The development manager has overall responsibility for the control of project risks and any actions associated with the risks throughout the project life cycle. The development management agreement (DMA) governs the relationship between the contract parties, minimizes the project risks, and increases the efficiency and quality of the property development project.
A project development risk is any risk in a development project that could cause it to fail to meet any of its objectives prior to the developer's exit, including construction project risk, project exit risk, transaction risk and sustainability risk. The project risks must be identified, effectively monitored and managed through agreed action taken or provisions made for mitigating, eliminating or preventing them from occurring.
Risk management is the management of the risks to which a person is exposed, to protect and minimize the risks to property, services and individuals. The development manager is responsible for the risk management program (RMP) according to the risk appetite, policies and objectives of the developer.
To achieve effective and efficient risk management, development of the RMP must begin in the preliminary planning phase of the project, before formal project approval is sought and obtained. The different project risks and actions are owned by different stakeholders, each having a distinct vested interest in a project and perception of its risks.
The accumulation of all the interrelated and interdependent risks associated with the construction of a project for its realization is construction project risk. The risks in a construction project vary and are classified according to their nature as physical, design, logistics, financial, legal, political, construction, and operational.
Risks are allocated to the respective risk owner for their management, including the developer, architect, designer, contractors, consultants, user/operator, and community representatives. Risk management calls for mitigation and control measures to be repeated and re-assessed throughout the life of the developed property by the respective risk owner.