International Journal of Innovative Technology and Exploring Engineering (IJITEE)

ISSN: 2278-3075 (Online), Volume-3 Issue-5, October 2013

A Study of Risk Management Techniques for

Construction Projects in Developing Countries
Patel Ankit Mahendra, Jayeshkumar R. Pitroda, J. J. Bhavsar

Abstract- Risks have significant impact on construction It applies to any project to evaluate the most, major, and
projects in terms of its primary objectives. Construction projects common risks which cause bad effect on the construction
which are intricate in nature, uncertainty and risks in the same project to achieve its objectives. The risk management
can develop from different sources. The record of the concept is very less popular technique in the construction
construction industry is not acceptable in terms of coping up with
risks in projects. Risk management is a process which consists of
industry, then it is necessary to spread awareness of the
identification of risks, assessment with qualitatively and same.
quantitatively, response with a suitable method for handling
risks, and then control the risks by monitoring.This study III METHODOLOGY
proposes to apply the risk management technique which includes In this paper, general focus has been made on the general
well - documented procedures for the one stop solution all types
of hazards most likely to occur during any construction project
concepts of risk management. Risk identification has been
Lifecycle. done with the study of literature. A questionnaire was
developed after the identified factors affecting risk.A risk
Keywords: -Risk Management, Construction Projects, Risk assessment can be done with the aid of qualitative and
quantitative analysis.Risk response could be planned on the
I. INTRODUCTION basis of the outcome of the study. Risk control is the last
step in the process of risk management.
Thedevelopment of infrastructureis one of the most
important activities that can boost up the business of various
IV. CONCEPT OF RISK ANALYSIS AND
industries, thereby increasing the gross domestic product
MANAGEMENT
(GDP) of the country. Constructionprojects are always
unique and risks raises from a number of different sources. Risk management is a process which identifies the project
Risk is defined as any action or occurrence which will affect risks, analyse them, and determine the actions to avert the
the achievement of project objectives.Risk management is a threats on any project. All steps in the risk management
technique which is used in many other industries from, IT process should be included to deal with risks, in order to
related to business, automobile, pharmaceutical industry, to implement the process of the project. Due to the nature of
the construction sector. Risks and uncertainties inherent in construction projects, risk management is a very important
the construction industry are more than any other industries. process.
Many industries have become more proactive about using Risk associated with construction industry can be broadly
risk management techniques in project. However, with categorized into:
respect to the construction industry, the same is not used Types of Risks
commonly.Risk is an integral component of any project. 1. Technical Risks:
Risk is present in all projects irrespective of their size or Incomplete
sector. No project is totally free from risks. If risks are not Design 2. Construction Risks:
properly analysed and strategies are not trained to deal with Inadequate Labour productivity
them, the project is likely to lead to failures. specification Labour disputes
Inadequate site Site condition
II. OBJECTIVES AND NEED OF STUDY investigation Equipment failures
The risk management technique is used very less because of Change in scope Design changes
less knowledge and awareness among the people. The track Construction Too high quality
record is also very poor in terms of coping up with risks in procedures standard
projects, resulting in the affection of project objectives.Risk Insufficient New technology
management is adopted to contain the possible future risks resource
proactively rather than being reactive. availability
3. Physical Risks: 4. Organisational Risks
Manuscript published on 30 October 2013. Damage to Contractual relations
*Correspondence Author(s) structure Contractor’s
Patel Ankit Mahendra, Student of final year M.E. (C.E.M.), B.V.M.
Engineering College, Vallabh Vidyanagar
Damage to experience
Prof. Jayeshkumar R. Pitroda, Assistant Professor & Research Scholar, equipment Attitudes of
Civil Engineering Department, B.V.M. Engineering College, Vallabh Labour injuries participants
Vidyanagar– Gujarat – India. Equipment and Inexperienced work
Prof. J. J. Bhavsar, Associate Professor and PG Coordinator (M.E C E
& M), Civil Engineering Department, B.V.M. Engineering College,
material fire and force
Vallabh Vidyanagar-Gujarat-India theft Communication

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 A Study of Risk Management Techniques for Construction Projects in Developing Countries

6. Socio-political Risks 1. Risk Identification can be done by the following

Changes in laws and methods:
5. Financial Risks
regulations Brainstorming:Thisis one of the most popular techniques.
Increased
Pollution and safety Generally, it is used for idea generation, it is also very useful
material cost
rules for risk identification. All relevant persons associated with
Low market
Bribery/Corruption project gather at one place. There is one facilitator who is
demand
Language/Cultural briefing about various aspects with the participants and then
Exchange rate
barrier after note down the factors. Before closing it the facilitator
fluctuation
Law and order review the factors eliminate the unnecessary ones.
Payment delays
War and civil Delphi Technique:This technique is similar to
Improper
disorder brainstorming but the participants in this do not know each
estimation
Requirement for other and they are not at the same place. They will identify
Taxes
permits and their the factors without consulting other participants. The
approval facilitator like in brainstorming, sums up the identified
7. Environmental Risks factors.
Natural Disasters Interview/Expert Opinion:Experts or personnel with
Weather Implications sufficient experience in a project can be a great help in
avoiding/solving similar problems over and over again. All
the participants or the relevant persons in the project can be
V. FACTORS AFFECTING RISKS
interviewed for the identification of factors affecting risk.
History:Newer projects are more prone to risks as they are Past Experience:Past experience from the same kind of
different from the other projects. Older projects are project, the analogy can be formed for identification of the
likelihood of success against risks because there are similar factors. When comparing the characteristics of projects will
projects has been done before. provide insight about the common factors.
Management Stability:Management stability means the Checklists:These are simple but very
whole management share the same goal or objective for any usefulpredeterminedlists of factors that are possible for the
project. Therefore, it will be beneficial to achieve the project project.The check list which contains a list of the risks
objectives with much ease. If the management is unstable identified in projects undertaken in the past and the
then it can lead to affect the project objectives. responses to those risks provides a head start in risk
Staff expertise and experience:If thestaff for any project is identification.
sufficiently experienced and with different expertise the 2. Risk Assessment can be done by the following
likelihood of quality, cost and other objectives can be methods:
achieved.
Team Size:For larger teams of any project there are more Qualitative Method:
chances of occurrence of problem because of
miscommunication. Risk Priority Number:
Resource Availability:If theproject is available with a good
amount of resources then the response to the problem will
be good. Because if the project is available with greater
amount of resources than it can deal with different risks with
ease.
Time Compression:If the project schedule is highly
compressed there are more chances ofoccurrence of risks in
projects. When more time is available for the project, then it
can be coped up by reducing risk impact on the project.
Complexity:If the project is highly complex there are more
chances for the occurrence of problem in the project.

VI. RISK MANAGEMENT PROCESS There are 4 categories defined in the above diagram.
Category 1 - PI factor 9, which requires maximum attention
Risk management is the process which consists of Category 2 - PI Factor 6, which requires a good amount of
identification, assessment, response, control as shown in attention
figure no. 1. Category 3 - PI Factor 3, which requires comparatively less
attention to be paid
Category 4 - PI Factors of 1 and 2, requires less attention to
be paid
Quantitative methods
Sensitivity Analysis: This is carried out to identify the
uncertain project components which will have maximum
impact on the outcome of the project.

Figure:1 Risk Management Process

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Journal Website: www.ijitee.org and Sciences Publication (BEIESP)
140 © Copyright: All rights reserved.
 International Journal of Innovative Technology and Exploring Engineering (IJITEE)
ISSN: 2278-3075 (Online), Volume-3 Issue-5, October 2013

After a risk model is made a sensitivity analysis is carried probability and/or impact, thereby maximising the benefits
out to check the sensitivity of different elements of the gained from the project. Seeking to facilitate or strengthen
model on project outcome. To do these the values of one the cause of the opportunity, and proactively targeting and
variable at a time is changed and the impact of these reinforcing its trigger conditions.
changes is then seen on the project. Risk Acceptance: Ultimately it is not possible to eliminate
Scenario Analysis: Scenario analysis gives the impact of all threats or take advantage of all opportunities – we can
different scenario of the project or impact of different risk if document them and at least provide awareness that these
that occurs simultaneously. A fair decision can be made exist and have been identified, some term this ‘passive
after this analysis, the option which will give lesser loss or acceptance. This strategy is adopted when it is not possible
hazards that option can be opted. or practical to respond to the risk by the other strategies, or a
Probabilistic Analysis (Monte Carlo Simulation):A response is not justified by the grandness of the risk. When
project simulation is done using a model to show the the project manager and the project team decide to accept a
potential impact of different level of uncertainties on project risk, they are agreeing to address the risk if and when it
objectives. Monte Carlo Simulation is generally used for this happens.
analysis. It can quantify the effect of uncertainties and risks Contingency Plan: This involves the use of a fallback plan
on project budget and schedule. It simulates the full system if a risk occurs. Contingencies can also be in the form of
many times, each time randomly choosing a value for each sometime kept in reserve to deal with unknown risks or in
factor from its probability distribution. It uses three point the form of costs to deal with unknown risks.
estimate like most likely, worst case and best case duration 4. Risk Controlis the final step of the process.
for each task in time management. After we have implemented response actions, we must track
Decision Trees:This analysis is carried out by decision tree andrecordtheir effectiveness and any changes to the project r
diagram. Decision trees are very helpful to both formulate isk profile. Did the response actions have a positive or
the problem and evaluate options. In this analysis there are negative effect on achieving project objectives? Responses
graphical models used to representa project and can clearly taken in risks should also be documented for future
reflect the effects of each decision taken in the project. reference and project plans.
3. Risk Response Planning can be done by the following
methods: VII. CONCLUSION
Risk Avoidance: Risk can be warded off by removing the Risk management technique rarely used by the participants
cause of the risk of executing the project in a different in construction projects. The participants used to handle the
direction while still aiming to accomplish project objectives. risks with an informal approach. This technique is not
Change project management plan to eliminate a threat, to employed because of less knowledge and awareness among
isolate project objectives from the risk’s impact, or to relax the construction industry.The risk management technique
the project objective that is in jeopardy, such as extending should be applied into any construction project at the initial
schedule or reducing the scope. stage of the project to get maximum benefit of the
Risk Transfer: Transferring risk involves finding some technique.Hence, there is thriving need to have a well-
other party who is willing to accept responsibility for its documented procedure which should be a one stop solution
management, and who will bear the liability of the risk to all hazards that are likely to occur during project life
should it occur.Transferring a threat does not eliminate it; cycle. There should be more wholesome approach towards
the threat still exists however it is owned and managed by risk management instead of the present sporadic approach
another party. Transferring risk can be an effective way to towards the risks.
deal with financial risk exposure. The aim is to ensure that
the risk is owned and managed by the party best able to deal
ACKNOWLEDGEMENT
with it effectively.
Risk Mitigation/Reduction: Risk mitigation reduces the The Authors thankfully acknowledge to Dr. C. L. Patel,
probability and/or impact of an adverse risk event to an Chairman, Charutar Vidya Mandal, Er. V. M. Patel, Hon. Jt.
acceptable threshold. Taking early action to reduce the Secretary, Charutar Vidya Mandal, Dr. F. S. Umrigar,
probability and/or impact of a risk is often more effective Principal, B.V.M. Engineering College, Vallabh
than attempting to repair the damage after the risk has Vidyanagar, Gujarat, India for their motivations and
passed. infrastructural support to carry out this research.
Risk Exploit: This strategy seeks to eliminate the
uncertainty associated with a particular upside risk by REFERENCES
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AUTHOR'S BIOGRAPHY

Patel Ankit Mahendra was born in 1990 in Anand, Gujarat. He received his
Bachelor of Engineering degree in Civil Engineering from the SVIT in
Vasad, Gujarat Technological University in 2012. At present he is Final year
student of Master`s Degree in Construction Engineering and Management
from Birla Vishwakarma Mahavidyalaya, Gujarat Technological University.

Prof. Jayeshkumar R. Pitroda was born in 1977 in Vadodara City. He

received his Bachelor of Engineering degree in Civil Engineering from the
Birla Vishvakarma Mahavidyalaya, Sardar Patel University in 2000. In 2009
he received his Master's Degree in Construction Engineering and
Management from Birla Vishvakarma Mahavidyalaya, Sardar Patel
University. He joined Birla Vishvakarma Mahavidyalaya Engineering
College as a faculty where he is Assistant Professor of Civil Engineering
Department with a total experience of 12 years in the field of Research,
Designing and education. He is guiding M.E. (Construction Engineering &
Management) Thesis work in the field of Civil/Construction Engineering.
He has published papers in National Conferences and International Journals.
Prof. Jaydevbhai J. Bhavsar received his Bachelor of Engineering degree in
Civil Engineering from the Birla Vishvakarma Mahavidyalaya, Sardar Patel
University in 1978. In 1986 he received his Master's Degree in Building
Science and Technology from University of Roorkee. He joined Birla
Vishvakarma Mahavidyalaya Engineering College as a faculty where he is an
Assistant lecturer of Civil Engineering Department with a total experience of
32years in the field of Research, Designing and education. He is guiding
M.E. (Construction Engineering & Management) Thesis work in the field of
Civil/ Construction Engineering. He has papers published in National
Conferences and International Journals.

Published By:
Retrieval Number: E1280103513/13©BEIESP Blue Eyes Intelligence Engineering
Journal Website: www.ijitee.org and Sciences Publication (BEIESP)
142 © Copyright: All rights reserved.