Risk Management Report For Australian Construction Company – Mac Constructions

Identification and Categorization of Risks

Question:

Prepair focuses on one of the important Construction Companies of Australia, Mac Construction, and ascertains the risk factors related to the firm and its operational activities. The report should gives a plan for ensuring that the identified risks of the organization are analyzed and counteracted with effectiveness so as to enable the business to deal with the risks efficiently?

The report aims at selecting an Australian company or an organization to develop a risk management report on it. It provides a deep insight into various aspects of the organization like internal or external context involving all key stakeholders, different risk categories to identify various risks, and develop a risk matrix which would be used by the organization to analyze the risks. This report gives a plan for ensuring that all the risks identified within the organization are analyzed as well as counteracted by the higher authority. This would allow the business to avoid prevailing risks efficiently.

The organization that has been chosen to develop the risk assessment report is an Australian construction company named “Mac Constructions.” It is an Australian construction company involved in construction business. This involves all those work related to construction, alteration, repairing, conversion, commissioning, renovation, fitting-out, demolition, maintenance, dismantling or refurbishment of structures. 

The firm is said to be quite efficient in identifying related organizational risks that impact upon the business outcomes. Also, it puts efforts to manage the risks by a planned manner. The organization believes that assessment of risk needs to be initiated from top down manner and communicated to every individual. The higher authority possesses increased responsibilities in reflecting commitment to the various stages of risk management. Some of the steps that are to be followed in risk management are creating suitable contexts, risk identification, analysis and evaluation of risks, and treatment of risk issues as required (Abraham, Chipman and Vijayan, 1999). Identification of risk occurs at the very initial stage to assess the key source and types. This step identifies risk conditions at the various projects and also clarifying the related risk responsibilities.

As referred to the current scenario of post-crisis economy, risk management approaches form an integral element of effective strategy. This construction company Mac is said to be heterogeneous with much complexity. The business conducts include certain key construction divisions that vary greatly (Wang et al., 2009). These include residential, non-residential building, heavy industrial, highway, etc. Various construction projects of Mac Construction in Australia involves conversion, construction, alteration, repairing, commissioning, renovation, fitting-out, demolition, maintenance, dismantling or refurbishment of structures. Its work include all kinds of tests or installation that are usually conducted within construction work, eliminating waste products from workplace areas due to demolition, assembling of elements, prefabrication of elements for building structures or installation, monitoring or maintaining all services of the company. 

The current risk management polices of Mac Construction are:

One of the major purposes of the policy is to eliminate the risk completely from the company. Communicating and confirming the company commitment to risk management in order to assist in achieving the strategic and operational goals (Adams, 2006).  Apart from that, in order to manage the operational risk company has been suing TQM within the supply chain in order to monitor and maintain consistency within the organizations.  Apart from that, the construction company uses various tools to manage the  risk within the organizations which has been very helpful lately.

Risk Assessment and Management in Mac Constructions

All available risks within the construction company are grouped into categories like external, internal, organizational, environmental, or construction work management. As per vast research study it has been identified that some risks affect Mac group which are resembled in projects like governmental bonds or common stocks or others. The process of identifying risk is iterative in nature as new risks become an integral part with project progression across the life cycle. At organizations like Mac Construction, it involves risks for every stakeholder like contractors, owners, suppliers and consultants (Adams, 2008). The risks may enhance with activities occurring near congested areas. This involves geological situations, construction mishaps, interference within construction activities, designing faults that adversely impact all activities of the organization and its projects.

All possible risks that have been identified at Mac Construction are listed below:

• Risk of completion – This type of risk was faced by the organization when it could not complete any of its projects due to several reasons like cost overrun, technological failure or force majeure.
• Risk of price – Risk of price has been faced by Mac Construction organization when the output price became volatile on account of supply-demand issues. This risk became high when output demand failed (El-Adaway and Kandil, 2010).
• Risk of technology – When technological advancements lacked or it did not updated properly, the organization faced this risk.
• Risk of operation – The organization had faced the risk while the operating and also maintaining cost increased at quite higher rate.
• Risk of environment – This risk factor enhanced the overall cost of projects to comply with the new raised standards within the environmental factors. The organization had even faced many protests from local population.
• Casualty Risk – This risk refers to the fact that products and equipment would get damaged over time with increased use (Fortunato et al., 2012).
• Risk of Construction – This risk had been faced by the organization when it involved safety aspects at the construction sites. Risks may be generated through faulty equipment as well as unprotected electrical wiring.
• Organizational Risk – Mac Construction organization had faced this type of risk when different operations as well as processes in production of output were not usually carried out in a sequential manner. The business activities lacked systematic process of converting raw materials into finished goods.

                                                                          

                                                                          Sources: (Hsu and Jiang, 2009)

Those who perceive risk management are considered to be participants, and contractors are entities who potentially impact all decision-making within projects. Based on individual experience, around 10% respondents acquired experience for possessing experience at managing risks. Project managers possessed experiences, and around 35% possessed no experience at all in managing risks. Within the organization, almost 55% did not have enough experience to manage risks. Majority of organizational members said that risks need to be controlled and managed at the early stages of project course (Jha and Devaya, 2008). With reference to the risks associated with the construction firm, technological changes and cost overrun were considered to be the most significant risk factors that are specified to contractors. It was assessed from the respondents at various organizational levels that all associated risks were due to poor work quality and delivery, faulty planning and implementation processes and also work delays.

The following diagram reflects the risk matrix of a construction organization like that of Mac Construction Company.

                                                                                         Source: (Wang et al., 2009)

Risk management concept occupies the most significant place within effectiveness of managerial practices. A relationship exists amidst risk and opportunity in every business operation of Mac Construction Company. Hence, it becomes increasingly important for organizations to identify, ascertain and also control risk issues for capitalizing upon available opportunities for achieving key goals. Any risk may be internal or external that may impact upon business conducts, and may prevent from delivering effective services, conducting projects, or capitalizing upon opportunities (Styhre, 2008).

Avoiding the risk	Not taking any form of activity that will be creating risk. So, planning and best alternative need to be chosen.
Reducing the risk	Controlling the likelihood of risk occurring and consequences.
Transferring the risk	The risk of implementing technology must be shared with IT company and the insurance must be made (Barnes, n.d.)
Retaining risk	Supportive manpower and change management required

Action plan	Analysis
Risk items	Risk in manual CRM and problem in logistics and procurements
Response	Strong feedback from the employees and the customers regarding the issues
Proposed actions	Implementation of E-CRM and E-logistic and E-procurement
Resources requirements	Manpower, funds and technology (Fortunato et al., 2012)
Responsibilities	Project manager and team leader for the implementations
Time frame monitoring	10-12 months , 2015

Risk Matrix of Mac Constructions

                                                                                         Risk management communications

                                                                                          Source: (Jha and Devaya, 2008)

Two way communications process would help to gain risk management communications. Reporting of the risk management to the employees and other stakeholder via tow way communication would enhance the risk management process. 

Document is one of the essential part to demonstrate the process has been systematic and the method and scope are must be indentified in order to assess the risk and consequences. The documents like ongoing change in CRM management. The documentation requires fully audited and dully attested by the risk managers (Hsu and Jiang, 2009). 

Action plan	Analysis
Risk identifications	Risk  within the poor handling of customer response and the supplier along with logistics
Who can be harm	The harm will be done to the customers, company, employees and other stakeholders.
Risk evaluations	The collected  data which are being collated from the feedback of customer and supplier must be evaluated and develop solutions
Record  the findings	After consulting the employees and explored the areas and taken the initial steps. Set goals and priorities the works (Monico et al., 2011).

Monitoring the implementation of new technology via dummy testing and by 360 degree appraisal system. Apart from that, Mac Construction uses balance score card and benchmarking system to analyze the implementation of technology is giving enough benefit or not.

The process of action must be evaluated by dummy testing and giving the proper training of the employees for the future benefit of the company (Styhre, 2008).  After implementation, evaluating the process that is to analyses the shortest path method and longest path method via using PERT and CPM in order to fulfil the mended of the demand of the company.

An efficient risk management process promotes Mac Construction Company to identify risks as well as considering reduction policies of all associated risks. Management of risks at construction firms incorporates a comprehensive and that of systematic way of identification, analysis, and response towards risks for obtaining key project aims. The risk assessment study shows Mac Construction Company had suffered risks like price risk, completion risk, technology risk, operational risk, construction risk, environmental risk, casualty risk, and operating risk. For effective management of all sorts of risk, every stakeholder associated with the company needs to understand individual risk responsibilities, risk preference, risk conditions, and management capabilities. Lack in terms of proper experience cause the organization much difficulties to change the attitudes of the contractors of Mac Construction in areas of risk management.

Conclusion:

From the above study, it has been found that, Total quality management is one of the major methods to manage the risk within the supply chain of the Mac Construction. Total quality management is helpful in monitoring the risk management within its supply chain that helps the company to maintain its consistency within its production of the products. Balance scorecard is one of the most useful techniques used by the organization every year in order to assess the risk and identify the causes behind the failure of any system or the departments.  

References

Abraham, B., Chipman, H. and Vijayan, K. (1999). Some Risks in the Construction and Analysis of Supersaturated Designs. Technometrics, 41(2), pp.135-141.

Adams, F. (2008). Risk perception and Bayesian analysis of international construction contract risks: The case of payment delays in a developing economy. International Journal of Project Management, 26(2), pp.138-148.

Barnes, R. (n.d.). Accounting for Derivatives and Corporate Risk Management Policies. SSRN Journal.

El-Adaway, I. and Kandil, A. (2010). Construction Risks: Single versus Portfolio Insurance. J. Manage. Eng., 26(1), pp.2-8.

Fortunato, B., Hallowell, M., Behm, M. and Dewlaney, K. (2012). Identification of Safety Risks for High-Performance Sustainable Construction Projects. Journal of Construction Engineering and Management, 138(4), pp.499-508.

Hsu, H. and Jiang, D. (2009). Opportunity Efficiency – Use Uncertainty Analysis to Evaluate Risks in Construction. Global Journal of Health Science, 1(1).

Jha, K. and Devaya, M. (2008). Modelling the risks faced by Indian construction companies assessing international projects. Construction Management and Economics, 26(4), pp.337-348.

Monico, E., Forman, H., Goodman, T., Schwartz, I. and Larkin, G. (2011). A survey of policies and procedures on the communication and documentation of radiologic interpretations. Journal of Healthcare Risk Management, 30(3), pp.23-27.

Styhre, A. (2008). The role of social capital in knowledge sharing: the case of a specialist rock construction company. Construction Management and Economics, 26(9), pp.941-951.

Thorn, K. (2001). Tourism planning: policies, processes and relationships. Tourism Management, 22(5), pp.573-574.

Wang, J., Liu, J., Liao, Z. and Tang, P. (2009). Identification of key liability risks of supervision engineers in China. Construction Management and Economics, 27(12), pp.1157-1173.