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Operational risks

Discuss about the Risks in Construction Project.

Types of Risks

Operational risks

Operational risks refer to the daily operations risks involving issues such as health and safety considerations by the managing team. Lack of meeting the requirements of the operators leads to a project operation risk which may harm the overall functioning of a construction process (Schieg 2006). Therefore, there is a need to be in agreement with the operators and design developers to guarantee a proper working environment. It is necessary to carry out a plan to avoid the risk factors in the operational stages and limit the financial implications that it may bear to the progress. 

Legal risks

Legal risks refer to the lack of adherence to the regulations in place during construction. The laws ranging from the environmental to the technical concerns have to be followed to the later to prevent the consequences. Failure to adhere leads to financial and legal implications where firms lose considerable time and money in legal costs (Mills 2001). Legal expenses affect the management in both stages of planning and occupation since every member has to go back to the drawing board to plan.

Technical risks

Technical risks exist in complex projects which might be related to the lack of proper expertise in the pre-construction planning as well as the actual planning stage. The consequences of the same spill to the financial constrain affecting the entire costs as the operations have to be planned and carried out once more.

Management risks

The risks involved in the case include conflicts between consultants and the quality control. Conflicts in organizations exist due to differences in interest arising from the several decisions within the construction phase. At the pre-construction stage, consultants may differ on a few issues leading to the management risks that have to be sorted. The consequences of the actions affect the overall progress of the construction which may stagnate at some point of the development (Hwang, Zhao, and Toh 2014). At the same time, risks exist in the quality control sector which affects the balance between quality of the design and the financial returns as well as delays in delivery of the work. The consequences of the move affect the overall management and his operations of the firm. Low-quality risks influence the overall stability of the construction thus leading to complications in the future.     

Technological risks

Technological risks are present right from the pre-construction to the building stage. Lack of adherence to the technical requirements required by a given regulation in a construction environment damages the progress of construction. Besides, too expensive technologies eat into the budget allowance thereby increasing the costs of construction. The risks affect the financial viability of a project leading to a lack of completion and complications in the use of technology (Kelly, Male, and Graham 2014). Technological failure within an organization can lead to increased costs of operation as a new system has to be brought in to cater for the changes.   

Legal risks

Market and financial risks

Market and financial risks related to the dangers of land prices, revenue, and construction costs. The risk of property prices affects a business in the cases where prices increase leading to higher costs of compensation for a land thus leading to high costs of acquisition. The risks remain present in the pre-construction and the construction stages where a plan has to be done to cater for any eventualities related to the rise of the price of land (Kerzner 2013). The consequences of the move lead to high costs in planning due to the increase in overall costs of construction. Consequently, the construction costs will escalate leading to a slow in progress and a hitch on the financial projections.  

Technical Risks

Technical risks emanate from the lack of the management to find the right people for the specified duties in the environment. Therefore, the planning team is better placed to handle the issue to ensure the right technology matching the construction requirements in a given environment as well having the building remains considered. The risks of the technical failure may spill to the project management as the costs of repair or redesigning remain on them as opposed to the construction owner in the case of a tender (Heagney 2016). All the regulations must be considered before actual implementation. For instance, there is a need to consider the use of lifts to transport construction materials to high buildings as opposed to ladders which might result in technical failures. Therefore, it would act negatively on their financial capability resulting in losses. 

Market and Financial Risks 

Market and financial risks can be contained by the assessment and procurement team to cater for the possibility of the rise in the price of land as well as the costs of construction. A plan has to be catered to have an alternative budget in case the prices of commodities and land rise before the actual implementation. Failure to plan for the same would result in high operation costs, inability to complete projects on time, and the compromise on quality which might lead to system flaw (Van der Ploeg, and Vanclay 2017). In averting the risks from occurring, the presence of a supplementary budget by the procurement team needs to remain in place and necessary measures to be set to allow for purchases at the best timing and in the right quantity to avoid high prices of construction materials.

Technical risks

Legal Risks

Legal risks can be contained by the consultants who provide adequate information on the development requirements and the ethical concerns that have to be catered for in the process of developing and completing a building program. Legal risks are dangerous and can provide severe damages to the financial and overall project start up due to costs incurred in catering for the legal expenses in representation as well as paying for the damages (Taylan, Bafail, Abdulaal, and Kabli 2014). Legal considerations enable a smooth operation thus limiting breaching the law in the process of construction. Obtaining all the necessary permits allows for proper risk management leading to a successful construction project.  

Technological Risks

Technology is an important aspect of the building project that leads to efficient operations increasing productivity and time taken towards completing a project. The building consultancy and technical team are responsible for the provision of information on the need for the best technology and the considerations to be taken in different environments (Kikwasi 2013). For instance, buildings within cities have to utilize the best technology as opposed to the remote locations. Thus, the computer technicians and the consultancy department must plan adequately before implementation to ensure a smooth operation. Lack of this leads to increased construction periods translating into higher costs for labor and materials.

Management Risks

Management risks can be handled by the project coordinators where several issues in the administration of projects have to be dressed. There is a need for all the stakeholders to meet and discuss while airing out problems with the consultancy team thus avoiding conflicts of interests (Kikwasi 2013). Besides, assigning the required budget to each department is a step towards limiting the side effects of management risks. Therefore, failure to do so results in high operational costs and delays in project execution as the conflicts halt the progress. Besides, it may lead to construction flaws due to inadequate support leaving the building at risk.

Operational Risks

Operational risks can be managed by the support team who manage the day-today activities. Supervisors and experts in the construction have to plan and monitor the progress of the construction. Failure to do so leads to wastage of resources resulting in increased costs of a project. According to Cheng (2014), the development manager ought to select the best fit operators from the inception of the project planning to take care of the considerations raised by the project team. The ability to do so would emerge due to a willing nature of the players in the construction management (Taroun 2014). Therefore, the development manager is in charge of overseeing and controlling the issues involved with risk management. 

Management risks

Dispute resolutions include bringing two warring parties to air out and remove their differences amicably. Disputes are part of development in organizations where individuals differ due to conflicts of interest and by people being entitled to their beliefs. Therefore, the need for resolution emanates to bring harmony and build a cohesive progress in a construction project (Goetsch and Davis 2014). Proper management of contracts can exist, but operational challenges may present issues leading to conflicts between parties thus raising the need for resolution of matters at hand. There are several methods that can be used in resolving disputes depending on the gravity of the conflict and the level of engagement between the conflicting parties.  

Negotiation

Negotiation refers to the act of involving two or more parties with conflicting issues to work together in developing resolutions favoring both sides of the bargain. During negotiations, several issues have to be considered such as the interests of both parties, options in place for agreement, and the alternatives to be discussed in the case of a failure to make an agreement. At the same time, proper communication has to exist to allow for a transparent and fair hearing to allow each party air out their grievances (Chen 2017). At the same time, the commitment of each party to the resolution has to be determined towards enabling a proper relationship between individuals in the long-run. During negotiations, proposed solutions have to be placed, accepted and endorsed by both parties towards fostering successful resolution.  

Mediation

Mediation is an alternative factor resolution mechanism where the parties in dispute allow an independent expert in the issue to assist them in arriving at a point of settlement. The mediator says the terms of mediation, hears out the concerns from both parties and comes up with a list of propositions to assist in finding a lasting solution (Moore 2014). The mediator ensures the resolution does not remain biased to one party but rather provides a balanced decision that leads to the settlement of a positive relationship between individuals. The process entails core steps such as choosing a mediator, identification of objectives for both sides, deciding on a probable schedule, engaging parties in discussions, mediation shuttle diplomacy, and endorsing a common deal arrived at by both sides assisted by a mediator.

Dispute Review Boards

The dispute resolution consists of experts neutral in a conflict situation that is called in to give deliberations to a particular conflict. The group of experts provides an amicable solution by analyzing the issues at hand about the law and experience and developing a sound solution (Fisher 2016). Therefore, the team offers an opinion that may be used for additional or further negotiations towards finding common ground. Decisions not suitable to the parties can be pushed to further reviews or alternative dispute resolution mechanisms.

Technological risks

Management to Avoid Future Conflicts

In preventing the development of conflicts, the administration in a construction project ought to sort out the critical issues that might result in conflict. Setting things bright and handling out issues through a dispute committee assisting in providing opinion and guidance enables in conflict resolution. Providing a proper communication standard in the environment assists for a good engagement and flow of information ha guarantees success and harmonious operation in a construction project (Wallensteen 2015). Future conflicts emanating from a similar issue handled can be handled through the making of a binding agreement. In this case, the agreement has to be duly signed by both parties and remain in copies to the various parts for easy referral in future problems.      

Conclusion

Risk management is an important aspect in the construction department which enables putting the necessary factors into consideration towards avoidance of adverse effects. In this respect, it assists in saving costs for a construction process by aligning to several factors in the construction environment. Besides, conflict management and resolution are critical in enabling a smooth operation leading o project success. There is a need to adhere to the recommendations set by the government and availing the necessary resources and finances towards a proper relationship as each team carries out their tasks. Developing avoidance concepts through highlighting and addressing critical issues leads to proper relations and reduced conflicts essential for a good construction project management. It is the responsibility of project development managers to ensure all this remain in place for success.

Reference

Chen, G., 2017. The Yin And Yang Of Conflict Management And Resolution. Conflict Management and Intercultural Communication: The Art of Intercultural Harmony.

Cheng, Y.M., 2014. An exploration into cost-influencing factors on construction projects. International Journal of Project Management, 32(5), pp.850-860.

Fisher, R.J., 2016. Generic principles for resolving intergroup conflict. In Ronald J. Fisher: A North American Pioneer in Interactive Conflict Resolution (pp. 87-104). Springer International Publishing.

Goetsch, D.L. and Davis, S.B., 2014. Quality management for organizational excellence. Upper Saddle River, NJ: pearson.

Heagney, J., 2016. Fundamentals of project management. AMACOM Div American Mgmt Assn.

Hwang, B.G., Zhao, X. and Toh, L.P., 2014. Risk management in small construction projects in Singapore: status, barriers and impact. International Journal of Project Management, 32(1), pp.116-124.

Kelly, J., Male, S. and Graham, D., 2014. Value management of construction projects. John Wiley & Sons.

Kerzner, H., 2013. Project management: a systems approach to planning, scheduling, and controlling. John Wiley & Sons.

Kikwasi, G., 2013, February. Causes and effects of delays and disruptions in construction projects in Tanzania. In Australasian Journal of Construction Economics and Building-Conference Series (Vol. 1, No. 2, pp. 52-59).

Mills, A., 2001. A systematic approach to risk management for construction. Structural survey, 19(5), pp.245-252.

Moore, C.W., 2014. The mediation process: Practical strategies for resolving conflict. John Wiley & Sons.

Schieg, M., 2006. Risk management in construction project management. Journal of Business Economics and Management, 7(2), pp.77-83.

Taroun, A., 2014. Towards a better modelling and assessment of construction risk: Insights from a literature review. International Journal of Project Management, 32(1), pp.101-115.

Taylan, O., Bafail, A.O., Abdulaal, R.M. and Kabli, M.R., 2014. Construction projects selection and risk assessment by fuzzy AHP and fuzzy TOPSIS methodologies. Applied Soft Computing, 17, pp.105-116.

van der Ploeg, L. and Vanclay, F., 2017. A tool for improving the management of social and human rights risks at project sites: The Human Rights Sphere. Journal of Cleaner Production, 142, pp.4072-4084.

Wallensteen, P., 2015. Understanding conflict resolution. Sage.

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