Content area
Full Text
Keywords
Risk management, Construction industry
Abstract
Systematic risk management is expecting the unexpected - it is a tool which helps control risks in construction projects. Its objective is to introduce a simple, practical method of identifying, assessing, monitoring and managing risk in an informed and structured way. It provides guidance for implementing a risk control strategy that is appropriate to control construction projects at all levels. This paper will review systematic management approaches to risk. It discusses the allocation of risk and suggests that risk needs to be identified and managed early in the procurement process. In addition, a case study of a small project that was affected by difficult economic circumstances is included to demonstrate the effectiveness of systematic risk management.
Electronic access
The research register for this journal is available at http://www.mcbup.com/research_registers The current issue and full text archive of this journal is available at http://www. emerald-library.com/ft
The construction industry is one of the most dynamic, risky, and challenging businesses. However, the industry has a very poor reputation for managing risk, with many major projects failing to meet deadlines and cost targets. This is influenced greatly by variations in weather, productivity of labour and plant, and quality of material. All too often, risks are either ignored, or dealt with in a completely arbitrary way: simply adding 10 per cent contingency onto the estimated cost of a project is typical. In a business as complex as construction, such an approach is often inadequate, resulting in expensive delays, litigation, and even bankruptcy (Hayes et al., 1986).
Risk management is an important part of the decision-making process of all construction companies. Risk and uncertainty can potentially have damaging consequences for some construction projects. Risk can affect productivity, performance, quality, and the budget of a project. Risk can not be eliminated, but it can be minimised, transferred or retained (Burchett, 1999).
Systematic approach to risk management
Risk management is not a new concept. Traditionally it has been applied instinctively, with risks remaining implicit and managed by judgement, informed by experience. The systematic approach makes the risks clear, formally describing them and making them easier to manage. In other words, systematic risk management is a management tool, which requires practical experience and...