AN EVALUATION OF RISK MANAGEMENT PRACTICE IN BUILDING CONSTRUCTION INDUSTRY IN NIGERIA

AN EVALUATION OF RISK MANAGEMENT PRACTICE IN BUILDING CONSTRUCTION INDUSTRY IN NIGERIA

ABSTRACT

This study carried out an evaluation of risk management practice in building construction in Nigeria. Three objectives were established which included: to identify potential risk in the building construction industry,  to determine the impact of those identified risk on construction projects and to determine how those risks can be reduced or eliminated. Based on the review of literature various forms of risk were identified and they include external, site, financial, technical and contractual risk amongst others, among the factors responsible for the success in risk management were the demonstrable measures that were put in place to manage them. Data was generated from selected professionals in the construction industry through stratified random sampling technique to enable the establishment of the causes of the forms of risk and the ways that these identified risk can be managed. Based on the data collected which revealed the various problems in risk management in Nigeria, five recommendations were made. This among others include, a comprehensive site survey should be conducted before construction commences to avoid external and site risk, drawings should be checked for mistakes and errors before construction commences to avoid technical risk and adequate equipments and machines should be provided for construction at height so as to avoid falls and other accidents so as to combat health risk.

CHAPTER ONE

1.0       INTRODUCTION

1.1  Background Of The Study

           Houses has been built ever since humans left caves and the construction project as a business branch has probably been around  before the construction of the pyramids. Risk is present everywhere and activities conducted by humans cannot  be considered risk free. There have always been considerations about uncertainties and risk.  Risks and uncertainties appear in various shapes (Hood, 1992).  No construction project is free. risk can be managed, minimized, shared, transferred, or accepted but cannot be ignored (Micheal, L, 1994). In projects the objectives are most often related to time, cost, quality and function and client satisfaction (Hillson, 2004). In organizations, depending on the risk management focus, different relations between the objectives and the definition of risk exist. The risk definition is therefore highly dependent on the choice of applied management focus in the organization. In the construction industry the management focus on site is closest related to what  can be described as project risk management and safety risk management. At other levels, apart from the project site, the focus is different. (Hillson, 2004).

             

Risk management may be described as a systematic way of looking at areas of risk and consciously determining how each should be treated. It is a management tool that aims at identifying sources of risk and uncertainty, determining their impact, and developing appropriate management response  (Uher, 2003). A systematic process of risk management has been divided into risk identification, risk assessment,  risk mitigation and risk monitoring.  An effective risk management method can help to understand not only what kinds of risks are faced, but also how to manage these risks in different phases of a project. Owing to its increasing importance, risk management has been recognized as a necessity in most industries today, and a set of techniques have been developed to control the influences brought by potential risks (Schuyler, 2001; Baker and Reid, 2005).

Compared with many other industries, the construction industry is subject to more risks due to the unique features of construction activities, such as long period, complicated processes, abominable environment, financial intensity and dynamic organization structures (Flanagan and Norman, 1993; Akintoye and MacLeod, 1997; Smith, 2003). Hence, taking effective risk management techniques to manage risks associated with variable construction activities has never been more important for the successful delivery of a project. Previous research has mainly focused on examining the impacts of risks on one aspect of project strategies with respect to cost (Chen et al., 2000), time (Shen, 1997) and safety (Tam et al., 2004). Some researchers investigated risk management for construction projects in the context of a particular project phase, such as conceptual/feasibility phase (Uher and Toakley, 1999), design phase (Chapman, 2001), construction phase (Abdou, 1996), rather than from the perspective of evaluation of the management of the risk.

           

This study captures work in building construction projects today in nigeria regarding risk management. The handling of risk in building construction projects varies considerably. This depends on the nature and location of the work, the operator and contractor involved and the prevailing contracting climate. In construction risk analysis can be described as a systematic methodology and ongoing process by which occurrences that may substantially affect the end product. i.e risk can be identified, quantified, modeled, managed and monitored. Risk management is generally a part of other management systems such as quality, environmental or work environmental management systems. Some core values are common in many quality and environmental management systems viz. the commitment of all employees, customer focus, management commitment, focus on process, continuous improvement and fact-based decisions. These core values are closely connected and could easily be found in the theoretical framework of risk management. The current focus on risk management should be regarded as a complement and a development of the already implemented quality management systems used by companies. Serious concern has been expressed about public projects that have been abandoned in various parts of the country, after huge financial mobilizations. The projects are in the construction industry and sometimes funded by foreign agencies. Various factors have been adducted for this unhealthy scenario, the most notable being poor project analysis and management.

1.2       Statement Of Problem

Although technical issues are a primary concern both early on and throughout all project phases, risk management must consider both internal and external sources for cost, schedule, and technical risk. Early and aggressive detection of risk is important because it is typically easier, less costly, and less disruptive to make changes and correct work efforts  rather than the later, phases of the project. Many companies and organizations in the construction industry have an idea of risk management but do not implement it because they are not ready for possible challenges. Such as; increase in cost, time wasting , altered quality and also unhealthy scenario for workers.

One of the major reasons for ineffective projects delivery in the Nigerian construction industry is the improper assessment of risk factors (Joshua,O,D and Jagboro,G,O, 2007). Many companies are not even aware of the kind or form of risks that they face in the process of construction. As a result the industry continues to suffer poor performances with many projects failing to meet time and cost targets (Joshua,O,D and Jagboro,G,O, 2007).  This study is going to evaluate the effect of risk management in the Nigerian construction industries.

1.3       Aim and Objectives

The aim of the research is to evaluate the risk management practice in the building construction industry in Nigeria.

The specific objectives are:

1. To identify the potential risk on project in the building construction industry.
2. To determine the impact of those identified risk on construction project.
3. To find out how those risks can be reduced or completely eliminated.

1.4    Research Methodology

This is the method carried out in conducting this research work. The methods are:

1. Consultation with relevant literature such as journals, articles and related projects to have an in-depth knowledge of the entire work.
2. Questionnaire administration

1.5    Scope

This study will focus on the  evaluation of risk management practice in the building construction industry in Nigeria. It will cover the components of the management of risk and its effective mitigation.

1.6   Justification

Many Nigerian construction companies run into losses, because of lack of proper management of risk in the construction industry. This causes delay in executing project incurs  more cost which at times could lead to abandonment of project due to exhaustion of funds. This brings about the evaluation of risk management in the building construction industry in Nigeria. The study will also be beneficial to the professionals in the construction industry as it will show ways in identifying, determining the impact and also mitigating risk in building construction projects. . This will also bring about better results of  projects if the recommendations stated are implemented  by those  concerned.  This study is justified on the bases that it will evaluate risk management practice in building construction in Nigeria.

1.7   Limitation

In carrying out these research work, the initial problem encountered was sourcing for adequate material for literature review and also the limited time available for the research. Also the problem of getting the right people that will fill the questionnaires and collection.