the opportunity to provide tangible benefits to local and global communities. We can proudly state that what we have achieved has actively improved people's lives. We all work collaboratively together and the opportunities for everybody are amazing. There are a considerable number of regional mega projects still being constructed, which equates to considerable opportunities and rewards for all concerned.

And as the risks come down, those projects become more attractive.
JC. Our aim with project risk management is to assist our clients to identify and manage the likelihood and the impact of threats to the project. When we reduce either the likelihood or the impact - or preferably both - then effectively we are making the project more attractive to our client, their investors and their customers. We encourage our clients to engage in our processes - to identify, analyse, evaluate and control or mitigate their risks. Once we have mitigated those risks, they invariably find that the potential for cost overruns or project delays have also been reduced. With these demonstrable tangible benefits of risk management, not only does our client reduce the risks to their project or business, they've also opened up avenues for greater opportunity and greater success. It's the F+G/Atkins formula - to take enormous pleasure in assisting our client to achieve greater success, as everybody wins. We aim to have our processes embedded in our client organisation's culture and processes to ensure their greater success - not just for this project today, but for their projects of tomorrow. Our risk management philosophy is really about assisting our clients to plan for success.

Risk management: a definition

Risk is defined in ISO 31000 as the effect of uncertainty on objectives (whether positive or negative). Risk management can therefore be considered the identification, assessment and prioritisation of risks, followed by coordinated and economical application of resources to minimise, monitor and control the probability and/or impact of unfortunate events or maximise the realisation of opportunities. Risks can come from uncertainty in financial markets, project failures, legal liabilities, credit risk, accidents, natural causes and disasters as well as deliberate attacks from an adversary. Several risk management standards have been developed including the Project Management Institute, the National Institute of Science and Technology, actuarial societies and ISO standards.

Methods, definitions and goals vary widely according to whether the risk management method is in the context of project management, security, engineering, industrial processes, financial portfolios, actuarial assessments, or public health and safety. The strategies to manage risk include transferring the risk to another party, avoiding the risk, reducing the negative effect of the risk, and accepting some or all of the consequences of a particular risk.

Certain aspects of many risk management standards have come under criticism for having no measurable improvement on risk, even though the confidence in estimates and decisions increases.

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