The identification of risks is best achieved in a workshop environment. Workshop attendance should be mandatory for all project team members, and where necessary the workshop should include experts with proven experience in the areas of risk being assessed - design, construction, commissioning, operations etc.
It is not necessary to quantify the impact of particular risks during the identification phase. The identification process is sufficiently complex without the added complexity of numerical quantification. To assist the quantification of risk in the next stage, the project team should make an assessment of:
■ the likelihood of the risk occurring; and
■ the consequence or impact of the risk if it did occur.
Once all risks have been identified and recorded, the likelihood and consequence of the risk occurring should be recorded and ranked in a simple matrix.
Table 2: Preliminary risk matrix
| Likelihood | ||||
| Low | Medium | High | ||
| Impact | High | 1, 2, 5 | 6, 9 | 4, 3 |
| Medium | 7, 8 | 12, 13, 16 | 19, 20 | |
| Low | 10, 11, 15 | 14 | 17, 18 | |
The preliminary risk matrix provides a shortcut for the project team in selecting which risks should be quantified. Of the 20 risks identified in the above example, risks 10, 11, 15, and perhaps 14 should clearly not be quantified, due to their relatively low likelihood of occurrence and impact. However, these risks should not be eliminated from the risk analysis process, as they have not as yet been allocated in the PSC. Further, although the risks may be relatively immaterial if the project were to be delivered by the public sector, they may nevertheless be of a material nature to a private supplier.
The project team should also make a preliminary assessment of the relationships between the identified risks. Risks that are not mutually independent should be noted as potentially correlated with other risks.
The project team should also identify the risks that it expects will be retained by the public sector and those that may be transferred or shared. Appendix 4 provides an example of a risk allocation matrix. Each material risk should be identifiable in the risk-adjusted costing in the financial model for the PSC.