Risk Management in Construction Projects

Topics: Construction, Project management, Project Pages: 6 (1715 words) Published: April 19, 2014
NTRODUCTION
This chapter presented the background to the research area and sets discuss the problem formulation. The aim, objectives and research questions are stated and delimitations are described. Finally, the structure of the dissertation is outlined.

1.1 Background
1.1.1 Definition of risk
Definition of risk is a state of uncertainty where some possible outcomes have an undesired effect or significant loss. Uncertainly is meaning that the lack of certainly due to limited knowledge that it is impossible to state the outcome exactly, perhaps, more than one possible outcome happens.

Risk concerns the deviation of one or more results of one or more future events from their expected value. Technically, the value of those results may be positive or negative. However, general usage tends to focus only on potential harm that may arise from a future event, which may accrue either from incurring a cost or by failing to attain some benefit.

(http://en.wikipedia.org/wiki/Risk) 5. Nov.2010
1.1.2 Description of risk management
Risk management is the discipline of identifying, monitoring and limiting risks. In some cases, the acceptable risk may be near zero. Risks can come from accidents, natural causes and disasters as well as deliberate attacks from an adversary.

Risk management applied in the field of construction currently, has been on the agenda for about 25 years. It has focused in the main on large-scale School of technology and business
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projects with different kinds of complexity related to them, such as Technology, international collaboration, geography or finance. (Hintze et al., 2004; Jaafari, 2001). More recently, risk management has started to influence an increasing number of companies and not only the largest projects. In spite of this, the small projects in construction do not feature a great deal of systematic risk management (Azinim & Edum-Fotwe, 2006; Simu, 2006)

1.1.3 Principle of risk management
The International Organization for Standardization identifies the following principles of risk management:
􀂾 Risk management should create value.
􀂾 Risk management should be an integral part of organizational processes. 􀂾 Risk management should be part of decision-making.
􀂾 Risk management should explicitly address uncertainty.
􀂾 Risk management should be systematic and structured.
􀂾 Risk management should be based on the best available information. 􀂾 Risk management should be tailor-made.
􀂾 Risk management should take into account human factors. 􀂾 Risk management should be transparent and inclusive.
􀂾 Risk management should be dynamic, iterative and responsive to change. 􀂾 Risk management should be capable of continual improvement and enhancement.
1.1.4 The process of construction projects
In general, Idea, Briefing, Design, Production and Maintenance management, are five steps as the process of construction project. (Figure 1) Depending on School of technology and business
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the scope of the construction companies’ business concept, they enter this process in different phases. The viewpoint in this study is that client has to take charge of the phases of idea, briefing and maintenance. This description of the construction process is a general one and several different descriptions can be found in other literatures.

Figure 1: A general description of the construction process
In the construction process, it is still most common with competition using a tender process to obtain the project and finish it. Such as commercial bid and technical bid is used in popular. According to the client demands, each of the competing companies submits a bid. The client will decide to choose the company as a winner, which is offered by the most favorable price. The winner is the one that continues with the project into the design and/or production phase of the construction process. In some cases, the constructions companies are exclusive and do not have to compete through bidding. As we know that the many...
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