Risk Management

Project Management

November 5, 2009

Submitted To:

Prof. Pradeep Owalekar

Submitted By:

Ankur Agrawal

Roll No: 205

 Risk Management Elements and Process

Case: The Sydney Opera House

The Sydney Opera House (SOH) is a top tourist attraction and landmark for Sydney and all
of Australia. It has become a major arts centre (although, owing to the design, it is not
necessarily the best place to hear opera). The SOH is visually spectacular and a magnificent
structure but designing and building it was somewhat nightmarish.

The original concept for the SOH was a sketch submitted by Danish architect, Jorn Utzon.
Judges selected it from an open competition that ended with 233 entries from 11 countries.
Though happy to win the competition, Utzon was mildly shocked. Although his concept had
caught the attention of the judges, it consisted only of simple sketches with no plans or even
perspective drawings. Utzon faced the task of converting the concept into a design from
which a structure could be built, but he had not prior experience in the design and
construction of such a large building. Because plans, detailed design drawings, and estimates
of needed materials were lacking, little existed from which the cost could be determined. No
one knew how it would be built, and some experts questioned that it could be built at all.
Despite all the uncertainty, the initial project cost estimate was put at $7 million, which the
government would pay through profits raised from a series of state-run lotteries.

Engineers who reviewed the concept noted that the roof shells were much larges and wider
than any shells seen so far. Further, because they stuck so high, they would act like sails in
the strong winds blowing up the harbour. Thus, the roof would have to be carefully designed
and constructed to prevent the building from blowing away.

The government was worried that people scrutinizing the design might raise questions about
potential problems that would stall the project. They thus quickly moved ahead and divided
the work into three main contracts: the foundation and building except the roof, the roof, and
the interior and equipment.

As many experts had feared, the SOH project became an engineering and financial debacle,
lasting 15 years and costing $107 million ($100 million over the initial estimate) Hindsight is
20/20, yet from the beginning this should have been viewed as a risky project. Nonetheless,
risks were either downplayed or ignored, and not much was done to mitigate or keep them
under control.

Risk Analysis of the SOH Project

1. Risks Identification
The risks that are obvious from the very nature of the project are as mentioned below:
1. Poor Cost Estimate.
2. Incomplete design.
3. Failure to keep within the cost estimate
4. Failure to achieve the required completion date.
5. Changes in project scope and requirements.
6. Design changes.
7. Pressure to deliver project on an accelerated schedule.
8. Inaccurate contract time estimate
9. Lack of communication between project participants.
10. Inadequately defined roles and responsibilities.
11. Insufficient skilled staff.
12. Political risks.

2. Risk Assessment

The matrix showing the likelihood, impact and hence the consequence of the above
mentioned risks is shown below. A scale of 1-4 has been used for likelihood and impact
whereby 4 indicate high and 1 indicates low. The consequence is given in qualitative format.

No. Risk Likelihood Impact Consequence

1 Poor Cost Estimate 3 3 Critical

2 Incomplete Design 1 3 High

3 Failure to keep within the cost estimate 3 4 Critical

4 Failure to achieve the required 4 3 Critical

completion date

5 Changes in project scope and 1 3 High

 requirements

6 Design Changes 2 2 Low

7 Pressure to deliver project on an 2 2 Low

accelerated schedule

8 Inaccurate contract time estimate 3 4 Critical

9 Lack of communication between project 3 4 Critical

participants

10 Inadequately defined roles and 1 4 High

responsibilities

11 Insufficient skilled staff 1 2 Low

12 Political Risk 4 2 Medium

3. Risk Response

3.1 Risk Avoidance

Most of the risk could have been avoided by only
• Using a Completed design.
• Estimating at a very detailed level.
• Not selecting untested design.
• Using local Architecture office

3.2 Risk transfer

• Using a fixed price contract will transfer construction risk to the contactor.
• Obtaining Insurance to cover costly risks.

3.3 Mitigate the risk

Risk analysis shows no clear management process for controlling the project however using
an experienced project manager would have effectively reduced the probability or impact of
risks to an acceptable level.

It is clear from the Risk Analysis that SOH was definitely a high risk project and the
government downplayed the risk for its own vested interests.