Managing risk of construction projects to enhance project performance delivery

Abstract

The construction industry is extremely complex, with dynamic project environments creating an atmosphere of high uncertainty and risk. For that reason, risks in construction projects have become an inevitable feature and the industry is susceptible to numerous business, socio-political and technical risks that negatively influence project delivery. This study therefore investigates the causes of risks in construction project delivery and the effect on project and organisational performance, so that efficient control measures can be designed to minimise their occurrence. The objectives of the study were as follows: (i) to determine the major causes of risks during construction project; (ii) to identify which construction risks are regarded as the most significant in militating the success of construction project; (iii) to determine the detrimental effect of risks on project and organisational performance, and (iv) to establish an effective strategy for reducing risks associated with construction projects. A quantitative research design was adopted, and the sample comprised of randomly selected contracting firms and construction professionals in the Western Cape Province. Specifically, only contracting firms registered on the CIDB database formed part of the study, whereas in the category of construction professionals, only those registered on the Professions and Projects Register and in good standing were sampled. It is worth noting that 60 respondents, representing 23% of those approached, willingly participated in the survey. The data was statistically analysed using descriptive and inferential analyses. The salient findings revealed that project management-related risk factors are the major causes of risks during construction project delivery; these factors include inadequate project planning, inadequate project budgeting, incompetence of local project team members and scheduling errors/ill planned schedule. In addition, the study revealed the impact of construction risks on projects and organisational performance, and it was found that cost overrun was ranked the most significant on project performance and disputes between parties to the contract was ranked the most significant on organisational performance. It is also worth mentioning that the opinions of construction professionals do not vary significantly with regard to the detrimental effect of risks on project performance. The research suggested strategies for mitigation of risk: the strategies include design strategy, construction and project management, and financial strategy. Furthermore, it was evident that the perceptions relative to the effective strategies for mitigating risks do not differ among construction participants. In effect, the analytical taxonomy of the major causes of risks and their ripple effect is the most obvious intervention in identifying, assessing and responding to risks. Hence, construction professionals and contractors should consider forming a risk management team within their respective firms, and allocate a budget for the team to attend risk management-related training courses.