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a holistic survey of risk management in building construction project

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a holistic survey of risk management in building construction project
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  A HOLISTIC SURVEY OF RISK MANAGEMENT IN BUILDINGCONSTRUCTION PROJECTBYBLDR. UGWOERI, J.C 1 .  mnio, R!". B#$%. 1 Department of Building TechnologyAbia State Polytechnic, Aba, Abia State, NigeriaE-mail: builderc!yahoo"com #obile No" $%&'-()&''%(*(' ABSTRACT The Construction industry is a key activity in any country. It controls the Nations Gross FixedCapital Formation (GFCF) and accounts for more than 6! of total capital investment"therefore# it contri$utes su$stantially to Gross %omestic &roduct (G%&) of any nation. It is avast industry employin' millions of orkers and offers unlimited opportunities.Construction# on the other hand# is a risky industry ith uncertainties due to many externaland internal factors that influence the construction process. The mana'ement of risks is acentral issue in the plannin' and mana'ement of any venture. p to date# mana'in' risk inconstruction pro*ects has $een reco'ni+ed as a very important process in order to achieve the pro*ective o$*ectives of time# cost# ,uality# safety and environmental sustaina$ility. The aimof this paper is to have a survey of risks in the construction process. The paper identifiedforty-four () risk factors critical in construction $usiness. It also identified four () mostimportant risk cate'ories as perceived $y construction professionals# hich include/0ardin' desi'n to un,ualified desi'ners" defective or incorrect desi'n" occurrence of accident $ecause of poor safety measure and inaccurate ,uantities. K!&'o%$() Con(*%+*ion -%o!*, %i(/, %i(/ m0n0"!m!n*  INTRODUCTION The mana'ement of risks is a central issue in the plannin' and mana'ement of anyventure. Construction industry is su$*ect to more risk and uncertainty than other industries(1aafari# 2334). The process of takin' a pro*ect from initial investment appraisal tocompletion and into use is a complex process. Construction industry in Ni'eria is sufferin'from misunderstandin' of risk mana'ement includin' risk identification# analysis andassessment# and that is hy the topic as chosen in order to expose the participants to theimportance of each factor in terms of severity and allocation. RISK 5isk in construction has $een the o$*ect of attention $ecause of time and cost overrunsassociated ith construction pro*ects. The relevance of section 6 of the Ni'erian Insurance0ct 233 can then $e captured $y these exposures of risk in construction. 5isk can $e definedas an uncertain event or condition that# if it occurs# has a positive or ne'ative effect on a pro*ect o$*ective (&erry and 7ayes# 489). 1affari (2334) defined risk as the exposure to loss#'ain or the pro$a$ility of occurrence of loss:'ain multiplied $y its respective ma'nitude.;artan (2334) has defined risk as the pro$a$ility of occurrence of some uncertain#unpredicta$le and even undesira$le events that ould chan'e prospects for the pro$a$ility ona 'iven investment. These can $e summari+ed to mean that risk is the possi$ility of asurprisin'ly $ad or surprisin'ly 'ood# specified future event. 0 num$er of researchers haveexamined the issue of risk mana'ement of construction pro*ects. <a*a et al (488=) identified#investi'ated and evaluated the process of risk identification. 5ancharra (4889) identified therisks usually faced $y the construction firms in a forei'n country. ;alay*ian (2333) identifiedthe risks that are specific to the developin' countries ar'uin' that investors should $ear theexchan'e and interest rate risks. Ri(/ 0( *%!! $im!n(ion( • %irection (either positive or ne'ative) • %e'ree of pro$a$ility (de'ree of likelihood) • >a'nitude of the conse,uences.The three dimensions of risk are independent/ a positive or ne'ative risk may $e either hi'hly pro$a$le or very unlikely" and the extent of its conse,uences may $e very small or very lar'e. Ri(/ M0n0"!m!n* 5isk mana'ement processes# accordin' to &erry and 7ayes (489) have four steps • ?valuatin' loss exposure • 0ppraisin' the feasi$ility of alternative risk mana'ement techni,ues • ?sta$lishin' a risk mana'ement pro'ram • 0daptin' to chan'e 0 num$er of variations of risk mana'ement process have $een proposed. 5a+ and >ichael(2334) su''ested a process consistin' of to main phases/ risk assessment# hich includesidentification# analysis and prioriti+ation# and risk control# hich includes risk mana'ement plannin'# risk resolution and risk monitorin' plannin'# trackin' and corrective action.<urchatt (4888) identified risk mana'ement approach as a multiphase risk analysis# hichcovers identification evaluation# control and mana'ement of risks. 0$$asi et al (233)   provided a definition for the risk mana'ement as the sum of all proactive mana'ement @ directed activities# ithin a pro'ram that is intended to accepta$ly accommodate the possi$lyfailures in elements of the pro'ram. AB0ccepta$lyBB is as *ud'ed $y the customer in the finalanalysis# $ut from a firmBs perspective# a failure is anythin' accomplished in less than a professional manner and:or ith less than ade,uate result. &ro*ect >ana'ement Institute(4886) su''ested three ays of respondin' to risk in pro*ects. They are as follos/   A2oi$0n!) eliminatin' a specific threat# usually $y eliminatin' the cause. The pro*ectmana'ement team can never eliminate all risk# $ut specific risk event can often $e eliminated. • Mi*i"0*ion) reducin' the expected monetary value at risk events $y reducin' the pro$a$ilityof occurrence (e.'. usin' ne technolo'y)# reducin' the risk event value (e.' $uyin'insurance) or $oth. • A!-*0n!) acceptin' the conse,uences.0cceptance can $e active $y developin' a contin'ency plan to execute should the risk event occur or passive $y acceptin' a loer profit if some activities overrun.5isk mana'ement is also seen as a process that accompanies the pro*ect from itsdefinition throu'h its plannin'# execution and control phases up to completion and closure.5isk mana'ement is not synonymous ith insurance# nor does it em$race themana'ement of all risks to hich a pro*ect is exposed. In practice# the truth lies somehere $eteen the to extremes. 0 risk mana'ement system must $e practical realistic and must $ecost effective. It is a pity that conventional education does little to foster an aareness of hounpredicta$le reality can $e. 5isk mana'ement measured the potential chan'es in value thatill $e experienced in a portfolio as a result of differences in the environment $eteen noand some future point in time.There are to kinds of mana'ement actions toards risk mana'ement" they include -%!2!n*i2! and mi*i"0*i2! 0*ion. &reventive actions are usually used to avoid or reduce risk at early sta'es of construction pro*ect# hereas miti'ative actions are remedial steps aimed atminimi+in' the effects of risks. Ri(/ F0*o%( in 0 Con(*%+*ion P%o!* 5isks in a construction pro*ect can $e 'rouped into nine ith at least  risk factorsinherent in a construction $usiness.Ta$le I  identified the 'roups and the risk factors associated ith each of the nine risk 'roups. These risk factors listed in each of the 'roups ere su$*ected to rankin' accordin' toits severity and allocation and Ta$le II  shos ho they stand in terms of severity of 4-43.Ta$le III  also shos the most and least important risk cate'ories as perceived $yconstruction professionals. These listed risk factors ere analysed ith respect to hom toallocate these risks to and Ta$le IV  shos the risk allocation accordin' to $uilderBs perspective. Ri(/ m0n0"!m!n* A*ion(P%!2!n*i2! 0*ion s ) It is considered that su$*ective *ud'ement should $e the mosteffective method to $e used in producin' a proper preventive action. Thou'h 'ettin' updated pro*ect information and the use of comparative estimate are effective preventive methods.tili+in' ,uantitative risk analysis techni,ues throu'h sufficient knoled'e and experienceof analysis techni,ues ill produce effective preventive results.  Mi*i"0*i2! 0*ion) There are six miti'ative methods availa$le hich include/(a)Close supervision to su$ordinates for minimi+in' a$ortive orks($)Coordinate closely ith su$contractors(c)Increase manpoer and:or e,uipment(d)Increase the orkin' hours(e)Chan'e the se,uence of ork $y overlappin' activities(f)Chan'e the construction methodThese miti'ative methods ill help to minimi+e the impact of delays# and serve as drivin'more effort that could enhance the contractors performance since construction pro*ects'enerally include many la$our- intensive operations. In fact# shorta'e of manpoer in a firmis one of the most serious risks to pro*ect delays. T0#! 1) Ri(/ F0*o%(P&(i0# 3G%o+- 14 ccurrence of accidents $ecause of poor safety proceduresDupplies of defective materialsEaried la$our and e,uipment productivity En2i%onm!n*0# 3G%o+- 54 ?nvironmental factors (floods# earth,uakes#..etc) %ifficulty to access the site (very far# settlements)0dverse eather conditions D!(i"n 3G%o+- 64 %efective desi'n (incorrect) Not coordinated desi'n (structural# mechanical# electrical# etc.)Inaccurate ,uantitiesack of consistency $eteen $ill of ,uantities# drain's andspecifications5ush desi'n0ardin' the desi'n to un,ualified desi'ners Lo"i(*i( 3G%o+- 74 navaila$le la$our# materials and e,uipmentndefined scope of orkin' 7i'h competition in $idsInaccurate pro*ect pro'ram&oor communications $eteen the home and field offices (contractor side) Fin0ni0# Inflation %elayed payment on contractFinancial failure of the contractor   3G%o+- 84 nmana'ed cash flo?xchan'e rate fluctuation>onopoli+in' of materials due to closure and other unexpected political conditions%ifficulty to 'et permits0m$i'uity of ork le'islations L!"0#3G%o+- 9 4 e'al disputes durin' the construction phase amon' the parties of thecontract%elayed disputes resolutions No speciali+ed ar$itrators to help settle fast Con(*%+*ion3G%o+- :4 5ush $iddin' Gaps $eteen the implementation and the specification due tomisunderstandin' of drain's and specificationndocumented chan'e ordersoer ork ,uality in presence of time constraints%esi'n chan'es0ctual ,uantities differ from the contract ,uantities Po#i*i0# 3"%o+- ;4 De'mentation of construction processes Horkin' at hot (dan'erous) areas (close to I%F positions) Ne 'overnmental acts or le'islationsnsta$le security circumstances (invasions)Closure M0n0"!m!n*3G%o+- <4 0m$i'uous plannin' due to pro*ect complexity5esource mana'ementChan'es in mana'ement aysInformation unavaila$ility (include uncertainty)&oor communication $eteen involved parities
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