The construction industry is highly risk-prone, with unique, dynamic and complex environments that create an atmosphere of high uncertainty and risks. The industry is vulnerable to various technical, sociopolitical, operational and business risks. The mechanisms for coping with the risks have not been accomplished in the industry and as such people working in the industry bear a host of challenges including quality and operational requirements, cost overrun and uncertainty delays in project execution. In this regard, an effective system of risk analysis and management for the construction industry remains a challenge for industry practitioners. The aim of this paper is to identify and evaluate the state of affairs and risks in the construction industry through an extensive literature review and make a basis for future reference for investors, developers, contractors and industry stakeholders.
The final paper outline will be as follows;
- Overview of the construction industry
- Risk management tools and processes
Risk is defined as a measure of probability, severity and exposure of all hazards of an activity. It refers to the lack of certainty about the structure, outcome and consequence of the future.
The construction industry is an crucial sector of the economy in any country. The sector, therefore, desires proper management with clearly defined roles to be executed by well trained and certified professionals in the construction industry. It is essential that the management duties of construction projects be delegated to professionals. Professionals possess the required skills and knowledge in project risk management to guarantee the success of a construction project.
Project management and risk analysis as transition has an internationally recognized field. This comprises of management tools critical to the success of construction projects in the current work environment. The competence of a project management exercise can be measured as a function of training and certification.
Risk analysis has been involved with estimating the probabilities required as input data for the evaluation of decision alternatives. Risk analysis weighs the probability of an event occurring in the construction industry and the impact of such an occurrence.
Numerous risk factors come into play in the construction industry. Some of the notable risk factors include place, entrepreneur management, construction machinery, construction activities and X factors. In order to design robust risk management mechanisms, these factors need to be conclusively studied and analyzed. Risk management plans involve the identification and design of risk plans to minimize project effects. Project risks have an effect on the resources and schedules of the project. In turn, the quality and performance is compromised leading to overall slag of the project. Risk management plans and software have been developed to counteract the risk effects. Such tools work in phases. They identify, analyze, plan and monitor possible risk factors.
Examples of software such as Primavera Expedition and Meridian Prolog are the most used tools and technologies in the market in recent construction activities. These tools serve as document management platforms and form the basis of project manager’s deliverables. The platforms tracks the status of documents as well as their revisions and incorporate collaboration with other project teams such as the owners, surveyors, contractors, assessors, engineers among others. A robust risk management plan should comprise of all these processes. Risk analysis accesses the likelihood and consequences of risks while risk planning draw up plans to reduce the impacts of the risk. Risk monitoring tracks the risks and monitors them throughout the project execution period.
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Liebing, Ralph W. The construction industry:Processes, Players, and practices. Prentice Hall, 2001.
London, Mayor of. The construction industry in London and Diversity performance . London Development Agency, 2012.