Project risk management is a rapidly growing area with applications in all engineering areas. We shall particularly concentrate on applications within the construction industry, but the techniques discussed are more widely applicable. Construction risks have been the subject of study for many years. In particular, [Thompson and Perry, 1992] gives a good overall guide to the subject with a large number of references. Several different models and examples of risk analyses for large projects are given in [Cooper and Chapman, 1987]. A description of many projects (in particular high-technology projects) from the twentieth century, the problems encountered during management, and the generic lessons learnt are given in [Morris, 1994].

Large scale infrastructure projects typically have long lead times, suffer from high political and financial uncertainties, and the use of innovative but uncertain technologies. Because of the high risks and costs involved it has become common to apply risk management techniques with the aim of gaining insight into the principal sources of uncertainty in costs and/or time.

A project risk analysis performed by a candidate contractor before it bids for work is valuable because it can give the management quantitative insight into the sources of uncertainty in a project. This gives management a guide to the risks that need to be dealt with in the contract, or in financing arrangements.