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Definition of Risk Management

Discuss about the Research Proposal on Risk Management in Construction Projects.

In the time of continuous change, the agenda of risk management for the forward thinking companies is becoming important due to customers demands and market globalization. Risk can be the cause of cost overrun and delay in the schedule of many projects. In the project management, the effectiveness of high risk is becoming an important issue. So, there is the need of effective risk management in any project. In order to make the risk management efficient and effective, all the parties and departments should understand the responsibilities related to risk, risk preferences, risk event conditions, and capabilities to manage the risk (Anumba, Egbu & Carrillo, 2005). There are different parties who are involved in the construction project and they face various kinds of uncertain factors. These factors can be gathered under the various category of risk. Risk or uncertainty can be described as the situation in which the actual result for the particular activity or event is likely to diverge from the forecast or estimated value (Mills, 2001).

There are various definitions of risk. The risk management can be defined as the formal process for systematically analyzing, identifying, and responding to the risk during the project to achieve the acceptable or best degree of risk control or elimination. Risk management is one of the nine knowledge areas provided by the project management institute. Risk management is the systematic way to reduce the impact of risk in the construction project (Alali & Pinto, 2009). The advantage of risk management process are identify, effective use of resources and analyze the risk, improvement in the construction project management. Further, construction project can be extremely complex and full of uncertainty. Risk or uncertainty in the construction project can be the damaging factor. Thus, risk analysis and management can be the main feature in the construction project management to deal efficiently with the unexpected and uncertain events to achieve the desired result and success in the project (Wang, Dulaim & Aguria, 2004).

The objective of this research is to present framework of risk management in the construction projects. The result survey will clarify the current estimated risk and construction circumstances in the construction industry.  The data and information will be gathered from the published articles and statistics, and individual questionnaire and interviews. Along with this, the gathered data will be used to compare with the previous published surveys. The aim of this comparison is to analyze the current trends in the construction risk management. By this, a basic knowledge of current trends and attitudes will be gathered. After that, the report will focus on some cases to improve the understanding related to construction and risk management (Jamil, Mufti & Khan, 2008).

The lack of risk management and risk analysis is the cause of failure of the project plan in the construction company. The lack of risk management can trouble the project and affect the three variable i.e. cost, time and scope. 

Advantages of Risk Management

In this research, there are stakeholders in the company included in the construction projects. Those stakeholders are main contractors, sub-contractors, project managers and suppliers who undertake the construction projects. This study will be very useful and interesting in the construction industry as it will provide the importance of risk management planning into the construction project.  This study will try to disclose the best practices which can be applied in the risk management. The research will provide the information to the stakeholders regarding:

  • Identification and analysis of the issues because of inadequate and insufficient risk management,
  • Provide understanding related to inadequate risk management and the problems in the construction projects related to insufficient risk management,
  • Prevention from the risk and uncertainties of construction projects, and
  • The set of recommendations to recover the failure of projects due to uncertainties (Seddon, 2003).

The aim of the research on the risk management will be designed to identify and analyze the hazards of the uncertainties and risk in the construction projects and to provide he plans to manage the risks associated in the project. It will also provide the way to develop the strategies to manage the risk. The purpose of this research is to identify the reason of failure of construction projects and he best practices to apply the risk management (Park, 2010).

Construction projects are unique in nature and more complex. They take extended period of time and include wide range of resources such as finance, people, material, facilities and intellectual property. In most of the situations, projects have the set and defined objectives which provide the clear vision and specification in their goals (Jalonen, 2012).

The topic for this research is the ‘risk management in the construction project’ to eliminate or reduce the uncertainties in the project.

The construction projects are unique in nature and complex also. It is well known that they take much time in the completion and include many resources such as finance, people, cost and materials. In many cases, projects have some goals and visions for the future. But there are many uncertainties associated with every project. Risk management is the helpful tool for the project managers to set the priorities, allocate the resources and implement the process and actions to minimize the risk in the project. The knowledge of risk management is helpful in achieving the project related goals. Risk management provides the better way for doing business and good results by providing knowledge, confidence and insight for better and effective decision-making. Along with this, it also supports efficient decision making in terms of planning and design processes to avoid and minimize the risk and uncertainties and to identify the opportunities in the market (Schieg, 2006). The understanding of risk management provides better planning to deal with the uncertainties and risks and their negative impacts on the projects as it encourages for better allocation of resources in the project, and for taking the right decision related to better allocation of risk among the parties who are involved in the construction project activity. These all are the lead to increase the certainty for future success and minimize the overall risk exposure (Wang, Dulaimi & Aguria, 2004). If the risk management is ignored in the construction organization then there will be the risk of:

  • Reduction or loss of profit,
  • Increased cost,
  • Worst disposal of business or liquidation, and
  • Damage of reputation or brand in the market.

So, it is clear that the proper and clear analysis of risk in the construction industry is important to successful completion of construction project.

Objective of Research

The objective of this research is to provide the better understanding of managing and analyzing the risk which can improve the construction project with the quality and overall success (Liu & Han, 2014). To be successful in achieving this, the following research question will be investigated:

  • How can the aim of the risk management be described,
  • How can the strategy related to risk management be described, and
  • How can the impact of risk management bemeasured.

The key source of input data for this research will be gathered from the various literatures and by the questionnaire survey to the group of qualified people in the construction industry. The data will be collected from the construction industry by the questionnaire survey which will be done by the means the statistical analysis to find out the appropriate result. Although the attitude or perception of the construction companies towards the uncertainties and risk are well known and there is little information available regarding the use of risk management as the systematic tool with the company. To analyze the skills in the risk management, the questionnaire survey including comprehensive multiple choice questions. After that, the questionnaire will be distributed into the construction organizations operating in the market. It will be ensured that all the respondents must have completely understood the design of questionnaire. Along with this, an interview will be conducted with each respondent to give details about the main goals of the survey. The goal of the survey is to identify the various types of risk and the important management actions to control the risk in the construction industry (Mojtahedi, Mousavi & Makui, 2010).

Further, the questionnaire will be divided into three sections. In the first part, the information of the company will be gathered such as type of Construction Company, and culture of the company etc. in the second section, the significance of the various risks will be analyzed. The third section will be related to the practical actions to reduce the impact of the risk. The complete answers will be gathered by faxes or emails. The answers will be divided into two sections i.e. risk significance and risk allocation. The selected respondents are the experts in the field of construction having at least 10 years of experience in this field. This survey will be done in the large construction organizations having the main aim of the public sector projects. Total sixty questionnaires will be sent to the respondents and it is assumed that in total, 55 responses will be returned with the response rate of 92%. From the returned responses, 44 could be used for the analysis

References

Alali, B. & Pinto, A. (2009). Project, systems and risk management processes interactions: Management of Engineering & Technology. 2(6).pp.1377,1386.

Anumba, J. C., Egbu, C. & Carrillo, P. (2005). Knowledge Management in Construction. US: Blackwell Publishing Ltd

Jalonen, H. (2012). The uncertainty of innovation: A systematic review of the literature: Journal of Management Research. 4(1). 1–47

Jamil, M., Mufti, N. H., & Khan, A.H. (2008). Risk Identification for Construction Projects: Advancing & Integrating Construction Education. pp. 4-5

Liu, T., & Han, D. P. (2014). Study on risk management of manufacturing industry’s R&D project: Key Engineering Materials. 584. 298–302

Mills, A. (2001). A systematic approach to risk management for construction: Structural Survey. pp. 245-252

Mojtahedi, S. M. H., Mousavi, S. M., & Makui, A. (2010). Project risk identification and assessment simultaneously using multi-attribute group decision making technique: Safety Science. 48(4). 499–507

Park, Y. H. (2010). A study of risk management and performance measures on new product development:  Asian Journal on Quality. 11(1). 39–48

Schieg, M. (2006). Risk Management in Construction Project Management:  Journal of Business Economics and Management. VII (2). 77-83.

Seddon, J. (2003). Freedom from command and control: A better way to make the work, work. , Buckingham: Vanguard Eduacation.

Wang, S., Dulaimi, M. & Aguria, Y. (2004). Risk management framework for construction projects in developing countries:  Construction Management and Economics. 22(3). 237-252

Wang, S.Q ., Dulaim, M.F. & Aguria, M.Y. (2004). Risk management framework for construction projects in developing countries: Construction Management and Economics. 22. pp. 237-252

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