Importance Of Risk Management In Projects Construction Essay

‘There are hazards and costs to a programme of action, but they are far less than the long-range hazards and costs of comfy inaction’- John F. Kennedy.

Hazard Management ( RM ) has become an of import facet of today ‘s modern universe menu. Hazard is involved in every undertaking irrespective of its size and range and has affected undertakings from little to big and from national to international. And hence, RM is used as a tool to place, analyze and turn to such hazards. All research workers of building undertakings agree that hazards must be managed in its initial phases because in its improbable outcome it can impact the undertaking objectives in footings of cost, clip and quality. A batch of research work has been conducted to develop a scientific expression for hazards but until now they have failed in their enterprises because hazard is non a distinct value. However, about all organisations are utilizing RM policies and schemes in their undertakings which have improved the success opportunities of their undertakings. The research work is still go oning and the research workers are developing different techniques and schemes for RM. And they all agree that the RM procedure must be conducted in three phases as hazard designation, hazard analyses and hazard response.

1.2 Risk Management ( RM )

RM is an of import facet of the undertaking direction and it is used to command hazards in undertakings. The chief aims of the RM are to place, buttocks, proctor and respond to put on the line in a simple and practical manner. RM is assisting organisations worldwide for supplying counsel to develop and implement schemes for commanding the hazards ( Mills, 2001 ) .

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Harmonizing to the Project Risk Management Handbook ( 2003 ) , ” RM is a systematic attack of be aftering for placing, measuring, reacting and monitoring for undertaking hazards ‘ .

RM is a complete counsel which helps in the determination devising by utilizing different tools, techniques and procedures. RM helps the undertaking directors in maximizing the opportunities of undertaking success and understating the opportunities of undertaking failures. The RM will hold a good consequence on the undertaking if it is conducted at the start of the undertaking and is continued till the terminal of the undertaking.

Harmonizing to Mills, ( 2001 ) the undertaking risks must be managed in an efficient and effectual manner because it can impact the undertaking objectives in footings of cost, clip and quality.

1.3 RM in Construction Undertakings

The building industry has a really bad repute in footings of hazard direction due to its hazardous, dynamic and ambitious nature. A batch of building undertakings fail in accomplishing its budget, agenda and quality aims. Among the many grounds, the quality of stuffs, productiveness of the works and labor and the fluctuations in conditions conditions are responsible for the failure of building undertakings ( Mills, 2001 ) . Harmonizing to Hayes, R. , Perry, J. , Thompson, J. ( 1986 ) many of the building undertakings fail due to the direction attitudes towards hazards. The direction either ignores the hazards or trade with it in a conventional manner i.e. in most of the undertakings they allocate a 10 % to 15 % eventuality quota in budget which is non an effectual manner of pull offing hazards. Burchett ( 1999 ) considers the RM to be an of import pillar of the determination devising for pull offing hazards because uncertainness and hazards hinders the undertaking aims and impact the public presentation, cost, quality and productiveness of the building undertakings.

Harmonizing to Taggart ( 2007 ) building companies worldwide have realised the importance of the RM and most of them have established separate sections for RM which trade with the budget, agenda, quality and wellness and safety issues of the undertakings.

Construction companies around the universe have been benefitted from the RM and more and more accents is given on the RM to be adopted in the organisation civilization. Godfrey ( 1996 ) has argued that the RM procedures have helped the determination shapers in taking informed determinations.

1.4 RM and the Project Management

RM has become an of import facet of the undertaking direction and is widely employed for pull offing hazards in building undertakings. Harmonizing to Chapman and Ward ( 2004 ) the RM is carried out in undertakings on the footing of common sense evolved through experience, cognition and inherent aptitude. And still the RM is non considered as an built-in portion of the subject of undertaking direction but one the nine facet of the undertaking direction which is used as an extra tool for work outing undertakings related hazards.

1.5 The Importance of the Research Topic

The building industry plays an of import function in the economic system. It has a great portion in the employment and the GDP growing of a state. Merely in Pakistan it employs about 9 % of the whole labor ( Farooqui, R et Al ) . Harmonizing to Mills, ( 2001 ) building undertakings are really hazardous and necessitate a great trade of direction to accomplish its aims in footings of cost, clip, quality and safety. And harmonizing to Thompson. A & A ; Perry. G, ( 1998 ) organisations which have a systematic procedure of commanding undertakings hazards are able to finish their undertaking in clip and within budgets.

In short, the success of the building industry is extremely dependent upon the successful engagement of the RM processes in such undertakings. And as I am making my research on the RM in Pakistani building undertakings ( P & A ; D Pakistan ) where this construct is like an foreigner and most of the organisations are incognizant of the benefits of the RM.

1.6 Research Question

Construction undertakings are hazardous and can neglect to accomplish their cost, clip and quality aims. This research investigates that which stairss in RM procedure are of import to take the hazards and uncertainnesss from the building undertakings in order to accomplish its aims?

1.7 Hypothesis

The hypothesis is that a there exists a direct relationship between the undertaking aims and the effectual hazard direction. The hypothesis will be tested by carry oning literature reappraisal and a questionnaire study.

1.8 Aims of the Undertaking

The aims of this research undertaking are as follows ;

To look into the construct of hazard and uncertainness in building undertakings.

To measure the application of the formal hazard direction processes in building undertakings.

To look into the techniques those are used for the designation of hazard, its analysis and its extenuation in building undertakings.

To discourse the current hazard direction scheme and techniques adopted by P & A ; D Pakistan.

Analyse and compare hazard direction scheme of P & A ; D Pakistan with other similar administrations.

To give my patron recommendations and a proposed scheme.

1.9 Contentss of the Research

1.10 Drumhead

This chapter covers a general thought about the research and develop the knowhow of the RM and its procedure, the purposes of this research, the research inquiry, the hypothesis and besides gives an lineation of this research.

Chapter 2

Hazard and Uncertainty in Construction Undertakings

2 Introduction

“ The radical thought that defines the boundary between modern times and the yesteryear is the command of riskaˆ¦ . ” Peter Bernstein

In this modern universe of globalisation unsure events such as recessions, roars, wars, clime alteration, technological alterations and competitory markets pose greater hazards and impact the human life from every facet. With no exclusion, industries have besides been affected from such hazardous events and they are seeking and coming up with different techniques to understate its influence on its long and short term aims. This chapter fundamentally deals with the construct of hazard and uncertainness and the related literature. And besides covers the assorted types and categorization of hazards.

In the on-going treatment about hazard and uncertainness, the construct of hazard will be investigated foremost and the construct of uncertainness will be discussed subsequently in this chapter.

2.1 Risk and Uncertainty in Construction Undertakings

In common linguistic communication the words uncertainness and hazards are used interchangeably i.e. the ‘risk is uncertainness ‘ and the ‘uncertainty is hazard ‘ . But if both the words are defined decently from undertakings positions, a distinction can be made between them ( Jam and Lars, 2002 ) .

Harmonizing to Holmes, ( 2002 ) uncertainness and hazard affect the successful completion of undertakings and impede its aims in footings of cost, clip and quality. Harmonizing to Zou, P. , Zhang, G. , and Wang, J. ( 2007 ) the building undertakings are really complex with particular characteristics such as complicated procedures, unannounced environments, long periods, dynamic organisational constructions and fiscal strength and such complexnesss generates tremendous uncertainnesss and hazards. Successful undertakings are those in which hazards and uncertainnesss are decently managed with its early designation and appraisal in the undertaking feasibleness phase. By measuring the impacts of the hazards and uncertainnesss, eventuality programs can be formulated and that will better the opportunities of the undertakings being completed in its clip, cost and quality parametric quantities.

2.1.1 Hazard


The term hazard has been defined by assorted writers and some of the definitions are given as follows ;

Hazard is perceived as the potency for unwanted or negative effects of an event or activity ; a combination of jeopardy and exposure ( Zou, P. , Zhang, G. , and Wang, J. 2007 ) .

Hazard is defined as the opportunity of an inauspicious event depending on the fortunes ( Mills, 2001 ) .

Hazard is the chance of happening of some unsure, unpredictable and even unwanted events that would alter the chances for the profitableness on a given investing ( Kartam, S. , and Kartam, N. 2001 ) .

Construction undertaking hazards are chiefly depend upon the civilization, age and gender. As per gender, work forces are considered as more hazard taker than the adult females. Likewise with regard to age ; immature directors are considered to be more hazard takers than the senior/old directors and civilizations of the abroad states pose many hazards than the host state civilization. The direction of the undertakings must place the hazard, the chance of happening and its impact on the undertaking objectives in any instances ( Smith, N. , Merna, T. , and Jobling, P. 1999 ) .

Harmonizing to El-Sayegh, S. ( 2007 ) undertaking hazards are those hazards which if occurs has a negative or positive consequence on one of the undertaking objectives i.e. cost, clip, quality and range.

Harmonizing to Hillson, D. ( 2001 ) the hazard being an umbrella term has two possible options ;

Threats – this option of the hazard has negative impacts on the undertakings ;

Opportunity- this face of the hazard refers to the positive impacts of the undertakings.

Harmonizing to Mills, ( 2001 ) the impact of hazard can be calculated from a simple mathematical equation ;

RI= L * C

Whereas, RI= Risk Impact ; L= the Likelihood and C= the Consequence.

2.1.2 The types of hazard

Different writers have mentioned different hazards of the building undertakings in their research work on building undertakings which are mentioned as follows ;

Zou et Al, ( 2007 ) has identified the undermentioned hazards related to building undertakings ;

Hazards related to project cost overproduction: these hazards include assorted hazards such as inaccurate appraisal of the undertaking budget, uncertainness about the material monetary value and handiness, inaccessibility and the addition of cost of the labor, jobs with providers and subcontractors, fluctuations in conditions conditions, alterations in involvement and currency rates, undertaking ‘s direction inordinate interface, political jobs, and jobs of local ordinances and corruptness.

Hazards related to clip holds: these hazards are chiefly associated with hapless definition of the undertaking range, complex nature of the undertakings, incorrect planning and programming of the undertakings, fluctuations in designs, inaccurate stuff and technology estimations, deficit of equipment, stuff and skilled labors, hapless productiveness of the labor and sudden fluctuations in conditions.

Hazards related to the quality of undertakings: these hazards are as a consequence of insistent alterations due to mistakes, inaccuracy in the undertaking design, jobs related to the handiness of the experient undertaking interior decorators, short clip for tendering, utilizing low quality stuffs, hapless procedures of building and less attention for run intoing the undertaking criterions and specifications.

Hazards related to the wellness and safety: these hazards are due to hapless safety ordinances, unknowingness of safety, no record maintaining of the incidents, unorganised operations, hapless layout and site conditions and rough conditions conditions.

Hazards associated with sustainability of the environment: such hazards are of two types i.e. , direct and indirect hazards. Direct hazards of the undertakings include emanation of harmful gases, dust, wastes, noise and indirect hazards include hazards which does non seems to be as a direct consequence of the undertakings but those have a long clip affects on the environment such as the exposure of the contaminated stuffs.

However, Aleshin, A. ( 1999 ) has classified the undertaking risks into chiefly two groups such as external hazards and internal hazards which are as follows ;

External hazards: – these hazards besides known as unmanageable hazards include alterations in the usage and revenue enhancement ordinances, political instability and the fluctuations in the currency. The undertaking participants have no control on these hazards and these are chiefly due to the unstable economic systems of the states. External hazards have a negative impact on the undertaking objectives and its affect is of the macro-economic nature. The American experts have argued that the negative effects of these hazards can be avoided by presenting ‘Grandfather ‘s clause ‘ in the undertaking contact by which the governments guarantees that all the alterations in the statute law will non be reflected in the undertaking after the contract is signed.

Internal hazards: – these hazards are besides known as governable hazards which occur within the boundaries of the undertakings. Such hazards are chiefly related to the undertaking processes and can be assumed by one of the undertaking histrions who can outdo manage it.

2.4 The Categorization of Risks

Edward and Bowen. ( 1998 ) as sighted in Ling, F. , and Hoi, L. ( 2005 ) have classified hazards chiefly into two groups i.e. natural and human. Natural and human hazards are farther classified in to different sub-groups. The natural hazards are beyond human control and it can hold a bad impact on the aims of the building undertakings. While human hazards