Workplace Issues

How Risk Management Kept the Olympics on Track

A comprehensive risk-management program used to build the facilities for the London Olympics helped keep the program under budget and ahead of sche...
Caroline McDonaldSeptember 5, 2012

Despite speculation that they might not be, the preparations for the London Olympics were pulled off with barely a hitch. The Olympic Games were successful and safe because of the way they were managed from the very beginning, contends Chris Bell, chief marketing officer with Active Risk, a risk-management software developer that helped the organizers prepare the facilities for the games. In a recent interview with CFO, he discussed the huge array of risks in building the London Olympics site, and how the megaproject was safely and successfully completed — under budget — with a comprehensive risk-management plan.

With the thousands of risks to manage, where do you begin?
The way the Olympics gets built begins with an organization called the Olympic Delivery Authority (ODA). This is an oversight committee that makes sure it has all the right partners in place and a management structure that looks across all of the different facilities being put together. Think of the ODA as an oversight-management firm. It also works with several other groups with expertise in architectural design, detailed engineering, and program management.

Now imagine the Olympics environment as being just one project. The amazing main facility with the twisted metal look, for example, by itself was built by incredibly complex engineering and construction projects. Now multiply that by more than 100 different facilities and 100 different projects. Coordination across all of those projects becomes an incredible challenge. This is really where risk comes into play.

The first thing is how all of the organizations work together. Back in 2006, as they were organizing their teams, the participating nations established risk management as a critical function to delivering all of the facilities needed for the Olympics.

They took a very simple approach. They assumed that they had hired the top and the best-of-the-best when it comes to engineering and construction firms and that their project management was good.

But the cross-coordination was the real challenge, so they set up three main stages of risk management:

Identifying and managing all areas of risk and how they applied to the more than 2,500 individuals working at any given time.

• Assessing the impact of those risks — and not just the impact on one project. For example, one risk was where it took extra effort to get the Olympic torches placed in the right location. That might mean the need for two extra cranes on site, but the ripple effect is that it took those cranes away from other projects that were using them. This could in turn cause those projects to be delayed.

• Having an aggressive plan to control the risks by being scientific rather than reactive. They laid out careful mitigation plans and actions and assigned authority and accountability in advance. So well before they laid their first foundation or their first iron beam or steel beam, they had the risks identified, the mechanisms to assess losses, and possible risk-control actions in place, just in case.

At that point, they looked at all the costs and the schedules and ran a simulation to identify the probability that a certain risk would occur. If a certain risk had a high cost or a high time delay and an 80% likelihood that it would happen, they made sure they solved the problem before it occurred. It was about being proactive.

Can you give an example?
One key area was the design and construction integration of materials for the main auditorium. A lot of it was about making sure there was access. So there was a team building the superstructure, the skin, of the amphitheatre. But all the techno events in the opening, including the pyrotechnics and the queen flying through the air, took heavy equipment. If you built the entire superstructure without getting some of those big elements in first, then you had a logistical issue.

The top risks they had to manage during that period were industrial disputes and labor issues with organizations: remember it was a tough economic time. One of the top risks that could have derailed the project was a strike of steel workers. If they all laid down their tools and walked off the job site, it could have been a catastrophic loss. So they made that part of their risk-management plan: identifying the risk that labor agreements would need to be negotiated right in the middle of the contract.

How did risk management help the Olympics come in under budget?
In the very beginning they did an assessment of the need to have additional funds, in case of increases in their negotiations. They also put controls in place, like developing great relationships with union leaders and the labor parties to make sure there was good bidirectional communication up front. That way those issues were kept at bay.

Another key issue, and this is where contingency comes in, was contractor insolvency — at that time bankrupt contractors were at a peak globally. So they identified that as a risk and profiled all of the contractors working on the program, asking them about their financial position. In some cases, they worked out ways where progress payments were done in advance of work completed instead of in installments.

The entire team had the ability to input risks into the risk assessment, and some of those risks became escalated. As they escalated, there was a contingency fund in place that could be used to keep the project within budget and on schedule.

By February 2011, they were 82% complete. In fact, the program was so well managed that almost all the main facilities, the core of the Olympic environment, was finished and delivered a year early.

The great news is that somewhere around 50% of the way through, they had only drawn down 30% of the contingency. By the end of the project, they were still able to keep well over 30% of the total contingency. They didn’t need it because they had done such a good job of managing the risk throughout the program.

How were workers kept safe?
At peak, when they were hitting on all cylinders, the Olympic campus had 12,500 people walking around the facility and working on their different projects. The whole other aspect of managing risk is keeping all of those individuals safe: making sure that they follow the right procedures of hard hats and safety lines and avoiding dangerous areas and closed environments, use of volatile chemicals, all those things. It is absolutely dizzying when you think about it.