Risk Assessment And Management In Construction Projects

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International Journal of Scientific & Engineering Research, Volume 5, Issue 8,August-2014ISSN 2229-5518387Risk Assessment and Management inConstruction ProjectsK. Jayasudha Dr. B.Vidivelli and E.R. Gokul SurjithAbstract — Construction of bridge projects are initiated in complex and dynamic problems resulting in circumstances of high uncertaintyand risk, which are compounded by demanding time and cost constrains. The general methodology is to study relies largely on the surveyquestionnaire which will be collect from the various bridge project construction contractors and project manager of different sizes by mail orpersonnel meeting. The questionnaire prepared for the survey was formulated by seeing the relevant literatures in the area of constructionmanagement. This research seeks to identify the risk factors that affect the performance of bridge projects as a whole and analyze byusing appropriate tools and technique and to develop a risk management framework. The responses were analyzed like bar charts weresubjected to using the software of SPSS. This questionnaire has been divided in to two factors namely time and finance management. The25 number of companies related to bridge projects industries. For these factors analysis of t-test and ANOVA were calculated, tabulatedand the result are given according to the suitable suggestions.Keywords—Risk Management, Construction Management, SPSS, t-test and ANOVA—————————— ——————————1. INTRODUCTIONRisk management is the systematic process of identifying,analyzing and responding to project risk. It includesmaximizing the probability and consequences of positiveevents and minimizing the probability and consequences ofadverse events to project objectives.Generally, risk is a choice in an environment rather than a fate.It is uncertainty inherent in plans and possibility of somethinghappening that can affect prospects of achieving, business orproject goals. The money spend fund shipments overseas wasthe first example of risk business in the early days of travel.Each and every activity we do involve risk, only the amount ofrisk varies.1.1. Definition of RiskRisk is defined as “a situation where there exists noknowledge of its outcomes”.In Macquarie dictionary, it is defined as “Exposure to thechange of injury or loss; a hazard or dangerous chance, to runrisks”.In general, “Every risk is proportional to the expectedlosses which can be caused by a risky event and to theprobability of this event”.1.2. Concept of risk and risk managementRisk is a multi-faucet concept. in the context of constructionindustry, it could be the likelihood of the occurrence of adefinite event/factors which occur during the whole processof construction to determine the project a lack of predictabilityabout structure outcome or consequences in a decision orplanning situation, the uncertainty associated with estimatesof outcomes-there is a chance that results could be better thanexpected as well as worse than expected �— Research Scholar, Department of Civil and StructuralEngineering, Annamalai University, Chidambaram.,Email: k jayasudhaer@yahoo.co.in Professor, Department of Civil and Structural Engineering,Annamalai University, Chidambaram. P.G.Student, Department of Civil and Structural Engineering,Annamalai University, ChidambaramInternational project tends to be subjected to the externalrisk such ass unawerness of the social conditions, economicand political scenarios, unknown and new proceduralformalities, regulatory framework and governing authority,etc.,.The main objective is to remove as much as possible thepotential impact and to increase the level of control of risk.The more control of one mitigation measure on the risk themore effective the measure is the process of risk managementdoes not aim to remove completely all risks from a project. Itsobjective is to develop an organized framework to assistdecision makers to manage the risks, especially the criticalones, effectively and efficiently.1.3. Risk exposureThe following are the several factors risk exposure. Team size: the larger the team, the higher the probabilityof a problem arising. For example, communications can bemore difficult as the number of participants increases. Thenumber of interactions among people increases and thusthey require greater coordination. History: newer projects are riskier because the processeshave not been refined. The more times a project of asimilar nature has been done, the greater the likelihood ofsuccess. Staff expertise and experience: if the staff lacks directexperience and knowledge of the subject, people willstruggle to learn as they go along, robbing the project oftime and possibly introducing errors. Complexity: the more sophisticated a project, there is agreater the opportunity of a mistake or problem. Management stability: management stability impliesunity of direction, which in turn means reaching goals.Management irritability can lead to unrealistic scheduledand insufficient use of resources. Time compression: if a schedule is highly compressed,then the risks are magnified. Having more times meansgreater flexibility and the opportunity to prevent ormitigate the impact of errors. Resource availability: the more resources that areavailable, the greater the ability to respond to problem asIJSER 2014http://www.ijser.org

International Journal of Scientific & Engineering Research, Volume 5, Issue 8,August-2014ISSN 2229-5518they arise. Plentiful resource, of course, do not guaranteeprotection from risk; however they do provide the meansto respond to it.1.4. Sources of Risk In Construction Projects Misunderstanding of contract terms and conditions Design changes and errors Poorly co-ordinated work Poor estimates Poorly defined roles and responsibilities Unskilled staff Natural hazards Political and legal problems1.5. Advantages of Risk Management Less uncertainty Achievement of objectives Reliability Reduction of capital cost Creation of value1.6. Limitations of Risk Management If risks are improperly assessed and prioritized, timecan be waste in dealing with risk oflosses that not likely to occur Spending too much time assessing and managingunlikely risks can divert resources that could be moreprofitably. Unlikely events to occur, but if the risk is unlikelyenough to occur, it may be better tosimply retain the risk & deal with the result if the lossdoes in fact occur.2. LITERATURE REVIEWWenzhe Tang, David M.Young (Dec 2007) "Risk Managementin the Chinese Construction Industry" studied the empiricalChinese industry survey on the importance of project risks,application of risk management techniques, status of the riskmanagement system, and the barriers to risk management,which were perceived by the main project participants. Thestudy reveals that: Most project risks are commonly of concernto project participants; the industry has shifted from risktransfer to risk reduction.Eric B. Williamson, David G . Winget(Aug 2004) "RiskManagement and Design of Critical Bridges for TerroristAttacks" This study deals with the risk for the governmentdue to the terrorist attacks on the beam column joint. Andresult in the retro fitting works to be done and it makesincrease in the time by disturbing the traffic and increase incost by allocating the labour, materials and safety.Riaan van Wyk, Akin tola Akintoye (Mar 2007) "Project riskmanagement practice: the case of a South African utilitycompany "documented the risk management practice of autility company for its Recovery Plan project to address therisks of power interruptions. The company's corporate riskmanagement process and its practice at divisional and projectlevels are discussed. The key role of stakeholders in riskidentification, analysis, mitigation, monitoring and reportingis emphasized by the company and this drives its riskmanagement practice.Florence Yean Yug Ling and Linda Hoi (Dec 2006) "Riskfaced by Singapore firms when undertaking constructionprojects in India" studied the risk that Singapore architecture,388engineering and construction (AEC) firms face when workingin India and investigated the risk response techniques adoptedby them. The risk response techniques include havingadequate insurances and careful planning and management.Robin K Mcguire(Jun 1999) "Analyzing of Risk Factors inConstruction" This study helps to make the risk factorsinvolved in construction during and after the constructionabout the resource allocation, procurement, inventory control.And to minimize the time, cost and increase in quality ofconstruction by analyzing the risk during planning itself.J.De Brito And F.A.Branco(Mar 2006) "Bridge ManagementPolicy Using Cost Analysis” This study helps to make theefficient use of resource to make the right decision formaintenance and rework in process if it is failed to maintain thethere will be some loss in structural failures, loss in time andloss of financial aspects.E.C.Hambly, Feng Fice And E.A. Hambly (Nov 2009) "Riskevaluation and realism" This study helps in risk calculating therisk analyse technique by the fatality accident rate method. Therealism states how the government is taking the necessarysteps to repair and rework process related to the time, cost andpolitics.G.MilIer (Jan 2006) "Time and Cost Risk Analysis" Thisstudy helps how to control the time and cost risk analysis bycomputer aided simulation of project appraisal and itsreview. These simulations give the result and help to make theprecautionary steps during the planning itself.Pedro Maria Sanchez, Carr. Tijuana-Ensenada (Dec 2005)"Neural-Risk Assessment System for Construction Projects"studied the assessing the risk impacts and as well inforecasting the possible costs of these risks. Transforming therisk impact into money terms certainly is not an easy thing todo. Traditionally within construction companies, riskmanagement has been adopted nevertheless; the work hasbeen concentrated mainly in risk analysis.Seon-Gyoo Kim, Jae-Jun Kim (Apr 2005) "A Risk ThresholdCalculation Methodology for the Construction ProjectsApplying Value at Risk" studied the risk managementtechnique rapidly becomes one of the critical projectmanagement methodologies to achieve project objectives andimprove its performance in gradually increasinguncertainties surrounding the construction environment.Terry Lysons and Martin Skitmore (Mar2004) "Project RiskManagement in the Queensland Engineering ConstructionIndustry a Survey" conducted a survey of seniormanagement concerning the usage of risk managementtechniques. Their survey compared with earlier survey whichindicates that the use of risk management is moderate to high,with very little differences between the types, sizes andtolerance of the organizations, and experience, riskmanagement usage in the execution and planning stage,techniques used for risk identification, risk analysis and riskresponse.Alfredo del cano, P.E and M.Pilar de la Cruz, P.E (Dec 2002)"Integrated Methodology for Project Risk Management"suggested that generic project risk management process that hasbeen particularized for construction projects. The process couldalso be adapted to the needs of other project participants. Anyproject risk management process must be tailored to theIJSER 2014http://www.ijser.org

International Journal of Scientific & Engineering Research, Volume 5, Issue 8,August-2014ISSN 2229-5518particular circumstances of the project and of the organizationundertaking it.J.H.M.Tah and V.Carr (July 2002) "Knowledge Based Approachto Construction Project Risk Management" suggested thatconsistent methodology for construction project riskmanagement. The construction industry consistently suffersfrom poor project performance due to a lack of formalized riskmanagement procedures which helps to facilitate moreeffective risk management while allowing all projectparticipants to develop and share a great understanding ofproject risk for improved performance.Mulholl. B and J.Christian (Feb 1999) "Risk Assessment inConstruction Schedules" suggested that a description ofsystematic way to consider and quantify uncertainty inconstruction schedules. Construction projects are initiated incomplex & dynamic environments resulting in circumstances ofhigh uncertainty & risk, which are demanding time constrains.Akin tola S Akintoye and MacLeod (Mar 1997) "RiskAnalysis and Management in Construction" studied theconstruction industry perception of risk associated with itsactivities and the extent to which the industry uses risk analysisand management techniques with the help of a questionnairesurvey of general contractors and project managers. The authorconcluded that risk management is essential to constructionactivities in minimizing losses and enhancing profitability.Construction risk is generally perceived as events thatinfluence project objectives of cost, time and quality.Roozbeh Kangari (Dec 1995) "Risk Management Perceptionsand trends of U.S Construction" discussed the attitude of largeU.S construction firms toward and determined how thecontractors conduct construction risk management through asurvey of the top 100 contractors. The study showed that inthe recent years contractors are more willing to assume risksthat accompany actual and legal problem in the form of risksharing with the owner.3. SCOPE AND O BJECTIVES To identify the various risk factors in construction ofbridge projects. To analyze the sources of risk factors arising in the bridgeprojects. The pilot studies were conducted from various reputedcompanies. Using the pilot study the questionnaire is prepared. The survey will be conducted to the constructionindustries through questionnaire. The result will be analyzed from the questionnaire. The risk will be solved using the software like SPSS. The result and discussion about the risk factors solving inthe construction projects.4. METHODOLOGYThe methodology adopted in this project is givenbelow: Study of literature related to Time and FinancialManagement risks. Preparation of questionnaire. Site visit to major construction project. Questionnaire survey and personal interviews withSite-Engineers, Supervisor and managers. Analyzing the questionnaire. 389Factor analysis of data obtained from site andidentifies the root cause.Remedial measures are to be suggested and thepresent data is to be recorded for futurereference.Conclusions, recommendations and suggestions forfuture study.4.1. Method of SurveyingThe general methodology of this study relies largely on thesurvey questionnaire which will be collected from the variousmulti project construction contractors and project manager ofdifferent sizes by mail or by personnel meeting. A thoroughliterature review was initially conducted to identify the riskfactors that affect the performance of construction industry asa whole. This study has adopted the more general and broaddefinition of risk as presented by Shen et al (2001) on china'sconstruction joint ventures and more risk factors from otherliterature. Also some interviews with industrial practitionerswere conducted to produce to check of questionnaires.4.2. Questionnaire Structure and DesignThe questionnaire was tested with a pilot survey for clarity,ease of use, value of the information that could be gathered.The questionnaire survey is divided into two parts. The firstpart consists of general information like type of company,experience, value of their project etc., and the second partconsists of the construction risk factors for evaluation.Risk factor for this study classified into eight categories,namely: financial risk, legal risk, management risk, marketrisk, policy & political risk, technical risk, environmental risk,social risk.The survey questionnaire survey is designed to probe thecross-sectional behavioral pattern of construction risksconstruction industry. The questionnaire was prepared for thepilot survey was formulated by seeing the relevant literaturesin the area of construction risk. The interviewer was free toask additional questions that focused on issues arising duringthe course of the interview. The freedom to follow theinterviewee, to ask for clarifications, and to focus on thespecify projects, risk practices and knowledge, made theinterviews insightful.4.3. Risk RatingA Likert scale of 1-5 was used in the questionnaire. A Likertscale is a type of psychometric response scale questionnaire,and is the most widely used scale in survey research. Whenresponding to a Likert questionnaire item, respondents specifytheir level of agreement to a statement. The scale is namedafter Rensis Likert, who published a report describing its use.The respondents were required to indicate the relativecritically/effectiveness of each of the probability of risk factorsand their impact to the management.4.4. Design of SurveyThe respondents were requested to judge the significance or"expected loss" of each risk. There are many criteria thatrespondents may need to consider. One alternative approachadopted by previous researches is to consider two attributesfor each risk: the probability level of risk occurrence, denotedby o; and the degree of impact or the level of loss if the riskoccurs denoted by p. The same type of evaluation is followedin this study also. Therefore, risk significance, denoted as RS,IJSER 2014http://www.ijser.org

International Journal of Scientific & Engineering Research, Volume 5, Issue 8,August-2014ISSN 2229-5518can be described as the function of the two attributes RS f(α, β).By applying this approach, the respondents were asked torespond to the two attributes for each risk. For considering a,the respondents were required to judge the probability level ofrisk occurrence by selecting one from among five levelsnamely, very small, small, normal, large and very large. Forconsidering p, the respondents were required to judge thedegree of impact if the risk concerned occurs, by selecting onefrom among five grades namely, very low, low and medium,high and very high.4.5. Analysis Of Survey ResultsThe survey result has to be analyzed using SPSS software(Statistical Package of Social Studies). This software is one ofthe management tool helps to analyse the 5-scale likert factoranalysis. The various formulas were used to calculate thefactor analysis are listed below. To assess the relativesignificance among risks, previous literatures study suggestsestablishing a risk significance index by calculating thesignificance score for each risk. For calculating the significancescore is to multiply the probability of occurrence by the degreeof impact Thus, the significance score of each risk assessed byeach respondent can be obtained through the modelS ip σ ij β ijWhere S i significance score assessed by respondent j for riski; a, probability of occurrence of risk i, assessed byrespondent j; and p, degree of impact of risk i, assessed byrespondent j. By averaging scores from all responses, it ispossible to get an average significance score for each risk, andthis average score is called the risk index score and is used torank among all risks. The model for the calculation of riskindex score can be writtenTRS i Si 1ijTWhere RS1 index score for risk i; and S1 significance scoreassessed by respondent j for risk I and T Total number ofresponses. To calculate S', the five scales for o and (3, this willbe converted into numerical (Likert scale) scales.4.6 Pilot SurveyA pilot questionnaire survey and follow-up interviews withlocal contractors was conducted. The purpose was to identifythe factors out of the 68 factors that applied overseas couldalso apply to the construction industry. The small numberinterviews and the structure of the questionnaire in die pilotstudy does not allow for statistical analysis.Responses to the interviews have been used to identifyconsistent themes, common practices, and insight provided byactive and influential project participants that would provideadditional gui

1.4. adequate insurances and careful planning and management.Sources of Risk In Construction Projects Misunderstanding of contract terms and conditions Design changes and errors Poorly co-ordinated work Poor estimates Poorly defined roles and responsibilities Unskilled staff Natural hazards

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