Question:
To what extent does Risk Management in Construction Projects have beneficial effects on emerging Countries’ Economies?
Development and construction has a considerable impact on the economic growth and sustainability of a country. However, construction projects are associated with major risk factors as well, and in case those risk scenarios are not managed accordingly. The detrimental impact of risk consequences on the economic growth of the country can be extreme as well. It can be mentioned in this context that the impact of faulty construction risk management is even more profound on the emerging countries. It must not escape notice that in case of emerging countries the developmental progress contributes handsomely to the economic stability (Fellows & Liu, 2012). Hence, this paper will argue that optimal and adequate risk management activities in case of the construction companies contribute the economic growth and stability of the emerging companies in terms of time and manpower management, cost management, procurement, opportunity identification and sustainable environment-friendly developmental goals.
Body section 1: Risk management in construction aids in optimal cost management:
Cost management can be considered the most direct advantage of construction project risk management; however, in certain circumstances the individual expense for the risk management procedure itself threatens the financial limit of the project itself (Fellows & Liu, 2012). Although, risk management avoids many financial risks that can eventually help in maintaining the financial stability of the project (Merrow, 2011).
The developmental construction projects are considered to be one of the greatest contributing factors behind the developing economy of the entire nation. Although the magnanimous developmental projects require adequate funding and time devoted to the project as well. In case of an emerging country, the optimal utilization of the resources utilized for the developmental projects is crucial for economic stability of any emerging country. Hwang and Ng (2013) stated that the construction industry can be considered as a highly heterogeneous and extremely complex associated with a number of risks and difficulties that can prove to be excruciating hurdles in the path of optimal economical development of a developing country. As there are various hazard risks associated with the construction projects, the possibilities of the hazards sabotaging the resources utilized for the construction projects are extremely high. Merrow (2011), has opined that adequate risk management activities can be extremely helpful in safeguarding the monetary expense invested by a national government in a particularly large developmental construction project. For example, there are various softwares like @Risk, Risk+, PERTmaster project risks and Predict, which has been noted to ease the risk management procedure in an efficient manner (Zwikael & Ahn, 2011). Although, it can be stated that the extra resources invested in the extensive risk management procedures can be a significant impact to the financial standing of the project (Merrow, 2011).
Body section 2: Risk management in construction helps in time and manpower management:
One of the most effective forms of risk management in construction projects in emerging countries is time and manpower, although in all circumstances, general risk management procedure might not result in the advantageous outcome for time and manpower management where more critical and advanced risk management is required (Qazi et al., 2016). However, it can be mentioned that utilizing software based risk management procedure like analytical hierarchy method can be beneficial in optimal time and manpower management.
It can be mentioned in this context that the manpower and time invested by a nation in a rather large construction project is considerably higher. Now construction projects of such intensity can be very unpredictable in terms of successful implementation and outcome generation. Kelly, Male and Graham (2014) explained that the impact of the risk management can be considered a business process management phenomenon that takes into consideration identifying and addressing the root cause of the hazardous risks that has the potential to challenge the outcome of the particular project. Hwang and Ng (2013) agreed on this fact and explained that the risk management procedures are comprehensive and systematic and explore, evaluate, and respond to all the risk-causing elements prevalent, to successfully achieves the construction project objectives. It also needs to be addressed that the time and manpower invested by an economically backward emerging country is massive in case of such projects. A failure may cause the workers and the government a major loss, which developing countries might not be able to afford. In this sector, regular risks assessment activities utilizing analytical hierarchy procedure in all the different phases of the construction project provides an advantage to the national government. However, there are opposing arguments that indicate that utilizing the analytical hierarchy procedure is extremely time consuming and requires expertise to be successfully implemented and many of the construction companies might find using this procedure more critical than standard risk management procedures (Hwang & Ng 2013). As a result, the construction authority can rectify the mistakes beforehand through adequate risk management, so that the resources like time and manpower can be saved from being wasted and can be invested in further developmental procedures to propagate the economic and developmental growth of the emerging country (Aminbakhsh, Gunduz & Sonmez, 2013). For example, in case of national construction project OHS (occupational health and safety) frameworks, when the analytical hierarchy procedure is used by the management, all the hazards that are prevalent in the construction sites that are both dependent and independent of human errors can be easily controlled or procured
Body Section 3: Risk management plan can help to procure important resources for the construction work
With the help of the risk management plan, it is possible to ensure that proper resources are being gathered and stored that can be used for the future purpose (Caiadoa, 2016). On the other hand, it many of the cases, it may be challenging for the construction workers to make the future perditions that are needed for the procurement of the resources. With the help of the procurement and the drafting advice that are needed as a part of the extensive work. It is important to note that each type of the construction work involves different types of resource utilization that is needed for the process of securing of the jobs. Qazi et al., (2016) discussed that one of the major aims of the project managers is to deal with the securement of resources. Schaufelberger and Holm (2017), have provided evidence about the fact that most of the resources that are being allocated for the construction work have the risks of fluctuating prices. This is more likely in the context of dealing emerging economic nations.
The example of Lithuanian construction company can be given in the context, which has to hire external resources for the construction project from the foreign nations at much higher cost. This has been a major cause of poor economic development of the nation, where it is not possible for the government to earn major revenues. The risk management plan in the context of procurement can thereby help to ensure high revenue income from the government sources. It can also help in the matter of resource allocation and procuring the same for the construction work. The government can also help in the process of risk mitigation and improve the chance of economic development. The example in this context can be given that most of the major construction forms partnership with the supplier’s groups that help in the matters of getting resources of during the time of crisis (Schaufelberger and Holm 2017).
On the other hand, it can also be said that while procuring the assets, there is also the risk of stocking resources for the future. This can increase the chance of shortages of resources during the present scenario (Schaufelberger and Holm 2017).
Body Section 4: Risk management can help in the process of opportunity identification
The research work of Paul and Basu (2016) discussed, the risk management and opportunity identification of the construction work is becoming more challenging in the context of the current days. This is also due to the change in the nature of the construction work and the demand for the client groups. On the other hand, there is also the chance factor that due to the poor assessment of the risk assessments, it is may not be possible to identify the proper forms of opportunities that are needed to deal with the issues of related to the construction projects. The non-homogeneous nature along with the non-serial type of production has been one of the major challenges for the construction work of the modern days.
As further opportunities are being identified, it may be possible to predict all types of future risks that are associated with the work of construction. Advanced level of monitoring is being implemented that are needed to deal with the future challenges associated with the work of construction in the emerging economic nations. As future risks of the construction industry are being identified, it is possible to implement the process of long-term savings that is one of the major ways to improve upon the government economy of the nation. The opportunities are also effective in identifying the effective ways to improve upon the usage of the natural resources. Lam et al., (2017), have added in the context that due lack of availability of the natural resources in the emerging nations, they are forced to import the same from the foreign nations. This results in the loss of revenue of the private organizations within the construction industry. The risk assessment planning can help in the securement of the resources and make proper use of the same in order to deal with the resource challenges.
Here the relevant examples can be given that will help in the cases related to that of risk identification. As risks could have been identified, it is possible for the construction agencies to develop policies that can help to make full use of the opportunities (Paul and Basu 2016).
It can also be said that there is high level of chance of mistakes that are involved due to poor process of risk assessment. Poor process of opportunity identification can result in false prediction for the future (Lam et al., 2017).
Body Section 5: Risk assessment can help to reduce the effect of environmental degradation and thereby help in the process of improving the level of health in the society
Perrenoud et al., (2017), have highlighted about the types environmental degradation that is usually caused due to the disposal of constructional wastes. The risk assessment plan can help in the management activity that are needed to deal with the issues of environmental wastages that are caused due to the construction works. One of the major examples of environmental degradation due to the construction work is that of the Dakota Access Pipeline that has received several critics due to over exploitation of the local available natural resources. The transportation of the natural oil for several miles has resulted in the environmental impact that has resulted in environmental pollution in the form of oil spilling and leakages (Hassan, 2016).
Hence, in the given context, it is not possible to deal with the adverse effects of the environmental changes that are usually associated with the construction activities. For the emerging economic nations, the risk assessment plans can help to deal with the process of suitable development. There are also special protocols within the risk assessment plans that are needed to deal with the adverse effects of constructional wastes. This can be achieved with the help of implementing proper wastes disposal and treatment procedures.
Here examples can be given in the forms that construction project workers use raw materials that are eco-friendly and can also be re-used in the future.
In the counter argument it can be said that in order to deal with the effects of environmental degradation, the cost of construction work is increased significantly (Hassan, 2016))
Conclusion:
On a concluding note, it can be stated that the risk management procedures act as saving grace for the construction companies and government authorities in saving crucial resources like time, money and manpower for the nation. And hence, optimal utilization of the resources is able to facilitate better growth and development for the nation. However, the benefits of the risk management activities are stretched further to incorporate procurement and opportunity identification. It in turn can effectively enhance the revenue statistics of the emerging country effectively. Lastly, sustainable development is a prerequisite for any of the developmental projects all across the world. Therefore, through risk management in context of environmental impact can also help in overall growth of emerging nations to the forefront of global-recognition.
References:
Aminbakhsh, S., Gunduz, M., & Sonmez, R. (2013). Safety risk assessment using analytic hierarchy process (AHP) during planning and budgeting of construction projects. Journal of safety research, vol-46, pp.99-105. doi: https://doi.org/10.1016/j.jsr.2013.05.003
Article 1,
Caiadoa, R. G. G. (2016). GUIDELINES TO RISK MANAGEMENT MATURITY IN CONSTRUCTION PROJECTS. Brazilian Journal of Operations & Production Management, 13(3), 372-385. Vol 13, No:3 Article 7 Doi:
DOI: https://dx.doi.org/10.14488/BJOPM.2016.v13.n3.a14
Fellows, R., & Liu, A. M. (2012). Managing organizational interfaces in engineering construction projects: addressing fragmentation and boundary issues across multiple interfaces. Construction Management and Economics, vol-30(issue 8), pp. 653-671. Doi: 10.1080/01446193.2012.668199, Article 2,
Hassan, M. K. (2016). Risk Management in Construction of Oil Industry Projects in Sudan (Doctoral dissertation, Sudan University of Science and Technology).
Retrieved from: https://repository.sustech.edu/handle/123456789/13796
Hwang, B. G., & Ng, W. J. (2013). Project management knowledge and skills for green construction: Overcoming challenges. International Journal of Project Management, Volume 31, Issue 2, pp. 272-284.doi: 10.1016/j.ijproman.2012.05.004 Article 3
Kelly, J., Male, S., & Graham, D. (2014). Value management of construction projects. John Wiley & Sons. Pp. 51-67 Retrieved from https://books.google.co.in/books?hl=en&lr=&id=MnTCBwAAQBAJ&oi=fnd&pg=PA239&dq=Kelly,+J.,+Male,+S.,+%26+Graham,+D.+(2014).+Value+management+of+construction+projects.+John+Wiley+%26+Sons.&ots=WEZ_ZTrU8a&sig=BF4ArO8lOWHBVALE4MM2oyjk9_A&redir_esc=y#v=onepage&q&f=false
Lam, T. Y., Lam, T. Y., Siwingwa, N., & Siwingwa, N. (2017). Risk management and contingency sum of construction projects. Journal of Financial Management of Property and Construction, 22(3), 237-251. Vol. 22 Issue: 3, pp.237-251 Doi: 10.1108/JFMPC-10-2016-0047
Merrow, E. W. (2011). Industrial megaprojects: concepts, strategies, and practices for success (Vol. 8). Hoboken, NJ: Wiley. Retrieved from https://onlinelibrary.wiley.com/book/10.1002/9781119201045/homepage/AuthorBiography.html
Paul, V. K., & Basu, C. (2016). Scenario Planning and Risk Failure Mode Effect and Analysis (RFMEA) based Management. Journal of Construction Engineering and Project Management, 6(2), 24-29. Article 8 DOI : 10.6106/JCEPM.2016.6.2.024 Volume 6, Issue 2, 2016, pp.24-29
Perrenoud, A., Lines, B. C., Savicky, J., & Sullivan, K. T. (2017). Using Best-Value Procurement to Measure the Impact of Initial Risk-Management Capability on Qualitative Construction Performance. Journal of Management in Engineering, 33(5), 04017019. Article 6 Vol: 33 Issues 5
Qazi, A., Quigley, J., Dickson, A., & Kirytopoulos, K. (2016). Project Complexity and Risk Management (ProCRiM): Towards modelling project complexity driven risk paths in construction projects. International Journal of Project Management, 34(7), 1183-1198. Article 5 Doi: org/10.1016/j.ijproman.2016.05.008 Vol: 34 Issue: 7
Schaufelberger, J. E., & Holm, L. (2017). Management of construction projects: a constructor’s perspective. Taylor & Francis. Retrieved from https://books.google.co.in/books?hl=en&lr=&id=8CklDwAAQBAJ&oi=fnd&pg=PP1&dq=Schaufelberger,+J.+E.,+%26+Holm,+L.+(2017).+Management+of+construction+projects:+a+constructor%27s+perspective.+Taylor+%26+Francis.&ots=2g-5a9Reh2&sig=1DumZuu3AUwesdqRP_xhjrR6ofI&redir_esc=y#v=onepage&q&f=false
Zwikael, O., & Ahn, M. (2011). The effectiveness of risk management: an analysis of project risk planning across industries and countries. Risk analysis, vol. 31(issue 1), 25-37.doi: 10.1111/j.1539-6924.2010.01470.x Article 4
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