Importance Of Risk Management In Construction Projects

Objectives of the research

Question:

Discuss about the Construction Projects Selection and Risk.

Risk management is essential for the project of construction because the main aim behind making waste management is to prevent of losses caused by exposure to risk. Risk management in the project of construction is designed to plan, control and monitor those requirements which are needed to protect exposure to risk. It is a research proposal which will describe the role of risk management in the project of construction. In order to understand the research, various sources will be used to analyze the topic. Literature review will reflect the entire structure of risk management to prevent exposure to risk. The importance of risk assessment will be described.   

The main objective of this research is to search out the importance of the risk assessment in the project of construction. Risk assessment is required to prevent the risk exposure. Secondary sources are being taken together the relevant information regarding the research title.

The research program will reflect the importance of risk assessment in the project construction. Risk identification and risk analysis will be discussed under the program of research. The major scope of research proposal is to make better understanding about the kind of risk in construction.

The projects of Constructions are exposed to risk at the time of their coming into existence. It is important for the risk management to measure and cost of the measure must be recognized and comfortable measures must be searched in order to avoid errors in the potential. There are various kind of construction project with the course of planning, development and realization. The importance of risk management in construction projects is vital. In the phase of planning possible risk for the successive achievement of the project can be raised and decreased by their integration into the planning. There is potential analysis of a construction project refers to what extent project risk affect the circumstances of risk of the business (Zhao, Hwang and Low, 2013). It is required for the risk potential to be predictable without depth knowledge of the individual raised at as little expense as possible. Risk management includes the integration of common Principles of risk policy and the organizational integration. With the help of risk management, transparency enhances, various issues can be avoided from the outside by applying the proactive action, and the construction project might be made for unavoidable issues (McNeil, Frey and Embrechts, 2015). The processes of risk management include many steps, which will be described in this literature review.

Role of risk management in construction projects

The certain steps of risk process are identifying risk, risk analysis, assessing risk, controlling risk, monitoring risk and managing the goals. It is important for the risk management that risk to be identified because the risks that are not recognized also cannot be assessed. The risk identification can be distinguished into quality risk, personal risk, cost risk, deadline risk, strategic decision risk and external risk. It is important for the organization to analyze the type of risk in the construction project (Marcelino-Sádaba, Pérez-Ezcurdia, Lazcano and Villanueva, 2014). The main objective of analyzing risk is to define the situation of Risk in the form of completely and precisely. The recognized risks are investigated with the term probability of the occurrence and the effect on the project the evaluation of Risk is brought by the project manager in the term of controlling the project. It is important for the risk team analysis to determine and evaluate as per the kind and points for risk are worked out. The third step of risk management is assessing the risk. The risk assessment includes the qualitative assessment as well as quantitative measurement of the risk of individual involving the interrelationship of their influences (Hwang, Zhao and to, 2014). The result of risk assessment would be helpful for the company to analyze the position of rest in the existing construction project. Risk assessment is considered as a constitutional requirement for the health and safety risk under the management of Health and safety at work regulation. In case of no objective data is present, risk should be quantifiable. With the help of qualitative estimation, risk can be assessed subjectively as per the probability of their occurrence and the amount of damage or loss.

Controlling risk has the effective influencing of the risk decided in the context of risk analysis. The measurement of handling with risk maybe various between cause related and effect related measures. The measure of cost related should be avoided or decrease risk, in the context of effect related measures serve to decrease or safeguard against the damage. The effectiveness of risk control is maintained when the operative control over the risk management is done on continuous manner (Osipova and Eriksson, 2013). The aim of risk management is not to eliminate waste entirely from the construction project. Monitoring risk facilitates guarantee that the position of the risk of the construction project conveys to the situation of endeavored for. The integral part of the body is internal control system. The constant monitoring of the previous indicators And the repeated risk verification are brought by the person who is responsible for every case, no afterward than the respective milestone deadlines.

Types of risks in construction projects

The response construction is wider at the earliest stages of the initiating project with the option of procurement route. There are several routes of procurement that construction project utilize each with different balance of risk either towards the customer or the contractor. For instance the design of client-led and create the weight of the risk on the customer and the stage of design where is contractor Finance creating the weight of Risk on the contractor by the phases of design and construction. There are majorly three kinds of risks in the project of construction that is client risk, contractor risk and health and safety risk (Manuj and Mentzer, 2008). Client risk is related to the quality and cost time. The consideration of the risk management for the customer may involve feasibility risk, design risk, funding risk and commercial risk. Feasibility risk involved the decision to move further backed up by a business case of robust. The preferred solution is presented after considering options. Design risk refers to a decision the level of control to put design and therefore the risk is described in the context of design. Funding risk is making ensure about the availability of the fund to pay the contractor. It reduces the risk of insolvency of contractor as well. The risk of commercial is on the profits and income if contractor is unable to deliver the project on time with quality (Taylan, Bafail, Abdulaal and Kabli, 2014).

The biggest risk for contractor is the stage of tender when commitments in the context of price and time scale. Accuracy in the bill is must in the construction project. Due to lack of quantity in the bill and inaccuracy in the bill can be the reason of fewer margins (Rothengatter, 2017). The contractor should define the entire detail about what he want related to the construction project because subcontractors might not stand by their commitment and work might be more costly in comparison of estimated if a choice of the method of construction is not suitable for the existing construction project. It has been analyzed that on average 2 to 3 people die every week on construction site. Most of them are avoided by constructor (Desai  and Kashiyani, 2015). To decrease the risk of die while performing the task of construction project, health and safety regulation support to them directly or indirectly. The health and safety risk is handled by the legislation regarding construction involving the design and management regulation 1994 and the construction regulation 1996. The importance of Health and safety plan in the construction project is vital and it is important to have the effective communication within the entire team throughout the project. The guidance are reflected by the approved code of practice (HSE 2001) that is concerned about the elements of the health and safety plan and describe the responsibility of those person who are responsible and have duties under the regulation. Apart from those risks, risk of Fire is higher in construction projects. Fire risk is always available on the site of construction. It is necessary to have the certain firefighting equipment in the place of construction project. Training program about preventing risk should be addressed to the existing labor (Froot, Scharfstein  and Stein, 2013). The principal contractor must develop the plan of fire prevention on construction sites.

Steps of risk management

Research questions have been created for this research topic which is defined below:

• What is risk management in the construction project?
• Why risk assessment is necessary to protect the exposure to risk?
• What are the steps or process of risk management to control the risk in the construction project?

Risk management is able to prevent the revelation to risk and their process is helpful for risk management team.

Lack of controlling over the risk can take the lives of many. It can influence the image of the construction project and organization as well in adverse manner.

There are various kinds of design and methodologies available which gives support to accumulate the data effectively. Different kinds of methods and techniques have been observed while executing of the research. The used methods and techniques are listed below:

There might be various kinds of techniques and methods which could support to research to gather the information. Qualitative data has been considered to collect the data and information regarding this topic. It will be facilitates to assemble the information on the quality basis.

Qualitative and quantitative both approaches have been measured to gather the information. The approach of qualitative helps to understand the aspects and opinion about the gathered data. The support of primary and secondary sources has been taken to gather thee quality research material and information regarding the topic.

Data collection is done with aim to collect the information for the executing of research. The relevant information is being collected by suing the primary and secondary data sources. A combination of the resources would b advantageous for the research to make effective understanding about the topic of research. Primary sources are fresh because it is directly fetched by respondent and includes questionnaire and interviews (Musa, Abanda, Oti, Tah  and Boton, 2016). The term of reliability is heavier of the secondary sources in the comparison of primary. Secondary sources are able to increase the authenticity and reliability of the material of research.

The gathered information is huge so it is the challenge to evaluate the entire data within time limit. It is the main reason and to cope up with this issue, random sampling technique has been chosen. It would be helpful to give opportunity to an individual of the population of being involved in the sample. The major feature of this technique is its delegation of the population (Neuman and Robson, 2014).

The research program should be completed within time frame because it is vital for the relevancy. The research should be conducted appropriately and it is necessary for attaining the aim and objectives. A systematic approach has been opted for the execution of the research. It facilitates to accomplish the data and activity within a sequence manner (Sadgrove, 2016). The outcome of the research program will come in a sequence way which is applicable for the research.

Impact of risk management on project success

Target market defines the place where relevant information regarding research topic has to be gathered. The primary as well as secondary sources have been taken in use to gather the information related to the topic. A primary source contributes in the term of questionnaire which will be represented to the risk management and secondary data has been collected from the reliability journals and published material after 2009.

Research program has been executed by keeping in mind about the ethical consideration. There are certain rules and regulations have been followed by researcher and permission is not there to reveal information regarding the research topic. Data protection act is there for those who will breach the rules and policies (Grace, Leverty, Phillips and Shimpi, 2015).

There are certain limit has found during researching the program, the limitations are described below:

• The time limit is not sufficient for this research and due to lack of time; random sampling technique has been chosen which will be helpful to determine the various aspects related to risk management in construction project.
• The range of resources is limited which is being in the issue of limitation to execute the research.
• The limitation of getting access over the data is also the reason of unfavourable collision on the execution of the research.

Serial number	Activities	Starting date	Duration	Attainment date	Description
1	Decision about research topic	1 October, 2017	2	2 October, 2017	Selection of the topic will be done.
2	Making plan for the research	3 October, 2017	3	5 October, 2017	Plans will be made.
3	Implementation of the plan	6 October, 2017	4	9 October, 2017	Plans will be implemented.
4	Data collection	10 October, 2017	4	13 October, 2017	The methods will be selected.
5	Analyzing collected data	14 October, 2017	5	18 October, 2017	Data regarding topic will be analyzed.
6	Interpretation of the outcomes	19 October, 2017	3	21 October, 2017	Results will be drawn from the analyzed information.
7	Drawing conclusion ad recommendations	22 October, 2017	2	23 October, 2017	The conclusion and recommendation will be made.

Conclusion

Thus, it can be summarized by from the above discussion that risk management is necessary for the construction project. It is vital for the risk management to assess the risk. The process of risk management has been discussed in this report.  The management of risk has been installed progressively in the project provides the opportunity to attain the clear understanding of the aim and objective of the services and viability of the project.  It has been recommended that the process of risk should be done in the proper manner. Construction project is risky and the risk management team should be active and follow all rules regarding health and safety. Training program should be conducted in the construction project so that labor can get security and know about how to protect.

References

Aminbakhsh, S., Gunduz, M. and Sonmez, R., 2013, Safety risk assessment using analytic hierarchy process (AHP) during planning and budgeting of construction projects, Journal of safety research, 46, pp.99-105.

Desai, A. and Kashiyani, B., 2015, Role of insurance as a risk management tool in construction projects, International Journal of advanced Research in Engineering Science and Management, 2(3/3).

Froot, K.A., Scharfstein, D.S. and Stein, J.C., 2013, Risk management: Coordinating corporate investment and financing policies. the Journal of Finance, 48(5), pp.1629-1658.

Grace, M.F., Leverty, J.T., Phillips, R.D. and Shimpi, P., 2015, The value of investing in enterprise risk management. Journal of Risk and Insurance, 82(2), pp.289-316.

Hwang, B.G. and Ng, W.J., 2013, Project management knowledge and skills for green construction: Overcoming challenges. International Journal of Project Management, 31(2), pp.272-284.

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.

Manuj, I. and Mentzer, J.T., 2008, Global supply chain risk management strategies. International Journal of Physical Distribution & Logistics Management, 38(3), pp.192-223.

Marcelino-Sádaba, S., Pérez-Ezcurdia, A., Lazcano, A.M.E. and Villanueva, P., 2014, Project risk management methodology for small firms, International Journal of Project Management, 32(2), pp.327-340.

McNeil, A.J., Frey, R. and Embrechts, P., 2015, Quantitative risk management: Concepts, techniques and tools, Princeton university press.

Musa, A.M., Abanda, F.H., Oti, A.H., Tah, J.H.M. and Boton, C., 2016, The Potential of 4D modelling software systems for risk management in construction projects.

Neuman, W.L. and Robson, K., 2013, Basics of social research, Pearson Canada.

Osipova, E. and Eriksson, P.E., 2013, Balancing control and flexibility in joint risk management: Lessons learned from two construction projects, International Journal of Project Management, 31(3), pp.391-399.

Rothengatter, W., 2017, Risk Management for Megaprojects, The Governance of Infrastructure, p.81.

Sadgrove, K., 2016, The complete guide to business risk management. Routledge.

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.

Walker, A., 2015, Project management in construction. John Wiley & Sons. United States.

Zhao, X., Hwang, B.G. and Low, S.P., 2013, Critical success factors for enterprise risk management in Chinese construction companies, Construction Management and Economics, 31(12), pp.1199-1214.