Risk Management in Construction Projects

Risk Management In Project Execution

A Risk management plan shall be formulated for the successful implementation of any project. Risks shall be managed through sound construction practices and through careful preparation and review of the project contract documents. An effective and efficient risk management approach requires a proper and systematic methodology. Risk management in construction is designed to plan, monitor and control those measures needed to prevent exposure to risk. The following flow chart shows the elements of risk management.

Identifying Risks

Risk identification shall be carried in a way that is both forward-looking and in line with the progress of the project, since before the start of the project not all risks are completely recognizable and during the project implementation further risks may emerge.

Quality risks, Personnel risks, Cost risks, Set date / deadline risks, Risks of strategic decisions and External risks are some of the risks that occur in particular for a project. The identified risks are investigated with regard to the probability of their occurrence and the effect on the project. Criteria, on the basis of which individual risks can be assessed and compared with one another will be developed. Risks will be ordered according to the amount of damage or loss and the probability of their occurrence. Accordingly, the effects on the project and the need to take action are evaluated.

Assessing risks

The risk assessment comprises the qualitative assessment and quantitative measurement of individual risks including the interrelationship of their effects. With the help of the results of risk assessment for a detailed list of risks of a project are illustrated and compared with others. The procedure of quantitative risk determination primarily aims at estimating the probabilities of dangerous occurrences within a risk scenario. In the evaluation of the risk of major damage or loss, the maximum damage or loss possible or probable is determined.

Controlling risks

Controlling risk is the active influencing of the risks determined in the context of the risk analysis. Measures of dealing with risk can be differentiated between cause-related and effect-related measures. Cause-related measures are supposed to avoid or reduce risks, while effect-related measures serve to reduce or safeguard against the amount of damage or loss to be expected in the event of the damage or lossentailing event

Monitoring risks

Monitoring of risks is the continuous operative control of the effectiveness of the risk control measures. The goal of risk management is to ensure eliminate risks completely from the project.

Contract Risk Analysis

The main risks associated with this project are foreseen to be the following:

Contract Failure

Major Risks associated	Solutions for Risk Minimisation:
Breach of Contract by any contract party Unacceptable progress achievement Unacceptable quality of workmanship Force Majeure	Repairs to any breach that may occur Improve construction management Impose additional sub-contracting Forfeiture and reassignment

Loss of Budget Control

Major Risks associated	Solutions for Risk Minimisation:
Inaccurate measurement control and forecasting Failure to solve on-site construction problems Unforseen items not measured in the BOQ Inflation and contract price variation Contract claims and disruptions	Proactive approach between the supervisor and the contractor Installation of Management Information System (MIS) Weekly Technical meetings on site Accurate monthly measurement data Updated CPI application and forecasting procedures Immediate calculation and assessment of variations

Program Slippages and Delays

Major Risks associated	Solutions for Risk Minimisation:
Ineffectual construction management Lack of suitable construction resources Lack of sufficient cash flow funding Interference from external sources Inclement weather beyond the expected risks	Accurate progress monitoring and reporting Regular construction management assessment Resources efficiency monitoring and analysis Efficient payment application processing Adequate works protection

Inferior Construction

Major Risks associated	Solutions for Risk Minimisation:
Ignorance of Specifications Procurement of sub-standard materials Poor construction supervision on site Sub-standard testing procedures Abandoning works that are not complete	Interpretation and training in Contract Specifications Strict site monitoring, recording and reporting procedures Assessment of adequate supervision requirements Provision of Labour instruction and training Calibration and maintenance of testing equipment Definitive notices of works approval/rejection

Other risks

• Way leave access, expropriation and compensation

• Imported materials ordering, procurement and delivery

• Health and safety procedures

• Environmental control and impact minimisation

• Human resources management

• Administration procedures cooperation

• Public relations and awareness program