Risk management in construction projects

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ABSTRACT

Risk is intrinsically there in every project that a business does, in the same there is risk in the construction projects. Right from the word start, the process of construction is composite and qualified by huge uncertainty. More often than not, a project of construction fails to deliver what they had promised and waste their time, quality, and budget. This failure is usually because of the happenings of unforeseen events, which a contractor had failed to discover, examine, and manage in a proper manner. Therefore, the process of risk management in a construction project is very important. Risk arises from uncertainty and we can manage uncertainty to a certain extent by analyzing the risk factors. There are qualitative methods to measure risk and quantitative methods to analyze risk. Each method has its own pros and cons.

ACKNOWLEDGEMENT

I would take this opportunity to thank my research supervisor, family and friends for their support and guidance without which this research would not have been possible.

DECLARATION

I [type your full first names and surname here], declare that the contents of this dissertation/thesis represent my own unaided work, and that the dissertation/thesis has not previously been submitted for academic examination towards any qualification. Furthermore, it represents my own opinions and not necessarily those of the University.

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Table of contents

ABSTRACTII

ACKNOWLEDGEMENTIII

DECLARATIONIV

CHAPTER 1: INTRODUCTION1

1.1 Introduction1

1.2 Background2

1.3 Problem statement3

1.4 Research questions4

1.5 Significance of the study4

1.6 Scope and Limitations5

CHAPTER 2: LITERATURE REVIEW6

2.1 Risk6

2.2 Risk Management Concept- An Overview7

2.3 Risk management as measurement of uncertainty9

2.4 Risk Management11

2.5 The Nature of Uncertainty in Construction Industry11

2.6 Application of Risk Management in Construction Projects12

2.6.1 Research Conducted from 1960-1997 and Suggestions12

2.6.2 Research Conducted from 1998 -Present13

2.7 Risk Management Best Practices in the Construction15

2.7.1 PRAM15

2.7.2 RAMP15

2.7.3 PMBoK16

2.8 Risk Management: A Systematic Approach16

2.9 Risk Management general steps and strategies in the construction industry17

2.9.1 Risk management planning18

2.9.2 Risk Identification18

2.9.3 Risk Classification19

2.9.4 Risk Analysis & Assessment20

Qualitative Risk Analysis20

Quantitative Risk Analysis21

2.9.5 Risk Prioritizing21

2.9.6 Risk Management and Response22

2.9.7 Risk Monitoring and Control22

2.9.8 Closure23

2.10 When to Apply RM23

REFERENCES24

CHAPTER 1: INTRODUCTION

1.1 Introduction

The Construction Industry Institute defines uncertainty, as "the gap between the information required to estimate an outcome and the information already possessed by the decision maker"(Kaplan and Garrick 1981, 27). Kangari and Riggs (1989, 131) suggests that "the nature of uncertainty in any problem is a vital point; scientists in general and engineers in particular should be able to determine this nature before choosing the suitable methods or models to express and address that uncertainty." In practice, the uncertainty in construction may arise from many possible sources such as geographical factors, weather conditions, and type of project, economical impact, subcontractor availability, political factors, and construction delivery methods.

To have a deeper understanding of uncertainty, the nature of uncertainty should be reviewed. As a common example, (Dhillon 1992, 719) compared two origins of uncertainty by explaining throwing dice versus playing dominos. He discussed that if we throw a dice an infinite number of times and record the frequency with which each number appears, we will find that ...