Risk Management in Construction Projects

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Risk management is a process used in all industries to reduce the risk. The Risk management tool usage changes from sector to sector and hence each sector has developed their own risk management tools and methodologies to mitigate the risk. But the concept remains the same behind all the tools (Ropel, 2011). The main steps for risk management irrespective of the sector are: 1. Risk Identification 2. Risk Assessment 3. Evaluation of the risk 4. Steps to mitigating the risks 5. Regular monitoring and review of the risks Here we will discuss risk management in the construction sector and in execution of construction project, project risk management is one of the most critical phase for successful completion of the construction project. Risk can be both negative and positive for the project. Negative risks are considered as threats and positive risks are taken as opportunities. Risk management also applies to operational functions of an organization. Risk management covers all types of listed risks like: 1. Financial risk 2. Quality risk 3. Reputation risk 4. Business impact 5. Long term impact on overall operations 6. Risk on organization structure 7. Business risk 8. Product risk 9. Process risk Risk is combination of consequence and likelihood of the event Risk of an event = Consequence * frequency (likelihood) of an event Risk can be mitigated based on Risk priority number (RPN). RPN is the combination of severity, occurrence and detection of an event. RPN = severity * occurrence * detection This rating criteria for all three elements of RPN mentioned above will be defined by the project management team based on the impact it has on ... ... middle of paper ... ...logy, Laboratory of Industrial Management. 5. Scott Jardine, 2007, “Managing risk in construction projects – how to achieve a successful outcome – an article”, PricewaterhouseCoopers. 6. Berkeley, D., Humphreys, P.C. and Thomas, R.D, 1991, “Project Risk Action Management”, Construction Management and Economics. 7. Chapman R.J, 2001, “The Controlling Influences on Effective Risk Identification and Assessment for Construction Design Management”, International Journal of Project Management. 8. Shen, L.Y, 1997, “Project Risk Management in Hong Kong”, International Journal of Project Management. 9. Shen, L.Y., Wu, G.W.C. and Ng, C.S.K, 2001, “Risk Assessment for Construction Joint Ventures in China”, Journal of Construction Engineering and Management. 10. Wang, J.Y. and Liu, C.L, 2004, “Risk Management for Construction Projects”, Beijing: China Water Publication.

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