Research Paper: Construction Project Risk Management

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Construction Project Risk Management

Risk management is the process of identification, assessment and prioritization of risk to minimize uncertainties within a project lifecycle. Risk management is a management tool aiming to identify the risks and uncertainties as well as determining the impact and develops appropriate management responses to manage the risks. A systematic approach to manage the risks is to divide the risks into risk identification, risk analysis and risk response. However, risk response is divided into further actions, which include reduction, retention, transfer and avoidance. Contrary to other industry, construction industry is characterized with more risks due to the unique features associated to construction activities and complicated process surrounding the construction project. (Zou, Zhang, Wang, 2010).

Construction projects are categorized as very complex projects because uncertainties may come from different forms. However, construction project offers an ideal environment for management research and several different techniques and tools have been developed to enhance risk management within the construction project. (Schuyler, 2001). However, there is still a gap between risk management techniques and their practical applications to construction project management.

The aim of this project is to investigate the construction project risks management technique and applying risk analysis techniques and method in the construction project management. This paper uses the case of the Bullring project to investigate an example where risk management techniques have been successfully applied.

1.1: Overview of Bullring Project in Birmingham (N Xie)

Bullring in Birmingham is considered as one of the most outstanding sustainable projects in Europe. Opened in September 2003, the Bullring project estimated costs were approximately £500 million, which ultimately transformed Birmingham as the world class retailing capital. The Bullring project was highly acclaimed 125,200 m2 scheme in Birmingham and was recognized as the most city emblem. "The project consisted of several different packages completed over a three-year period, for which the construction approach was a mix of traditional procurement and design-and-build." (WSP, 2010 P. 30). Successful completion of the Bullring project was due to the strategies the stakeholders used to manage the risks within the project lifecycle. Using modern techniques and tools to manage the project's risks, the results of the project

"is a world class, award-winning project, completed early, on budget and with zero defects, and delivered in the true spirit of strategic partnering, with a genuine desire for success across the supply chain, that is often talked about but rarely achieved." (WSP, 2010 P. 30).

This paper evaluates various strategies that the project stakeholders employ to manage the risks associated with the Bullring project in Birmingham.

2. Risk management requirements of a construction project/sub-project

Managing risks in a construction project is very critical to achieve a project objective. To achieve a project objective, project stakeholders are required to identify and analyze the risk requirements to achieve a project objective. Bullring project team managed the project risks by systematically classifying the risks associated to the project.

"A systematic process of risk management has been divided into risk classification, risk identification, risk analysis and risk response, where risk response has been further divided into four actions, i.e. retention, reduction, transfer and avoidance." (Zou et al., 2010).

Major risk management requirements are to divide risks into four phases, which include:

Risk management planning,

Risk identification

Qualitative and quantitative risk analysis,

Risk response

Risk monitoring and control.

Bullring project team identified these project requirements and used them to mitigate the risks within the project lifecycle. Risk management planning is a systematic process of deciding the strategy to approach, plan and executing the risk management activities throughout the project lifecycle. The goal of risk management planning is to maximize the beneficiary outcome from the project as well as eliminating and minimizing the consequences of adverse risk events. (Chen, Hao, Poon, et al. . 2004).

On the other hand, risk identification is the process of determining the risks that might affect the project and documenting these risks. More importantly, qualitative risk analysis is the process of assessing the likelihood and impact of the identified risks on a project and prioritizes these risks for further analysis. The Bullring project team was able to achieve a success from the project by evaluating the probability of occurrence of the risks and their impact on project outcomes. On the other hand, quantitative risk analysis is a systematic method of numerically estimating the probability of the costs allotted to a project and ensure that a project schedule meets the project objectives. Risk response planning in its own case is the process of developing options that will reduce the threats on the project outcomes.

Risk monitoring and control monitors are the system of tracking and identifying new risks and devise an effective strategy to execute the plan to reduce the risks. Risk monitoring and control is an ongoing process throughout the project lifecycle.

3: Risk information and Data Collection

Risk information is very critical for the risk management because information collected will assist stakeholders to effective manage a project. The critical information needed for the risk management is to collect information about all the risks that could affect the project lifecycle and rank the risks according to their significant. However, data are very critical for the risk management process. The data collected will assist the stakeholders to generate information about the likely risks that could affect the construction project lifecycle. Bullring project team used different data collection methods to generate information needed to manage the project.

First, the Bullring project stakeholders used secondary research to collect data. Secondary research involves collecting data from already published research papers. The data collected assisted the stakeholders to identify various risks that could affect the project. The secondary data were collected from several academic database such as EmeraldInsight, Sage publication Science Direct, and EBSCOhost Online Databases. These databases contain several journals on risk management and civil engineering, and analysis of various research articles assisted the stakeholders to collect data on various risks that could affect the project.

Primary research was another data collection strategy that Bullring used to generate information. The team used survey and interview to collect primary data. The importance of primary data was that stakeholders were able to collect data specific to the project. Brainstorming is another method of data collection. Brainstorming is the process by which group of people come together to gather ideas in order to come out with the solutions. Brainstorming is more effective in collecting ideas to address specific problems. However, brainstorming alone is not adequate to collect data to manage a construction project. Examination of past projects is also another effective method for data collection. Evaluating the past projects is the process of evaluating an already completed project and identifies the risks associated with the project and the strategies used to manage the risks. Typically, lesson learned from the past projects would assist project stakeholders not to repeat the same mistakes on their project. Since a previous project has its own unique features such as uncertainties and risks, Bullring project team used combination of brainstorming, evaluation of past projects, and collection primary and secondary data to generate information to manage the risks associated to the project.

4: Risk Identification

Brainstorming is one of the effective methods for risk identification for a specific project. The Bullring management included project stakeholders, regulatory agency and representatives of specialty groups for brainstorming for risk identification. Effective brainstorming requires project team and specialists and a skilled facilitator to work together to bring additional expertise. (Baker, and Reid,2005). Bullring management used a project specialists and a skilled facilitator to come up with the following category of risks in the project lifecycle.

Thus, the risks are categorized as:

Cost Related Risks,

Time Related Risks,

Quality related risks,

Environment related risks,

Safety related risks.

5: Risk Analysis

Risk analysis is a strategy of prioritizing the risks according to its importance. Quantitative and qualitative techniques are used for risk analysis. Using quantitative risk analysis, all the risks are ranked based on their significant, and the index scores are used to measure the significant of a project. The index scores used to measure the risk significant of the bullring project are presented in table 1.

Table 1

High level impact

(1.0)

Medium level impact (0.5)

Low level impact

(0.1)

Highly likely (1.0)

1.00

0.50

0.10

Likely (0.5)

0.50

0.25

0.05

Less likely (0.1)

0.10

0.05

0.01

With combination of quantitative technique to manage risks, the Bullring project team also used the following risk management strategies to manage the project risks:

5.1: Risk Avoidance

Risk avoidance involves the strategies of isolating the project objectives from the risk impact. The process is by obtaining more expertise and improves more communication to avoid some risks. (Smith, 2003).

5.2: Risk Transfer

Bullring management shifted some risks that could affect the positive outcomes of the project to the contractors and sub-contractors.

5.3. Risk Mitigation

Risk mitigation involves reducing the impact or probability of risk threats to an acceptable level. The company took pro-active and early action against the risks that could affect the project lifecycle.… [END OF PREVIEW]

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