ADIGRAT UNIVERSITY

COLLEGE OF ENGINEERING AND TECHNOLOGY

DEPARTMENT OF CONSTRUCTION TECHNOLOGY AND MANAGEMENT

Assessment and mitigation strategies for construction risks : a case study of

projects in adigrat.

NAME F/NAME ID NO

1, DANIEL WELDESLASSIE 00316/09

2, GEBREHIWET MEASHO 00946/09
3, TIRHAS GEBREKIDAN 01400/09

.
It is submitted to adigrat university college of engineering technology in
partial fulfilment of the requirement BSc degree in construction technology and
management

Sub to ins hadush G

Sub date dec,08/2023

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 DECLARATION
We the undersigned claim that this studies inspiration is our unique work that has now not been

supplied and could no longer be provided to any other University for another diploma award.

Advisor: Mr. Hadush G. Signature __________________ Date __________________

1,Daniel Weldeslassie __________________ __________________ __________________

Signature Date

2, Gebrehiwet Measho __________________ __________________ __________________

Signature Date

3, Tirhas Gebrekidan__________________ __________________ __________________

Signature Date

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 ACKNOWLEDGEMENT

We Owen our special thanks to the almighty GOD for empowering and giving us internal
courage and strength to achieve our Goal. We would like to take this opportunity to express our
greatest gratitude. For our advisor, Mr. Hadush G . For guiding us in the whole research process.

We are greatly indebted for his continuous follow-up, for providing us different reference

materials, for his constructive comments and ideas as well us for his precious time in reviewing

this work.

We are also grateful for all respondents who were kind to cooperate and welling to give genuine

information with in a very short period of time for preparation of this study. We would also

like to expand our gratitude to all those who have directly and indirectly participated and guided

us in preparing this thesis paper.

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 Abstract
Currently, construction is one of the sectors leading the way towards modernization and
industrialization in Ethiopia. Hence it is essential to apply the concept of management in every
project in order to create healthy construction environment. Construction industry is exposed to
wide array of risks, with complex and dynamic project environments creating an atmosphere of
high uncertainty and risk, and it impacts on their performance towards achieving the desired
objectives. Literature told that risk management and mitigation in construction projects is full
of deficiencies that affect its effectiveness as a project management function and in the end,
projects’ performance. According to different literatures risk management in construction
projects has been approached usually by using a reductionist approach (risk reduction) that
produces poor results and limits the quality of project management. It shows that delays and
cost overruns are the common negative effects of risk inherent to construction projects.
Etete construction, Gulf Engineering, Melcon construction, Oromia road works construction,
Rama construction, Satcon construction, Sunshine construction, Sur construction, Teklebirhan
Ambaye construction, and United construction PLC.

The main objective of the study is to assess the risk mitigation practices and to show how risks
are mitigate through risk management tools for construction projects . The study was used
interviews and questionnaire rather than cases and other dusk studies to conduct the study. All
analyses are through qualitative and quantitative way based on theoretical and practical
backgrounds regarding risk, risk management process, principles and techniques; and a model
(Primavera Risk Analysis) was used for the case sample construction project schedules.
Therefore, the study concludes that construction risks are not managed by applying risk
management principles and techniques, and through the applicability of risk management
tools/models. In addition the study shows, project schedules doesn’t show when the project
completes and how much it consumes. Whereas applying formal risk management principles
and techniques in construction projects and managing risks through the applicability of risk
management models/tools are recognized as a very important risk management system in
order to achieve the project objectives to overcome cost overruns and uncertain delays in
project completion.

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 TABLE CONTENTS

CHAPTER ONE :INTRODUCTION..................................................................................................1

1.1 General Background.........................................................................................................................1

1.2 statment of the problem....................................................................................................................2

.1.3 Research quesion............................................................................................................................4

1.4 Objective of study...........................................................................................................................4

1.4.1 General objective........................................................................................................... ......................4

1.4.2 Specific objective......................................................................................................................4

1.5 Significance of the Study ..............................................................................................................5

1.6 Scope of the Study .........................................................................................................................5

1.7 Statement of Limitations.............................................................................................................6

CHAPTER TWO:LITERATURE REVIEW...................................................................................................6

2.1 Risk and the Construction Industry: Overview...................................................................................6

2.2 Categorization of Construction Risks .........................................................................................7

2.2.1 Contractual Risks....................................................................................................................7

2.2.2 Financial Risks ...................................................................................................7

2.2.3 Political Risks ........................................................................................................................8

2.2.4 Legal Risks ........................................................................................................8

2.2.5 Environmental Risk .......................................................................................................9

2.2.6 Safety Risks:.................................................................................................................................10

2.2.7 Operating Risks ................................................................................................12

2.2.8 Force Majeure Risks .........................................................................................12

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 2.3 Strategies for Mitigating Construction Risks:.............................................12

2.3.1 Risk Identification: Methods....................................................................................................12

2.3.2 Construction Risk Assessments:...............................................................................................13

2.3.3Contingency Planning:..............................................................................................................13

2.3.4 Project Management Oversight:.............................................................................................14

2.3.5 Project Status Reports:.............................................................................................................14

2.4 Construction Site safety Practices to Reduce( mitigate) risks Risks...................................14

2.5 Risk Mitigation/Response ............................................................................................................15

2.6 Reviewing Risk Factors and Consequence.................................................................................16.

2.7 Final Thoughts on Construction Risks:..............................................................................20

CHAPTER THREE :RESEARCH METHODOLOGY....................................................................21

3.1 Description of the Study Area...........................................................................................21.

3.2 Work Description..............................................................................................................21.

3.2.1 Type of Data Used for Study ......................................................................................21.

3.2.2 Source of Data .............................................................................................................21.

3.2.3 Data Collection Procedures.........................................................................................22.

3.2.4 Data Analysis ...............................................................................................................23

. CHAPTER FOUR: ANALYSIS AND DISCUSSION OF RESULTS

......................................................23.

4.1 Introduction...................................................................................................................................23.

4.2 Case Project Selection and Respondent Selection Criteria .........................................24.

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 4.3 Respondents are selected based on some criteria: ..................................................................24

.3.2 Risk Response Practices and the Applicability of Risk Mitigation strategies .......26.

4.3.3 Construction Risk Response Trends ..................................................................26.

4.4 Techniques Used to Identify Risk Factors.................................................................................27.

4.5 Remedial Measures/Actions taken to Minimize Risk .............................................................29

CHAPTER FIVE: CONCLUSION AND RECOMMENDATIONS..................................................31

5.1 CONCLUSION................................................................................................................................31

5.2 RECOMMENDATIONS.................................................................................................................33

5.3 REFERENCES.................................................................................................................................34

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 Glossary

Applications: Tools or models that used to analyze and manage risks.

Impact: The cost, benefit or risk, financial or socio-economic, rising from an investment option.

Monitoring: Continual checking, supervising, critically observing or determining the

status/progress in order to identify change from the performance level required or expected.

Project life cycle: The stages of an asset lifecycle between the identification of the need and the

delivery and handover of an initiative.

Risk: Risk is often characterized by reference to potential events, consequences, or a

combination of these and how they can affect the achievement of objectives. Risk is often

expressed in terms of a combination of the consequences of an event or a change in

circumstances, and the associated likelihood of occurrence.

Risk assessment: Overall process of risk identification, analysis and evaluation.

Risk acceptance: This is often where the residual risk is accepted, or the risk of some extremely

low likelihood events but high consequence events are accepted.

Risk avoidance: The decision not to be involved in, or to withdraw from, an activity based on

the level of risk.

Project: A group of activities that have to be performed in a logical sequence to meet pre-set

objectives outlined by client.

Risk identification: The process of finding, recognizing and describing risks.

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Risk management: Coordinated activities to direct/control an organization with regard to risk.

Risk mitigation: The measures taken to reduce an undesired consequence.

Risk transfer: Insurance (treatment of last resort)…we are still going to manage our key risks

despite the fact they may be insured!

Risk vs. uncertainty: Uncertainty is the extent of variability in the capacity to achieve the

desired outcomes or the outcomes themselves. Risks lead to uncertainty.

Project risk management: includes maximizing the results of positive events and minimizing

the consequences of adverse events.

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 CHAPTER ONE
INTRODUCTION
1.1 General Background

Construction industry has become one of the major sectors that significantly contribute to the
economy of Ethiopia. The contribution of the Ethiopian construction industry to the economy
has
now reached 8.2%, and public construction projects share an average annual rate of 60% of the
Government’s capital budget (Tsegaye, 2009). The construction industry is distinct from other
industries because of its complex system of management practices for each project life-cycle.
Each project is unique and has its own specific design to be constructed on a particular site
within a definite time frame, cost/payment, materials, equipment and labor and it should be
managed systematically. Then it is characterized by vast usage of resources, and is highly
sensitive to work environment changes which held to uncertainty and risk.
In addition construction industry is highly exposed to risks, with complex and dynamic project
environments creating an atmosphere of high uncertainty and risk, and it might have a direct
impact on their performance towards achieving the desired objectives (Abdulrahman H., 2015).
However, managing risks in construction projects has been recognized as a very important
management process in order to achieve the project objectives in terms of time, safety,
environmental sustainability; and to overcome failure of abiding by quality and operational
requirements, cost overruns and uncertain delays in project completion.
Risks might come from various sources such as uncertainty in financial markets, threats from
project failures, legal liabilities, credit risks, accidents, natural causes, deliberate attack from an
adversary, or events of uncertain or unpredictable root-cause. Different methods can be applied

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 to manage risk which may range from transferring of the risk to subsequent party, avoiding the
risk factor, minimizing the consequences of risk and accepting the effect of risk. (Pieplow,
2012)
Generally, risk assessment and mitigations the models those used to manage risks should be
emphasized and implemented in construction projects, regardless of the project size, to assure
the achievement of project objectives. In addition, in project management, project risk is an
uncertain event that, if it occurs, impacts at least one project objective, and project risk
management intends to increase the probability and impact of positive events, and decrease the
probability and impact of negative events. (Tsegaye, 2009)

1.2 Statement of the Problem

Among the challenges facing in Ethiopian construction industry, the one is incapable of
applying risk management principles and techniques (Addis, 2014). These might be come due
to lack of experience and awareness about how to assess and analyze the risks of cost and time
overruns, and it results unable to deliver projects within the allocated budget and on a
scheduled time. In addition these and all other related risks might cause losses that lead to
increase in costs, time delays and lack of quality of projects. The root cause of this problem is
hence risk management may not be applied in construction projects and also those applications
that used to manage risks may not be applied systematically. At present, it is seen that project
managers lack appropriate decision support tools for simultaneously addressing project risks
due to cost, schedule, and quality. Usually risk is handled through the application of
contingencies (money) or floats (time) that are not determined based on a comprehensive
analysis of the risks, and that in many cases are clearly insufficient to cover the consequences
of risks that do occur during the project realization.
Therefore, in Ethiopian construction sector the major problem what we have seen is that ‘most
construction projects were completed with cost overruns and later than the scheduled time’. An

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 implication in which the project is not completed within budgeted cost and scheduled time is
shown in table 1.1 below.
Table 1.1: Sample report for the accomplishment of projects

Project Planned Planned cost Actual Actual cost Schedule Cost

variance
code duration duration variance

SXDD- 180 57939812.62 305 59004095.73 125 1064283.11

1

XDD-2 180 66630784.52 335 122317382.21 155

55686597.69

XOR-1 125 17937849.50 142 22872929.80 17 4935080.3

XOR-3 374 7901946.33 404 8823044.49 30 921098.16

XOR-4 72 2141082.94 97 2583605.02 25 442522.08

XBok- 303 191376816.9 324 199027455.86 21 7650638.87

1 9

XTA-1 1167 599147575.8 1385 650949716.97 218 51802141.08

9

XTA-2 706 2379169839. 835 2379170251.7 129 412.3

4

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XTA-3 618 196196884.1 648 196197002.3 30 118.16
4
SSS

1.3 Research questions

those questions would guide the research identifying the specific risks that need to be
addressed and evaluated the best practice for managing them.
1. what is the risk in construction ?
2. What are the most common risks in construction project ?
3. What are the most effective strategies for mitigating these risks ?

4. What are the actions or remedial measures taken that reduces risk ?

5. How risks are managed through risk management models/tools for construction projects ?

1.4 Objective of study

1.4.1 General objective: the general objective of assessing and mitigating risks in
construction is to ensure the successful completion of construction projects by
identifying ,analysing , and addressing potential risks that may impact safety , quality , budget ,
and schedule.
1.4.2 Specific objective:
1. Identifying potential risks and their potential impacts on the project.
2. analysing the likelihood and severity of identified risks.
3. developing specific mitigation strategies to address each identified risk.
4. implementing proactive measures to prevent or minimize the occurrence of risks.
5. establishing clear roles and responsibilities for stakeholders in managing and mitigating
risks.

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 1.5 Significance of the Study
The results of the research will allow a client or contractor first, to apply formal risk
management systems in construction sector based on best practices, and second to improve the
performance along the realization of new projects through the use of risk minimization tools.
Also the paper used as an evidence-based decision support tool for the construction industry
that risk mitigation is the major tool for a healthy and productive execution of the project. The
research findings may help parties involved in construction to improve their risk management
and mitigation strategies. The claims and disputes due to uncertainty and risk that arise during
and after construction can be avoided by improving risk management. The research is
significant in helping alleviate some of the problems facing the construction industry by
enlightening the parties about risk management starting from the contractual stage and in turn
making the projects achieve their objectives.
The outcome of the research tells how risk would be mitigated, what major risk management
principles and techniques are applied, what seems to like the understandings of contractors
about risk management, how risk management tools are used to manage or mitigate risks in
construction projects, identifies the possible methods and processes applied to manage risks
and the actions taken to reduce risks, and recommends the appropriate models and techniques
aimed for managing risks .

1.6 Scope of the Study

The scope of the study is very much limited to assessing the risk mitigation practices and to
show how risks are mitigated through the applicability of risk management tools for
construction projects undertaken in adigrat . construction projects are executed by contractors
and they have relatively structured organizations. Therefore, the study was conducted by
selecting the reasonable number and meaningful choice of sample construction firms in
Adigrat. Adigrat is selected because of most construction risks are apear in the city. The
problem of RM has shown all over Ethiopia and even the study uses some risky projects
executed in the country side rather than in Adigrat. How and in what way construction risks are
Assessed and mitigated especially through risk management models/tools are the major
concerns of the study.The scope of the study(research) would involve assessing the various
risks that are commonly associated with construction projects , such as safety
hazards ,financial risks and environmental impacts.
It involves identifying and evaluating different mitigation strategies that can be implemented to
minimize or eliminate these risks .

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 1.7 Statement of Limitations
The study was challenging especially in collecting data. First of all the methodologies in which
they are proposed on proposal are interviews, project schedules as a case study and document
analysis. But when the study is going on, questionnaires are necessary in order to answer
questions in which they needs ranking especially those questions having too much choices. So
the study uses questionnaire as one of additional research methodology. The study coincide
some major challenges. Among them, lack of willingness for interview by the respondent
hence interview is one methodology to conduct the study was one major challenge. The other
challenge to collect the data was, respondents are unable to fill questionnaire on time. Hence
questionnaires are distributed to different parties and it was collected in a challenging way.
The other major challenge that was happened during conducting the research was, some local
contractors are not willing to give project schedules hence case studies through project
schedules are proposed as one methodology to conduct the study. In proposal it was proposed
to collect data from different construction projects from different local construction firms.
Each construction project schedules and each respondent represents one construction firm for
analysis. Finally, the study is focused on general risk assessment and mitigation practices for
construction and shows the applicability of risk mitigation strategies or tools to manage
construction project risks. Due to the specific ness of the study risk claims and its contractual
issues are not studied.

CHAPTER TWO

LITERATURE REVIEW

2.1 Risk and the Construction Industry: Overview

The construction industry operates in a very uncertain environment where conditions can
change due to the complexity of each project. Hence construction projects are always unique,
risks are raise from a number of different sources, and are inherently complex/ dynamic,
involving multiple feedback processes. A lot of participants are actively involved in the
construction projects, and their interests may be positively or negatively affect as a result of the
project execution or completion. Different participants with different experience and skills

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 usually have different expectations and interests. This naturally creates problems and
confusion for even the most experienced project managers and contractors. (Banaitis, 2012)

A construction project is characterized not only by its size and complexity, but also by various
events and interactions which take place during the life cycle of a project. The work
environment is constantly changing due to the number of participants involved, the project
duration and the events along the way. (Sanvido, 1992)

2.2 Categorization of Construction Risks

2.2.1 Contractual Risks
Construction contracts are inherently fraught with risks. Contractors are (or should be)
rewarded on the basis of the risks they bear in a contract risks should be transferred to those in
the best position to control them. (Mbachu, 2014) Corroborate this by arguing that risks should
be transferred to those in the best position to control them. Also the provisions of the contracts
governing the various parties’ rights and obligations serve as the most appropriate tool for
allocating the inherent risks on this basis. However, (Mbachu, 2014) view of contractual risks
is only limited to the payment and performance risks, which are often addressed through
indemnity and insurance provisions in the contract. So such risks are reimbursable via those
provisions.Overall project related risks were identified as one of the major contractual risks
groups, having risk components with risks comprise experience and capability of estimating
team, poor design and documentation, and insufficient time given to price the work. Overall
the pricing contractual risks were identified as mid-ranking risks, suggesting that risks around
initial pricing is not the major concern of most contractors, probably because many look up to
variations to make up envisaged profit on a job. Difficulty and uncertainties around site
conditions constitute one of the inflating factors to contractors’ pricing in competitive
tendering. Additionally the availability of key inputs such as material and labor was identified
as the third most significant contractual risk factor. (Mbachu, 2014)

2.2.2 Financial Risks

Budget overruns due to inaccurate estimates or cost increases: This refers to a situation
where the actual costs of a construction project exceed the estimated costs. Inaccurate cost
estimates or unexpected cost increases are significant financial risks that can impact the
successful completion of construction projects. These risks may arise due to factors such as
changes in the scope of work, material and labor cost fluctuations, and unforeseen site
conditions. To manage these risks, it is crucial to develop accurate cost estimates, implement
effective change management procedures, and track project costs closely. Failure to manage

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these risks can lead to delays, cancellations, or disputes between the parties involved in the
project

Inadequate cash flow or financing: Inadequate cash flow or financing is a major financial
risk that can arise due to delays in payments, unexpected costs, or changes in the project’s
scope. This risk can lead to the project’s suspension or termination, disputes between the
parties involved, and reputational damage. To manage this risk, it is essential to develop a
robust financing plan, monitor cash flow closely, and implement effective payment
management procedures.

Supply chain impacts: Disruptions in the supply chain that affect the timely delivery of
materials, equipment, or services required for a construction project are significant financial
risks that can lead to delays, cost overruns, and project cancellations. These delays can lead to
increased costs and a decrease in the quality of work. These disruptions may arise due to
factors such as transportation issues, trade restrictions, or supplier bankruptcy. To manage this
risk, it is crucial to develop effective supply chain management procedures, build relationships
with key suppliers, and implement contingency plans to address any disruptions.

Increase in material costs: An unexpected increase in material costs is a financial risk that
can arise due to changes in market demand or supply chain disruptions. This risk can lead to
cost overruns, delays, and disputes between the parties involved. To manage this risk, it is
essential to develop effective cost management procedures, track material costs closely, and
build relationships with key suppliers

2.2.3 Political Risks

Both construction companies and financial companies face risks that the project execution may
be negatively affected by acts of the contracting authority (Government), another agency of the
government or the host country’s legislature. Such risks are often referred to as political risks.
Political risk faced by firms can be defined as “the risk of a strategic, financial, or personnel
loss for a firm because of such nonmarket factors as macroeconomic and social policies.
Political risk includes risks such as changes in law, payment failure by government, increase in
taxes and change in government.

2.2.4 Legal Risks

Legal risks are risks in connection with non-compliance with legal or regulatory requirements.
Much of the law is general and will apply to all organizations e.g. employment law, health and
safety, environmental legislation, etc. Some of the legal risks that a construction projects can
face are related to lease of property, ownership of asset and breach of financial documents

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 2.2.5 Environmental Risks

Adverse weather conditions causing delays or damage: Adverse weather conditions refer to
severe weather events, such as heavy rainfall, snow, extreme heat or cold, hurricanes, and
tornadoes, that can delay or damage construction projects. These events can cause delays in the
completion of the project, resulting in increased costs due to additional labor and materials
needed to complete the work. They can also cause damage to the project, resulting in rework
and repairs, which can be costly and time-consuming. Adverse weather conditions are a risk in
construction projects because they are often unpredictable and can occur at any time, leading to
delays or damage that can impact the project’s overall success.

Environmental contamination or pollution: Environmental contamination or pollution

refers to the presence or introduction of hazardous materials or pollutants into the environment.
Construction activities can produce pollutants such as dust, noise, and chemicals that can be
harmful to the environment and health of workers and bystanders. Construction projects that
involve the excavation or handling of hazardous materials, such as asbestos, lead, or mercury,
are at a higher risk of causing environmental contamination or pollution. Environmental
contamination or pollution is a risk in construction projects because it can result in fines,
lawsuits, and damage to the environment.

Non-compliance with environmental regulations: Environmental regulations are laws or

rules that govern environmental protection and sustainability. Non-compliance with these
regulations can result in fines, legal consequences, and damage to the environment.
Construction projects must comply with environmental regulations such as the Clean Air Act
and Clean Water Act. Non-compliance with environmental regulations is a risk in construction
projects because it can lead to legal consequences, project suspension or delays.

Unforeseen geological or soil conditions affecting construction: Unforeseen geological or

soil conditions refer to unexpected geological or soil conditions that can affect the construction
project’s progress. These conditions include rock formations, soil erosion, and soil instability,
which can impact the project’s foundation, drainage, and stability. Unforeseen geological or
soil conditions are a risk in construction projects because they can lead to additional costs due
to the need for additional resources and equipment, delays in the project’s completion, and
safety hazards. These conditions may not be identifiable until the construction phase begins,
making it difficult to predict and mitigate their impact.

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 2.2.6 Safety Risks:

Construction workers face numerous hazards and risks on job sites, and managing these risks is
essential for ensuring their safety and well-being. The Occupational Safety and Health
Administration’s (OSHA) Fatal Four and the American Industrial Hygiene Association’s
(AIHA) Focus Four for Health provide a comprehensive overview of the most common safety
risks in the construction industry.

OSHA’s Fatal Four:

 Falls: Falls from heights are a leading cause of fatalities and injuries in the construction
industry. Workers can fall when working on roofs, ladders, scaffolds, or other elevated
surfaces without proper fall protection. Employers must install fall protection equipment
such as guardrails, safety nets, personal fall arrest systems, and train workers on how to
use them to manage this risk.
 Struck by Object: Workers can be struck by moving, swinging, or flying objects such as
equipment, materials, or vehicles, resulting in serious injuries and fatalities. Employers
must implement measures to prevent or control the movement of equipment and
materials, such as barricades, warning signs, and personal protective equipment, to
minimize this danger, and workers must be trained on how to recognize and avoid
hazards.
 Electrocutions: Workers in the construction industry face a high risk of electrocution
when working near power lines, using electrical equipment, or working with temporary
power sources. To combat this danger, employers must utilize electrical safety
procedures such as hazard assessments, the use of personal protective equipment, and
training workers on how to identify and avoid electrical hazards.
 Caught-in or Caught-between: Workers can become caught in or between equipment or
objects, leading to crush injuries, amputations, or fatalities. Employers must implement
measures to prevent workers from becoming entangled in or between equipment or

objects, such as proper guarding, lockout/ragout procedures, and training workers on how to
recognize and avoid hazards, to address this danger.

AIHA’s Focus Four for Health:

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  Noise: Prolonged exposure to high noise levels can lead to hearing loss, tinnitus, and
other hearing-related health issues. To manage this risk, employers must implement noise
control measures, including engineering controls, administrative controls, and personal
protective equipment, and train workers on how to recognize and avoid noise hazards.


 Airborne Contaminants: Exposure to dust, fumes, and other airborne contaminants can
cause respiratory and other health problems. To take the right steps, employers must
instill measures to control exposure to these contaminants, such as ventilation, respiratory
protection, and work practices, as well as train employees on how to recognize and avoid
hazards.
 Heat Stress: Workers who work in hot environments or with heat-generating equipment
are at risk of developing heat stress, heat stroke, and other heat-related illnesses. To
handle this danger, employers must introduce heat-related illness prevention measures
such as providing cool rest areas, hydration, and training workers on how to recognize
and respond to heat-related illness symptoms.
 Material Handling Injuries: Incorrect lifting, carrying, or moving of materials can lead
to sprains, strains, and other musculoskeletal injuries. Employers must implement
musculoskeletal injury prevention measures such as ergonomic work practices, lifting
aids, and training workers on how to properly lift and carry materials to manage this risk.

2.2.7 Operating Risks

Some of the risks may face in construction projects that were applied during operations and
maintenance type services. More specifically, operational risk can be defined as the risk of
loss resulting from inadequate or failed internal processes, people and systems, or from
external events. Some of the risks and actions available to the concession company include:
 Performance risk: The completed facility cannot be effectively operated or maintained
to produce the expected capacity, output or efficiency.
 Operation cost overrun: The operating cost exceeds the original estimates.
 Operating contractor default: The concession company may terminate the operations
and maintenance contract and appoint a new operations and maintenance contractor
.  Default: The default may be caused by the actions of a third party, in which case the
concession company could make claims of damages against that party.

2.2.8 Force Majeure Risks

These risks are regarding the events that are outside the control of any party and cannot be
reasonably prevented by the concerned party and generally arise due to causes extraneous to
the project. Force majeure events include natural force majeure events, direct or indirect

11
political force majeure events. Natural force majeure events comprise of all events that can be
attributed to natural conditions or acts of god such as earthquakes, floods, cyclones and
typhoons.

2.3 Strategies for Mitigating Construction Risks:

The impact of construction project risks can be significant and widespread, affecting project
timelines, budgets, and quality. Delays, cost overruns, and compromised quality are common
outcomes of construction project risks. Therefore, stakeholders need to identify, assess, and
manage project risks proactively to minimize their impact and ensure successful project
outcomes. Effective risk management practices, such as risk assessments, contingency
planning, project management oversight, and project status reports, can help mitigate the
impact of construction risks on timelines, budgets, and quality.

2.3.1 Risk Identification: Methods

(Tsegaye, 2009), explains risk identification as it is the process of systematically and

continuously identifying, categorizing, and assessing the initial significance of risks, together
with information on their causes and possible effects, which might affect the project objectives
associated with a construction project. It is the first step of the risk management or
minimization process. It is aimed at determining potential risks, i.e. those that may affect the
project. An effective risk identification technique would aim at answering the question: “What
are the distinct features of the project and its general environment or risk sources which might
cause failure?” (Addis, 2014). Also (Tsegaye, 2009) tells us risk identification process will
vary, depending on the nature of the project and the risk management skills of the team
members, but most identification processes begin with an examination of issues and concerns
created by the project development team. These issues and concerns can be derived from an
examination of the project description, work breakdown structure, cost estimate, design and
construction schedule, procurement plan, or general risk checklists. There are a number of
tools and techniques for identifying the project risks. These are “what can go wrong” analysis:
brainstorming, expert opinion, structured interviews, questionnaires, checklists, historical data,
previous experience, testing and modeling, evaluation of other projects. (Tsegaye, 2009), on
his paper ‘Empirical studies of risk management practice’ shows that checklists and
brainstorming are the most usable techniques in risk identification. They also highlight that
risk identification often relies on individual judgments of the project participants.
Brainstorming, scenario planning, and expert interviews are tools that construction engineers
commonly use in routine engineering and construction management tasks (Tsegaye, 2009).
The risk identification process should include all sources of uncertainty and associated
responses, i.e. includes many steps regarding risks and uncertainties related to why, who, what,
which way, where and when in the project life cycle etc. by using a model that includes all of

12
these factors, the threat of missing risks along the way becomes minimal or is at least
decreased.14 After the risks are identified, they should be categorized into groups of like risks.
There are several approaches to categorizing project risks and risk sources. Generally

according to (Tsegaye, 2009) the sources of risk in construction projects may be divided into
three groups, i.e. internal or controllable risks (e.g. design, construction, management and
relationships); external or uncontrollable risks (e.g. financial, economic, political, legal and
environmental risks); and force majeure risks. The consequences of incorrectly identifying
risks are that when these risks are considered in the management system, incorrect assessments
and responses will follow.

2.3.2 Construction Risk Assessments:

A construction risk assessment involves evaluating potential risks associated with a

construction project, including safety hazards, environmental concerns, legal disputes, and
financial issues. The process of risk assessment involves evaluating the likelihood and severity
of those risks, and developing effective strategies to manage or mitigate those risks. The
construction risk assessment process is typically conducted by a team of experienced

professionals such as AEI who have expertise in the different aspects of construction projects.
The assessment should be comprehensive, taking into consideration all potential risks and their
potential impact on the project. By conducting a construction risk assessment, stakeholders can
develop a deep understanding of the potential risks and develop effective risk management
strategies. This allows stakeholders to proactively identify potential risks and develop
strategies to mitigate those risks, ultimately reducing the negative impact on the project’s
success.

2.3.3Contingency Planning:

Contingency planning involves developing plans for addressing unforeseen events or risks that
may arise during a construction project. This includes identifying potential risks, developing
response plans, and allocating resources to mitigate the impact of those risks. Contingency
planning should be a comprehensive process that considers all potential risks and their
potential impact on the project. This includes identifying potential risks, developing a response
plan for each risk, and allocating resources to mitigate the impact of those risks. The response
plan for each potential risk should be flexible and adaptable, allowing for adjustments as the
project progresses. It should also include clear communication and collaboration among
project stakeholders to ensure that everyone is aware of the contingency plan and their role in
implementing it. This reduces the negative impact on the project’s success, ensuring the
successful completion of the project.

13
 2.3.4 Project Management Oversight:

Project management oversight, one of the many services offered by AEI involves providing
expert guidance to oversee the construction project’s progress. This oversight includes
monitoring project progress, identifying potential risks, and developing effective strategies to
manage those risks. Experienced project managers can effectively manage the project’s
progress, ensuring that it is completed on time, within budget, and according to the project
plan. Project management oversight also involves effective communication and collaboration
among project stakeholders. This allows for a proactive approach to risk management,
ensuring that potential risks are identified and addressed before they impact the project’s
success. By engaging in effective project management oversight, stakeholders can effectively
manage construction project risks, ensuring the successful completion of the project.

2.3.5 Project Status Reports:

Project status reports prepared by AEI provide regular updates on the project’s progress,
including potential risks and strategies to manage those risks. These reports allow stakeholders
to make informed decisions regarding the project’s progress and risk management strategies.
Effective project status reports should be comprehensive, providing detailed information on the
project’s progress and potential risks. They should also include clear and concise
communication and collaboration among project stakeholders. Project status reports can also

be used to evaluate the effectiveness of risk management strategies. By tracking the progress of
the project and the effectiveness of the strategies, stakeholders can adjust as necessary to
ensure the successful completion of the project. Project status reports are a valuable tool in
managing construction project risks. They provide regular updates on the project’s milestones,
potential risks, and strategies to manage those risks, allowing stakeholders to make informed
decisions and ensure the successful completion of the project.

2.4 Construction Site safety Practices to Reduce( mitigate) risks Risks

Construction sites are inherently risky environments, with the potential for accidents and
injuries. However, there are several construction site safety practices that can help reduce risks
and create a safer work environment such as:

14
  Develop and implement a comprehensive safety plan: A safety plan should be created
for every construction project and should include hazard identification, risk assessment,
and mitigation strategies. The plan should be reviewed and updated regularly.
 Provide adequate safety training: All workers should receive safety training that covers
the specific hazards associated with their job duties. This training should include proper
use of equipment, hazard recognition, and emergency procedures.
 Use personal protective equipment (PPE): Workers should be provided with
appropriate PPE, including hard hats, safety glasses, gloves, and safety footwear. PPE
should be always worn when on the construction site.

 Maintain good housekeeping: A clean and organized work area can help prevent
accidents and injuries. Good housekeeping practices include keeping walkways clear,
removing debris, and properly storing materials and equipment.
 Use proper equipment and tools: All equipment and tools should be properly
maintained, inspected, and used according to manufacturer’s instructions. Workers should
also be trained on proper use of equipment and tools.
 Establish a safety culture: A culture of safety should be established on the construction
site, where all workers are encouraged to identify hazards and report unsafe conditions.
Workers should also be recognized and rewarded for practicing safe work habits.

2.5 Risk Mitigation/Response

(Mousa, 2005), in his study entitled ‘risk management in construction projects from
contractors and owners perspectives’ suggests three ways of responding to risk in projects. The
first one is risk avoidance: eliminating a specific threat, usually by eliminating the cause. The
project management team can never eliminate all risks, but specific risk events can often be
eliminated. Mitigation, the second ways of responding to risk, is reducing the expected
monetary value at risk events by reducing the probability of occurrence (e.g., using new
technology), reducing the risk event value (e.g., buying insurance), or both. And the last one is
acceptance: accepting the consequences. Also (Mousa, 2005) suggests some actions to be
taken in response to residual risks. Such actions include reduce uncertainty by obtaining more
information, this leads to re-evaluation of the likelihood and impact, eliminate or avoid the risk
factor through means such as a partial or complete redesign, etc., transfer the risk element by
contracting out affect work, insure against the occurrence of the factor and abort the project if
the risk is intolerable and no other means can be undertaken to mitigate its damages. There are
four distinct ways of responding to risks in a construction project, namely, risk avoidance, risk
reduction, risk retention and risk transfer. (Mousa, 2005) also tells that risk
avoidance/elimination in construction is not generally recognized to be impractical as it may
lead to projects not going ahead, a contractor not placing a bid or the owner not proceeding
with project funding are examples of eliminating the risks. Risk transfer is essentially trying to
transfer the risk to another party.

15
 The other ways of responding risk is Risk Retention. This is the method of reducing
controlling risks by internal management; handling risks by the company who is undertaking
the project where risk avoidance is impossible, possible financial loss is small, probability of
occurrence is negligible and transfer is uneconomic (Akintoyne A.S., 1997). The fourth one is
Risk Reduction. This is a general term for reducing probability and/or consequences of an
adverse risk event. In the extreme case, this can lead to eliminate entirely, as seen in “risk
avoidance”.

2.6 Reviewing Risk Factors and Consequences

Both (Tsegaye, 2009) and (Yilma, 2014) list or classify risk factors in their view which causes
risk during the project life cycle. (Yilma, 2014), classifies it according to stages for the project
life cycle starting from feasibility stage up to post construction stage; and (Tegabu, 2015)
classifies risk factors based on source that risks may happen. Risks were classified in
chronological manner that affect, in principle, the construction trinity of owner, professional
team and contractor and, in certain circumstances, the community at large as risks with the
feasibility stage, risks with the design stage, risks with the construction stage and to the
postconstruction stage (Yilma, 2014). The most common risk factors encountered during the
construction of a project by the contractor under a standard type of construction contract are
stated below by mixing other researchers’ way of risk classification method that may adversely
affect the project objectives, are listed as follows: (Yilma, 2014)
A. Risks with the feasibility stage:

 Owner’s choice/brief of professional team and advisers, choice of contractor and nominated
subcontractor , and choice of site.

 Adequacy of soil investigations, surveys and inspections, and finance and related calculations
 War, nuclear reaction, etc.
B. Risks with the design stage:
i. Design Risks
Design incomplete, Surveys incomplete, site data incomplete, inappropriate choice of design
with respect to others, and New or revised design standard
 Unexpected geotechnical or groundwater issues
 Inaccurate assumptions on technical issues in planning stage
 Changes to materials/geotechnical/foundation
 Hazardous waste site analysis incomplete
 Consultant design not up to preset standards

16
  Complex hydraulic features and incomplete quantity estimates
 Project in a critical water shortage area and a water source agreement required
 Unforeseen construction window and/or rainy season requirements

ii. Organizational Risks

 Inexperienced staff assigned and losing critical staff at crucial point of the project

 Insufficient time to plan and unanticipated project manager workload

 Lack of understanding of complex internal funding procedures

 Inconsistent cost, time, scope and quality objectives

 Overlapping of one or more project limits, scope of work or schedule

 Funding changes for fiscal year and capital funding unavailable for construction

iii. Project Management Risks

 Project purpose, scope, schedule, objectives, cost, and deliverables are not clearly
defined or understood
 No control over staff priorities, consultant or contractor delays, and estimating and/or
scheduling errors
iv. Environmental Risks

 Environmental analysis incomplete and availability of project data and mapping at the
beginning of the environmental study is insufficient

 New alternatives required to avoid, mitigate or minimize impact

 Acquisition, creation or restoration of on or off-site mitigation

 Environmental clearance for staging or borrow sites required 19

 Historic site, endangered species, riparian areas, wetlands and/or public park present

 Design changes require additional Environmental analysis

 Unforeseen formal consultation is required and unforeseen resources affected

17
 Unanticipated noise impacts and project causes an unanticipated barrier to wildlife

 Project may encroach into a floodplain or a regulatory floodway

 Project does not conform to the state implementation plan for air quality at the program
and plan level and unanticipated cumulative impact issues

 Environmental regulations change

v. External Risks

 Landowners unwilling to sell and local communities pose objections

 Unreasonably high expectations from stakeholders

 Political factors or support for project changes and stakeholders request late changes

 New stakeholders emerge and request changes and threat of lawsuits

 Increase in material cost due to market forces and water quality regulations change

 additional information required and new information required for permits

 Reviewing agency requires longer than expected review time

 Controversy on environmental grounds expected

 Pressure to deliver project on an accelerated schedule and labour shortage or strike

 Construction or pile driving noise and vibration impacting adjacents

C. Risks with the construction stage:

i. Design Risks

 Defective design, unforeseen design exceptions and unresolved constructability items

 Defective workmanship and material and defective temporary works and their design
ii. Management Risks

 Inadequate site management, workmanship and quality control problem

 Unplanned work that must be accommodated, and lack of coordination/communication

 Underestimated support resources or overly optimistic delivery schedule

18
 Scope creep and unresolved project conflicts not escalated in a timely manner

 Unanticipated escalation in right of way values or construction cost

 Delay in earlier phases jeopardizes ability to meet programmed delivery commitment 20

iii. Technical and Force majeure Risks

 Construction staging more complex than anticipated

 Technical complexity and innovation in design requiring new methods of construction

 Excessive Rainfall, flood and inundation, wind and storm, subsidence, landslide,
rock slide and avalanche, extremes of temperature, earthquake, ground movement…

 Adverse geological and underground characteristics, explosion and fire, vibration…

 Acceptability of project by local residents, mechanical and electrical breakdown

Iv Risks during construction associated with Acts of Man

 Human error, negligence and lack of care, fraud and infidelity, programming the work,
theft and burglary, lack of communication, riot and civil commotion, strike…

 Failure to comply with insurer’s conditions and requirements, incompetence, malicious acts,
inefficiency and delays, inadequate site supervision, variations front contract documents,
illegal activities, and risks associated with dispute resolution.
D. Risks associated with the post-construction stage

 Extended duration of construction

 Risks associated with safety, serviceability, fatigue, fire and arson, natural hazards,
fitness for purpose, project operation, man-made hazards (including political risks),
and wear and tear during the project’s designed life span.

 Acts of God in relation to nature of site—topography and surface water run-off

 When risks of natural hazards are added to human mistakes

19
 All of the above listed risk factors will cause so many effects, among them the most serious
effects of risk are:

 Failure to keep within the cost estimate; the time stipulated for the approvals, design,
construction and occupancy.

 Failure to meet the required technical standards for quality, functions, fitness for purpose,
safety and environment preservation.

 Failure to achieve the required completion date and the required quality

Failure of the project to meet the required operation needs

 Damage to the property as a result of fire or flood

2.7 Final Thoughts on Construction Risks:

Effective risk management in construction projects is essential to ensure the successful

completion of any construction project. Risks can negatively impact the safety, efficiency, and
financial stability of a project, and stakeholders must develop and implement effective risk
management strategies to mitigate these risks
If you’re serious about ensuring the safety, efficiency, and financial stability of your
construction project, don’t hesitate to leverage the expertise of AEI’s Construction Risk
Management Services. Our experienced team can help you identify potential risks, develop
effective risk management strategies, and provide project oversight and status reports to ensure
the successful completion of your project.

We understand the importance of managing construction project risks, and our services are
tailored to meet the unique needs of each project. We use advanced tools and techniques to
identify potential risks and develop effective mitigation strategies, providing you with peace of
mind and confidence in your project’s success. Contact us today to learn more about our

Construction Risk Management Services and how we can help you effectively manage
construction project risks. With AEI by your side, you can rest assured that your construction
project is in good hands.

20
 CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Description of the Study Area

Adigrat town is one of the oldest towns in Ethiopia ,and the second largest town in the region.
It is a city,and spareted in the tigray(region) of the country.it is located in the northern part of
Ethiopia, western zone of the state at longitude and latitude 14 16 N and 39 27E respectively.
with an elevation 2457 M above the sea level, below high ridge to the west.
This city is located approximately 900 Mks from Addis Ababa. Total area of the town is
estimated to be 13268.99 KM2 .
Adigrat university is one of the third generation higher institutions of the country which is
established lately in the beautiful town of adigrat and contributing for development of skilled
people. The university has gained great appreciation for its input of the community based
education program .        
      
           
      3.2 Work Description

3.2.1 Type of Data Used for Study

Two types of data were used during conducting a research. These are qualitative data: basis of
knowing meaning and words and narratives are the basic elements of analysis, and quantitative
data: basis of knowing cause and effect relationships and basic elements of analysis are
numbers and statistical analysis. The study uses both qualitative and quantitative types of data.

21
 3.2.2 Source of Data

In order to conduct the research the study was used majorly the primary and secondary sources
of data/documents. The research covers project participants in construction project, primarily
project managers, project planners and office engineers in adigrat. Hence they are major
stakeholders whom those are responsible for risk events. Interview is used as one of the
primary data that was conducted for technical things. Also project schedules as a case study
was collected and analyzed in relation with risk assessment and mitigation.

The secondary data sources that were used for the analysis are questionnaires that are used for
conducting other technical things which are left from interviews and documents from the local
contractors, and sourced literatures found from internet. The secondary data was used to get an
insight of the problem and is used as a criterion for developing and analysing the primary data.
Different research papers, and other supportive data were gathered from different
acknowledgeable sources and it has analysed well.

3.2.3 Data Collection Procedures

As explained before the source of data used for the study were primary and secondary sources.
The primary data sources are interviews and questionnaires filled by the respondents (project
managers, project planners and office engineers) those are selected based on a criteria such as
two years minimum experience in construction sector, whom they work as an employee in
construction firms and employees having a position either project manager, project planner or
office engineers. Also case project schedules executed by construction firms were collected
for analysis. Based on the objectives and the research questions, interviews were developed to
obtain as extensive, a collection of data as practicable, from the stakeholders of the project.
Secondary data sources are used majorly for questionnaires and conducting literature through
dusk study, such internet, papers, etc.
Personal interviews, which are a face-to-face conversation, in which to the respondents ask
questions with a brief explanation for the ideas and contents of interview, was conducted.

Questionnaires were collected after those are filled by respondents. Another data was collected
according to the schedule from the concerned companies (contractors) like project schedules
and that were analysed. Starting from the inception stage of the proposal it is necessary to
search and analyse different literatures, Papers and those other data’s used for desk study are
more related to the concept of achieving the specific objectives and solve the problem related
with risk assessment and reduction. All the interview questions and questionnaires are attached
hereunder in the appendix form.

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 3.2.4 Data Analysis

Analysis is an interactive process by which answers to be examined to see whether these

results support the hypothesis underlying each question. The data analyses for the desk study
were carried out with regard to theoretical propositions. Whereas the methods used to analyze
interviews and questionnaire data are through descriptive and quantitative statistical analysis.
In addition some data such as the level of impacts and the probability that may happen and
responsibilities of stakeholders were used as an input for models. This method assists to
analyze the feedbacks from the respondents which can easily be tabulated in actual numbers.
The risks, taken by the projects, were analysed as a case study by using their schedules with
software simulations such as ‘Primavera Risk Analysis’. Because as it is expressed in the
literature review Primavera Risk Analysis provides a risk management solution integrated with
both qualitative and quantitative risk analysis capabilities to determine the impact of risk and
uncertainty on the project. Primavera Risk Analysis offers the following risk minimization
features:
 A risk register where we can log all project risks and mitigate their details, including
descriptions, status, probabilities, impacts, and other information.
 Used to prioritize project risks based on risk scoring criteria defined for the project.
 Run a Monte Carlo analysis using project schedule and risk data to produce probability
curves showing expected time and cost outcomes and the probability of achieving each.
 Develop risk response plans to address project risks and establish post-response scenarios.

CHAPTER FOUR

ANALYSIS AND DISCUSSION OF RESULTS

23
 4.1 Introduction
The aim of the study is to assess how and in what way to apply risk assessments and mitigation
strategies, why risk mitigation is important for construction projects, and what methods applied
and actions taken to reduce risks, and what tools and techniques is used to reduce risks in
construction projects for the case undertaken in local construction project.. Mainly, the chapter
focuses on the risk assessment and mitigation strategies or methods, risk responses and actions
taken to reduce risk; and the impacts of risk factors construction project.

Note that risks are a wide and general term used to identify uncertain events that impacts at
least one of the project objectives. Such risk includes the risks of accidents, damages, delays,
force majeure risks and such a like risk causes. The study focused on risks related to the causes
of cost overruns and time delays in which projects are executed beyond the scheduled time and
budget

4.2 Case Project Selection and Respondent Selection Criteria

The study analyses risks and assesses the risk reduction practices of construction firms by
selecting local contractors as a sample. contractors are selected because relatively they take
substantial risks hence they manage huge projects and so many resources. In addition if risks
are not well managed by construction firms, nothing is expected from other construction
firms. So first it is necessary to study the risk management practices of construction firms.

4.3 Respondents are selected based on some criteria:

 Two years minimum experience in construction sector.
 Whom they work as an employee in construction firms.
 Those persons having a position either project manager, project planner or office
engineer

24
Reasons that hinder to use risk management Frequency Percentage

And reduction/models

Lack of skill/experience/training 12 39%

Negligence 5 16%

Default construction practice/trend 8 26%

Needs time and too many data 1 3%

Poor construction management system 3 10%

Poor opinion for software by companies 2 6%

25
The above table shows lack of skill/experience of employees or lack of training given to
employees by the construction company is relatively the major reason, 39%, that hinders to use
software/models those are used to manage risk. This indicates construction companies are not
given critical attention for risk and risk reduction tools. Next to lack of skill/experience or
training, default construction trend executed by local contractors, 26%, is the second
major reasons that hinder to use risk mitigation tools. In our country doing by default using

experience is acceptable than that of technical things because of the non-well supervised
construction working system.
In addition, negligence by the construction companies about risk management and its tools is the
third reason that hinders to use risk management tools. Awarding the contract and run through
traditional system is the major implications of working with negligence for the risks. Also poor
construction system is one of the fourth reason, 10%, that hinder to use risk management tools
that are higher probability than poor opinion for software by companies, 6%, and analysing
through models takes time and may use too much data, 3%. Hence construction industry is
risks can not be totally managed but it can bemitigated.

4.3.2 Risk Response Practices and the Applicability of Risk Mitigation

strategies

4.3.3 Construction Risk Response Trends

Different researchers suggest there are four ways of responding to risk in construction
projects as it was stated in literature review. The first one is risk avoidance: eliminating a
specific threat,
usually by eliminating the cause. The project management team can never eliminate all
risks, but specific risk events can often be eliminated. Mitigation or risk reduction, the
second ways of responding to risk, is reducing the expected monetary value at risk events by
reducing the probability of occurrence (e.g., using new technology), reducing the risk event
value (e.g., buying insurance), or both. Risk retention is also another ways of responding
risks and it indicates that the risk remains present in the project. Two options are available
when retaining the risk: either to develop a contingency plan in a case when risk occurs
(active retention), or to make no actions until the risk is triggered (passive retention). And
the last one is risk transfer; it is essentially trying to transfer the risk to another party.

26
 The study uses four time classification of risk responses as risk avoidance/elimination, risk
reduction/control, risk retention and risk transfer. Figure 4.1 shows the respondents answer for
the question what risk mitigation/response strategy does the company usually use? (See details
@ Appendix D (part d)).

Figure 4.1: Risk response practice

Generally, respondents were recommended those risk management approaches as a principle in
order to achieve their objectives and to create safer and risk free construction environments.
Some of them are:
 Make risk reduction part of your project
 Identify risks early in your project
 Communicate about risks
 Consider both threats and opportunities
 Clarify ownership issues
 Prioritize risks and analyze risks
 Plan and implement risk responses
 Register project risks, Track risks and associated tasks

4.4 Techniques Used to Identify Risk Factors

Hence construction firms use different risk reduction techniques the first technique is risk
identification.

27
 Table 4.15 shows the techniques used by them in order to identify risks. One
major technique used to identify risk factors is through expert opinions. Risks may be
identified
directly by experts with relevant experience with similar projects or business areas.

Brainstorming (information gathering technique) to obtain a comprehensive list of project risks

is another technique used to identify risks. Identifying risk factors through using checklists,
previous experience or historical data and risk records are another technique.
Table 4.15: Risk identification techniques

Techniques used to identify risks factors Frequency Frequency

Expert opinions 8 26%

Brainstorming 7 23%

Risk checklists 9 29%

Previous experience or historical data 13 42%

Risk records 11 35%

Nothing is used 17 55%

Table 4.15 shows that all of the listed risk identification techniques are the best techniques and
hey are applied by some construction firms according to the project conditions. Especially
identifying risk factors through previous experience or historical data, 42%, and through past
risk records, 35%, are the most frequent technique applied by construction firms. Still most
construction contractors, 55%, don’t use any techniques which are used to identify risk factors.

28
 4.5 Remedial Measures/Actions taken to Minimize Risk
According to the study contractual and financial risks such as change orders/ variations,
payment delays, financial failure of the contractor, cash flow problems and difficult to access
the site were found to be the major causes of risks which has a high probability of occurrence
and a high level of impact on project objectives. Therefore managing contractual and financial
issues efficiently are the major aims of management practices in which it should be executed
by construction companies. Wise use of resources and applying strategic resource management
system are another mechanism used to reduce the impacts of risk factors. Construction
companies use some remedial measures or actions before risks happened other than applying
effective risk management system. Some remedial measures or actions are recommended by
respondents such as increase manpower or equipment, increase working hours or change the
construction method etc. (table 4.19).
Table 4.19: Remedial measures or actions taken before risks are happened

Remedial measures/actions Frequency Percentage

Increase manpower and/or equipment 24 75%

Increase working hours 19 61%

Change construction method 17 55%

Change the sequence of work by overlapping activities 25 81%

Coordinate closely with in subcontractors 27 87%

Close supervision with subordinates 26 84%

Don’t know 4 13%

29
 Most construction firms use all the above actions or remedial measures
separately or both of them according to the conditions of projects. Survey result shows that
techniques especially change the sequence of work by overlapping some activities, coordinate
closely with in subcontractors, and close supervision with subordinates for minimizing abortive
works are major techniques which were applied in construction projects. Still 13% of the
respondents don’t know whether their company uses such type of actions or not.

NB. Survey result shows that most projects, both road and building projects, would not be
completed more than 50% within a scheduled duration and also budgeted costs are not enough
to complete the execution of the projects as shown in the figure below.

Project Planned cost Actual Actual cost Schedul Cost SPI CPI
code Planne duratio e variance
d n variance
duratio
n

XDD-1 180 57939812.62 305 59004095.73 125 1064283.11 0.6 0.9

0 8

XDD-2 180 66630784.52 335 122317382.2 155 55686597.6 0.5 0.5

1 9 4 5

XOR-1 125 17937849.50 142 22872929.80 17 4935080.3 0.8 0.7

7 8

XOR-3 374 7901946.33 404 8823044.49 30 921098.16 0.9 0.8

2 9

XOR-4 72 2141082.94 97 2583605.02 25 442522.08 0.7 0.8

4 3

XBOK 303 191376816.9 324 199027455.8 21 7650638.87 0.9 0.

30
-1 9 6 3
96

XTA-1 1167 599147575.8 1385 650949716.9 218 51802141.0 0.8 0.9

9 7 8 4 2

XTA-2 706 2379169839. 835 2379170251. 129 412.3 0.8 0.9

4 7 4 9

XTA-3 618 196196884.1 648 196197002.3 30 118.16 0.9 0.9

4 5 9

CHAPTER FIVE
CONCLUSION ANDRECOMMENDATIONS
5.1 Conclusion

The results obtained in the analysis of the survey such as interviews, questionnaires and cases
are discussed and presented in the previous chapter in detail. the study focuses on the risks
related to time delays and cost overruns. Therefore, based on the findings from the analysis,
the following major conclusions are derived and summarized:

 The study revealed that most technical employees of construction firms are aware of the
concept of risk mitigation . In addition, the strategies of risk mitigation are known by
most technical employees whom those are involved in the execution of construction
projects. But it doesn’t mean that risk management is well developed because still there
are employees who participate in construction sector in which they are not aware of the
concept and/or principles of risk mitigation. In relation to awareness of the concept of
risk reduction most employees are aware of it through education or study. But
employees are not discussed together about risks and the principles/techniques to
manage it and also construction firms are not given well training to their employees
properly.

31
  The study concludes that most construction firms don’t use formal risk management
plan that are used to manage risks. The study reveals that in most cases construction
firms are not pro-active rather risks are managed in re-active manner after risk events
were occurred and in addition poor company management and organization system
practices are developed.

Here are the principles that were used by some construction companies.
 Make risk management part of your project
 Identify risks early in your project
 Communicate about risks
 Consider both threats and opportunities
 Clarify ownership issues
 Prioritize and analyse risks
 Plan and implement risk responses
 Register project risks, and
 Track and associate tasks

The other conclusion drawn in relation with this specific objective is about the level of the
impacts of risks, its allocation and the actions taken to minimize risks. Contractual and
financial related risks especially change orders/variations, exchange rate fluctuation, and
payment delays are occurred in a high level and they were result high impact or
consequences on construction projects those are executed by local construction
firms. Also technical, like poor construction method, and operator related risks are most
likely occurring risk factors and results high consequence on projects. Each risk factor has
responsible for the parties. Before the risks were happened some construction firms are used
some actions or remedial measures in order to minimize its consequences.
The major actions used by construction firms are:

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  Increase manpower and/or equipment
 Increase working hours
 Change construction method
 Change the sequence of work by overlapping activities

 Coordinate closely with in subcontractors, and

 Close supervision with subordinates
A construction project schedule doesn’t show when the project completes and how much it
consumes. But it is an implication for the projects work breakdown and its sequential activity.
Because each projects were not completed within a scheduled duration and budgeted cost.

5.2 Recommendations
Based on the conclusions of the findings especially the understandings of the applicability of
formal risk mitigation systems and the main causes and impacts of risks related to delays and
cost overruns of construction projects, its actions applied to minimize such risks and the

applications/models to manage risks, the following important recommendations are proposed.

Especially project planners and office engineers whom those are an employee in construction
firms should be participate in trainings and workshops in relation with risk management given by
risk experts and try to increase their knowledge of the concept/principles and techniques of risk
management.

 contractors should develop the applicability of risk management through the use of
applications/models by giving training to their employees about risk management
software’s/models.

 contractors should be communicate each other and discussed together with project
owners about the causes and impacts of risks especially risks which may result delays
and cost overruns.

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  Reducing or minimizing risks rather than transferring risks through establishing risk
mitigation team or designating risk expert is highly recommended in project risk
management system.

 Construction project risks should be managed by applying the principles and techniques,
and through a clear and short process i.e. plan about RM, identify risk factors, analyse
risks qualitatively and quantitative, plan for risk response, and monitor and control risks.

 construction firms should give special attention to manage financial and contractual
related risks since they were identified as most frequent occurring risks and highly
impacts for construction projects.

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