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RISK IDENTIFICATION Light Rapid Transit, also known as LRT, is a system of public transportation provided by the government to ease the travelling and transporting people from a distance. The LRT system is somehow the combination of buses and monorail system since the middle of year 1996. This modern and reliable transportation mode will be making Kuala Lumpur in good stead to welcome the 21st century. When it comes to accepting a contract value of RM100 Million to build the Light Rapid Transit project from Cheras to Kajang, commencing plan period within 2013 to 2015, a risk management process plan need to be made. In risk management planning, the first and foremost is identifying the possible risks that may occurred during the project. Risk identification can be defined as the process of identifying risks using techniques such as brainstorming, checklists and failure history made before. In identifying risk in the Light Rapid Transit project, the risk could be categories into Design and Planning Risk, Construction Risk, Finance Risk and Operation Risk. Design and Planning Risk. During the design and planning stage, there will be many problems occurred. One of the problems will be due to congested area of land from Cheras to Kajang. The site for constructing the railway for the LRT must be considered whether to follow the flow route of the highway, or need to find the new route for the railway. There are two highway route from Cheras to Kajang, one is the CherasKajang Highway which approximately 19 kilometres and the other one is the South-North Highway (PLUS) which approximately 24 kilometres. As for the route planning, the highway route should be considered, as the LRT Station should be either near a bus station to ease the user or near the housing area for the local population could return home safely. Besides that, other public transportation should be considered as it will caused competition between other modes of transportation. Some of changes in design might be occurred as there is many consideration such as soil condition, topography and land territory should be reconsidered during construction. Finance Risk. According to Kiggundu (2009), most major cities in the world today are facing an immense challenge in financing their public transport systems. The capital city of Malaysia, Kuala Lumpur contains population of 4 million in the metropolitan area presently. Public transport services in Kuala Lumpur are a bit poor in part due to the failure of major private operators to secure ample funding. Many public transport firms in Kuala Lumpur have not been able to service their debts and to buy new vehicles. According to a recent study conducted by the World Bank (2004) on the role of private

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concessions in developing urban Mass Rapid Transit (MRT) in Kuala Lumpur, Manila and Bangkok found that, despite efforts by the governments to promote private sector participation in the infrastructure development and the financing of public transport projects such as the light rail transit systems, there has been no replicable and sustainable financing model developed thus far in the three cities. It is important to aware that a fare revenue-dependent public transport system has been difficult to maintain and sustain in Kuala Lumpur because of the extremely low levels of public transport ridership. According to Jamilah and Kiggundu (2007), one of the major challenges faced today in financing public transport in Kuala Lumpur is the unfavorable environment in which public transport system operate. For instance, in many parts of Kuala Lumpur, major roads are always congested and this has affected average speeds for road-based public transport especially stage buses. In addition, the recent surge in private vehicle use and ownership especially cars and motorcycles have reduced demand for public transport and also escalated traffic congestion in the city centre. Construction Risk. During the construction stage, many problems and issues may be arising. Such as, the route from Cheras to Kajang might be compacted with housing area, commercial area and industrial area, to set out the site, the area involve may be affected. Besides that, highway and roads need to be closed to allow big and massive structures to be transport to construction site. This will slow down the traffic near the construction site, and will caused massive traffic jam. In addition, the safety of the pedestrian and road users might be affected if any of mistakes done during the construction stage.

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RISK CLASSIFICATION Definition: One common way for risks to be classified is with respect to impact on the organization, whereby risks with certain impacts have to be addressed by certain levels of governance. Risks are normally classified as time (schedule), cost (budget), and scope but they could also include client transformation relationship risks, contractual risks, technological risks, scope and complexity risks, environmental (corporate) risks, personnel risks, and client acceptance risks Initial Risk Assessment Risks is classify with respect to effect and frequency in accordance with scales used within the organization, TOGAF (1999). There are no hard and fast rules with respect to measuring effect and frequency. The following guidelines are based upon existing risk management best practices. Effect could be assessed using the following example criteria:

Frequency could be indicated as follows: Frequent: Likely to occur very often and/or continuously. Likely: Occurs several times over the course of a transformation cycle. Occasional: Occurs sporadically. Seldom: Remotely possible and would probably occur not more than once in the course of a transformation cycle.

Catastrophic infers critical financial loss that could result in bankruptcy of the organization. Critical infers serious financial loss in more than one line of business leading to a loss in productivity and no return on investment on the IT investment.

Marginal infers a minor financial loss in a line of business and a reduced return on

investment on the IT investment.

Unlikely: Will probably not occur during the course of a transformation cycle

Negligible infers a minimal impact on a line of business' ability to deliver services and/or products.

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Classify Risks by Type Steps to be taken to assess and classified risks: Assess Risks Step 1: Assess the likelihood of occurrence (probability of occurrence) by eliminating any risks which, on reflection, you believe will not occur. Roughly classify the remaining risks as high, medium, or low probability of occurrence. Step 2: Assess the severity of impact by: Evaluating each risk in terms of its possible impact on the project baselines of effort, cost, time (schedule), and requirements (scope, performance, acceptance, quality) Eliminating any risks which you believe have no or only trivial impact on the baselines Roughly classifying the remaining risks as high, medium, or low severity of impact. Step 3: Prioritize the identified risks on the basis of the rough assessments. The contributing factors are the likelihood of occurrence and severity of impact. Step 4: Quantify the risk based on probability by assigning numerical values to various aspects of each risk to provide a consistent basis for combining them into an overall Risk Profile and determining risk mitigation opportunities and actions. Assign a value from 1 to 5 to each risk (based on the likelihood of occurrence) using the scale below:

Table 1 - Scaling Risk ASSESSMENT OF LIKELIHOOD Very unlikely Somewhat unlikely 50/50 chance Highly likely Nearly certain VALUE SCALE 1 2 3 4 5

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Step 5:

Quantify the risk (based on severity of impact) using the table below:

ASSESSMENT OF SEVERITY Minor impact on cost, schedule, performance Moderate impact performance on cost, schedule,

VALUE 1 2 3 4 5

Significant impact on project baselines Very significant impact on project baselines Disastrous impact, probable project failure Step 6:

Quantify the risk (in terms of level of controllability) using the table below: ASSESSMENT OF CONTROLLABILITY Essentially avoidable through selected risk mitigation actions Highly controllable through organization or project actions Moderately controllable through organization or project actions Largely uncontrollable by the organization or the project Uncontrollable by the organization or the project VALUE 1 2 3 4 5

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RISK ANALYSIS & ATTITUDE Definition of risk analysis Risk analysis is a tool to find and assess the risk that might happen. This gives benefits to the company as the risk can be identified and decision making will be made easier. This is a method that evaluates the consequences associated with the type of risk, or combination of risks, by using analytical techniques. Secondly, it assessed the impact of risk by using various risk measurement techniques. There are 2 types of analyzing which is financial risk (quantitative) and physical risk (qualitative).The prime purpose of a risk management is to assist business to take the correct risk. This is one of the most vital parts of the system. Risk analysis is the attempts to capture all reasonable options and to investigate the various outcomes of the made decision. a) Analyzing Financial Risk (Quantitative) Programmed Budget Cost Planning By using Sensitivity analysis Probability analysis Monte Carlo simulation Sensitivity analysis according to Ho (1992) aims to identify the uncertainty factors which have a significant impact on a projects return. This technique usually involves a series of what if questions by giving a percentage change to each key assumption at one time (Ansell & Wharton, 1992). It is viewed as a first step to screen those factors to be specified in probabilities in more sophisticated methods (Ansell & Wharton, 1992). As for this project, the financial risk should be minimized to ensure that the project will be completed within the budget hence avoiding cost-overrun. The sensitivity analysis is analysed by preparing the list of any probability of what if some problem arise during the construction. Any problem encountered during the construction such as reclaimed the land from the current owner, any problems regarding the restrictions the work programme such as there are unexpected water table in during undertaking the tunnel construction will affect the cost. By analysing these probabilities, the possible loss could be avoided, hence minimize the cost. Probability analysis includes all probability-based analytical methods (decision trees, E-V rule, etc.). It provides answers to questions such as what is the probability of making given Net Present Value

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(NPV) or Internal Rate of Return (IRR)? One simple example is to assign probability distributions of future period-by-period cash flows and produce a probability distribution of NPV/IRR (Ansell & Wharton, 1992). The NPV and IRR method is the most suitable and the most practical method being used nowadays by construction players whether from the contractors side, the consultants and even in the clients side for balancing review. This method also could be easier to understand and clearly stated that how much the project will generate income, and at the same time will evaluate how much the cost will be incurred during the construction with the pre-determined route. If the earlier proposed route is not feasible in terms of cost, for instance, the route will involve high land cost or involving the demolition to the existing building, the cost incurred during pre-development will be high. If the route is proposed to be Cheras-Kajang via the congested city such as Bandar Tun Razak, there are possibilities for demolitions for the building that crossing the route especially involving the tunnel construction. The IRR method will provide the information about the cost incurred and will assist in further discussion for decision making for any other alternatives that is considerably feasible in terms of cost. The Monte Carlo Simulation method is an application of the laws of probability and statistics to the natural sciences. The essence of the method is to use various distributions of random numbers, each distribution reflecting a particular process in a sequence of processes such as the diffusion of neutrons in various materials, to calculate samples that approximate the real diffusion history. Statistical sampling had been known for some time, but without computers the process of making the calculations was so laborious that the method was seldom used unless the need was compelling. The computer made the approach extremely useful for many physics problems (Anderson, 1986). The introduction of Microsoft Project led to another logical application of Monte Carlo simulation analyzing the uncertainties and risks inherent to the management of large projects for instance, LRT construction project. This method is more accurate but takes a longer time to be carried out. Eventhough, this method is more suitable for large scale project, but the time required for preparing the Monte Carlo simulation is not practical. In the Malaysian Construction Industries also does not have many expertises in the science regarding to construction. Since this method required to be prepared by the expertise, this method is considered as not practical to be used in this proposed LRT Cheras - Kajang line construction

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Definition of risk attitude Risk attitude in scientific term if risk is defined as an uncertainty that could have a positive or negative effect on one or more objectives, and attitude is defined as chosen state of mind, mental view or disposition with regard to a fact or state, then combining the two gives a working definition of risk attitude as chosen state of mind with regard to those uncertainties that could have a positive or negative effect on objectives, or more simply chosen response to perception of significant uncertainty (Hillson & Webster, 2004). Meanwhile, the concept of risk attitude is a generic orientation (as a mind-set) towards taking or avoiding a risk when deciding how to proceed in situations with uncertain outcomes (Rohrmann, 2002). Generally, there are two types of risk attitudes which are Risk propensity (tendency): Attitude towards taking risks; Risk aversion: Attitude towards avoiding risks Risk attitude is required to be identified in order for the requirement for risk response stage. The client will comment the either their decision is risk propensity or risk aversion. This LRT project is under the Ministry project and can be categorized as the government project. Typically, the government will have the attitude of risk aversion, which is avoid to facing the greater risk as the greater risk will have the possibility of affecting the safety of the construction itself, the workers and other persons that around the construction. The greater risk could also affect the cost of the project. The government certainly will avoid the risk if there still other feasible alternatives that cause low risk towards the project. The government project if it is financed by the government fund, hence there will be tight budget to run the project because the government fund is carefully allocated for any project and be decide in the government annual budget and will be audited by the countrys General Auditor.

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RISK RESPONSE Definition: Risk response basically consider the responsibility of the risk allocation which could either be handled by the client, contractor or intended for all parties to share. These allocations could be carried out properly if the objective and task for each party have been clearly defined. Criteria for risk response: a) Proportional to the severity of the risk. b) Cost effective. c) Timely. d) Realistic. e) Accepted by all parties involved.

f) Owned by a person or a party

Risk response strategies: Risk response strategies are the approaches that make to dealing with identified and quantified the risks. The quantification is the process of evaluating the risk in terms of its impact and probability in such a way that we would be able to rank risks in their order of importance. This is called as severity, the combination of impact and probability. There are several strategies are available for dealing with risks which is avoidance, acceptance, transfer, and mitigation. There are many reasons for selecting one risk strategy over another and all of these factors must be considered. Cost and schedule are the most likely reasons for a given risk to have a high difficulty. Other factors may affect our choice of risk strategy for example if a schedule risk is identified for a task in the project, and if this task has many other tasks depending on it, its progress may be calculated as being lower than is apparent, and the severity should be adjusted even though the schedule impact due to the disruption may be difficult to judge. The strategy should be appropriate for the risk it is intended. The following four strategies comprise the strategies that are normally used for risk:

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1. Risk Acceptance/retention/ absorption Not all risks can be transferred, but even if they were, they may not prove to be economical. Using the acceptance strategy means that the difficulty of the risk is lower than our risk tolerance level. If this were not the case, it would not make sense to accept the risk. Once the risk occurs, we will fix the problem and move on. The risk is acceptable because the severity of the risk is lower than our risk tolerance. Accepting a risk does not mean that we will not do something about the risk when and if it occurs. It means that we will do something about it only if it occurs. Many of the project risks will fall into this category. It is the category where the many insignificant risks are put. Many of these risks cost less to fix when they occur than it would cost to investigate and plan for them.

There are two kinds of acceptance, active and passive. Acceptance is active when a risk is identified as being acceptable but we decide to make a plan for what to do when and if the risk occurs. It is much more effective to have a plan in place when these types of risk occur rather than trying to deal with the risk when there is little time and lots of fits. There is also another risk involved such as the wrong thing can be done to solve the problem because its solution was not clearly thought out under pressure in the heat of the moment.

Acceptance is passive when nothing at all is done to plan for the risk occurrence. Many of the identified risks in the project will be passively accepted. These risks are simply too small to be of concern. The cost of developing a plan and documenting it can be higher than the cost of dealing with the risk without preparation.

An example of risk acceptance is the risk of plant that was purchased for the project will be not working. There is a probability of 2 percent that this will occur. That is, the plant is delivered when it not work and will have to be replaced with a new plant. This causes a delay of five days to a task that has twenty-five days of free float. Passive acceptance will probably be used in dealing with this risk. It is probably not worth the effort to anticipate the problem and do something about it. It is simpler to wait and see if something is wrong with the plant and take corrective action.

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2. Risk Transfer The transfer strategy in managing risk is to give responsibility for the risk to someone outside the project. The risk does not go away and the responsibility of the risk is simply given to someone else. This can be done a number of ways. One way is to negotiate the refusal of a project deliverable that has a high risk of causing problems and have that risk contracted to another project. The stakeholder simply agrees that the deliverable is not required as part of the project and finds another project that is willing to do it.

Risks can also be transferred to a contractor who working for the project. If this is done with a firm fixed price contract, the vendor will be obligated to deliver the agreed product for a fixed price. In this situation the vendor is responsible for any risks that occur while trying to complete the contract. The vendors risk strategy may be to increase the selling price to compensate for the risk if it occurs. If the risk does not occur the vendor will make extra money. If they try to transfer the risk in this way mean that the clients are paying for the impact of the risk whether it happens or not.

Probably the most common method of transfer is to buy insurance. With insurance you give a relatively small amount of money to an insurance company. This amount of money, called a premium, is usually much smaller than the cost of the risk. If the risk happens, the insurance company pays to have the risk resolved. If the risk does not take place, the insurance company keeps the premium.

3. Risk Avoidance This is synonymous with refusal to accept risks. In risk avoidance, it completely eliminates the possibility of the risk. The simplest way to avoid a risk is to remove it from the project deliverables. If the parties of the project agree to allow a risk-filled deliverable to be removed from the project, the risk is removed along with the deliverable. The price that paying for the project will probably be reduced to compensate for the reduction in scope. In avoiding risk in this way, we should remember that profits are often related to the risks we take to complete projects that have risks. Another way to avoid risks is to design around parties involved in the project. This strategy involves changing the design of the product so that the risk cannot occur. This kind of strategy are familiar use in design and built project which is the design of the structure are made by contractor and all risk involved during the construction are be taking by contractor.

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Examples of risk avoidance: Add resources or time. Adopt a familiar approach instead of an innovative one. Avoid an unfamiliar subcontractor. Clarify requirements. Improve communication Obtain information Acquire expertise. Reduce scope to avoid high-risk activities

4. Risk Mitigation Risk mitigation aims at reducing the probability or impact of a risk to within an acceptable level. The probability or impact should be mitigated before the risk takes place. Thus avoiding dealing with the consequences after the risk had occurred.

The risk mitigation strategy involves with some monetary such as contingency budget which is expected value of the risk before mitigation. Some of this money is put into the projects operating budget to carry out the mitigation strategy. Since the probability or impact will be reduced, the expected value of the risk will also be reduced and the contingency budget should be reduced accordingly.

Examples of Risk mitigation: Implementing a new course of action that will reduce the problem e.g. adopting less complex processes, conducting more seismic or engineering tests, or choosing a more stable supplier. Changing conditions so that the probability of the risk occurring is reduced e.g. adding resources or time to the schedule. Prototype development to reduce the risk of scaling up from a bench scale model. Where it is not possible to reduce probability, a mitigation response might address the risk impact by targeting linkages that determine the impact severity. For example, designing redundancy into a subsystem may reduce the impact that results from a failure of the original component.

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Risk Strategies and Money Allocation Risk avoidance is frequently going to cost some money. The money that we spend to redesign the project so that the risk is eliminated is money that will have to be spent regardless of the probability of the risk. The additional work of doing the redesign and adding more expensive parts will be part of the operating budget. No money needs to be put into the risk reserves if the risk is completely eliminated. If the risk has already been allocated funding in the contingency budget, the increase in the operating budget can be taken from the contingency budget. Risk acceptance will have money put into the contingency budget if the risk has been identified. If the risk is an unknown risk and has not been identified, the money for it will be roughly estimated and become part of the management reserve. If the risk does happen, the money is taken from the contingency budget or the management reserve and moved into the operating budget when the plan for dealing with the risk is put into place. Risk mitigation will have money put into the contingency budget to handle the risk if it occurs. There will also have to be money put into the operating budget to take care of the cost of the mitigating activities that are being taken for this risk. The mitigation of the risk will reduce either the probability or the impact of the risk, and the contingency budget should therefore be reduced. Risk transfer requires money to be put into the operating budget to pay for the additional cost of either subcontracting the risk or buying insurance for it. The money to do the work for the activity affected, not including the risk cost, was put into the operating budget when the task was created. The cost of the transfer, either the additional cost that the supplier will receive or the cost of the insurance premium, must be added to the operating budget. This money can be taken from the contingency budget. The operating budget of the project sometimes called the performance budget is the amount of money needed to do the things that is planned for in the project. This includes all of the work to produce all of the deliverables that were planned for in the project. It is not the total project budget, it includes funding only for the things that are planned for. Subject to limitations in the project policy, this money can be spent freely by the persons responsible for the tasks of the project as long as the expenditures are following the project plan. The contingency reserve is the money to do the things that may or may not have to be done but that have been identified. This is where the funding for risks that actually take place comes from. When a risk takes place, the project manager authorizes money to be taken from the contingency budget and placed into the operating budget. Generally the project manager must approve money

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transferred from contingency reserves to operating budgets. In larger projects a sub-project manager may approve these funds. The transfer of funds must include any appropriate changes to scope or schedule. The management reserve is money that is set aside for the risks that have not been identified, the so-called unknown risks. This transfer is made when a risk occurs that has not been identified and money must be spent to solve the effects of the risk. The use of these funds usually has to be approved by a manager one level above the project manager.

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REFERENCES Ahmad. K (2011). Risk management. Construction economics 2nd edition: Pearson Custom Publication p.245 Ahmad.K (2012). Risks and Uncertainty in construction. Construction economics Problem and solution 2: Pearson Custom Publication p.57-p.75 Lecturer note. (2012), Construction Economics III, Students notes, UiTM. p.60 EPMO Executive Project Management Office North Carolina (2013) Risk Assessment and Management. [Online] Available at: http://www.epmo.scio.nc.gov/library/docs/riskana [Accessed: 31 May 2013]. TOGAF (1999) Risk Management. [Online] Available at: http://pubs.opengroup.org /architecture/togaf9-doc/arch/chap31.html#tag_31_04 [Accessed: 31 May 2013]. Anderson, H. L. (1986) Metropolis, Monte Carlo and the MANIAC. Los Alamos Science, Vol. 14 p.96. Ansell, J. and Wharton, F. (1992) RISK: Analysis, Assessment and Management. West Sussex, England: John Wiley & Sons Ltd., p.74-75. Hillson, D. and Murray-Webster, R. (2004) Understanding and Managing Risk Attitude.Risk Doctor, Vol. 2 p.4-5. Rohrmann, B. (2002) Risk Attitude Scales: Concepts and Questionnaires. [Project Report] Melbourne, Australia: p.2-13. Kiggundu, A.T. (2009) Financing Public Transport Systems in Kuala Lumpur, Malaysia: Challenges and Prospects. Transportation, Vol. 36, pp. 275-294 World Bank: A Tale of Three Cities: Urban Rail Concessions in Bangkok, Kuala Lumpur and Manila. Final Report, Halcrow Group Limited, December (2004) Jamilah, M. and Kiggundu, A.T. (2007) The Rise of the Private Car in Kuala Lumpur, Malaysia: Assessing the Policy Options. IATSS Res. Journal, Vol. 31, pp. 1-9 Schwarcz, S. (2003) Public Transportation in Kuala Lumpur, Malaysia. MST, pp. 1-24

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