17 May 2017
Infrastructure programmes are extraordinarily complex: they can take many years, have many stakeholders and often have to be executed while connected infrastructure is still in public use. For this reason, being a commercial manager is perhaps as much about controlling risk as it is about controlling cost.
Andrew Allen, associate director, advisory, at HKA, explains why risk management is a key component in the RICS distance learning course in Infrastructure Commercial Management.
Situational awareness may not seem the most likely of key attributes for commercial managers, but an appreciation of context can be crucial in the infrastructure sector to understand how to approach, talk about and calculate risks for project success. Partly the reason for this is the sheer range of projects involved - in terms of their type, duration, size and aim.
Different types of risk
There is a hierarchy of risk within infrastructure projects. From risks to public trust in the project to risks around quality of building materials, different types of risk will be encountered by commercial managers depending on the stage the project has reached and their role within it. Directors with responsibility for overall programme benefits will have quite different concerns to a procurement manager concerned about supply chain interest in a tender, for instance.
Collectively the sponsor, client, supply chain must manage the risks at each level in the delivery hierarchy, from project concept to successful operation, from initial stakeholder approval to long-term passenger demand and from construction site weather to end of life environmental impacts.
Managing risk and change arising from risk will be a central theme of the RICS Infrastructure Commercial Management distance learning course launching in 2017, so how then do we measure and then communicate risk in infrastructure; what makes projects in transportation, energy, water and other utilities different to those of other sectors?
The influence of politics
Serving the needs of society, infrastructure projects are inherently political and managing the risk this entails is a normal part of delivery. The decision to build a runway, for example, is clearly political, but even small community projects can face political opposition.
Politics can slow a project down, but schemes that start with an enthusiastic “nothing will stop us” attitude, may too easily disregard the external factors and impact of economic cycles. Complex infrastructure has gathered a reputation for publishing early budgets that are breached later and promising benefits that ultimately are not delivered.
Society is quite rightly demanding much better performance on the part of the industry’s professionals. Chartered surveyors in particular are in demand to help improve risk and value management in the infrastructure sector. They can do so partly by looking at what’s gone on in the past. While each new project appears unique to some extent, we are not wandering entirely into the unknown. Well documented successes and failures, and the role of luck should not be ignored. They can teach us a lot about how to address project uncertainty.
Stay ahead of the game
The RICS Infrastructure Commercial Management distance learning course will aid your understanding of the standard techniques that can be used, to look back at past projects, and consider the role of uncertainty in the future; and furthermore it will build your ability to ask questions that challenge risk assumptions and identify steps to mitigate those risks.
A key reason for measuring risk is to help manage it, but we have to ask ourselves what level and type of analysis is right for the amount of risk involved, and what tools will most help us prepare? Also, are we aware of unmeasurable risks that still have to be managed? What is missing from our registers? Are important risks – those that have impacted projects in the past – not being considered because they are difficult to quantify?
Commercial managers need to have the ability to ask these sorts of questions, and assess and communicate risk at all levels in the world of infrastructure. It’s exactly this level of intelligence that is valued most highly by clients, because the preparation that follows it, is vital to the success of infrastructure projects and programmes.
The deadline for delegates to enrol for the RICS Infrastructure Commercial Management distance learning course is Friday 16 June.
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