Risk Management In Construction

CHAPTER1

INTRODUCTION

1.1 INTRODUCTION

Risk is defined as an event that affects the project activities or its objectives such as time , schedule , cost , quality , scope neagatively . Risk Management is the process of identifying the risks associated with the project and devising methods to handle those risks . Risk in any project is a choice rather than fate . According to the characteristic of the construction industry , which has high uncertainty , many new risks occur during the construction phase and operational phase . Risk in construction has been the object of attention because of time and cost over-runs associated with construction projects. Risk is inherited in all the activities of a project

The phases of planning , executing and maintaining project activities is complex and time consuming . The whole process requires number of people with diverse skill sets and the perfect coordination of a large amount of complex and interrelated activities. The situation worsens further by many external factors which are beyond the control of industry . The past performance of construction industry is very poor with respect to coping with risks , resulting in the failure of many projects to meet their deadlines with respect to time , targeted budget and sometimes even the scope of work. As a result of which , clients , contractors & various stakeholders even general public has to suffer a lot .

In project management , some of the critical effects of risks are failure to achieve operational requirements , desired quality & non completion of the project within the stipulated time and estimated budgeted cost.

Thus time and cost optimisation is not sufficient to address these uncertainties , a proper study and implementation of “ Risk Managment “ is essential .

So lets know the characteristics of a Construction Projects first .

1.2 NATURE OF CONSTRUCTION PROJECTS

Since little is known about risks uncertainties which are going to impact the project in future that make the project vulnerable to cost overruns , scheduled completion failure or delays , and inferior quality . All these may affect the projects in monetary terms and heavy financial losses . To counteract this it is necessary to have proper “ RISK MANAGEMENT PLAN OR STRATEGIES “ .

1.3 WHY RISK MANAGEMENT IS NECESSARY –

Risk is the major factor which gives rise to uncertainties in any organisation . Thus , construction companies focus more on identifying risks and managing them before they arise surprisingly and affect the business . The ability to manage risk effectively will make companies act more confidently on business decisions related to future . Their knowledge of the risks which they face give them various choices on how to deal with problems right before they occurred . Thus avoiding financial losses , project delays and out of hand quality control .

Risk management is important because without it , a firm cannot define its objectives for the future . If a firm defines its objectives without taking risks in to consideration , there are chances that they will lose direction if any of these risks occurred