Details

Written by: Carlos Delgado

Created: 17 December 2024

It was the year 1998, I was about to get married, and an excellent client, GML—part of the Peruvian engineering, construction, and real estate conglomerate Graña y Montero, now AENZA—was building the Larcomar shopping and entertainment center on the cliffside of the Miraflores district in Lima, at the end of Av. Larco, right where the traditional Parque Salazar was located.

At that time, I was the Head of Engineering at Técnicas Metálicas Ingenieros (TMI), and we had been pursuing business opportunities with the Graña y Montero group, which was not only constructing Larcomar but also, just across the avenue, building the Marriott Hotel (where my future wife was part of the supervision team) and, in the same block, the Parque Mar Tower, a twin building to the Marriott Hotel.

TMI was an engineering and construction company specialized in the fabrication and installation of steel structures and heavy industrial works. Over time, it became the sector leader, with the largest installed capacity in Peru, handling approximately 3,000 tons of steel monthly.

Our commercial efforts paid off, and GML’s project manager for Larcomar, Luis “Luchín” Vargas, called us in for a job that perfectly matched our capabilities: fabricating and installing three steel chimneys that would later be covered with glass by other contractors.

The fabrication workload posed no problem; each chimney contained approximately 17.5 tons of steel and accessories, making the total work volume just under 53 tons. However, the geometry was somewhat complex. The chimneys were elliptical, not circular, and the most challenging elements were the supports for the glass coverings to be installed after the structure was erected. These supports gave our detailing engineers more than one headache during fabrication.

As Head of Engineering, I oversaw the Proposals Department, and besides accounting for the geometric challenges and complexity of the support accessories, I faced an unexpected issue: the installation could not be executed using any crane available in the country.

Let me explain. A typical installation of heavy elements involves placing a crane as close as possible to the final position of the load to minimize the “lever arm” (the distance between the crane’s center of gravity and the load’s center of gravity). This allows the crane to lift the load more efficiently. If site conditions force the crane to be placed farther away from the load’s final position, increasing the lever arm, the crane’s lifting capacity is significantly reduced. This is basic physics: attempting to lift the same weight with a longer lever arm creates a tipping effect. No matter how powerful the crane's engine is, failing to respect the maximum load-to-lever-arm ratio will result in an accident. That's why every crane has a load chart that specifies the maximum allowable load based on the distance from the crane's axis to the load's center of gravity. This chart is known as the crane's "load chart."

Unfortunately, the site conditions at Larcomar prevented the crane from being placed close to the chimneys' positions, as the entire area was a post-tensioned concrete slab with three levels of parking underneath. One option was to shore up those three levels, but besides the unacceptable risk of positioning a crane and performing a maneuver on shored-up slabs, it was unfeasible to halt work in the basements for the time required to shore up, unload the chimneys on-site, position the crane, move it between each of the three final chimney locations, and finally remove the shoring.

The obvious alternative was to place the crane farther away, outside the post-tensioned slab area. This would require positioning the crane on the avenue separating the Larcomar and Marriott Hotel construction sites. Beyond the obvious issues of closing a road in Lima's most touristy district, there was a physical obstacle: the lever arm required was so large that no crane in the country (not only in terms of motor capacity but also size and weight) could perform the maneuver.

How do you price a job when you don't know how to execute it? A cynic might suggest "charge exorbitantly and hope the client declines." We considered that too. We analyzed the problem extensively with the installation team, and TMI met with GML to find a solution. Finally, an interesting alternative emerged: use a helicopter.

With this option on the table, as Head of Engineering, I was tasked with finding a provider. I met with Jorge Luis Infantas, Head of Installations, and together we visited the Army Aviation unit. We explained our needs to their commander, who, after some thought, confirmed that a helicopter maneuver was feasible and that they had the necessary equipment.

In my youthful naivety (I was 27 at the time), I asked if they had ever performed a similar maneuver. Without hesitation, the commander replied that they had installed the roof of the new Jockey Plaza shopping center using a helicopter.

I turned pale immediately and was grateful to be seated, as I almost fainted. We thanked the commander for his kindness, promised to stay in touch, and left. Walking to the parking lot, I told Jorge Luis, "The roofs of Jockey Plaza? I installed those… and no helicopter was involved." He turned pale as well.

To keep the story short, we ultimately contacted an American company, Erickson Air Crane (EAC), specialized in aerial crane operations using helicopters specifically designed for lifting, transporting, and placing heavy loads. These "aerial cranes" have two control cabins: one for the pilot and another, directly behind it, for the crane operator, who has full visibility of the load and controls for lifting, rotating, and even flying the helicopter for fine positioning of the load.

EAC was operating in the Peruvian jungle at the time, so we had to coordinate schedules, but the costs were extremely high. Like all cranes, an aerial crane charges by the hour, but in this case, for flight hours. We had to account for the time it would take the helicopter to travel from its base in the jungle to Lima and back.

Given the uniqueness of the operation, it was agreed that GML would directly cover EAC's aerial crane costs, while TMI's price for the installation was calculated based on the personnel and auxiliary equipment required for the maneuver, as jointly designed by TMI and EAC.

Helicopters, like any other aircraft, must evaluate their flight autonomy, which depends on the amount of fuel and the weight of the load. In this case, the weight of a single chimney was approximately equal to the aerial crane's maximum load capacity, even with minimal fuel. Considering that the helicopter had to take off from its base in Callao, reach TMI's plant to pick up each chimney, transport it to the installation site, maneuver it into its final position, and then return to Callao for refueling, it was imperative to reduce the weight to be lifted.

Calculations, including an appropriate safety factor, determined that each chimney had to be cut into three sections for transport and installation. This meant nine operations in total, and a quick and safe assembly system was required so that the aerial crane could place the second and third sections of each chimney onto the lower sections, ensuring proper horizontal alignment (to avoid rotational misalignment) as quickly as possible. Every extra minute consumed fuel, reducing flight autonomy and compromising the safety margin of the operation.

The assembly system was achieved using square-section tubes as "guides," placed at the base and top of the two lower sections. A safety zone was defined where a load that could not be correctly positioned in the allotted time could be deposited, allowing the aerial crane to detach from it and return to Callao to refuel before retrying the maneuver. Jorge Luis Infantas was placed in charge of overseeing the installation operation on-site, and only he could issue instructions.

The operation was scheduled for a Sunday, starting at 9:00 a.m. Permits were obtained from the General Directorate of Air Traffic (DGTA), and it was made clear that everything had to be completed no later than 5:00 p.m., as the DGTA only allowed the aerial crane to operate during daylight hours. Limiting hazardous operations such as installations to daylight hours is also a good practice, even with traditional methods.

On the designated Sunday, thanks to my fiancée's arrangements, I gained access to the Marriott Hotel construction site, where the highest floor slab was equivalent to just a sixth floor at the time, to witness the maneuver and take official photos.

As you can imagine, the permit process was not completed in time, and the first of the nine planned lifts took place late in the afternoon. The first section was successfully positioned just before 5:00 p.m.

Finally, everything resumed on Monday at 9:00 a.m. By then, normal work had resumed at the Marriott Hotel site, so I could no longer access the highest floor slab. Instead, the TMI senior management and I settled into the Social Club of Miraflores restaurant, placing chairs near the window. It was on the second floor, so the view wasn't as good as the day before, but it was still a fascinating and unforgettable spectacle.

One by one, the remaining sections were delivered… until one failed to fit properly. After several minutes without achieving a correct alignment, the order was given to deposit the problematic section in the designated safety zone. While the aerial crane refueled, the field team under Jorge Luis's command corrected the guides of the section meant to receive the load. After verifying that everything was ready, instructions were sent to the aerial crane to take off from its base and continue the operation.

The aerial crane lifted the load from the safety zone and successfully positioned it in place. The remaining sections were installed without further issues, and by the end, all three chimneys were complete.

Throughout my professional career, I've been part of truly remarkable installation operations. We've launched bridges weighing several tons over deep ravines, installed the Interbank trading room structure, erected the Puentes del Ejército bridges steel structures, one of the three (at least at the time) Loesche mills in the country, transmission towers over 185 meters high (the tallest structures in Peru), and countless complex, challenging, and hazardous operations. However, the installation of the Larcomar chimneys remains the most memorable and delicate operation I've had the privilege of participating in.

In times of change, when agility and economy are needed at all levels, the use of specialized services provides that precise mix of capacity, effectiveness and efficiency that organizations need to succeed.

At DC&R we are able to meet these requirements with professional solvency and the experience of more than 30 years in complex engineering and construction environments for heavy industrial markets of high demand such as mining, gas & oil, or energy, as well as for infrastructure and commerce.

DC&R also offers technical assistance services to businesses that need to interact with engineering and construction companies, from tender and project management to contract administration.

Details

Written by: Carlos Delgado

Created: 12 November 2024

The methodology for facilitating a risk workshop in a heavy industrial engineering and construction project should be structured to allow the identification, assessment, and prioritization of project-associated risks. A typical approach can be divided into the following stages:

1. Workshop Preparation

• Define objectives: Clearly establish the workshop objectives (e.g., identifying critical risks, defining mitigation measures, etc.).
• Gather appropriate participants: Include all relevant project parties, such as engineers, construction managers, safety specialists, leaders of key areas, and, if possible, client representatives.
• Review project background: Ensure that all participants understand the project’s nature, scope, and limitations.
• Prepare a framework: Select or develop a methodological framework (e.g., risk matrix, FMEA methodology, HAZOP, etc.) appropriate for the types of risks specific to the project.

2. Workshop Introduction

• Explain the workshop process and objectives: Present the methodology and tools to be used to the participants.
• Describe the scope of the risk analysis: In industrial engineering and construction projects, the scope may include safety, environment, schedule, costs, regulations, and quality, among others.

3. Risk Identification

• Apply structured brainstorming techniques: Facilitate discussion sessions to identify risks at each stage of the project (design, construction, operation).
• Classify risks into categories: This helps maintain structure and may include categories such as technical, safety, environmental, logistical, and financial risks.
• Document the risks: Record and describe each risk in a formal risk register, specifying its cause and possible impact.

4. Risk Assessment

• Evaluate probability and impact: For each risk, determine its likelihood of occurrence and potential impact, usually with qualitative (high, medium, low) or quantitative scales.
• Calculate the risk level: Using a risk matrix or scoring system, rank risks based on their probability and impact to obtain a "risk score."
• Prioritize risks: Based on the risk level, identify critical risks requiring prioritized attention.

5. Develop Mitigation Strategies

• Propose response measures for each risk: Strategies may include avoiding, mitigating, transferring, or accepting the risk.
• Assign responsibilities and resources: Determine who will be responsible for implementing the mitigation strategies and what resources will be needed.
• Establish contingency plans: For critical risks, develop contingency plans that can be activated if they materialize.

6. Documentation and Follow-up

• Record all risks and mitigation strategies: Consolidate the information into a report that serves as the basis for follow-up.
• Define a periodic review process: Ensure that the risk analysis is updated as project conditions change and as execution progresses.
• Establish key risk indicators (KRIs): To monitor the effectiveness of mitigation measures and detect potential increases in the risk profile.

7. Workshop Closure and Results Reporting

• Review key points: Summarize the critical risks identified, the proposed mitigation strategies, and the assigned responsibilities.
• Report results: Issue a final report summarizing the workshop, the risk register, and the mitigation plan, which should be shared with all project participants and stakeholders.

This methodology facilitates a comprehensive and systematic review of risks, with a collaborative approach that involves experts and project stakeholders, ensuring that all
perspectives are considered and that mitigation strategies are aligned with the project's objectives.

In times of change, when agility and economy are needed at all levels, the use of specialized services provides that precise mix of capacity, effectiveness and efficiency that organizations need to succeed.

At DC&R we are able to meet these requirements with professional solvency and the experience of more than 30 years in complex engineering and construction environments for heavy industrial markets of high demand such as mining, gas & oil, or energy, as well as for infrastructure and commerce.

DC&R also offers technical assistance services to businesses that need to interact with engineering and construction companies, from tender and project management to contract administration.

Details

Written by: Carlos Delgado

Created: 09 October 2024

The Earned Value Management (EVM) methodology is a project control technique that integrates scope, cost, and time, allowing managers to objectively assess the performance and progress of a project. EVM not only focuses on how much money has been spent or how much time has passed but also on the value that has been generated compared to the original plan. This approach makes it an essential tool for planning and controlling construction projects, where cost overruns and delays are common risks.

 

Basic Principles of the EVM Methodology

EVM is based on three fundamental principles:

1. Measurement of planned work (Planned Value): This involves establishing a baseline plan that defines what must be completed (scope), when it must be completed (schedule), and how much it should cost (budget). This planned value is known as Planned Value (PV), which reflects the value of work that should have been performed by a specific date.

2. Measurement of completed work (Earned Value): In this phase, the work that has actually been completed by the cutoff date is measured. Earned Value (EV) corresponds to the budgeted value of the work that has been completed, not just the cost incurred. This is essential in construction projects as it allows for an assessment of whether the actual progress is aligned with the plan.

3. Measurement of actual costs (Actual Costs): This metric consists of calculating the actual costs incurred to perform the work. It is known as Actual Costs (AC) and provides a direct comparison between what has been spent and what was planned for that work.

Key EVM Indicators

To effectively analyze the progress of a construction project using EVM, several key indicators are used. Below are the most important ones:

1. Schedule Performance Index (SPI): This indicator measures project performance relative to the schedule. It is calculated by dividing Earned Value (EV) by Planned Value (PV):

SPI = EV / PV

An SPI equal to 1 indicates that the project is progressing as planned. A value greater than 1 shows that the project is ahead of schedule, while a value less than 1 suggests a delay.

2. Cost Performance Index (CPI): The CPI measures the efficiency with which financial resources are being used in the project. It is calculated by dividing Earned Value (EV) by Actual Costs (AC):

CPI = EV / AC

A CPI of 1 means the project is on budget. A value greater than 1 indicates that the project is spending less than planned for the work performed, while a value less than 1 signals cost overruns.

3. Schedule Variance (SV): Schedule variance provides a monetary difference between the value of work that should have been completed and the value of work actually completed. It is calculated by subtracting Planned Value (PV) from Earned Value (EV):

SV = EV - PV

A positive SV value indicates that the project is ahead in terms of time, while a negative value suggests a delay.

4. Cost Variance (CV): Similarly, cost variance indicates whether the project is over or under budget. It is calculated by subtracting Actual Costs (AC) from Earned Value (EV):

CV = EV - AC

A positive CV means the project is saving costs, while a negative CV indicates overspending.

Application of EVM in Construction Projects

The EVM methodology is particularly useful in construction projects due to the inherent complexity and interrelationship between different activities. Below are some of its main applications:

1. Budget Control: EVM allows for the quick identification of project cost overruns. If the CPI shows a value below 1, managers can review areas where more resources are being spent than expected and take corrective measures, such as renegotiating contracts or reducing costs in other areas.

2. Schedule Management: By calculating the SPI, managers can detect if key activities are behind or ahead of schedule. This enables proactive planning, avoiding the ripple effect that delays can have on dependent activities.

3. Performance Forecasting: EVM is also useful for predicting future project performance through projections like the Estimate at Completion (EAC), which calculates the expected total project cost based on current performance:

EAC = BAC / CPI

Where BAC is the total budgeted cost of the project (Budget at Completion). Similarly, projections can be made for the schedule, estimating the project's completion date.

 

Keeping EVM Updated

To ensure the accuracy and usefulness of EVM, it is crucial to regularly update the EV, PV, and AC values. This is achieved through constant data collection from the field, monitoring of costs and physical progress, and periodic reviews of the schedule and budget. In construction projects, changes in scope, weather, and other external factors can significantly impact performance, so it is important for the EVM system to be flexible enough to adjust to these changes.
Conclusion

Earned Value Management is a powerful tool for planning and controlling construction projects. It offers a clear and quantifiable view of progress in terms of time and cost, enabling more informed and timely decision-making. Its ability to measure both the work performed and the associated costs provides a significant advantage over other control methods, which only focus on time or cost in isolation. To reap the maximum benefit from EVM, it is essential to implement the methodology from the beginning of the project and keep it updated throughout its execution.

---

In times of change, when agility and economy are needed at all levels, the use of specialized services provides that precise mix of capacity, effectiveness and efficiency that organizations need to succeed.

At DC&R we are able to meet these requirements with professional solvency and the experience of more than 30 years in complex engineering and construction environments for heavy industrial markets of high demand such as mining, gas & oil, or energy, as well as for infrastructure and commerce.

DC&R also offers technical assistance services to businesses that need to interact with engineering and construction companies, from tender and project management to contract administration.

Details

Written by: Carlos Delgado

Created: 07 August 2024

I.    Introduction

In the current context of engineering, project management, and various academic disciplines, the concepts of complexity, uncertainty, and risks have emerged as fundamental pillars for analysis and decision-making. These terms, although interrelated, encompass different aspects that profoundly influence the success and sustainability of projects, especially in highly relevant sectors such  as engineering, economics, and organizational management. This comprehensive analysis aims to provide a deep understanding of each of these concepts and their importance in the academic and professional fields..

 

II.   Complexity: Definition, Causes, Effects, and Examples

Definition

Complexity refers to the degree of interconnection and interdependence among the components of a system. In the context of engineering projects, organizational management, and other disciplines, complexity implies  the presence of multiple elements, dynamic interactions, and a structure that cannot be fully understood or easily predicted.

Causes of Complexity

1. Multiple Interconnections:

Modern projects and systems often involve  a multitude of interconnected components and stakeholders. For example, in the construction of an industrial plant, design teams, material suppliers, contractors, and government regulators must  be coordinated.

2. Advanced Technology:

The  use of advanced and constantly evolving technologies introduces complexity due to the need to integrate diverse systems and keep  them updated. In the aviation industry, for example, navigation and communication systems require precise integration and constant technological updates.

3. Regulations and Standards:

Projects must  comply with a variety of regulations and standards that can change over time, adding a level of complexity. In the energy sector, environmental and safety regulations significantly influence the design and operation of power plants.

4. Human Interaction:

The  involvement of multiple stakeholders with diverse goals, cultures, and expectations can increase complexity. In a transportation infrastructure project, the interests of local governments, citizens, investors, and end-users must  be balanced.

5. Environmental Factors:

Environmental conditions, such  as climate and geography, can also contribute to complexity. In mining projects, local geological and climatic conditions must  be carefully considered.

Effects of Complexity

1.  Difficulty in Planning:

Planning complex projects requires greater effort to anticipate interactions and dependencies among system components. This can lead to longer timelines and higher budgets.

2.  Increased Risk:

Complexity raises the likelihood of unforeseen failures and errors, as unanticipated interactions can result in problems that were not identified during the planning phase.

3.  Communication Challenges:

As the number of actors and interactions increases, effective communication becomes more difficult, potentially leading to misunderstandings and lack of coordination.

4.  Need for Advanced Management:

Managing complex projects requires advanced skills and specific tools to monitor, control, and coordinate multiple aspects of the project.

5.  Adaptability and Flexibility:

Complex systems need to be adaptable and flexible  to respond to unforeseen changes and real-time adjustments.

 

Examples of Complexity

1.  Infrastructure Projects:

The  construction of a public transportation network in a large city is a clear example of complexity. It involves coordinating various government agencies, contractors, engineers, and the public, as well as complying with multiple regulations and facing geographical and environmental challenges.

2.  Software Development:

Software development projects, especially those involving integration with existing systems and new technologies, are inherently complex. The  need to coordinate development, testing, and operations teams, as well as managing changing requirements, contributes to this complexity.

3.  Renewable Energy Projects:

Developing a wind or solar power plant involves considering multiple factors, such  as geographical location, climatic conditions, environmental regulations, integration with the existing power grid, and managing multiple stakeholders.

4.  Supply Chain Management:

In the manufacturing industry, managing a global supply chain is an example of complexity. It involves coordinating suppliers, manufacturers, distributors, and retailers in different parts of the world, each with their own challenges and local regulations.

Conclusion

Complexity is an intrinsic characteristic of many  projects and systems in the modern world. Its causes are varied, including multiple interconnections, advanced technology, regulations, human interaction, and environmental factors. The  effects of complexity include planning difficulties, increased risk, communication challenges, and the need for advanced management. Understanding and managing complexity is essential for success in engineering projects and other fields.

 

III. Definition of Uncertainty

Uncertainty refers to the lack of certainty or the absence of complete information about future events. It is the condition in which  the outcome of an action or event cannot be accurately predicted due to insufficient data or limited knowledge about the variables involved. In the context of engineering, economics, and project management, uncertainty can arise from  various sources, including changes in the environment, technological innovations, and market fluctuations.

(a)Distinction between Uncertainty and Risk

Although they are often used interchangeably, uncertainty and risk are distinct concepts:

"Risk and Uncertainty. In 1921, before the great financial crisis, the economist Frank Knight argued that: Uncertainty must be taken in a sense radically different from the familiar notion of risk, from which it has never been properly separated… The essential fact is that “risk” means at some times a quantity susceptible of measurement, while at other times it means something distinctly different; and there are profound and crucial differences in the effects of phenomena depending on which of them is present and operating… A measurable uncertainty, or properly a “risk”… is so different from an immeasurable one that it is not an uncertainty at all." - From  "Risk: A Very Short Introduction" - Baruch Fischhoff and John Kadvany

 

1. Knowledge and Predictability:

• Uncertainty:Implies a lack of knowledge and the inability to accurately predict future events. Neither the probabilities nor the impacts of possible outcomes can be estimated.

• Risk: Refers to situations where the possible consequences of an event can be identified and the likelihood of its occurrence can be estimated. Risk can be quantified and managed.

2. Evaluation:

• Uncertainty:Itis difficult to assess and quantify due to the lack of sufficient information. Uncertainty does not have  a defined probabilistic basis.
• Risk: Can be assessed and quantified through probabilistic and statistical analysis, allowing for the estimation of the likelihood and impact of negative events.

3. Management:

• Uncertainty:Managed through the collection of additional information, the development of scenarios, and the implementation of flexible and adaptive strategies.

• Risk: Managed by identifying, assessing, monitoring, and mitigating specific risks using various techniques and tools.

(b)Impact of Uncertainty on Decision-Making

Uncertainty has a significant impact on decision-making in several aspects:

1. Planning and Strategy:

Uncertainty forces decision makers to consider multiple scenarios and develop contingency plans. This can make  planning more complex and time- consuming.

2. Innovation and Adaptability:

In high uncertainty environments, organizations and individuals must  be more innovative and adaptable. Ability to pivot quickly  and adjust strategies is crucial to staying competitive.

3. Alternatives Assessment:

Uncertainty may make  it difficult to assess the alternatives available due to lack of clear and accurate information. Decision makers should rely on assumptions and estimates, which  may increase the likelihood of errors.

4. Costs and Resources:

Managing uncertainty often involves additional costs, as it requires the implementation of measures to mitigate possible negative impacts. This may include investment in research, insurance and emerging technologies.

5. Risk of Inaction:

In some cases, high uncertainty can lead to inaction, as decision makers may feel they do not have  enough information to proceed. This can result in missed opportunities and a decline in competitiveness.

6. Intuitive Decision-making:

In the absence of clear data, decision makers often turn to intuition and past experience. While this may be effective in some cases, it can also introduce biases and increase subjectivity into  the decision process.

 

Strategies for Managing Uncertainty

(a)Information Gathering:

Obtaining more data and conducting additional research can reduce uncertainty. This includes market analysis, feasibility studies and trend assessment.

(b)Scenarios Development:

Creating multiple possible scenarios and assessing their potential impacts allows organizations to prepare for various contingencies.

(c)Flexibility Implementation:

Designing plans and strategies that are flexible  and adaptable allows organizations to quickly  adjust to unforeseen changes.

(d)Investment in Innovation:

Fostering innovation and creativity within the organization can help find novel  solutions to emerging problems and adapt to new realities.

(e) Collaboration and Networking:

Collaborating with other organizations, experts and stakeholders can provide additional information and diverse perspectives, helping to reduce uncertainty.

Conclusion

Uncertainty is an inherent feature of many  environments in which  modern organizations operate. Distinguishing between uncertainty and risk is critical to developing effective management strategies. While risk can be quantified and managed by traditional methods, uncertainty requires a more adaptive and flexible approach. Understanding and addressing uncertainty is essential for informed and resilient decision-making, especially in complex and dynamic contexts.

 

IV. Risk

Risk is defined as the possibility of an event occurring that may have  a negative impact on the objectives of a project or organization. In the business environment, risk can manifest itself in various forms, such  as financial losses, damage to reputation, regulatory non-compliance, among others.

Risk management is a systematic process that involves identifying, assessing and mitigating potential risks faced by an organization or project. It consists of taking proactive measures to minimize the likelihood of adverse events and reduce their impact in the event that they occur.

Risks Management

Traditionally there are four ways of dealing with risks:

1.  Elimination:

Whenever possible, the risk should be eliminated. This can be achieved by, for example, modifying a process or changing technology. In complex projects, good engineering can detect potential risks and eliminate them permanently.

2.  Transference:

Typically achieved when  the organization or project, through an agreement, transfers risk to a third party who accepts it, probably because they are better prepared to manage it. Of course, this has a cost and is equivalent to taking out insurance: you pay a known cost and the risk is taken by another.

3.  Mitigation:

It consists of taking measures to reduce the likelihood of occurrence, reduce the potential impact or both. For example, if a risk of collision has been detected in the case of equipment under certain circumstances that cannot be changed, the use of an automatic operator warning system when  such  circumstances are considered to be a risk reduces the likelihood of collision.

4.  Acceptance:

When it is determined after analysis that the risk cannot be eliminated, transferred or mitigated and, on the understanding that the consequence is not serious, it is simply accepted, and some appropriate amount of money could be allocated to cover the estimated costs of the impact in case of occurrence of the accepted risk.

 

Mitigation Strategies

Some  common risk mitigation strategies include:

1.  Diversification:

It consists of distributing the investments or activities of the company in different areas to reduce exposure to specific risks.

2.  Insurance:

Take out insurance policies to cover financial losses arising from  adverse events, such  as fire, theft, accidents, etc.

3.  Contingency:

Develop contingency plans to respond effectively in the event of an unwanted event, thus minimizing its impact.

4.  Risk Transfer:

Outsourcing certain risks through contractual agreements, such  as service level agreements (SLAs) with suppliers.

5.  Risk Reduction:

Implement preventive measures to reduce the likelihood of adverse events, such  as safety controls, regular audits, etc.

These risk mitigation strategies are just some of the many  options available to organizations seeking to properly manage the risks they face in their daily operations.

Conclusion

Risk is inherent in all activity and is present in organizations as well as projects. In the case of engineering and construction projects, because of their complexity and the uncertainties that arise from  it, it is essential to be aware of the need to identify and manage risks systematically, seeking their elimination first, Where possible.

Engineering is an ideal stage to identify risks in projects and introduce the variations necessary to eliminate them. In case risks cannot be eliminated, transfer and mitigation must  be foreseen, for which  it is necessary to take preventive measures and develop contingency plans.

Risk acceptance is a last resort strategy and should only be used if the three previous strategies are not feasible and, in addition, the expected consequences are acceptable. If a risk cannot be eliminated, transferred or mitigated and the expected consequence is unacceptable or extremely onerous, the project becomes unviable and should be cancelled.

 

V. Bibliography

Complexity

1.   "Complexity: A Guided Tour" - Melanie Mitchell

2.  "Complexity and the Nexus of Leadership: Leveraging Nonlinear Science to Create Ecologies of Innovation"- Jeffrey Goldstein, James K. Hazy, and Benyamin B. Lichtenstein

3.  "Thinking in Systems: A Primer" - Donella H. Meadows

 

Uncertainty

4.  "Uncertainty: A Guide to Dealing with Uncertainty in Quantitative Risk and Policy Analysis" - M. Granger Morgan and Max Henrion

5.  "Governing the Commons: The  Evolution of Institutions for Collective Action" - Elinor  Ostrom

6.  "The Signal  and the Noise: Why So Many Predictions Fail – But Some  Don’t" - Nate Silver Risk

7.  "Against the Gods: The  Remarkable Story of Risk" - Peter L. Bernstein

8.  "Risk Management and Financial Institutions" - John C. Hull

9.  "Risk: A Very Short Introduction" - Baruch Fischhoff and John Kadvany

 

Academic Papers

10."The Science of Managing Uncertainty: A Review of Empirical and Analytical Approaches" - Carl M. Stroh et al.

11. "Complexity Theory and Project Management" - Terry  Cooke-Davies, Lynn H. Crawford, and Thomas G. Lechler

12. "Understanding Risk: Informing Decisions in a Democratic Society" - Paul C.Stern and Harvey V. Fineberg (eds.)