ISSN(Online): 2319-8753

ISSN (Print): 2347-6710

International Journal of Innovative Research in Science,

Engineering and Technology
(A High Impact Factor, Monthly Peer Reviewed Journal)

Vol. 5, Issue 2, February 2016

A Study on Risk Factors Involved in the

Construction Projects
Surabhi Mishra1, Brajesh Mishra2
Assistant Professor, Department of Management, IILM, Lucknow, India1
2
Assistant Engineer, Department of U.P. Cane Development, Lucknow, India

ABSTRACT: Infrastructure development is the key of success to any country in present scenario. It will generate a
large number of jobs and increase in growth of economy as well. Therefore the projects involved in infrastructure
development have to invest a huge amount of money. In consideration of the same if any kind of wastage of resources
takes place that will result in huge momentary losses. These losses are due to various types of risks associated with
such development projects. A crucial role is played by these risks for the completion of project successfully with in the
time schedule and allotted budget. This study primarily discusses the critical risk factors and its evaluation techniques
by conducting a comparative study of various international and national construction projects. About 50 articles
published over the last 15 years were reviewed. The finding was that a simple analytical tool will be developed for each
project task to evaluate the risk quickly and effectively to do the risk analysis in the project. By study it was concluded
that by the virtue of earlier risk identification during the bidding stage of the construction project will lead to precise
estimation of the escalation on cost and time overrun. This will help in rescheduling the construction projects by
incorporating the things in the budget for the successful completion.

KEYWORDS: Risk Factors, Risk evaluation techniques, Escalation, Construction projects, Time schedule.

I. INTRODUCTION

1.1 Risks in Construction Project: The construction industry is of very complex and strategic nature. Therefore it is
considered as a risky affair due to its peculiarity. Due to involvement of various stakeholders connected with the
project , several internal and external factors the chances of risks are very high. Studies reveal that construction
industry has a poor track record in risk analysis as compared to other industries. On practical grounds no construction
project is risk free. Risk cannot be fully controlled in reality. However by taking adequate and timely precaution it can
be reduced to some extent. Risks are bound to happen, in the interest of project some risks are accepted up to certain
extent. The effects of risks are multidimensional. In project management the risks are identified and analyzed in every
aspect. The project risk management tool (PRMT) is very important for success of any construction project. The
probability of occurrence of an event or combination of events which are liable to occur during entire life cycle of
construction project are worked out. The construction project consists of a number of variables and interdependencies
and correlations ,so determination of exact cause and effect is very difficult. Therefore performance of a project is
dependent on risk factors. Uncertainty is responsible for exposure of risks. Identification and evaluation of risks and its
impact on construction project may be defined as risk assessment technique. The various stages of life cycle of a
construction project are shown in Fig.1. Risk management plays a major role in achieving the project objectives
irrespective of the size of construction project. The risks are the uncertainty of future event and should be controlled
systematically through risk management and analysis method.

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 ISSN(Online): 2319-8753
ISSN (Print): 2347-6710

International Journal of Innovative Research in Science,

Engineering and Technology
(A High Impact Factor, Monthly Peer Reviewed Journal)

Vol. 5, Issue 2, February 2016

Fig:1 Life Cycle of a Construction Project

II. OBJECTIVES

The purpose of study is to review and compose the previous facts and discussions about risk factors and to provide a
complete list of major sources of risk factors in the life cycle of construction projects based on extensive literature
study.

III. LITERATURE REVIEW

3.1. Analysis of risk factors in Construction Industry: Various risk analysis techniques adopted during 1990, 2000
to 2010 and after 2010 are summarized below-
3.1.1. During 1990’s: There were no definite risk analysis tools or specified method for analyzing risks involved in a
construction project during 1990’s decade. Many contractors were dependent on their own thumb rules for assessing
and analyzing risk factors, resulted in failure of many projects in achieving their goals on time. Many researchers have
given their ideas in 1990’s that project risks and uncertainties can be controlled during estimation stage to minimize
their effect by taking suitable measures and rectification in the process of analysis. Prominent were Al-Bahar in 1988,
Bimie and Yates,1991. As per Akincl,1998 risks were categorized on the basis of manageable and non-manageable
factors which has resulted in delay and cost overrun in a project. On the basis of this result various risk assessment
models were formed by the researchers named Tah et al., 1993, Wirba et al.,1996 , Mustafa and Bahar, 1991 and
Dawood, 1998 ,which are as under-
 Probability-Impact assessment (P-I)
 Fuzzy Set Theory (FST)
 Monte Carlo Simulation (MCS)
The above risk assessment models were used for analysis and identification of risks during the preliminary and bidding
stages of a construction project.
3.1.2. Systematic Approaches: There were few efforts till 2000 on identification and assessment of risks factors of the
construction projects. This has resulted in inefficient and unorganized approaches to identify and manage the risks of
construction projects. Various researchers have categorized risks into various groups . Chapman in 2001 categorized
risks into four categories as shown below-
 Environment

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International Journal of Innovative Research in Science,

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Vol. 5, Issue 2, February 2016

 Industry
 Client
 Project
Similarly Shen in 2001categorized risks into six categories as mentioned below-
 Financial
 Legal
 Management
 Market
 Policy
 Political
Many researchers have tried their best in proposing the limitations and complexity of risk assessment tools like
Analytical hierarchy process (AHP), P-I, FST, MCS and decision support system.
3.1.3. Refined Techniques After 2010’s: There was a sharp improvement in the number of risk identification and
assessment researches after 2010. Various refined models were developed by researchers for risk management and
comprehensive decisive framework. Risk factor was classified in three heads by Rezakhani in 2012, as under-
 External
 Unpredictable
 Predictable
 Legal
 Internal
 Non- technical
 Technical
Rezakhani also suggested that a hierarchy based work breakdown structure (WBS) of risks should be drawn to identify
the risk factors in an easier way. Goh et al in 2013 pointed out 19 risk factors in the life cycle of a project under five
heads, as below-
 Planning stage
 Design stage
 Procurement stage
 Construction stage
 Handing over stage
Researchers have suggested that risk management workshop will be a boon for identification and analysis of risks as a
tool of managing risks. Researchers have made various approaches for representing the interdependencies between
project risks and its complexity of the surrounding environment and also reported that risk management
implementation is relatively low in small construction projects and this is due to lack of time and budget, low profit
margin and not economical. The results indicated a positive correlation between risk management (RM)
implementation and improvement in project quality, cost and schedule performance of small projects.

IV. IDENTIFICATION AND ASSESSMENT OF CRITICAL RISK FACTORS

4.1. Risks in Construction Projects: There are variety of risks involved in construction projects. Tah et al, in 1993
has categorized project risks into internal and external risks. They also developed a fuzzy model for bidder’s risk
assessment at the bidding stage. The risks that are widespread in the external environment of projects, may be defined
as external risks. Some examples of external risks are given below-
 Due to inflation
 Currency exchange rate fluctuations
 Technology change
 Client induced changes
 Politics
 Climate and weather conditions

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International Journal of Innovative Research in Science,

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(A High Impact Factor, Monthly Peer Reviewed Journal)

Vol. 5, Issue 2, February 2016

 Natural disaster or major accidents

External risks are factually of non-controllable nature so there is every need to frequently scan and make a prediction
about these risks in connection of agency’s strategy. Likewise internal risks are relatively more controllable in nature
and may vary between projects. Some examples of internal risks are given below-
 Uncertainties due to labour, Plant & material
 Subcontractor
 Resources and site conditions
Many researchers have identified several risk factors, these are grouped in different types on the basis of their nature of
risks. Prominent researchers were Mustafa in 1991,Akincl et al, in 1998, Prasanta kumar Dey in 2002, Ghosh et al., in
2004, Wiguna and Scot in 2005, Enshasi and Mosa in 2008, Wang et al., in 2010, Razakhani in 2012 and Goh et al., in
2013. According to them the risk factors are dependent on nature of risks like physical, environmental, design.
Financial, contractual, legal, construction, political, management, natural hazards, safety and delay risks.
4.2. Identification of Critical Risk Factors: On the basis of studies on different types of projects like residential
,industrial , commercial and infrastructure development in various foreign countries , the critical risks factors identified
are shown in Table-1.
Table- 1 Critical Risk Factors
Critical Risk Factors Must Pras Gho Lary Enha Sun Wan Eyb Reza Goh
afa anta sh ea, ssi & g et poos khan et el,
et al, Kum et al, 2007 and Men el, h, i, 2013
1991 ar 2004 Mos g, 2010 2011 2012
Dey, a, 2008
2002 2008
Scope and design changes,
Technology Implementation ▲ ▲ ▲ ▲ ▲ ▲ ▲
Site conditions and Unknown
Geological conditions ▲ ▲ ▲ ▲ ▲
Inflation, Country economic
condition and rules and ▲ ▲ ▲ ▲ ▲ ▲ ▲
regulations
Unavailability of funds,
▲ ▲ ▲ ▲ ▲ ▲
Financial failure
Inadequate Managerial skills,
Improper Coordination ▲
▲
between Teams
Lack of Availability of
▲ ▲ ▲ ▲
resources
Weather and Climatic
▲ ▲ ▲
conditions
Statutory Clearance and
▲ ▲
approvals
Poor safety procedures
▲ ▲
Construction Delays
▲ ▲ ▲ ▲

On the basis of information in Table-1 it was concluded that following are the critical risk factors in various
international projects.
 Inflation, (Country economic condition )
 Environmental and geological risk (weather & climatic conditions)
 Statutory Clearance before planning a project

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International Journal of Innovative Research in Science,

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Vol. 5, Issue 2, February 2016

 Design risk
 New technology implementation
 Poor safety procedures
 Construction delays
 Inadequate managerial skills
 Improper coordination between teams
 Resource risk (lack of availability of resources)
It was concluded that there is necessity for a information map which represents the sources of critical risk factors on
successful completion of a construction project. Accordingly information map was developed.
4.3. Information Map: From the study and review of literature the major sources of risks and their impacts were
identified. The information map representing the sources of critical risk factors and its affect on project success is
shown in Fig. 2.

Fig: 2. Information map representing the risk sources affecting the project success

Various risk factors are shown in flow chart as shown in Fig.2. Engineering risks are predictable whereas non
engineering risks are unpredictable. The prediction should be forecasted in earlier stages of projects whereas
unpredictable factors involve uncertainties, this should also be accounted for successful completion of project to avoid
any adverse effect on cost, time and quality of the project.
4.4. Techniques of Risk Assessment (TRA) : Recently various models have been developed for identification of risks
and their management. A concept of decision tree analysis, an analytical hierarchy process was presented by Prasanta

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International Journal of Innovative Research in Science,

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Vol. 5, Issue 2, February 2016

Kumar Dey in 2002. He also raised a question on probability models like MCS, FST, P-I which required a detailed
quantitative inputs which was not generally available at the time of planning and its application is also limited in real
project. Thomas et al, in 2006 made an effort to asses risk probability by using fault tree model. Resource
management(RM) was explored by Abdelgawad et al in 2010 using combined fuzzy failure mode effect analysis
(FMEA) and Fuzzy AHP. A relationship between impact and probability of occurrence and detection and the degree of
criticality of risk events was developed by these analysis to support project management team to take corrective
measures on time to avoid any adverse effect on project. In 2011 Eybpoosh used SEM technique to demonstrate casual
relationship between the risk factors. SEM is responsible for risk identification and to develop an alternate improved
strategies at the earlier stage of the project. A model named TOPIS-F with fuzzy criteria values was developed by
Tamosaitiene et al, in 2013 to asses risk in construction projects. This model was used to compare risk assessment of
three projects. The various risk assessment techniques followed by various researchers in different literatures is shown
in Fig. 3. The various risk assessment techniques are as under-
1. Project evaluation and review technique (PERT)
2. Probability and impact (PI)
3. Mantecarlo simulation (MCS)
4. Analytical hierarchy process (AHP)
5. Likelihood occurrence of risk(LR)
6. Fuzzy logic

Various Risk Assesment Techniques Vs. No. of Key Papers

14
12
10
8
6
4
2
0

Fig: 3 Various Risk Assessment Techniques Vs. No. of Key Papers

Analytical neural network(ANN), Bayesian belief network(BNN) was used by some researchers for the purpose. It was
observed from Fig. 3 that most of the researchers have used the risk assessment model in AHP, MCS ,LR and FUZZY
compared to other techniques. The developed model using AHP, MCS and LR techniques have shown good results in
assessment of project risks in construction project. Among all the models AHP model is more effective because of its
systematic approach to risk assessment problems by providing hierarchical approach. For assessment of project risks at
initial stage of the project the researchers may not have sufficient data at that time. Therefore it is necessary to develop

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 ISSN(Online): 2319-8753
ISSN (Print): 2347-6710

International Journal of Innovative Research in Science,

Engineering and Technology
(A High Impact Factor, Monthly Peer Reviewed Journal)

Vol. 5, Issue 2, February 2016

a regression model for each project specific task. Risk assessment tools should be simple in its application to encourage
the professionals.

V. CONCLUSION

This paper discussed a review of literatures of past 2 decades on identification and assessment of risk factors in
construction project. Several international projects from various countries like UK, US, Australia, China, Malaysia etc
were reviewed in this study. On the basis of study the following conclusion can be drawn-
1. The study was basically focused on the development of various models for assessment of risk factors in
construction projects.
2. The critical factors have a vital role on project’s performance so the critical risk factors should be managed by
adequate risk assessment techniques.
3. The findings from study are tabled in Table-1 above, which shows the various critical risks factors to be
managed accordingly in order to achieve a successful result of construction project. An information map was
also prepared which represents the sources of critical risk factors and its affect on project success, as shown in
Fig. 2.
4. An extensive literature study by various researchers have revealed their noteworthy contribution towards risk
management techniques.
5. The study recommends to identify the risk factors of construction projects. Accordingly a suitable outline
should be formed to quantify the risk factors on the basis of uncertainties. The success of project should be
prime objective so it will be beneficial to develop a simple and suitable risk assessment model for construction
projects considering the nature and magnitude of projects, to counter the risks during entire life cycle of
projects.

REFERENCES

[1] Al-Bahar, J.F. “Risk management in construction Projects: A systematic analytical approach for contractors”, Ph.D. Dissertation, Department of
Civil Engineering, University of California, Berkeley, 1988.
[2] Bon-Gang Hwang, Xianbo Zhao, Li Ping Toh, “Risk management in small construction projects in Singapore: Status, barriers and impact”,
Elsevier International Journal of Project Management, Vol. 32, pp. 116-124, 2014.
[3] Burcu Akincl and Martin Fischer, “Factors affecting contractors risk of cost overburden”, ASCE Journal of Management in Engineering,
Vol.14, No. 1, pp. 67- 76, 1998.
[4] Birnie. J. and Yates. A., “Cost predictions using decision/ risk analysis methodologies”, Construction Management and Economics, Vol. 9, pp.
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[5] Chapman R.J., “The Controlling Influences on Effective Risk Identification and Assessment for Construction Design Management”, Internat. J.
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[6] Chen H., Hao G., Poon S.W., Ng F.F., “Cost Risk Management in West Rail Project of Hong Kong”, AACE Internat. Trans., 2004.
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[9] Dawood, N., “Estimating project and activity duration: a risk management approach using network analysis”, Construction Management and
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