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A FRAMEWORK METHODOLOGY FOR SELECTION OF RISK ANALYSIS TECHNIQUES IN CONSTRUCTION PROJECTS

A FRAMEWORK METHODOLOGY FOR SELECTION OF RISK ANALYSIS TECHNIQUES IN CONSTRUCTION PROJECTS

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Published by Jamal Thaheem
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Conference research paper

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Published by: Jamal Thaheem on Jul 10, 2013
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A FRAMEWORK METHODOLOGY FOR SELECTION OF RISK ANALYSISTECHNIQUES IN CONSTRUCTION PROJECTS
Alberto De Marco
Politecnico di Torino, Dept. of Management and Production Engineering (DIGEP), Turin, Italy,alberto.demarco@polito.it 
Muhammad Jamaluddin Thaheem
Politecnico di Torino, Dept. of Urban Studies and Planning, Turin, Italy, jamal.thaheem@polito.it 
Sabrina Grimaldi
Politecnico di Torino, DIGEP, Turin, Italy, sabrina.grimaldi@polito.it 
Carlo Rafele
Politecnico di Torino, DIGEP, Turin, Italy, carlo.rafele@polito.it 
Abstract
Project Risk Management has been gaining acceptance amongst the practitioners due to anuntiring stress on its importance, and the availability of a number of risk analysis techniquesfor facilitating this task in construction project management. In this arena, the selection of asuitable risk analysis technique is critical to the entire project risk management process andthus critical to the success of a construction project. However, the availability of anappropriate selection methodology, which may help the project managers choose a suitablemethodology for their projects, seems missing.In this paper a selection framework methodology is presented, which looks at the realizationof a practical tool that may help project managers and construction practitioners in choosinga suitable risk analysis technique that satisfies select project drivers. Also, the presentedwork extends the traditional time, cost and quality drivers of a project by enhancing thefocus to the level of complexity and maturity of the organization. The project drivers arefurther classified into four scales each, to assist in formulating a well-structured chart. Thedimension of project risk analysis technique is classified into qualitative, semi-quantitative,quantitative, and simulation scales, rendering a balanced diagram. Plotting the projectdrivers on the chart result in acquisition of the category of risk analysis technique, which isappropriate under given variables.The paper further proposes individual classification of existing techniques into the fourcategories of project risk analysis dimension, which may help practitioners to obtain aspecific technique for their construction project by conveniently putting in the variables into
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Creative Construction Conference 2012 June 30  July 3, 2012, Budapest, Hungary 
the proposed chart. Applicability of the framework methodology is finally presented followedby conclusions and future research directions.
Keywords:
construction management, decision making, project classification, projectmanagement, risk analysis.
1. INTRODUCTION
Risk management is a major concern to project managers, as unmanaged or unmitigatedrisks are one of the primary causes of project failure (Royer, 2000). Risk is considered to be amajor factor influencing project success, and Project Risk Management (PRM) is an importantprocess in any capital project (Krane et al., 2010). Thus, PRM is currently one of the maintopics of interest for both researchers and practitioners working in the field of projectmanagement. The various approaches available for PRM are shared and standardized by theProject Management Institute (PMI, 2009), which recognizes PRM as the process of identification and analysis of risks, preparation of the answers to the risks, and theirmonitoring and control in the course of the project.In particular, the analysis of project risks is a critical challenge for any project manager, andfurther critical is the selection of an appropriate technique to assist the duty of project riskanalysis. In fact, there is no universally accepted way to assess risks in all projects and theliterature is littered with a number of techniques, all claiming to be mathematically,statistically and, from an engineering point of view, extremely competitive and effective, andrightly so. But, choosing the most suitable risk analysis technique under given projectcharacteristics is critical to project success.In an attempt to help project managers choose the appropriate project risk analysistechnique for a project, this paper proposes a framework methodology to help managersselect a specific qualitative or quantitative risk analysis technique under given characteristicsof a project being managed.This paper is structured as follows. First, we illustrate the four main risk drivers that cancharacterize the dimensions of a project. Second, the main risk analysis techniques are listed.Then, we present the methodology of selecting the appropriate risk analysis techniques bymapping the main dimensions of a project. Finally, after discussing the application of themethodology, we draw implications and conclusions.
2. PROJECT DRIVER DESCRIPTION
It could be argued that large, high-risk projects require specific techniques, and resourcesthat differ from those required by small, low-risk projects. For example, it seems reasonableto assign the most experienced project managers to head large, high-risk projects. As well,
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Creative Construction Conference 2012 June 30  July 3, 2012, Budapest, Hungary 
high-risk projects should be more carefully planned, closely monitored, and strictly controlled(Couillard, 1995). In other words, a high level of risk requires a scrupulous project riskanalysis and the best risk management techniques vary widely according to projectcharacteristics (McFarlan, 1981).We propose that a project can be described as characterized by four main dimensions,represented by the radar diagram depicted in Figure 1, namely: its degree of complexity, thesize of its scope of work, the focus on one or more phases of its life-cycle, and level of maturity of its project management processes. The combination of these four factors allowsto conveniently framing the project into objective drivers of project risk. For example, ahighly complex and large-sized project is likely to bring a high level of risk, which requiressophisticated risk analysis techniques.In the following subsections, we discuss these categories and their four associated increasingdegrees of elevation.
Figure 1: Radar diagram representing the four dimensions of a project 
2.1. Complexity
Project complexity is often defined in terms of a broad range of attributes such astechnological difficulty of task performance, differentiation and interdependency of operations, e.g.: overlap of design and construction (Baccarini, 1996).Here, the concept of complexity encompasses all these definitions, with four levels of increasing complexity that can characterize a project (Shenhar and Dvir, 2007): 1) uniquenessof the constructed facility; 2) innovativeness of the building technology or of the constructionprocess; 3) complication of the system design and its subsystems assembly; and 4) criticalityof the time frame requiring a fast pace and time-critical construction effort. With this notion,
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