Risk Management in Construction

Syed M. Ahmed, Ph.D.

Department of Construction Management
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Syed M. Ahmed, Ph.D.

Department of Construction Management
 Introduction

Cost Success

Project
Constraints
Quality Time

Syed M. Ahmed, Ph.D.

Department of Construction Management
Introduction

Cost
overrun

Project
Poor Constraints Delays
Quality

Syed M. Ahmed, Ph.D.

Department of Construction Management
What is a Risk?

Unknown

Unexpected
endeavor
Risk
action
Undesirable

Unpredictable

Syed M. Ahmed, Ph.D.

Department of Construction Management
 Project risk is an uncertain event or condition that,
if it occurs, has a positive or a negative effect on a
project’s objectives.(PMBOK4, PMI, USA)

 A risk is an uncertain event which may occur in the

future
 A risk may prevent or delay the achievement of an
organization’s or units objectives or goals
A risk is not certain – Its likelihood can only be
estimated

Syed M. Ahmed, Ph.D.

Department of Construction Management
 Risks in Construction
Economic Factors
Client

Environmental Factors
Contractor Supplier
Social Factors

Architect Quantity
Survey

Engineer Project
Manager

Inspector`

Political Factors
Syed M. Ahmed, Ph.D.
Department of Construction Management
 Types of Risks in Construction

Physical
Acts Financial
of &
God Economic

Risks

Political
Const.
&
Related
Environ.
Design

Syed M. Ahmed, Ph.D.

Department of Construction Management
 Types of Risks in Construction

Physical
Acts Financial
of & Acts of God
God Economic
 Flood
 Earthquake
Risks  Landslide
 Fire
 Wind damage
Political
Const.
&
Related
Environ.
Design

Syed M. Ahmed, Ph.D.

Department of Construction Management
 Types of Risks in Construction

Physical
Acts Financial
of & Physical
God Economic
 Damage to structure
 Damage to
equipment
Risks
 Labor injuries
 Fire
Political
&
Const.  Theft
Related
Environ.
Design

Syed M. Ahmed, Ph.D.

Department of Construction Management
 Types of Risks in Construction

Physical
Acts Financial
of & Financial &
Economic
God Economic
 Inflation
 Availability of funds
Risks
 Exchange rate
fluctuations
Political
Const.
 Financial default
&
Related
Environ.
Design

Syed M. Ahmed, Ph.D.

Department of Construction Management
 Types of Risks in Construction

Physical
Acts Financial
of & Political &
Economic
God Environmental
 Changes in laws
and regulations
Risks  Requirement for
permits
 Law & order
Political
Const.
&  Pollution and safety
Related
Environ.
rules
Design

Syed M. Ahmed, Ph.D.

Department of Construction Management
 Types of Risks in Construction

Physical
Acts Financial
of & Design
God Economic
 Incomplete design
scope
 Defective design
Risks
 Errors & omissions
 Inadequate
Political
Const.
specifications
&
Related
Environ.
Design

Syed M. Ahmed, Ph.D.

Department of Construction Management
 Types of Risks in Construction

Physical
Acts Financial
of & Construction
Economic
God Related
 Labor disputes
 Labor productivity
Risks  Different site
conditions

Political
 Design changes
Const.
&
Environ.
Related  Equipment failure
Design

Syed M. Ahmed, Ph.D.

Department of Construction Management
 Risk Management
RISK MANAGEMENT
 Risk Management is the process of identifying and mitigating risk.
 Risk management is the process of identifying, assessing and
controlling threats to an organization's capital and earnings. These
threats, or risks, could stem from a wide variety of sources, including
financial uncertainty, legal liabilities, strategic management errors,
accidents and natural disasters.
• Why is it important?
 Risk affects all aspects of your project – your budget, your schedule,
your scope, the agreed level of quality, and so on
 Increase probability of positive event.
 Reduce the occurrence of negative event.

Syed M. Ahmed, Ph.D.

Department of Construction Management
 Risk Management
A systematic approach to control the level of risk to
mitigate its effects.

Risk
RiskIdentification
Identification
Risk
RiskMonitoring
Monitoring
Controlled
Risk Risk
RiskEstimation
Estimation Risk
Analysis Environment

Risk
Risk Response
Response
Risk
RiskEvaluation
Evaluation

Risk Management Life Cycle

Syed M. Ahmed, Ph.D.

Department of Construction Management