RISK ASSESSMENT AND MANAGEMENT IN

CONSTRUCTION PROJECTS

by

A.DEVIPRASADH

A thesis report submitted to the

FACULTY OF CIVIL ENGINEERING

In partial fulfillment of the requirement for the award of the degree

of

MASTER OF ENGINEERING

IN

CONSTRUCTION ENGINEERING AND MANAGEMENT

DEPARTMENT OF CIVIL ENGINEERING,

COLLEGE OF ENGINEERING GUINDY CAMPUS,
ANNA UNIVERSITY
CHENNAI – 6000 25
JUNE 2007
 ABSTRACT OF THE PROJECT WORK

Degree and Branch : M.E CONSTRUCTION ENGINEERING

AND MANAGEMENT

Month and Year of Submission : June 2007

Name of the Student : A.DEVIPRASADH

Roll Number : 200511840

Name and Designation of supervisor : Dr.M.SEKAR

PROFESSOR & DEAN
COLLEGE OF ENGINEERING - GUINDY
ANNA UNIVERSITY
CHENNAI-600025

Construction projects are initiated in complex and dynamic environments resulting

in circumstances of high uncertainty and risk, which are compounded by demanding
time constraints.

Construction industry has changed significantly over the past several years. It is an
industry driven primarily by private investors; the presence of securitized real estate has
increased considerably. It is vulnerable to the numerous technical & business risks that
often represent greater exposures than those that are traditional. Thus risk assessment
need arises. Risk assessment is a tool to identify those risks in a project and manage it
accordingly with proper treatment. Risk assessment is defined in this study as a technique
that aims to identify and estimate risks to personnel and property impacted upon by a
project.

The general methodology of this study relied largely on the survey questionnaire
which was collected from the local building contractors of different sizes by mail or by
personnel meeting. A thorough literature review was initially conducted to identify
the risk factors that affect the performance of construction industry as a whole.

The questionnaire prepared for the pilot survey was formulated by seeing the
relevant literatures in the area of construction risk management. Totally for seventy five
companies the questionnaires were given, out of which forty five had an effective reply
and two were rejected due to improper answering. Thus the response rate is 60% which is
considered a good response in this type of survey. This research seeks to identify and
assess the risks and to develop a risk management framework which the investors/
developers/ contractors can adopt when contracting construction work in India.

Risk factors for this study were classified into seven categories, namely:
1. Financial risk
2. Legal risk
3. Management risk
4. Market risk
5. Policy and political risk
6. Technical risk
7. Environmental risk

As far as the contractor is concerned shortage of skilful workers has the

maximum risk rating and other risks which have maximum risk rating are time
constraint, sub-contractor related problems, project delay, improper verification of
contract documents, and competition from other companies. For the owners time
constraint has the maximum risk rating and other risks which have maximum risk
rating shortage of skilful workers, project delay, errors in design drawings, Improper
project planning and budgeting, loss due to fluctuation of inflation rate. The least risk
rating given by both owners and contactors are environmental risk, relation with
government departments, local protectionism and industrial disputes.
Shortage of skilful workers is the major risk faced by almost all the companies. This
is because; the skilled workers are migrating between companies very often due to the
high demand in the market. And also huge vacuum is created by the workers who
move to Middle East countries where they are offered very high packages when
compared to India. Since real estate, construction sector are in the boom side,
construction companies are in move to make profit as soon as possible in current
wave itself; but this creates tremendous pressure to the workers to complete the
project in a very short span. This time constraint risk prevails in all the companies
surveyed. The risk of competition from other companies constitutes major problem to
the small & medium sized companies. Due to the policy of the Indian government that
100% FDI is allowed in the construction sector which allowed foreign companies to
enter the market, created a stiff competition to the local companies both technically
and financially.

Overall market, management, and the financial risks are high when compared to other
risks.