Fundamentals of Risk Management

Risk governance
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such archaeological remains. Cautious construction companies will plan for this 
eventuality and build the consequences into the project plan. The possible time
delays introduced by finding archaeological remains can be built into the project 
timeline, and the increased costs associated with these delays may be covered by
archaeological insurance, if it is available at a cost-effective price.
Project risk analysis and management
The Association for Project Management (APM) developed the Project Risk Analysis 
and Management (PRAM) Guide in the mid-1990s. The key considerations that 
underpin the PRAM approach are set out in Table 31.1. Perhaps one of the most 
important points made is that there is often no historical experience specific to the 
project that will enable accurate prediction of the impact of risk-based events. The 
PRAM Guide provides steps to project risk management that are broadly consistent 
with the steps outlined above.
The PRAM approach represents a continuous set of activities that can be started 
at almost any stage in the lifecycle of a project. There are five points in a project 
where particular benefit can be achieved from using the PRAM model:
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Feasibility: at this stage the project is most flexible, enabling changes to be 
made that can reduce the risks at a relatively low cost.
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Sanction: the client can view the risk exposure associated with the project and 
check that all steps to reduce/manage the risks have been taken.
TAbLE 
31.1
PRAM model for project RM
Project risk analysis and management is a process that enables the 
analysis and management of the risks associated with a project
Properly undertaken, it will increase the likelihood of successful completion of a 
project to cost, time and performance objectives.
Risks for which there is ample data can be assessed statistically.
However, no two projects are the same.
Often things go wrong for reasons unique to a particular project, industry or working 
environment.
Dealing with risks in projects is therefore different from situations where there is 
sufficient data to adopt an actuarial approach.
Because projects involve a technical, engineering, innovative or strategic content,
a systematic process is preferable to an intuitive approach.
Project risk analysis and management (PRAM) has been developed to meet this 
requirement.

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