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Top 5 Biggest Types of Risks for Mega-Projects

13th Feb 19

Posted by Richard Wood

Topics: Safran Risk

Infrastructure mega projects are often integral to the city, region or country in which they’re built. The Panama Canal brings in almost $3B for Panama annually, Dubai’s International Airport accounts for 27% of the country’s GDP, and the Channel Tunnel – between the UK and France – continues to drive profits year after year.

However, the construction of these complex capital projects is not without its difficulties, and there are many disparate risks that pose challenges for project leaders attempting to meet deadlines and satisfy stakeholder demand. Here are five of the most important.

1. Environmental Risks

Over the last few years, environmental risks inherent in infrastructure development projects have been increasing in scale and scope.

Environmental risks can exist in varying degrees throughout the project lifecycle and lead to significant disruptions at each stage. From environmental or public interest protests in pre-construction, to contamination or pipe discovery during construction, to operational and maintenance pollution in post-construction.

And thanks to more stringent global environmental regulations and heightened public awareness regarding protection of the environment and natural resources, this risk is growing in significance all the time.

Project leaders must give more credence to the severity of environmental risks, and take real steps not only to understand but also control them.

Here are some common types of environmental risks:

  • severe weather may impact progress
  • ground conditions may not be suitable for construction
  • building licences may not be granted on ecological preservation grounds

2. Dependency Risks

In project management, dependencies refer to the relationship between preceding tasks and succeeding tasks – with the most common relationship being finish-to-start: whereby Task P (predecessor) must be finished before Task S (successor) can start.

In these dependent situations, a delay to one task will likely impact all future tasks, thereby disrupting the entire project. In some circumstances, this can also add to the budget of the project, as additional funds may well be required to get the project back on track or resolve the issue.

In mega-projects, the number of dependencies is much higher in comparison to traditional constructions, which is why project leaders must pay more care and attention to these types of activities if they’re to avoid lengthy delays and stay within budget constraints.

Types of dependency risks include:

  • not enough physical space for required equipment
  • number of personnel required exceeds those available
  • data ranges for required construction quality may exceed capacity

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3. Regulatory Risks

Regulations are an ever-growing feature of project management practices both in Europe and the wider world.

Implementing and maintaining compliance with regulations is a major responsibility of project leaders, and severe consequences – such as monetary and legal sanctions and reputational damage – can amass if compliance is not achieved and maintained.

Today, both the number and significance of regulatory risks are growing, thanks in part to stricter health and safety regulations, a greater number of industry-specific governing bodies, and increasing environmental pressure on governmental organizations.

Project leaders must stay ahead of any and all regulations which threaten to disrupt project progress and find a more involved method of maintaining compliance across an entire mega-project life-cycle.

Types of regulatory risks include:

  • the regulator may introduce new requirements relating to size of building
  • health and safety regulations may be revised mid-way through the project
  • sanctions for non-compliance are introduced

4. Communicatory Risks

Many entities involved in mega project construction have a multi-layered organizational structure

In a common system, contractors communicate with construction managers, who then report to project-owner representatives, who in turn speak to the project sponsor, who will then talk to the business executive.

Rarely is there an opportunity to circumvent the levels, and, as capital projects involve many contractors who work to their own detailed plans, there exists a vast number of dependencies, creating a complex picture to communicate.

To succeed, project leaders must understand the limitations of communication present in a mega-project and understand the risks that this introduces on the project itself, taking time to find a working solution for all parties involved.

Types of communicatory risks include:

  • contractor interfaces not compatible with project platforms
  • language barriers between communication levels
  • lack of designated time for meetings allocated

5. External Risks

No matter how well-planned your project, risk and uncertainty will always exist outside project parameters threatening to disrupt the success of your schedule.

Due to the fact these risks exist outside of the project team and organization, they're often more difficult to predict and control. For this reason, external risks often take project leaders by surprise since not enough analysis has been focused on external threats.

However, to be successful, internal and external threats must both be identified and categorized before being placed within a risk breakdown structure, paying special attention to the impact of how these risks can impact the project plan if they occur.

Types of external risks include:

  • crime and/or destruction of property
  • localized terrorism
  • war

A Better Way to Measure Risk

At Safran, we understand the challenges inherent in large infrastructure mega-projects with multiple stakeholders. Safran Risk was designed specifically to handle the many different types of project risk and seamlessly combine advanced project schedule risk, duration risk, and cost risk analysis for ultimate analysis integrity.

Using Safran Risk, project leaders can not only measure environmental, dependency, regulatory, communicatory, and external risks, but accurately calculate the prevalence of those risks on the project schedule in terms of both duration and cost.

To assess your organization’s maturity in risk analysis against the five levels of risk maturity outlined above, why not try Safran's David Hulett Risk Maturity Assessment for free now

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