Risk Management & Liability

1. Risk Management & Liability Informa Brownfield Hospital Development Summit 23-24 June 2009

2. What is Risk? • The chance of something happening that will have an impact on objectives. • Risk = Consequence X Likelihood Probability or Frequency of an event (qualitatively or quantitatively) • Outcome or impact of an event

3. Risk Management • What is Risk Management? • The culture, the processes, and the structures that are directed towards realizing potential opportunities whilst managing adverse effects. • What is Risk Management Process: • Establish Context • Identify Risks • Analyse Risks • Evaluate Risks • Treat Risks, and • Always Communicate, Consult, Monitor and Control

4. Context in Brownfield Hospital Developments • For a Disused Site: • Contamination • Human Health • Ecological Impact • Change of Use Requirements • Legal (seller and buyer) • Economical – Not just cost but also finance (willingness to fund) • Technical • Regulatory (changes in standards and exclusions from standards) • Liability (long term responsibility)

5. Context in Brownfield Hospital Developments • For an Existing Hospital Site: • Everything as for disused sites, plus…. • Access • Staging • Location of existing services • Capacity of existing infrastructure • Interruptions to the existing services (impact on provision of health care) • Disruption to the new works (impact on contracts) • Integration of health services • Integration of infrastructure

6. Context in Brownfield Hospital Developments • For All Sites: • As usual, for any project involving real estate, the goals of the key players are not always aligned. • The Competing goals include: • Maximising benefits • Limiting liabilities • Timely achievement of objectives • Safety to humans and the environment • Costs

7. Risk Management in Overall Context • The Overall Development Process Includes (typically): • Land Acquisition • Site Assessment • Risk Assessment • Remediation Plan • Remediation Action • New Activity

8. Establish the Context MONITOR AND REVIEW COMMUNICATE AND CONSULT Identify Risks Analyse Risks RISK ASSESSMENT Evaluate Risks Treat Risks Risk Management Process

9. Proactive vs Reactive? • Plan Proactively • But Stay Flexible • The tools are not a final fix

10. The Tools • Due Diligence: • Conduct all appropriate enquiry • Understand pre-existing conditions • Understand risk and potential impacts (including impacts on existing services operational and infrastructure) • However …… • May later prove to be incomplete

11. The Tools • Contractual Protection: • Indemnities • Transfer of risk • However …… • May limit parties willingness to enter into an Agreement

12. The Tools • Financial Tools: • Cost planning • Cost adjustments • Finance / Allocations • However …… • Funds do not always cover full costs (that should have been known) – typically at the initiation of Health Projects, not enough effort is put into identifying all the risks, options available and likely costs. • Cost overruns occur

13. The Tools • Regulatory Protections: • Federal & State statutory requirements • However …… • Standards change • Standards have exclusions

14. The Tools • Insurances: • By the Owner • By the Designer • By the Contractor • However …… • Have set limits • Have exclusions

15. Analyse Risks What is Risk Analysis? A systematic process to understand the nature of and to deduce the level of risk. Risk analysis may be: • Qualitative • Semi-Quantitative • Quantitative

16. Analyse Risks (Qualitative) Qualitative methods for generating information for risk analysis include: • Evaluation using multi-disciplinary groups; • Specialist and expert judgment; and • Structured interviews and questionnaires. Qualitative Representation

17. Analyse Risks (Semi-Quantitative) In Semi-Quantitative methods, qualitative scales such as those described are given values. Semi-Quantitative Representation

18. Analyse Risks (Quantitative) • Quantitative analysis uses numerical values for both consequences and likelihood using data from a variety of sources. • These may include: • statistical analysis of historical data • influence diagrams • life cycle cost analysis • simulation and computer modelling • statistical and numerical analysis • probability analysis

19. Evaluate Risks • Risk evaluation compares the level of risk against the criteria. It is the basis of decision making which may include, but not be limited to: • Whether a risk needs treatment • Priorities for treatment

20. Treat Risks What is Risk Treatment? process of selection and implementation of measures to modify risk Options for treating risks with negative outcomes: Avoiding the risk Changing the likelihood of the risk Changing the consequences Sharing the risk Retaining the risk Action Plan defines: RESPONSIBILITY, RESOURCES, BUDGET, TIMETABLE, REVIEW, COMMUNICATION, and Cost-Benefit Analysis.

21. Monitor, Control & Communicate • Monitor and control risks: • Manage risks in accordance with established risk management plans to ensure a common approach to the achievement of objectives; • Monitor progress against plans to identify variances; and • Implement agreed risk responses and modify plans to reflect changing objectives in an environment of uncertainty.

22. Questions • Questions ?