Introduction

1.1 – Defining “Risk”

The Concise OXFORD Dictionary (1996) defines 'risk' as:

"A chance or possibility of danger, loss, injury, or other adverse consequences; or a person or thing causing a risk regardless in relation to risk."

In every strata and sphere of life there is risk, and so is the case with various industries among which one is construction industry. In this industry various terms are used to define the term “risk” but they do not have universal acceptance. Nevertheless, the definition by Oxford clearly states that everyone generally understands the meaning of the term ‘risk’ and the concept itself.

According to Bootbroyd (2000) he mentioned that "the concept of risk is probably as old as the Bible, but the discipline of Risk Management itself arrived in the insurance industry during the mid-1500s. In these days brokers and underwriters were only concerned with the 'pure' risk or 'downside' — looking at the loss or break-even scenario of a lost ship or cargo. That has come a long way since then." In comparison, today Risk Management is more concerned about maximising gains over potential treats. Wysocki (2000) stated that “risk” as a change that may occur in the environmental conditions. This change is basically associated with the estimated loss or a chance of event to occur, which can be both estimated, and the choice of the project manager on how to reduce the risk factor or the loss that may occur.

Moreover, Chong (2000) argues that there are no projects that run smoothly and according to plan. This is because there is no such a thing as a risk-free project. Running project require a lot of planning and some occasional changes to be made to meet the unexpected. However, a good project manager is the one that is able to understand the risks so that he is able to successfully adjust the project by altering the plans when the unexpected risks come in the way.

1.2 - Background

"The project manager must manage risk but without professional Risk Management it is management by luck, and we can't all be lucky all the time." (Boothroyd, K., 2000, p.26) Baccarmi (2002) agrees with Boothroyd and states that Risk Management has attained a lot of weight age in the project management community in the past decade by becoming a global phenomenon, especially internationally.However, there are many who are unable to understand that the inherent risk can be managed and, thereby, they fail to understand the benefits of the professionalised Risk Management: in an organisation Risk Management is commonly considered to be an expense or, in better words, an extra expenditure in the project.

Even Ireland (1988) agrees that it is essential to identify risks in a project, but the considerable benefits are not achieved by the new termed methodology widely known as “Risk Management.”

1.3 – Aims and Objectives

To include Risk Management in construction industry is still a debateable topic for most of the professional project managers, even though study and theory have shown its long term benefits. A lot of research and debates have been done on this but still there is a lack of use of RM in real life projects.

A research on this topic has been done by Mills (2001) in his papers on ‘A system approach to Risk Management for Construction’, where he mentions the benefit of identifying risk at early stage and talks about the allocation of risk. Also in Davis Langdon book named - Cost point on ‘Risk and Value’, it is emphasised that RM is beneficial in early detection of consequences of risks, the review of objectives done by the third party and also it helps in improvisation or targets, thereby minimising the risk factors, leading to an improved audit trial and towards a better end value in terms of cost balance, time and quality.

Therefore the aim of this research is to encourage the usability of RM by different project managers and especially in the conceptual stages of the life cycles of the project, where RM is most significant.

A list is to be developed on all the basic risks and analysis needs to be done for selection of possible treatments and tools that can be of use to project managers in a Risk Management identification and minimisation process.

The objectives of this research are:

1- Investigate current Risk Management practices used by Project Managers involved in the construction industry.

2- Identify the advantages and disadvantages of Risk Management applications in construction projects.

3- Identify the benefits, outcomes and problems faced by and when using Risk Management throughout the project, especially during Conceptual stage.

4- Assess the consequences and outcomes when Risk Management is not applied.5- Examine and evaluate the causes that lead to or cause the lack of use of Risk

Management.6- Determine whether Risk Management processes are maintained throughout the project

life cycle.

1.4 The Research Approach

In order to fulfil the aim and the objectives of this dissertation, it is necessarily to perform the research by adopting a step-by-step approach Dixon (1987)

PHASE 1: Essential First Steps

• Selecting, narrowing, and formulating the problem to be studied

• Selecting a research design

• Designing and devising measures for variables

• Setting up tables for analysis

• Selecting a sample

PHASE 2: Data Collection

• Collecting data

• Summarising and organizing data

PHASE 3: Analysis and Interpretation

• Relating data to the research question

• Drawing Conclusions

• Assessing the limitations of the study

• Making suggestions for further study

Both a structured survey or questionnaire and structured interview will be used for data

collection. Data will be collected from selected professional project managers found on

The AIPM website that specialises in the construction projects. The questions posted

will be based on research identifying (bring about all the general findings, through

literature review, by the many steady stream of published books, journal and even

article in the web site, on this subject) the possible common risk encountered in the

construction industry and the available tools and treatments used against such risks,

and finally to find out the effectiveness of the risk assessment, and is it a advantage or

disadvantage doing so.

These questions will be formed in a detailed questionnaire which will be sent

electronically to only a fixed set of construction organisation in South Australia and

also conduct interviews with a few a set of project managers that have participated in a

risk assessed project from start to completion.

Below are the proposed possible steps to this research:

Literature review, general Risk Management in project management and also narrow it into Risk Management usage by project managers in the construction industry.

A set of close ended and half open ended questions for the questionnaire will be developed on all the possible common risks, techniques or tools used in risk assessment and treatments of risks when it is encountered in the construction industry.

Developed a set of question for interviews with projects inconstruction industry, to find the advantages and disadvantages of the different tools or techniques they have used in their risk assessment in pass and present projects, and whether they found the Risk Management and assessment has been beneficial or a burden\liability during and after the process and completion of the project.

.

Analyse the response of the questionnaire and identify whether, from both the questionnaire and interview the benefits or the liability of Risk Management in 'real' construction projects.

1.5 The Structure of Dissertation

Chapter 2

Identifies in depth what are the distinct Risk Management tools and

techniques for risk analysis and risk assessment.

Finally the benefits that exist in providing Risk Management Services to the clients,

and why the usage is still so uncommon in the construction industry. The main

problems that exist in the construction industry that may causes the lack of use in Risk

Management are looked into in detail and debate why these reasons still exist after years

of research.

Chapter 3

It discusses about the spectrum of research methodology available; justifies the

research, method chosen for the research, the questionnaire designing process, issues

on measuring the variable, the sample and its selection, and the pre-test and piloting

exercise.

Chapter 4

Provides an overall picture of the results on the data collected, with pie charts,

graphs, figures and table as part of the illustration. Also presents a discussion on the

analysed results.

It critically discusses the implication on the findings in terms of using the

reviewed literature, aims and objectives set for this research.

Chapter 5

Summarises the overall research and concludes this research. The Researcher

experiences in completing this research will be reflected that include all activities

involved when producing this research. Finally, recommendations will be developed

for further research.

1.6 Sources of Information

The information for references is obtained from the following resources:

Journals such as:

• International Journal of Project Management.

• Project Management Journal

• Construction Management and Economics

Magazines such as:

• India’s Project Manager

• Project

• PM Network

Electronic Journal from the internet such as;

• IRMI Online

• ConstructionRisk.com

Electronic Databases from the university libraries:

• Science Direct

• Business Source Premier

• Emerald

Professional practitioners from the Project Management industry;

TATA Construction (India)

Royal Institute of Chartered Surveyors

Institute of Surveyors Malaysia

Various other readings; such as newsletters, conference papers.

2. LITERATURE REVIEW

It was incepted in the late 1950’s and is being used since then. Project management has evolved and is considered for delivering the projects on time, with the set of budgets and other specifications and its effects has made it holistic approach.

Ireland (2000) mentioned that the origin of project management is Defence , while the reports of Crawford (2000) states that membership of PMI is new approach and having members from various other industries such as Software & Computers, Telecommunications , IT and Construction Industry.

Murphy’s Law states that-

‘If anything can go wrong it will’

Murphy has given people lot of motivation and wisdom about projects, machines ,people and also about the circumstances and situations that makes the things go wrong.

To understand or to define the term Project Management, the word project needs to be defined first. Whitten (2004) defines project as-

"A temporarily sequence of unique, complex and connected activities that have one goal or purpose and that must be completed by a time, within and according to specification."

He had further added that for any project, proper project management is essential. The project should be designed in such a way that the project is able to complete on time, and become a success in an acceptable budget and is also capable of fulfilling the customer specifications.

The PMI (PMBOK 2000) defines project as-

"A temporary endeavour undertaken to create a unique product or service."

The two keywords used in the definition are: Temporary and Unique.

Temporary here means ‘a definite start point’ and a specific end point and

unique states that a product is very different and stands apart. Both of these

terms bring light that makes a project looks apart from the tasks which takes

place continuously such as in manufacturing.

2.1 PROJECT MANAGEMENT

A project is not a permanent organisation, its only made or worked upon to achieve a set of

ad-hoc goals which are split-up where the ultimate goals are achieved. Project management is

a technique used by people who manage projects and use friendly techniques, tools and

methods. Thereby Ireland (2000) had concluded that project managers must stand by people

who resist change, as a project is always concerned with a structure, service, product or an

event project. He also believed that a great extend one can use project management to manage

changes.

To protect the value of project it is very important to meet the needs of it and dealt with the

issues that are linked to the project delivery. Ramgopal (2003) had stated that the task of the

project management is making it possible to convert uncertain events and efforts into certain.

He also mentioned that Risk Management is always supported and enhanced by the other

process of project such as scope, schedule or spending management. Management is one of

the very critical and essential part of successful Project Management and is required for

enhancing the value of efforts which are project based.

The Project Management (PMBOK 2000) defines Project Management as-

"The application of knowledge, skills, tools and techniques to a broad range of

activities in order to meet the requirements of the particular project"

Morris (1998) had said after examine a summary of the birth or how Project

Management came into use in late 1950’s. He enforced that most of the modern

concepts and techniques other than Risk Management were invented in the U.S

department of Defence between 1950 and 1964. Projects during that time as said

before had complexities related to Engineering and other problems such as urgency on

schedules or overlapping budget and even overambitious schedules. In response to

which the focus was shifted to find a solution or way which makes project delivery on

time, with set budget specification possible.

Modern Project Management has now evolved more and has become an holistic

approach that is being integrated by major project teams. It is realised that realisation

has come within the project managers that a specific set of technique or skills need to

be used for making timescales of the project, budget, resources, risk etc.

2.2 PROJECT LIFE CYCLE The project moves on a fixed cycle of life. The project life cycle can be explained as a process

where a project moves from the beginning towards the end along with the variations that are

natural and do exist depending upon the factors such as area of application.

Fig. 2.1 Generic Project Life Cycle (Wideman, R.M., 2000)

Fig 2.2

It shows a well recognised picture of risk in project, and also indicates the relationship among risk and amount at stake through the life of the project. In this context the Risk Management is project focussed.

Total Project Life Cycle

Increasing risk

Time

Fig. 2.2 Project Life Cycle Risk Profile (Wideman, 1992)

Plan

Oppurtunity and risk

Phase 1 concept phase 2 Developmentconceive (C) (D)

period when high risk incurred

amount at stake

Accomplish

phase 3 Implementation phase 4 execute (E) termination

finish (F)

period of highest risk impact

On comparing this diagram with fig 2.3 it has been noticed that the decrease in the risk is due increase in the useful information over the life of the project. It also shows the importance of identifying and addressing risk at the early stage when it is cheap to deal with. Project Management rightly goes well beyond technical performance risk to consider all risk that can impact a project including cost, schedule, scope.

Risk Conceptual stage

Preliminary stage

Detailed stage

Useful information

Fig. 2.3 Risk Decrease with useful information.

2.3 RISK MANAGEMENT

The theoretical basis of Risk Management is described by various literatures as a mixture of Uncertainty and Consequences (Browning 1999), Probability and Impact (PMBOK 2000) and Probability of Failure and adverse consequence by Forsberg (1996).

The PMBOK describes Risk Management as a systematic process of first locating , then analysing and finally responding to risk of a project. It includes various process which are a part of Project Management such as Risk Management planning, identification of risk , Risk analysis , response planning of risk and monitoring and control of risk.

The term Risk and Risk Management both have a broad application. Risk Management covers various aspects of a project such as political, commercial, technical, etc. Browning (1999) had summarised the categories of risk into six main categories-

Performance Risk

Schedule Risk

Development Risk of cost

Technology risk

Market Risk

Business risk

This illustrates the broad aspect of risks involved in a project.

Uher (1999) had defined Risk Management as a procedure to control the level of risk and mitigate its effects. The general steps involved are risk identifications, analysis and response. According to Davey (2001) every business venture faces risk which may arise from various sources such a technical management , communication , financial, etc.

Risk Management has become a very invaluable process that enhances the possibility of the outcomes of all types of projects. By analysing risk the investigation of all causes and efforts of risk can be done in terms of- possibilities of things that might go wrong with the expectations of the project. Risk Management main purpose is to control or cut down risks.

When it was observed that there are increasing uncertainties, Risk Management was introduced as a new concept in the construction industry in 1980’s. Its significance was realised when it was applied practically and a lot of research was done in the field by Vicknayson (2004), Uher (1998), Raftery (1999), Al-Bahar (1990) and Perry (1986). According to them the main focus of Risk Management is to manage risk effectively. If the risk is managed effectively then only the client will be able to get a project within the timeframe, budget and specified quality.

Fig. 2.4 depicts the relationship between consequence and probability, role of risk management to move to level of risk associated with a project.

probability of failure Manage to mitigate probability and consequence towards zero

low adverse consequence high

Fig. 2.4 Risk Management Objectives (Forsberg et.al., 1996)

In recent years the management of risk is one of the hot topics among the researches and practitioners in the field of project management.

A recent survey of research by Williams (1995) had shown that Risk Management has been given a very high strata and is one of the nine main areas of the knowledge of project management by PMBON. Raz (2001) also found that Risk Management is included in all major courses for project managers.

Byford (1998) mentioned that the purpose of analysing risk is not to eliminate any project that a worthy projects is proceeding effectively, in an environment which is of realism and Risk Management proves to be an effective tool in providing such working conditions.

According to wellington (2002) the analysis of risk can be done at any phase in the project, but is more profitable if it done at the early phase because it is phase when the budget is made and spending is more effective. The main reason of risk management is to develop a risk profile for the future to make effective decisions. In fig. 2.5 indicates that if steps are not taken quickly , options of risk management become uneconomic with the benefit outweigh by the reduction of cost.

influence

Cost centralinfluence

cost

Plan design construct operate

facility

Fig.2.5 Cost Control Influence Graph (Forsberg et.al., 1996)

2.4 Risk Management in Construction Industry

Several organisations of various industries have understood the significance of

‘Risk Management’ departments to avoid or say control the risks that may come

during the project. And if we talk of construction industry where there is huge

risk due to its nature of activities, procedures, process and environment. So

construction industry and risk is closely associated as it is one of the most

changeable uncertain, risky and challenging business industries.

Yet Hays and Thompson (1986) stated that construction industry holds a very

poor reputation in managing risks as majorly the projects under this industry

fail to meet the deadlines and the target set for expenditure. He also provides us

with various reasons behind it like the changes in weather conditions, the

productivity in terms of labour and the planet and also the quality of material

used. Often here risk is not taken very seriously and it is dealt old ways such as

adding 10% contingency on to the cost estimated for the project. In an industry

like construction such an approach towards dealing with risk only causes major

problems such as expensive delays and even bankruptcy.

In Akintoye (1997), it is mentioned that construction industries is one such

wherein there are many unpredictable and unknown factors. Various surveys for

the same have been done on places like to get a feedback from the people who

are closely dealing with risk, who the project managers.

As a whole and in their own projects. Risk Management is now a globally

known methodology in construction industry but still its proper usage or say

usage cannot be seen, which a questionable issue is.

In 1997 a paper done by Akintoye, describes on the base of a questionnaire

which was used for a survey on project management in terms of risk in

construction industry and to extend its use.

The survey concludes that risk management should be the integral part of

construction industry and essential for the activities related to construction. It

states profit possibilities. Construction risk generally include the events and

occurrence that

Affect the objectives of cost, time and quality of a project.

Unfortunately the risk management is not able to hold roots due to lack of

knowledge and the doubts that storm the minds of the project managers in the

construction industry.

2.5 PROJECT MANAGEMENT IN RISK MANAGEMENT

These both terms are interdependent. In a construction industry, the one who

heads the project, the project manager is like a ruler; in this industry risk

management plays a very evident & essential role in ensuring the smooth

running of the project and also in meeting the budgetary and various other

objectives of the project.

A person can better understand the significance and the potential of risk

management in all parts of organisation can only be done when he moves out of

the four walls of a single project and think out of the box. Now a day’s Risk

Management has became an integral part of various sectors such as the

manufacturing and construction sectors.

According to wellington and Norris 2002- RM can play a very significant role in

improving the decision regarding the project and also help in achieving the

desired goals/ objectives.

But few organisations still follow the tradition process of avoiding risk instead

they must understood the potential of Risk management and must make use of

it in a structured manner. It is an effective tool that has been neglected from the

decision makers.

If there is a structured, proactive risk management it can be great help situation

where when risk arises one is not just prepared for it or where a review is

received that it was someone’s responsibility or everyone was so engrossed in

the work that they just thought that it can be seen when it arises. Such an

approach can cause severe problems to the project.

Yet Mc Veigh (2002) is of the view that risk management is a problematic

concept rather than the practical one. He came to this conclusion after

facilitating a 14 hrs risk assessment workshop as part of his research and study,

wherein a senior manager approached him and said ‘it sounds interesting to sit

with co- workers and discuss on how to be successful and have a risk free

project but my instincts prompt me to think whether it will actually work or not.

He even framed a questionnaire to prove his point of view that any management

thinks on lives of their own experiences and views and no two individuals have

same views or view points. In this questionnaire they collect different people

reactions or tackling strategy or assessing manager of any project which is at

risk. And the observation was turned out to be that each person had different

conception, connotations or in simple words a way to tackle the situation of

risk, wherein the set of problems were the same.

Even Grey (1999) is of the view that organisation must consider risk

management

For negative reasons in formal manner. If this is done the organisation can

overcome the situations wherein string or disasters takes place. He also

mentions that how risk management is started is not that essential what is

essential is that if its well designed and planned it can be beneficial in a long

run. There are few Risk |Management strategies and methods that happen to be

very cost effective but still there is lot of confusions on its applicability.

Mc Veigh (2002): has done a lot of research work on the topic states that even

though he followed the RM standard 4360:1999 it has not taken him anywhere,

but on the other hand also agrees that during the initial days they did not focus

on the real issues. He also mentioned that probably they failed to have a fair

understanding towards the stake holders and generally looked at the risk factors

which later were difficult to assess and moreover difficult to treat.

2.6 RISK MANAGEMENT DURING THE CONCEPTUAL STAGE

Since years Wysocki Robert & crave (2000) have done through research and

studies on project management methodologies. After all this they found that

various principles are behind the more successful methodologies and patterned

a project management life cycle to do comparative study with client

methodologies. And its results clearly proves their views to be factual , that

features reoccur in successful methodologies and also their life cycle was very

much similar to that of PMBOK published by PMI.

It has been brought forward in parallel in PMBOK, and a project management

cycle of life has four phases- conceptual, design, execution and finalisation.

The stage of concept is the stage where the scope of planning is brought

forward, where the difficulties of opportunity of the project can be stated, the

establishment of the goals and objectives can take place and moreover a list of

assumptions, risk and obstacles can be identified.

Lyons and Skitmore (2002) in his paper entitled ‘Risk Management’ in

Queensland engineering construction industry: - risk management is higher in

execution and planning stages rather than the conceptual & termination stages .

So, it can be said that his view was that management is far more essential in

initial stages.

2.7 CONSEQUENCES OF NOT USING RISK MANAGEMENT.

Burchett 1999 stated that risk management part is the essential part of decision

making process of all construction companies. Easy, risk and uncertainty are

the destructive in nature for some construction projects. Risk can be a hindrance

in the way of performance, pro-destructivity and quality and also to budget.

Wysocki 2001 states that the concept of Risk Management is not all that easy,

it’s easy to talk of RM benefits but to use it and bring into practise is a attention

seeking job. This is because of the pressure of deadlines on project managers

which exists or indeed forces them to catch up with their work rather than

spending time on planning and preparing work. It’s advised that project

managers instead of generating press we must try to sort out things in such a

manner that a detailed project plan that is added up with sound Risk

Management should be considered more. As its been demonstrated that poor

planning has adverse effects on the project, such as schedule steps ,low quality ,

budgetary problems etc.

2.8 RISK MANAGEMENT BENEFITS

Potential benefits of risk management.

Risk management of project is the thing which every project manager face in day to day life so is more spontaneous than practical. If the risk in the project is not identified and managed properly the consequences could be penalties like-

a. Overspend

b. Overrun

c. Poor project performance

d. Loss of reputation

Risk Management Benefits are-

1. Increasing awareness of risk among the project team.

2. Keeping a control on exposure to risk.

3. Minimising loss related to finance.

4. Project programme that are pre-informed to help to meet the targets.

5. Improvisation in quality of project.

6. Enhancing the reputation in terms of an proper system of risk identification, assessment and control.

To achieve these project managers must locate and identify risk at various stages of life cycle of project, from initial level till the end. It is also essential to keep a check on operational, maintenance and other phases of the project. Managing risk in a project should be engrossed in a project for good management. However , Risk Management is often seen by many as an activity for developed or established project activities.

Project managers need to focus more on project Risk Management in terms of goals and interaction with other companies.

For an effective Risk Management a formal approach needs to be followed that ensures that it is done in a structured and systematic manner in order to identify and manage all the risk effectively. The principal benefits are-

1. Managing risk in order to reduce exposure to risk.2. Minimise losses in terms of finance.3. Improvisation in project in terms of cost effectiveness, time and target.4. Provision of a framework for reporting a project.

2.8 RISK MANAGEMENT PROBLEMS

Traditionally the view about risk is negative, represents loss and adverse of ill effects. But some guidelines on current risk includes the possible situation where there is ‘upside risk’ or opportunity, where there is certain risk or uncertainties that have a beneficial consequence in achieving objectives. Inspite of this theory mostly risk process is applied as managing threats and the approach towards opportunity management is still overlooked. The tools and techniques that are available to the practitioners mainly focus on the negative side.

Davey (2001) stated that majorly risk management concentrates on project problems that are negative. But risk can also contain positivity. A risk can both be a threat as well as an opportunity. If it is able to identify the risk it can turned

out be an opportunity and can work not only on identifying problems but also realising the benefits.

To make a project success, expert advice should always be considered. The problem is facing expert advice is that they are very often and short but the real problem we face daily is overlooked.

Risk Management can make an essential contribution to a good project management. Ramgopal (2003) mentioned that current Risk Management is only limited to managing threats which creates a limitation and hinders in contribution of risk management in enhancing project performance. Chapman (2002) suggested that R.M now focus limited are which restricts its contribution in betterment of project performance. It also has been raised an argument that demanding a wide perspective for managing risk or uncertainty.

2.9 RISK MANAGEMENT AS A PROCESS

Fig. 2.6 Risk Management Framework.

There are various key steps involved in the R.M that comes in the particular phase of project life cycle. The foremost of R.M is form objectives of the involved parties.

Baccarini (2001) mentioned that R.M’s process can put down as following.

1. Risk Identification- where potential events of risk are identified.

2. Risk Analysis- analysing the potential risks to keep a check on the consequences.

3. Risk Response- adopting strategies that help on dealing with risk that have been identified.

4. Risk Monitoring- monitoring that strategies are well implemented and also keeping a control on all spheres.

Number of variations have been bought forth in the project Risk Management process. Boehm (1992) said that process has two main phases namely- Risk Assessment and Risk Control .

Risk assessment- identify analyse and prioritize risk

Risk control- which involves R.M, planning, resolution of the risk and monitoring & planning risk.

Fig. 2.7 The Risk Management process.

Chapman (1997) proposed a process consist of nine phases for project- Risk Management.

1. Defining the main aspects of the project.2. Focus on the strategic approach to Risk Management.3. Identifying where risk might arise.4. Structuring all the information about risks.5. Assigning duties or ownership in terms of risk and responses.6. Estimating uncertainty’s extend.7. Evaluating the magnitude relatively of various risks.8. Planning in regard of response.9. Monitoring and controlling the project for proper management.

Fig. 2.8 Risk Management Standard

2.10 RISK MANAGEMENT – AS A TOOL OR TECHNIQUE

R.M is one of the essential of project management process. Various tools are there to help in various phases of Risk Management. R.M is to its upmost level as a strategic planning tool and is able to provide best value when used enhancing or at the initial phase of project. Grey (1999) mentioned that a few Risk Management methods are very cost friendly but Risk Management still is attracting lot of confused thinking and intentions that are absorbing more efforts than giving results. Thereby he also mentioned that practitioners should be clear of their expectations from Risk Management.

Wellington (2002) said that various organisations still depends on traditional ways like meetings rather than developing a structured Risk Management plan. He also mentioned that various industries have adopted Risk Management and have also been benefited particularly in terms of assessing quantitative risk. Risk assessment is a requirement of every project.

2.10.1 QUANLITATIVE RISK ASSESMENT

Wellington (2002) mentioned that to understand risk it is essential to clarify the risk types and causes. Profiles of risk can be made that are sources of help to management reviews, decisions & communication. A typical risk profile was presented in the form of histogram or pie chart.

Wellington (2002) mentioned QRA as the quickest and easiest mode of assessing risk. He also said that Risk Assessment can be used for the following-

1. As a preliminary study – when results are required on urgent note.2. For justification of actions.3. In case of absence of numerical data.

2.10.2 QUANTITATIVE RISK ASSESSMENT

The process used by quantitative risk assessment are similar to the process of qualitative risk assessment having an exception of numerical values.

Wellington (2002) mentioned that a quantitative risk must have items that are assessed with probability of occurrence of three points. It’s a triangular model focusing on cost, time and impact.

There is no visual aid for quantitative Risk Assessment. It provides a detailed understanding towards risk of projects, but needs to develop more.

They can be very costly and also mislead if the validation of data is not done.

CHAPTER 3- METHODOLOGY

3. RESEARCH METHODOLOGY

3.1 Research

This research will reveal the steps and reasons for using the methods of research chosen for

this research. This research also shows that how from the initial stage of the research, the

design of the research by defining the problems faced and thus forming the aims and

objectives from the data collected and obtained results in order to reach the conclusions to

support or to go against the objective laid in the research.

3.2 Problems, Aims and Objectives

In this research the author has used many concepts used in Risk Management

and its techniques while reading for his post-graduate degree in the university.

The author had realised that the introduction of risk management techniques was

seen formally in the 80’s and it was noticed as beneficial, though it had been

seen that different research shows different results. This is first noticed by

Toakley (1991), Risk Management had given success to large amount of projects

in recent yrs and is perceived as beneficial , but till date there are very few

evidence of its usage in the construction era particularly in the building industry.

This was also said in the research done by Carr(1997), ha mentioned that

management is not simple as it sound to everyone , there are many organisations

that are unable to evaluate effectively risk due to insufficient infrastructure

management to support management of the risk and systematic methods to

analyse and plan the mitigation of Risk.

The research of Mok et. al. (1997) shows that there are other methods as well that are

preferred above Risk management, these methods are not well known and are not widely

used by the construction industry.

The research done by In Abdul-Kadir and Price (1995) shows that there was an

issue of production in work in the construction industry related to phases other

than conceptual stage of any construction projects. They had also discovered

that the conceptual stages are the most influencing stages and for the success of

every phase depends upon the decisions took in the conceptual stages. according

to them these phases , stages and decisions were overlooked in the construction

projects.

As the problem mentioned above, the author had reached to a his research question that encouraged him to put it to test:-

"A professional project manager working on projects in the construction industry actually finds Risk Management assessment beneficial during the conceptual stage."

3.3 Qualitative or Quantitative

Quantitative research gives the required data for verification. Dixon et al. (1987) had shown

the importance to determine an accurate method of putting together all the information.

Nachmias et al had recognised various methods, while Naoum (1998) categorised kind of data

into qualitative and quantitative.

"Quantitative research designs are used to determine aggregate differences between group or

classes of subjects” (Rudestam & Newton, 2001).

"The qualitative means of research is a more laid back approach to a research project and it

allow researcher to be more spontaneous and flexible in exploring the phenomenon in their

natural environment"(Rudestam & Newton, 2001).

Creswell (2003), states with the expansion and apparent authenticity of both qualitative and

quantitative research ,the mixture of research methods and techniques, using the collected

data which is associated with both forms is expanding. It had been recognised that all methods

has got some limitations, and is noted that the researchers who felt biased in one method

could counteract or cancel the biased of the other method.

"Mixed methods approach: pragmatic knowledge claims, collection of both quantitative and

qualitative data sequentially." (Creswell, J., 2003, p.21)

It includes strategies of inquiry that also include collection of data either at the same time or

in sequence to understand the problems fully. Data was collected in both forms i.e numeric

(e.g questionnaire) and text (e.g interviews) which shows both qualitative and quantitative

information. This research begins with a survey in order to generalise results to a population

and then focuses in a second phase i.e interviews conducted from people working in the

construction industry basically working in risk management department.

Taking into account the disparity among the qualitative and quantitative data, the researcher

had taken a decision to the put this research while mixing both the research methods. It can be

seen that the use of several data collection methods and techniques is always good to answer

the research question. The use of variety of methods and techniques gives different perception

on the study and therefore change the actual meaning of it. The use of both forms of methods

and techniques gives the wide picture and also results in good quality of information by

mixing the perception of both the observer and the people interviewed.

Creswell (2003) mentioned the three methods approach they are sequential study, concurrent

study and transformative study. The author took the decision to use the sequential study in

which the procedures are organised in collecting data and analyses of the data.

(Stage 1), followed by qualitative data and collection and analysis (Stage 2). Then, in the

conclusions or interpretation phase of the research, the author will comment on how

qualitative findings helped to elaborate on or extend the quantitative results.

3.4 Questionnaire — Stage 1

"A questionnaire is not some sort of official form, not is it a set of questions which have been

casually jotted down without much thought. We should think of the questionnaire as an

important instrument of research, a tool for data collection." (Oppenhaim, 1992, p.100)

The consideration took time but was helpful to the author to decide mailing the survey to the

appropriate people who could help in this research.

The author has kept in mind few factors while constructing and designing the questionnaire.

While constructing the questions and modifying it time to time assuming the prospects of the

project managers. Doing so, the objectives can be seen clearly in the questions developed and

easy to understand by people as well.

"Survey questions may be concerned with facts, opinion, attitudes, respondent's motivation

and their level of similarity with a certain subject." (Nachmias, 1996)

The classification of question can be seen as more factual than subjective in nature. The

factual questions are kept in the questionnaire to get the objective information from the

respondents, where there were some questions which are subjective in nature to get the

preference, ideas, and prejudice information from the respondents. But, in this research the

author took the decision to not to use the subjective questions as the fact that it can create

complexity and the answers to the subjective questions are more sensitive than those to

factual.

In this questionnaire planning, the author used both close-ended and half open-ended

questions. For questions that has fixed or singular answers to it, the author used the close-

ended questions, for example:

Q7. What is the usual stage to launch Risk Management in projects?

Conceptual Preliminary Design

Detail Design

Tendering Construction Operation of Building

There are some questions which have close- ended and some are direct , the close-end

questions are biased at times therefore the author used few open end questions also. There are

set of answers for the questions which are at the end of every questions, respondents can write

their own answers if feel like or can tick any one of them which they feel is appropriate.

For example:

Q6. To what extent do the following factors deter you from applying Risk Management

on some or all projects?

Not a deterrent strong deterrent

Too complicatedTime consuming

Others

3.4.1 Validity, Reliability

and Scaling Methods

Nachmias (1996) said that validity and reliability goes hand in hand in measurement theory.

1 2 3 4 51 2 3 4 51 2 3 4 5

The term Validity is concerned with the question of whether one is measuring what one thinks

one is measuring. While, reliability indicated the extent to which measure contains variable

errors, and the measure can be estimated by one or more of the following methods: test-retest,

parallel-forms and split half.

3.4.2 Likert Scale

Likert scale is the method used in questionnaire. In this questionnaire the respondents not

only agree with it or go against it but also choose among the options given and the score is

given to every option and is calculated once it’s done.

The Likert scale is known as the ordinal-scaled data or the non-interval scale, for conclusions

cannot be drawn for the meaning of distances between its scale positions, and is recognised

for its simplicity. The scale measures the intensity expressed by the person filling the

questionnaire.

Likert scale is an organised, one dimensional scale from which the respondents are required to

choose one option they think is appropriate. Usually there is four and seven option given in

the scale. All options are usually labelled. A very common form is the one where a person

asked to agree or disagree, varying degrees.

5-point traditional Likert scale:

Strongly agree

Tend to agree

Neither agree nor disagree

Tend to disagree

Strongly disagree

I like going to Chinese restaurants

3.4.3 Statistical Analysis

Leedy (2004) mentioned that the only tool to analyse data and which provides a meaning for

the researcher is statistics. A statistical analysis will give a clear picture and the hidden

meaning of the data collected. The researcher for this case study uses SPSS computer

software.

There are variable in statistics which can be divided into three types, they are Normal, Ordinal

and Interval ratio scales of measurement. Bryman, A. and Cramer (1995) mentioned the

different types of ratio scales are listed in the table below 3.1

Table 3.1: Types of Variables

Types Description In Questionnaire

Nominal A classification of objects(people,frims,etc.)into discrete

categories.

Q1,Q2,Q3,Q4

Ordinal The categories associated with a variable can be rank

ordered. Objectives can be ordered in terms of a criterion

from highest to lowest.

Q5,Q10.Q12,Q13,Q14

Interval A with true interval variables, categories associated with

variable can be rank ordered, as with an ordinal variable, but

the distance between categories are equal.

Q7,Q8

Interval B Variable which strictly speaking is ordinal, but which have a

large number of categories, such as multiple –item

questionnaire measures. These variables are assumed to have

similar properties to true interval variables.

Q6,Q11

Dichotomous A variable that comprises only two categories Q9

(Bryman and Cramer, 1995, p.68)

3.4.3a The use of SPSS

"The advent of computers led to the development of various computer programs for

calculation statistics." (Cramer, 1998, p.35)

Cramer (1998) mentioned that the use of SPSS software is easy to operate and even calculate

very quickly. SPSS keeps the record of variable, calculates new variables and deals with the

values missing. SPSS can do any kind of statistical analysis and this makes it an appropriate

software for calculating results.

3.4.3b Independent Samples 'T'-Test

The independent sample t-test is used to determine the means of two unrelated samples

that differ. It is used to compare the difference between the two means together with

the standard error for differences in the different sample.

3.4.3c Chi-Square Test

There are many types of Chi-square test available for testing data. For this research,

the Chi-square test for two or more unrelated samples were used to compare the

frequency of cases found in one variable in two or more unrelated samples, or

categories of another variable.

3.4.3d Exploring Relationship

Cross tabulation and significance: the chi-square (x2) test

The test above is one of the simplest and most frequently used ways of demonstrating

the presence of absence of a relationship. The 'f' test is a significance test and it is

able to ascertain the probability of the observed relationship between two variables.

For this research, all the respondent's answers are used for this test.

Correlation

Measures of correlation indicate both strength and the direction of the relationship

between a pair of variable. Two types of measures can be distinguished as the

following:

o Measures of linear correlation using interval variables.

o Measures of rank correlation using ordinal variables.

3.5 Interview — Stage 2

"Interviews can be a very effective method used a source of information, for the contents of

the interview are more or less taken at face value." (Denscombe, 1998, pg.1 12)

Denscombe (1998), mentioned that as a data collecting tool, in the interview it help in adding

a detailed and in depth of the data.

As an information gathering tool as mentioned by, the interview lends itself to being used

alongside other methods as a way of supplementing their data, adding detail and depth.

Therefore, to modify the questions and concepts that appear in the questionnaire survey,

where the questionnaire might have thrown up some interesting lines of enquiry, the author

can use interviews to pursue these in greater detail and depth.

Later in this phase, the researcher had chosen a type of interview called ‘interview survey’.

This interview survey was mentioned in Fellows and Liu (2003), a lot of writings have

debated on this type of survey and said that it is more Quantitative. Although the set of

question in the interview survey are planned earlier in which the researcher has put more

stress on the qualitative aspects of the questions whereas the interviews are held freely so that

the respondents answered them the way they want rather than choosing from the options

given to them.

Generally interviews are done to get the in depth of the questions in the survey , to get to

know what the respondent think about it. By doing so it can reduce the biasness that usually

occurs in the quantitative research. The information gathered in the interview is not presented

in the numerical form therefore considered as qualitative.

The aptness of using interviews later than the questionnaire survey is given below. The

aptness of the interviews used in this research after questionnaire survey is justified below:

1. Allows the author to understand more and elaborate on the personal front of the

individuals.

2. The author can later on develop more knowledge or statistical results from the analysis

of the quantitative research.

3. The author can present a more narrative form of report rather than just a numeric

statistical analysis , thus making it more easily to understand by everyone.

The interview method chosen for this research is the in-depth interview to get more deep

information other than questionnaire survey.

Conducting a good In-depth interview could be said to require the skills of a good investigate

journalists." (Ticehurst and Veal, 2000, pg.98)

3.6.1 Structure and Interviewees

Robson (2002), mentioned three styles of questions to put into the questionnaire. They are-

1. Closed (fixed alternative)

2. Open

3. Scale

The researcher had chose open styles of question than the other two given above. Open style

is most commonly used and doesn’t restrict the content or the response.

The reward of using open style questions are-

1. Flexibility

2. Allows testing the limits of respondent knowledge.

3. Produce unexpected answer.

As stated by Robson (2002), the rewards of open-ended question style are that they:

Usually the three variety of interview are: structured, semi-structured and unstructured

interviews. In this research the researcher had used the semi-structured interviews because he

has the clear set of problems to be address and questions to be answered, and yet flexible

enough to the topics covered so that the interviewee can speak freely on the problems raised

by the researcher.

Chapter 4— Results Analysis and Discussion

4.1 — Stage I — Questionnaire4.1.1 — Respondents 'Background4.1.2 — Risk Management Usage

4.1.3 - Risk Management Benefits

4.1.4 — Risk Management Deterrents4.1.5 — Risk Management Life Cycle4.1.6 — Risk Management in Conceptual Stage4.1.7 — Risk Management Advantages and Disadvantages4.1.8 — Risk Management Tools and Techniques

4.2 — Stage 2—Interview4.2.1 — Interviewee's Background4.2.2 — Risk Management Usage4.2.3 — Risk Management Stakeholders4.2.4 — Risk Management Process4.2.5 — Risk Management Tools and Techniques

4.2.5.1 — Risk Management Workshop4.2.6 — Risk Management Benefits and Deterrents4.2.7 — Risk Management Implementation

4.2.7.1 — Risk Management in Conceptual Stage4.2.7.2 — Risk Management in Other Stages4.2.7.3 — Maintaining Risk Management

RESULTS ANALYSIS AND DISCUSSION:

4. Stage 1 Questionnaire

In this section the outcome of the statistical analysis is discussed. This research has been

analyzed with the project managers involved in the construction projects throughout Australia.

4.1.1 Respondents' Background

From the feedback forms received most of the respondents were project managers from the Construction sectors (52%) or the fields ancillary to it: Utility (15%), Government (13%), Project management (10%) and Engineering sector (10%).

15%

10%

13%

10%

52%

Fig. 4.1.1aProject Managers from dif-

ferent sectors

UtilityProject man-agementGovt.Engineeringconstruction

59% of the total respondents have experience in project management of 5 years or less, 18% - 16 years or more, 13% - 6 to 10 years, and the least at 10% have experience between 11 to 15 years.

59%

13%

10%

18%

Fig. 4.1.1b Years of Project Mangement experience

5 years or less6-10 years11-15 years16 years or more

4.1.2 Risk Management Usefulness & Management

92%

8%

Fig. 4.1.2A Risk Management Usefulness & effectiveness

YESNOINDIFFERENCE

Out of the 37 correspondents that employ Risk Management, 92% find Risk Management beneficial while other 8% are indifferent

Every Project 1 in 5 projects 1 in 10 projects Seldom0

102030405060708090

Fig. 4.1.2b Frequency of Risk Management Usage

81% of the Respondent use Risk Management in their projects. While 8% of them use it every 1 in 5 projects, or 1 in 10 projects. 3% use Risk Management at rare intervals while some are of opinion that they would use it in almost every project in a ratio closer to 1 in 2 projects.

More than 10

Years

6-10 Years

2-5 Years Less than 2 Years

0

5

10

15

20

25

30

35

Fig. 4.1.2C Length of Risk Management Provision

Length of Risk Management Pro-vision

Different correspondents provided Risk Management differently: 32% of them had it for a fairly long time of 10 years or more, 22% - 6 to 10 years, 27% - 2 to 5 years and 19% provided it for less than 2 years.

Table 4.1 Length of provision against Frequency of Risk Management provision

FREQUENCY OF RMGT PROVISION

YEARS OF PROVISION

EVERY PROJECT

1 IN 5 1 IN 10 SELDOM

Less than 2 yrs 14% 3% 3% 0%

2-5 yrs 19% 0% 5% 3%

6-10 yrs 22% 0% 0% 0%

More than 10 yrs 27% 5% 0% 0%

27% of practitioners, who possess experience of Risk Management of more than 10 years, use

it to mitigate the risk consequences for every project, follow by a slight decrease of 3% to 5%

at each category, in years provision against frequency of Risk Management provision. Only

19% fall in the remaining category of providing it in 1 in 5 projects, 1 in 10 projects or seldom

provided, for all years of provision.

Table 4.2 Risk Management experience

YEARS OF PROVISION

NONE < 5 6-10 11-15 16

Less than 2 yrs 8% 23% 0% 3% 3%

2-5 yrs 0% 13% 5% 3% 0%

6-10 yrs 0% 10% 0% 3% 5%

More than 10 yrs 0% 13% 5% 3% 8%

For the 8% of correspondents not using Risk Management, their organization has provided this service for 2 years or less. Whereas 23% of the correspondents, having project management experience of less than 5 years, have been provided it for 6 years or more compared to more than 10 years provided for 5% of correspondents with experience of 6 to 10 years.

The feedback from the survey shows that the many companies are in benefits for practicing Risk Management.

4.1.3 Risk Management Benefits

Table 4.3 Reasons for providing Risk Management

REASONS

Long term cost savings 58%

Complex projects 40%

Quick and more competent in handling risks 45%

Clients Requirements 30%

The basic reason for providing Risk Management agreed by 58% of respondents was long-term cost savings, while the other respondents quoted reason is that Risk Management is beneficial when projects are complex or have high risk and that cannot be commenced without a good Risk Management plan; also where the client specifically demands it as it quickens and provides more competencies in handling risk.

Moreover, 15% of the correspondents indicated that Risk Management helps in proper planning and recognition of risk and that sometimes it is specifically required such as political requirements or client specifications.

4.1.4 Risk Management Deterrents

Table 4.4 Deterring Factors Affecting Provision of Risk Management

FACTORS NOT 2 3 4 STRONG

Too complicated 38% 32% 16% 14% 0%

Time consuming 24% 22% 19% 30% 5%

Not enough info. 16% 22% 32% 22% 8%

Not required 27% 18% 18% 18% 18%

The basic reason for not using Risk Management as provided by 35% of the correspondents is time consumption, while 46% hold the view that it is turning to be a non-deterrent factor.

Other deterrent reasons as quoted were not having enough experience in Risk Management, no strict company procedures, also the resistance to change is often quoted a reason as old staff are frightened for that.

Political interference, affect from professional indemnity insurance and insufficient resources could also be the reason for not providing Risk Management.

4.1.5 Risk Management Life Cycle

Saving of time and money as well as the optimization of the quality of work is possible by early cost advice. Researcher, as discussed in Chapter 2, also emphasizes this. Table 4.5 Stages of Risk Management Implementation in Practice Now

Conceptual Preliminary Design

Detail Design

Tendering Construction Operation of Building

27% 23% 18% 14% 13% 4%

Generally, Risk Management is initiated at the early stage followed by the initial design stage. If Risk Management is implemented before the Detail Design Stage, it still can be beneficial, but if the change is made after this stage then it can cost more and also complicates the whole plan.

The results of the other stages of Risk Management than the practitioner’s usual practice are provided in the table below.

Table 4.6 Stages of Risk Management Implementation Preferred

Conceptual Preliminary Design

Detail Design

Tendering Construction Operation of Building

32% 14% 18% 18% 14% 10%

There is a distinct choice from the correspondents on the Conceptual stage, as some of them refer it to as the Business Plan stage or Feasibility stage, which is the ideal recommended stage by most learned researchers. Results are evenly distributed at the remaining stages, which states that the correspondents feel that Risk Management should be provided throughout the process. But though it needs to be initiated in the Conceptual stage.

78%

22%

Fig. 4.1.5a Maintenance of Risk Management

YESNO

While 78% of the correspondents feel that Risk Management should be maintained through the whole project life, the other 22% do not hold this view. However, researchers also feel that it should be maintained throughout the project. One correspondent states that he is restrained from maintaining it throughout the project and maintains it only in some areas.

4.1.6 Risk Management in Conceptual Stage

Table 4.7 Problem encountered when Risk Management not implemented during conceptual stage

PROBLEMS

Unforeseen disputes and claims 60%

Project time and slippage 60%

Excessive variations 55%

Less likely to find alternative solutions 43%

Unable to identify cost savings 40%

The two basic reasons that were found as to why Risk Management is not implemented during the Conceptual stage were unforeseen disputes and claims, and project time slippage, as these two are more costly to settle at later stage. The other reasons include excessive variations. Non–implementation of Risk Management at early stage leads to disadvantages like not finding good alternative solutions, the chances of encountering an increase in unidentified obstacles and the inability to identify cost savings. Correspondents may also have to bear cost pressure and leave a bad impression to their clients.

Table 4.8 Factors for Implementing Risk Management

FACTORS LITTLE 2 3 4 Lot

More training 5% 3% 41% 22% 30%

Emphasis benefits of usage 5% 5% 5% 22% 38%

Better or cheaper provision of tools and techniques 9% 12% 12% 21% 26%

The next inquiry was made to find out the factors that would initiate the practitioners to implement Risk Management. Most of the correspondents emphasized that the important factor for encouraging Risk Management is that it is a proven risk-preventive measure. Other factors include providing more training such as Risk Management workshop, cheaper ways for providing Risk Management by incorporating it in the system that will also encourage correspondents to use it on regular basis. Making it time saving, firm and actively committed by organizations can also encourage the implementation.

4.1.7 Risk Management Advantages and Disadvantages

The author put forward the next questions to find out the weight of advantages versus disadvantages of Risk Management.

Table 4.9 Advantages and Disadvantages of Risk Management

ADVANTAGES

Minimize Risk 90%

Minimize claims and disputes 68%

Long term cost savings 63%

Quality improvement 63%

Quick risk response 58%

solutions alternatives 55

DISADVANTAGES

Time consuming 58%

Unforeseen risk 30%

Consume more resource to conduct 8%

NONE 13%

The analysis clearly shows that the advantages of Risk Management surpass the disadvantages of it. The advantages of Risk Management are the minimization of risk, long-term cost savings, quality improvements, and quick risk responses. Most of the correspondents provided all these advantages as cited. However, one correspondent also quoted the minimization of claims and dispute as its advantage by the project having clear baseline.

The disadvantages of Risk Management are process being very objective and subjective, involvement of uncontrollable variables, and overdependence on easy methods for solving complex process. The other drawback is the non-information sharing between higher management and bottom group resulting into bottom group being isolated from the process.Also, as cited by correspondents, there is always a lack of resources and it is a costly exercise.

Over 13% find that there are no disadvantages and the worst disadvantage would be not using Risk Management.

4.1.8 Risk Management Tools and Techniques

Table 4.10 Risk Management Tools and Techniques

Tools & techniques Comparison w/ others Frequency of usage

Brainstorming sessions 28% 75%

Checklist 25% 68%

Sensitivity analysis 13% 35%

Decision trees 12% 33%

Influence diagrams 5% 13%

Monte Carlo simulation 3% 8%

Pass experience 3% 8%

Risk matrix 2% 5%

Finally, the inquiry was raised to see the frequently used tools and techniques to tackle Risk Management that were found to include Brainstorming sessions and checklist. Also the idea of 'keeping it simple' and the inclusion of workshops, showing the benefits of Risk Management, encourage its implementation.

Other basic applications are the risk matrixes or subjective rating, i.e. daily monitoring and reporting throughout the project life cycle of the category of risk, the risk event, likelihood, impact, containment, monitoring and responsibility. Some are just as plainly as developing a risk mitigation strategy for prevention and contingency. Usually some organizations have their own in house software that is used to perform Risk Management.

Some respondents said that industrial standard studies are actually a form of Risk Management. For the complex project the usage of HEMP or hazard identification plan may be preferred, which is identical to risk matrix.

Correspondents quoted some tools as having more sophistication i.e. Klepner and Tregoe as compared to Sensitivity analysis, Decision Tree, Influence diagram and Monte Carlo Simulation.

8% of the correspondent’s states that previous experience and lessons learned are the main tools to any project managers' needs, in order to implement the best Risk Management.

4.2 Stage 2— Interview

In the stage 2- InterviewThe data collected from the interview is examined. The researcher for this research has analyzed the data with the project managers who are generally concerned with the construction industry or has handled construction projects in India.

(Gammon India Ltd, DLF Project’s India Ltd.)

4.2.1 Interviewee's Background

In the earlier stage of Chapter 4 it was noticed that , being from construction industry but handled has handled different fields in construction for that reason to have everyone’s feedback on Risk management , the proportion that was kept in mind is :

a. There will be two project managers originally from the project management sector of construction and will represent the huge percentage of Professionalism.

b. One of the project managers will be from the government sector and will represent the public projects.

c. One of the project manager from the private sector which will represent the consulting team which helps in fulfilling the clients demand.

Some of the two project managers undergone the interview were more experienced in their

particular fields for more than 10 years. This was kept in mind while doing the research

because the researcher wanted to have a in depth knowledge on Risk management. With two

project managers left in which one has experienced of about 6 years while the other one has

got approximately 5 years of experience in managing a project. The project managers selected

represent the new thinking and new practitioners in the construction industry.

4.2.2 Risk Management Usage

The term Risk Management has been known to people since long time about 25 years in one

way or the other, is it believed by the respondent that it has got some more forms even before

then. The term Risk Management has not been formal and its trend can be seen since last 10-

15 years only. According to some practitioners this term was used very casual around 10

years back but in recent years this term has been used very carefully and being used for

almost every construction projects. Earlier it was used very casual without any documentation

or any formal process but now it is used consistently and follows a particular process.

"Risk Management has happened in the past informally and without people knowing.

We practice Risk Management every day of the week"

Some Practitioners mentioned that they are pro- active and participate in active risk

management and also it is an important part of what they do. Some practitioners states that the

term Risk Management is used all the time, daily basis , formally or informally in one way or

the other in each and every project.

It is well known that public sector projects particularly the bigger ones have much to do with the formal Risk Management. For almost every project manager big projects are more formalized than a smaller ones and the procedures for the big projects must undergo all the formalities required to identify the probability and types of Risk at the conceptual stage.

Some of the small organization use it as well but it cant be more formalized as seen in the bigger projects. Project managers finds it part of day to day activity to manage risk. For some practitioner if they find that the project is not too big and can be managed with project managers day to day activity basis then it is said to be handled more efficiently then handling bigger projects in which there are many formalities to follow. It takes more time to follow all the formalities in small projects whereas bigger project always have a good span of time for completion.

It is also seen that in construction industry, especially small organizations , don’t actively participate in following Risk Management. It is based on only the interest of the project manager, if it is in personal interest of the project manager then only it will be implemented on the project.

4.2.3 Risk Management Stakeholders

"Call the project manager the risk manager because that’s one of the key jobs that the project manager does."

The respondents agrees that project managers play a key role in every project and always initiates the managing of risk. It is a key role of every project manager to manage risk, planning and developing during the project. Project managers are actively involved in the smooth running of the projects and follows all the 9 knowledge areas given in PMBOK.

Generally, it is required to choose correct stakeholders to manage and asses risk at various stages depending upon the setup of the project. The people concerned for Risk Management keeps an eye on the type of risks and might change as they goes through the whole project.It is very common in the earlier stages while introducing new Risk Management steps started by the clients, once the stakeholders been through the training, they do not initiate it any further and expect the practitioners to manage and asses risk for them.

An example quoted from an interview on the above statement:

"A lot of the project manager's clients are developers that have been working on a

regular basis and the clients believe they have a good handle on what the costs are.

They believe they have a good understanding of what the community wants in the

terms of a project and they look at the bottom line. By bottom line I mean the

profitability of a project, and that is why I call them "small minded clients ", is they

might be doing a $2 million project and are not prepared to spend $2,000 to get

someone to come in to look after the cost because that is one of the easiest examples as far

as Risk Management goes. Well the biggest example. They are not even prepared

to spend that sort of money to guarantee the viability of the project and make sure that

they are not going to go over budget and that it will come in within the dollars that

they are looking at."

It has been noticed that stakeholders are not willing to entertain any extra cost because as per

to them it is not justified. They are willing to take a stand for Risk Management without

knowing the implications and utilize their time doing other things. It basically depends upon

the knowledge of the stakeholders related to Risk Management. If the stakeholders are not

keen to know about the assessment and managing of risk and becomes hostile about the Risk

Management and the cost for it. This situation arises when they are in a low risk environment

or when they do not know much about it. But if the client are from government sector

organization then they are more keen to mitigate the risk that comes across and are happy to

pay for it. e.g.,$10,000 now might save them a million dollars later

"Clients are rapidly becoming more, not educated, but more understanding of Risk Management."

It has been noticed that in recent years clients are becoming more and more educated on Risk

Management. Today clients want the Risk Management process to take place. In bigger

projects , project managers are likely to follow the formalized set of steps given in Risk

Management process. This is usually seen in government sector projects where it is the duty to

follow the formalized set of procedures because they keep an account of it. Whereas in small

projects the formal set of rules and regulation is not seen at all and is managed on the set of

formalized set used in day to day activity of a project manager.

4.2.4 Risk Management Process

Most project managers work on the behalf of their client. Project managers look develop

feasibility studies and cost effective processes for their client, and analyze the economic

options available at that time.

The first step in risk management is to write down the project intentions and evaluate the

limitations involved. Different levels of risk are involved in any project. These could be

extreme, high or low risks, and it is the duty of the clients to determine the level of risk they

are willing to take.

The next step is to develop a risk strategy, which involves decisions about what is to be done,

as well as providing solutions and alternative options for the limitations. The strategy is

achieved through mitigation, negotiation as well as risk-sharing approaches. Although Risk

avoidance is the preferred method of risk management which results in removal of risk at little

or no cost, some risks are inevitable and would need to be taken.

The risks taken in a project need to be carefully monitored by a designated project manager

through re-assessment and re-evaluation, to ensure that the risk strategy is effective.

According to one of the project managers interviewed, risks are not necessarily constant

throughout a project and may appear half way through; thus proper risk management through

the life time of the project can reduce extreme risks to lower risks, and result in a successful

project outcome.

A status report is kept by the project managers to monitor the progress, the expected

completion as well as the budget of the project. Any changes occurring in the project are

documented and attended to, in consultation with the stakeholders; and any risks that may

appear are handled using mitigation approaches in the risk strategy developed.

At completion, the project managers review the whole project using a formal "Post- project

Review process ". Together with the clients, they review the original brief and determine how

successfully that brief was addressed, taking note of issues that should be addressed in future

projects. Some project managers interviewed confirmed the importance of this post-project

review phase in ensuring client satisfaction in terms of how the brief was resolved, proper

functioning of the project outcome and what they would do differently if they project was to

be carried out again.

After handing over of project, project managers are also responsible for proper functioning of

the outcome. Any hitches are analyzed and the risks that may arise are determined and

attended to. Thus, it can be suggested that the risk management exercise extends after project

completion.

4.2.5 Risk Management Tools and Techniques

The risk management methods used by the project managers interviewed are mainly

qualitative and not quantitative methods. Quantitative approaches, like the statistical analysis

involves the financial or economic analysis part of the risk assessment process in the planning

stage, but for the other risks it is mainly through brain storming, which is a qualitative

approach.

The project managers and the stakeholders brainstorm to get ideas and then rate these ideas as

low, medium or high. The client might have something more complicated, but project

managers normally try to keep it simple -"the old KISS principle".

The brain storming sessions are usually achieved by conducting risk management workshops,

as described in the following section.

Various Risk Management tools and techniques are available for use. It can be as simple as a

live spreadsheet that gets updated every month, which informs the project manager of the

current project progress and any issues arising. Very commonly, practitioners only use Excel

or risk matrixes.

4.2.5.1 Risk Management Workshop

Project managers are mostly responsible for risk management workshops and these

workshops are especially popular with government projects, particularly State Government

projects.

These workshops are a good way of getting stakeholders involved in the project,

and involve Brainstorming or risk storming to assess the likelihood and the impacts of the

risks, and the development of risk management strategies. The workshops show that the

clients have their own requirements and the project managers have to meet these

requirements. If clients do not have any requirements, the project managers make suggestions

according to their budget or time availability, and formalize the suggestions by documenting

them.

Different stakeholders have different perceptions of the risks involved in the projects, and

during risk workshops, these risks are scored and written down according to a risk profile.

Copies of the information developed are circulated amongst Stakeholders to remind them of

their contributions and to enable them think of any new risks, mitigation or avoidance

strategies that were not previously thought of. The information obtained from the workshop

influence the decisions of clients and project managers in solving problems which arise in

the project. Review meetings are held to address any issues that were missed, using the

same brain storming process

There are different opinions on risk management workshops, considering the time and

monetary costs involved. One project manager thinks that Risk Management workshop is a

buzzword for the majority of the clients, and that only insurance people, project managers and

some clients, who have a lot to lose really take it seriously. Another project manager

interviewed said "When you have clients, you have to document risks and protect yourself at

the end of the day". He believes that a risk management workshop enables the project

manager carry out due diligence and ensure that all reasonable steps are taken to mitigate,

control and avoid risks, and would serve as a line of defense in case of eventualities.

The risk management workshop can be carried out less formally through exchange of e-mails

between the clients and the project managers, reducing the time and cost implications of the

process. This also provides a documented system.

4.2.6 Risk Management Benefits and Deterrents

Risk management has a number of benefits and deterrents. The benefits of Risk

Management pinpointed in most interviews with several project managers are outlined

below:

- Risk management allows for easy identification of risks and it gives a better cost-

analysis, with identification of areas that can 'burn the project budget'. It allows for

establishment of risk exposure as well as mitigation and avoidance strategies, saving

clients the potential financial impacts of those risks.

- Risk management provides an avenue to engage the stakeholders in the project, in order to

determine the viability and success of the project and to make decisions about the best options

to adopt.

-Risk management also helps to achieve best-practice for a project, and allows a project

manager to assess project threats, enabling the project manager to exercise measures to

counter these threats.

Some of the Risk Management deterrents mentioned by interviewees include the time and

monetary implications; the lack of man power and expertise, especially in smaller

organizations, as well as the complexity of the work involved.

However, the benefits of Risk Management outweigh the deterrents. A few project managers

interviewed stated that Risk Management is so embedded in everything they do, that they are

providing Risk Management principles. Unmanaged Risks Can result in a number of

undesirable situations, which include adverse publicity or lack of confidence as well as

dissatisfaction from a client or stakeholder, or they could increase the costs or change the

scope of the project, which could in turn cost you time and diminish the success of the

project.

Risk Management is thus a very essential part of any project.

4.2.7 Risk Management Implementation

Risk Management practices should be engaged at the initiation of each project. It should be

implemented at the planning stage of the project prior to detail design, and then updated

during the project. The main stages where Risk Management is usually initiated are

conceptual, design and construction stage. Other stages noted are during the project proposal,

at budget approval time, during project and at any time when the budget changes.

Larger projects have more formalized stages, for example during concept design stage, there

is a risk assessment for that, and then during design development stage, there is another risk

session.

4.2.7.1 Risk Management in Conceptual Stage

Risk Management starts from day one, to enable optimum results in terms of time, quality and

cost involved in the project. Project Managers interviewed emphasized that Risk Management

is an integral part of what they do, particularly at the conceptual stage, looking at options and

the viability of the project. After risk management at the conceptual stage, the project

managers reveal the options available to the client, who then selects the preferred option, after

which the project manager proceeds to the other phases or stages, based on the client's

preferred option.

The advantages of implementing Risk Management in conceptual stage include forward

budget planning, reduced fluctuation of spending and timelier deliveries; Knowledge of the

major threats to the project at the start results in less change in documentation; project

managers can put strategies in place to mitigate the potential impacts and therefore mitigate

the costs. It allows for successful delivery of the project, according to the client's

requirements.

The consequences of not performing risk management in the early stages of the project go

beyond the financial impacts. The adverse impact could be environmental, economic or social

impacts. Issues such as budget overrun, time or program overrun, bad quality of work,

political embarrassment, public backlash and bad publicity to the client and project

management themselves could occur.

4.2.7.2 Risk Management in Other Stages

For some project managers, the construction phase is the most important stage of the project.

By looking at all the effort or all the number of hours worked on a project, it is the period of

highest risk because it is when all the activity happens, thus the project manager needs to pay

more attention at this stage. Most of the risks encountered in the planning stage can be

resolved, but when encountered in the construction stage, is nearly always irreversible.

4.2.7.3 Maintaining Risk Management

Risk Management should be implemented throughout the whole project, right over to the final

handing over, to ensure that appropriate decisions are made and executed. The risk

management pattern depends on the size of the project, the cost of the project and the nature

of risks identified in the risk management workshop. The risks involved in small projects are

usually less frequently reviewed by project managers than large multi-million projects.

CHAPTER 5

CONCLUSION

"Risk Management applies to everything that you do, not just the advice that you give

the client but yourself and how you run your office."

5.1 Summary

Is risk management undertaken at an early stage in project management?

The purpose of this dissertation is to bring out the significance or importance of Risk

Management in construction industry at different stages specially at the conceptual stage

Management assessment of risk beneficial during the conceptual stage' and the aim is to

determine how many professional project managers in the construction industry,

or has project managers in their organisation uses Risk Management in their projects,

during the conceptual stage .

After analysing and comparing the results in Chapter 4, it has been found that there is a

significant discrepancy on the reason why Risk Management may not be undertaken at an

early stage.

Less experienced managers only evaluate risk at a later stage?

"Anything found later maybe too late to save your hide" (Reiss, G., 1995)

Risk Management has been concluded, by most of the practitioners, that Risk

Management is useful and effective, and it is indeed beneficial if Risk Management if

implemented from the early stages of the project life cycle, especially from the

conceptual stage. Yet, there are still a handful of practitioners that still do not practise

Risk Management at every project or even launch this process from the early stages of a

project life cycle. It is found that most of these practitioners are project managers who have

only been in the industry or has project management experience of 5 years or less. Therefore

they are labelled by senior’s project managers as 'young practitioners' or junior project

managers. More than half of the respondents are from this category and since project

management is a growing industry, therefore the growing numbers of 'young' practitioners

will represent the overall usage of Risk Management.

How do juniors learn?

Linking to the above statement, another apparent finding was that many young

practitioners were not given a chance to learn or practise risk Management. Quite often when

senior management or senior practitioner have workshops for stakeholders, junior project

managers or 'young practitioners' are not required to attend. Therefore, many

at times, these project managers are not able to contribute, or learn the trade and the process of

Risk Management at the conceptual stage. When the project proceeds into other stages, such

as the design stage, Risk Management is taken up by junior project managers to work on these

projects, they tend to feel lost and do not see the need or the importance of maintaining or

following up the process, thus do not learn to implement Risk Management at the beginning

of their own projects or even providing this service at all.

Risk Management Workshops are not always effective

Risk Management workshops are now a common occurrence, that if either senior or

junior practitioner had not attended one before, they would have at least heard of it. As

mentioned above, other than personal experience, most project information is

expectedly documented for future use. These documents are frequently used as a guide

in other projects or workshop orientation as a reference in similar or 'near' similar

projects. This may lead project manager to approach it in a tactless and routine manner.

Since every project is unique, there are no two exact similar to how the approaches, the

conditions and risks it will face, therefore no identical risks and solutions for it can be

used by just referencing from documented reference.

Most of the senior practitioners practice Risk Management based on experience or

lesson learnt. Though records of project information, especially in large organisations

or companies are recorded, as mentioned above, it is recognised that each individual

project can be distinctly different from the next. Therefore, risks encountered for each

project can vary, and reading up on documented risks does not have the same effect as

handling risk on first hand basis.

Risk management is not always built in to company systems

An evident group of young practitioners also explain that the obligation to provide

Risk Management is not evident in their company's system. There were no company

procedures to follow nor is it implemented formally with a paper trail; therefore it

relies on individual confinement to learn and become skilled at putting Risk

Management into their practice. Even though senior staffs do put Risk Management in

practice and provide this service in most of their project, it is difficult to engage them

to implement Risk Management following formal company procedures, for most of

them are fixed in their old ways, by providing Risk Management informally. This can

mean that Risk Management is provided spontaneously and project information on this

type of provision is virtually undocumented. Tying to the above reason, senior staff

applies Risk Management with their own experience, and this is not transferable to the

younger staff in the organisation or to the company.

Poor decisions at early stages have a larger impact on costs

It is recognised that the greatest degree of decisions are made during the early stages in

the project life cycle and the cost implications of decisions made at this time would

have a dramatic effect on the overall viability of the project. Therefore project

managers and stakeholders should want to involved as early as possible of the project

cycle, where high level strategic decisions are made which affect overall business

development and procurement strategies Most studies shows that Risk Management

commences during pre-design phase, where proposal outlines and sketch designs are

done, which most people assume as the 'conceptual' stage. Conceptual stage goes

hand-in-hand with feasibility studies, or sometimes even slightly before.

5.2 Reflection

"A bit like project management, 10 to 20 years down the track what we call project

management today maybe called something else but the process of doing it will have

some basis."

Specialization in the field of risk management is expected. Discussions regarding starting a

full fledged course on Risk Management are taking place to promote Risk Management and

for industries to have managers who would have specialized in Risk Management.

Business process

Like the update in the 1990's of Quality Assurance, it is seen that QA greatly falls to

the wayside but it is now seen to be just sensible business process. Much is Risk

Management in the 2000's. Risk Management is just good management practice.

Therefore, it means that responsible companies will have greater and greater need for

project management who can do effective Risk Management.

Risk Management is there, existing, and the process is there to be used. The frequency

will increase when more people are using it, therefore, when the overall efficiency of

increases, it becomes expected as normal thing to do in a project.

It is obvious that Risk Management exists in one form or another, formally or

informally, and its utilisation is gradually increasing. Smaller organisations or

companies may not utilise it as formally as the larger organisations or projects. Yet

when projects are not so big, Risk Management can be implemented day by day and

are actually more efficient than some larger projects where there are many parts to the

formalised process. The time that it takes to put the concept together for a larger

project versus a smaller project can be costly.

5.3 The Future

Even now, Risk Management is beginning to have new various names labelled on it.

The few common researched ones are: Opportunity Management and Uncertainty

Management.

Opportunity Management(David Hillson, 2005)

Opportunity Management comes about because Risk Management is

seen as an approach that views risks as a negative impact and only focuses managing

its threats and impact, while Opportunity Management looks into the positive side of

the project and tries to create an opportunity by turning a negative treats to positive

objectives. Uncertainty Management is a half-and-half of both, adversity found from

the results of Risk Management and upside potentials found from the results of

Opportunity Management. The basic theory to it is to have opportunities be exploited

in addition to risk being mitigated.

If thought about Risk Management, everyone have always done it, way back from

years ago. It is just that all of a sudden someone has decided to give it a label and a tag

and make a subject out of it and it is part of someone trying to justify its existence. A

lot of these project management elements are coming into vogue and it is part of what

a well trained professional has always done as part of their working career. It is just

that now someone is able to put a label on it and present Risk Management training

Value Management training, or any other training, professionally.

Impact of litigation and insurance claims

Another reason due to increase of utilisation in Risk Management is because of the

terrorism has made insurance company scared and having the HIH Insurance Ltd.

disaster which the insurance company went broke and the insurance premiums have

become very high to the extreme. Even though the utilisation of Risk Management

tools and techniques is not compulsory or not even mandatory, but insurance

companies are asking for Risk Management plan when renewing insurance because it

might reduce premiums. The frequency of Risk Management processes will increase as

people become more and more risk adverse.

5.4 Recommendation

"The solution is simple."

(Ansell, J. & Wharton, F., 1992)An Approach

A responsible approach to Risk Management requires the senior managers adopt a

voice a collective moral stance with regards to implementation. The adoption of such a stance

should not be an artifice, it has to be a sincere expression of a set of values that

will determine the ethos of the organisation. Any shallowness in the expression of

these values will quickly be tested in the organisations, with culture quickly to adapt

the expression of the priorities revealed in the pattern of decision making by the senior

managers.

The board of directors and the chief executive have the ultimate responsibility for the

articulation of a value system which addresses its importance in implementation. The

board must place a priority on matters affecting Risk Management, must define

responsibilities for these issues, and establish a system to monitor its performance.

Risk Management and other issues related to social responsibility should be treated as

equivalent to other components of commercial strategy, worth of board-level review

and incorporated fully into corporate value system.

If senior managers do not begin to express the sincere commitment to the issues of

Risk Management, then they run the danger that society will decide to change the rules

of the game. The public's outrage at de degree of irresponsibility shown by

management in the succession of recent disasters had led to calls to alter the degree of

legal protection that managers have for acts carried out on behalf of employers. If

business executives do not express a responsibility for the care of those who are

affected by their business decisions, then the criminal justice system may be redirected

so as to hold them accountable for both their actions and, more importantly, their

inactions.

Risk Management should be incorporated as a requirement into policy and procedure

of the company or the organisation. This will make certain both senior and junior staff

exercise Risk Management and formally implement it as per requirement.

In order to sustain Risk Management, it should be maintained throughout the life cycle

of the project, from conceptual stage right to hand over. As mentioned, due to time

restraints, this is sometimes seen as impractical or near impossible. In Chapter 4, time

restraint was pinpointed as one of the main deterrent to why Risk Management is

neither implemented nor maintained, and in order make it more time available, it is to

keep things simple and with proper upfront planning would change the perspective on

its usage and turning it to a useful risk preventive process. With keeping things simple,

the industry does not see a need for new Risk Management tools and techniques, for

majority of the project managers feels that the current ones are simply effective enough.

"Don't believe what some software vendor put in their brochure"

(Reiss, G., 1995)

Tools and techniques used in Risk Management are supposed to assists management as

decision support techniques. Risk tools do not make decisions but are aids to decision

making.

Clients play an important role as one of the key stakeholders in Risk Management

process. For they are normally the formal decision holders, and decisions they make will

have a large impact on the project. Therefore it is very important that the client

receives the best options to decide on, and it is the project manager's duties to

'educate' the client and introduce the benefits of Risk Management to them.

Providing Risk Management workshop is one of the best approaches into getting the

stakeholders involved in the project, and also for all stakeholders to get together to

brainstorm the possible risks and solutions for it.

'A risk is a risk shared'

If everyone in the workshop identify, discuss and collectively accept some risks,

everyone will go ahead with project with their eyes wide open, with the risks

understood and acknowledged.

The main recommendation to this study is that any project management methodology

must include a standardised Risk Management process. Although it may have a

Dampening effect on the 'creative’s', the risk identification should start as early as the

conceptual stage. There are many sources of risk that a project will face from the

conceptual stage through to project implementation. The conceptual stage of a project

preceding the design stage is used to determine from various perspectives whether a

project should be constructed or not. Project managers should conduct risk assessments

during the project's conceptual stage and at periodic intervals throughout the

development lifecycle

.

5.5 Recommendation for Further Research

Finally to conclude this dissertation, these are the recommendations for further

research:

• The passing down of knowledge between experienced practitioners and young project

managers.

• Importance of linking conceptual Risk Management with corporate aims and

objectives.

• Importance of incorporating Risk Management tools and techniques into company

policies and procedures.

• Evolvement and specialisation of Risk Management,

management, Uncertainty management; in conceptual stage.

• Generic Risk Management Plan in conceptual stage for the construction

industry.

• Ways to encourage and 'educate' clients and stakeholders of Risk Management

benefits, especially during the early stages of project lifecycle, through Risk

Management workshops.

• Definitions and misconceptions of what Conceptual stage is.

• Benefits of simple and informal, over sophisticated, formal and technical Risk

Management tools and techniques.