RMFD: TERM PAPER SYNOPSIS

RISK MANAGEMENT IN CONSTRUCTION PROJECTS

Group-1

Group Members
Divye Gupta Sonal Sharma Vineet R. Singh PoojaAgnihotri 211123 211141 211165 211177

BROAD AREA OF INTEREST

Risk Assessment and Management of Construction Projects

TITLE OF TERM END PAPER

In depth study on Risk Assessment and Management in Construction Projects

ABSTRACT
Construction projects are set up in extremely complex and dynamic environments resulting in situations of high uncertainty and risk, which is increased manifold by time constraints. Construction industry has significantly transformed over the past several years. This industry is majorly driven by private investors and the presence of securitized real estate has increased considerably. It is vulnerable to numerous technical & business risks that often represent greater exposures than other traditional risks. Thus, the need for risk assessment arises. Risk assessment is a tool to identify these risks in a project and manage them accordingly.

OBJECTIVE OF TERM PAPER

The construction industry, perhaps more than any other industry, is overwhelmed by risk. Quite often this risk is not dealt with properly. As a result, the industry has performed poorly. Infrastructure projects being huge in nature involve large amounts of money. So, any sort of wastage would lead to huge monetary losses. These losses are due to various risks associated with such mega projects. These risks are to be identified and mitigated to avoid the losses. This entire process of risk identification and mitigation is termed as risk management. This study focuses on risk assessment and management in India in the field of construction.

SCOPE OF TERM PAPER

The scope of this study is limited to construction projects in India (Delhi NCR region, to be more specific). It aims at identifying and assessing all the risks that can possibly affect the performance of the construction industry and thus, develop a risk management framework that can be adopted for any construction project in India. The scope of this term paper is aimed at including all the major risks (be it financial, management, technical, legal, political, environmental etc.) and what possible proactive measures can be taken to mitigate them in case they arise.

LITERATURE REVIEW
1. Li bing et.al (2005) conducted a questionnaire survey to explore preferences in risk allocation in United kingdom. Analysis of the response data shows that some risks should still be retained within the public sector or shared with the private sector. These are largely macro and micro level risks. The majority of risks in PPP/PFI projects, especially those in the macro level, should be allocated to the private sector. 2. El-Diraby.T. A and Gill S.M (2006) developed taxonomy for relevant concepts in the domain of privatized-infrastructure finance. The taxonomy is an attempt to create information interoperability between the construction and financial industries. The taxonomy models the concepts of privatized-infrastructure finance into six main domains: projects, actors, resources, processes, products, and technical topics (technical details and basic concepts). The taxonomy was formed to be consistent with Open Financial Exchange (OFX). It was developed through the analysis of 10 case studies and involvement in project development and interaction with industry experts. The taxonomy was checkeed through interviews with domain experts and through the examination of two independent case studies. A semantic web based portal for communicating project risks was developed to in order to illustrate the use of the taxonomy.
3. Florence Yean Yng Ling and Linda Hoi (2006) studied the risks that Singapore-

based architecture, engineering and construction (AEC) firms face when working in India and investigated the risk response techniques adopted by them. Data were

accumulated from Singaporean experts who were involved in AEC projects in India through exhaustive interviews. Besides the typical risks that a domestic project faces, the foremost risks that worldwide AEC firms face in India include: political and social risks; high cost of financing; fluctuating currency exchange rates; and huge cultural difference between outsiders and Indians. The risk response techniques include having adequate insurances and careful planning and management. It is recommended by them that the foreign firms operating in India should not try to change Indians technique of working. Instead, foreigners should value local culture and practices, and be supple and extremely patient developed risk assessment methodology performed for a
subway construction project in Korea.

4. Seung H. Han et.al (2004) focussed on a financial portfolio risk management for international projects to integrate the risk hierarchy of both individual projects and at the corporate level, which applies a multi criteria decision making method to maximize the total value of firms. To reveal the approach, a case study was carried out based on real projects collected from a multinational general contractor. Finally, they presented lessons learned as well as guidelines for the application of lessons to future projects through a workshop with industry practitioners. 5. Terry Lyons and Martin Skitmore (2004) conducted a survey of senior management involved in the Queensland engineering construction industry relating the practice of risk management techniques. Their survey results are compared with four earlier surveys conducted around the world which indicates that: the use of risk management is modest to high with very small differences between the types, sizes and also risk acceptance of the organisations, and experience and risk acceptance of the individual respondents; risk management usage in the execution and planning stages of the project life cycle is higher than in the conceptual or termination phases; risk identification and risk assessment are the most often used risk management elements ahead of risk response and risk documentation; brainstorming is the most common risk identification technique used; qualitative methods of risk assessment are used most frequently; risk reduction is the most commonly used risk reaction method, with the use of contingencies. 6. Ming T Wang et.al (2003) conducted multiple-case studies using a systematic analytical procedure to identify risks in highway projects in Taiwan to distinguish risk allotment by contract clauses, and to analyze the pressure of risk allocation on the contractors risk handling methods. The results show that the proprietor allocates risks

by stipulating specific bond clauses into five kinds of risk allocation conditions. If a risk is more controllable by the contractor, the proprietor has a greater leaning to allocate the risk to the contractor. Risk allotment determines which kinds of risks the contractor would take and influences the contractors risk handling decisions. The analysis furthermore indicated that, if the probability of a certain risk event condition is unmanageable, then with the increasing likelihood of taking the risk, the contractors propensity of risk handling changes from actively transferring the risk to passively retaining the risk. On the contrary, if a risk is controllable and certainly allocated to the contractor, the contractor tends to take the proposal to reduce the impact caused by the risk event rather than retain the risk. 7. Shou Qing et.al (2004) identified twenty-eight critical risks associated with international construction projects in developing countries and categorized them intothree hierarchy levels (Country, Market and Project), of which 22 were evaluated asCritical or Very Much Critical based on a 7-degree rating system. The top 11 critical risks are: sanction and Permit, Local Partners Creditworthiness, Political volatility, Change in Law, Justice Reinforcement, Cost Overrun, Corruption, Government Policies, Government pressure on Disputes and Termination of JV, Inflation and Interest Rates. The risks at Country level are more critical than that at Market level and the latter are more critical than that in Project level. For each of the identified risks, practical mitigation measures were provided and evaluated. Almost all of the mitigation measures were perceived by the respondents to the survey as effective using a 7-degree rating system. It is suggested that when mitigating a particular risk, the measures with higher efficacy should be given a higher priority. Taking into account the higher criticalities of higher risk hierarchy levels, the alleviation measures should also be prioritized by the higher risk hierarchy echelon, i.e. the risks at higher hierarchy level should be mitigated first with higher priority with their respective more effective mitigation measures. A risk model, named Alien Eyes Risk Model, was proposed which shows the three risk hierarchy levels and the influence relationship among risks. This model will enable better categorizing of risks and representing the influence relationship among risks at different hierarchy levels as well as revealing the mitigating sequence/priority of risks.

8. (Mehdizadeh et al., 2012)Thus Project Risk Management is aimed at decreasing the likelihood of failure to reach the project purpose at a residual, identified and suitable level. It is intended to make best use of the beneficial outcome of the opportunities and lessen or eliminate the consequences of undesirable risk events. A noteworthy number of construction failures and collapses occur during the construction phase and in most of the cases these failures involve the temporary structures and apparatus which are used during the construction process. 9. (Breysse and Elachachi, 2012) France has known a few disastrous structural failures, even if the Malpasset dam collapse is known worldwide. The unfortunate development of the culture of risk management, together with the small number of academic studies of economics/construction management, has restrained the development of PRM in France. However, the crumple of the Roissy Terminal 2E in May 2004, whatsoever its causes (technical, organizational) may have been, was the warning sign for a need for change.

SOURCES OF DATA
Primary: Questionnaire floated to various local building contractors, open ended interviews with the concerned people Secondary: Internet, Journals, Magazines, Research Papers

METHODOLOGY
The methodology to be adopted in this project is as follows: Study of literature related to Risk Management. Preparation of Questionnaire. Visit to various local construction project sites. Survey Questionnaire and interviews with personnel. Data Collection from various sites. Questionnaire Analysis.

Qualitative analysis of data obtained from various sites and to identify the root cause of various risks. Remedial measures to be suggested and present data to be recorded for future reference. Conclusions and suggestions for to carry out future studies.

LIMITATIONS
Study limited to only a few construction sites in Delhi. Some people may give a half-hearted response. Due to time constraints, we may not be able to do full justice to the project.

REFERENCES
1. https://www.ucviden.dk/student-portal/files/9465673/7th_diss_Final_with_A_.pdf

2. http://cdn.intechopen.com/pdfs/38973/InTech-risk_management_in_construction_projects.pdf