Professional Documents
Culture Documents
ed
Using RII Method: A Case Study of Gondar City, Ethiopia
Amare Tilahun Tessemaa*, Getachew Asefa Aleneb, Natnael Melsew Wolelawc
a,b&cDepartment of Civil Engineering, Faculty of Technology, Debre Tabor University,
iew
South Gondar, Ethiopia
*Corresponding author:
e-mail: amentilahun23@gmail.com (Amare Tilahun Tessema), +251913230576
Address: South Gondar, Debre Tabor, Ethiopia
ev
Abstract
In Gondar, Ethiopia, the building construction industry is subjected to risky situations that affect
construction projects and therefore require systematic means to achieve project objectives and
r
ensure time and money aren’t wasted. Most of the time, many buildings construction companies
er
in Gondar, Ethiopia ignores the influence of practicing risk management can result in the success
and achieving of a project’s goal. This study aims to assess the risk management practices on
building project in Gondar city with typical construction project risk factors. Risk factors are
pe
present at every stage of the project, from design and planning through completion. To improve
the success of building construction projects, risk factors must be recognized, assessed, and
minimized in order for the projects to be completed on time, safely, and economically. This
research involves the identification, classification, and assessment of risks in the construction of
ot
building projects using a Relative Importance Index (RII). Furthermore, risk factors were ranked
according to their effects. The questionnaire was prepared in the form of a five-point Likert scale,
tn
i.e., 1-very low, 2-low, 3-moderate, 4-high, and 5-very high importance. A total sample of 32
questionnaires was distributed to the respondents in Gondar city, and 26 respondents returned the
questionnaires.
rin
Inflation and changes in prices, Defective design, quality problems with materials, delayed
payment to the contractor, and poor quality of work were the top five major risks in the building
construction project and, Lack of scope of work definition, delays in obtaining site access, Labor
ep
strikes and disputes, accidents during construction, and changes in government laws and
regulations were the five least harmful risks to the building construction project.
Pr
Key words: (1) Risk, (2) risk management, (3) risk factor, (4) risk allocation, (5) risk
identification. (6) Relative Importance Index
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4072468
1. Introduction
ed
Many development policies in many countries aim to promote the construction industry in order
to prevent companies from collapsing unexpectedly [1]. The construction industry's growth
necessitates an understanding of risk management principles. Every stage of the building process,
iew
from the initial investment appraisal to the construction and operation of the completed facility, is
fraught with risk for all parties involved. Risk and uncertainty have the potential to be detrimental
to construction projects [2]. Even though risk is inherent in all project endeavors, it is widely
recognized that risk can be properly managed to limit its negative effects on project objectives. As
ev
a result, risk analysis and management are still an important part of construction project
management nowadays in order to cope effectively with uncertainty and unexpected events and
achieve project success. Risk management helps key project participants – client, contractor or
r
developer, consultant, and supplier – in meeting their obligations and minimizing negative effects
er
on construction project performance in terms of cost, time, and quality [3].
In scientific literature, there are several meanings of "risk." Risk is described as a series of events
that have either a negative or positive impact on the project. Despite the different definitions of
pe
risk, all contain the same concept. The words "loss" and "uncertainty" have been mentioned in
most risk definitions [4].
Basically, risk management isn't a new concept, and it's been used for a long-time using
ot
quality, time, and cost of building projects, the nature, occurrence, and impact of risk in
construction have recently become a topic of concern [7].
The rapid growth of the Ethiopian economy necessitates enormous infrastructure and asset
ep
development. While this provides opportunities for project stakeholders, it is critical to employ
effective risk management methods to deal with risks associated with variable construction
Pr
activities in order to complete projects on time, on budget, and with high quality, safety, and
environmental sustainability.
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4072468
Several authors' previous research focused on identifying and categorizing risks associated with
ed
construction projects. Some of the authors include [8, 9, 10, 11, 12, 13], and others mentioned
numerous risk factors that contributed to a project suspension, cost overruns, and quality
deprivation. They all identified several risk variables and categorized them into internal and
iew
external hazards that could arise during construction projects.
From the works of the above scholars, External risks that are beyond the project team's control
were classified as environmental risk, political risks, economic risks, legal risks, social risks, and
nature risks. On the other hand, internal risks that arise from the specific nature of the project and
ev
events and are within the control of the project team were divided into design risks, financial risk,
construction risks, management risks. In this research, both external and internal risks, as well as
the categories that correspond with them, are identified and used for the Assessment of Risk
r
Management Practice in the Construction of Building Projects in Gondar city.
1.1.External risk
er
External risks are not directly related to the construction process, but they have a significant weight
in terms of the completion of the project. They can be categorized as follows.
pe
1.1.1 Environmental risk
Climate change has an adverse effect on projects all around the world. Although environmental
risk cannot be eliminated, it can be decreased by taking the required actions. Environmental risk
ot
plays a significant role in large building projects, notably transportation projects. To avoid material
durability being reduced owing to climatic change, construction supplies should be appropriately
stocked. During the construction material selection process, the material that is most suited to the
tn
causes of political risk, such as the possibility of negative consequences from political events (such
as wars, regime changes, revolutions, political violence, riots, insurgencies, terrorist attacks, and
coups) and government activities (e.g., expropriations, unfair compensations, foreign exchange
ep
restrictions, illegal interferences, changes in laws, corruption, poor enforcement of the contract,
and labor restrictions) [16]. The second approach focused on the repercussions of political risk,
Pr
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4072468
1.1.3 Economic risk
ed
In terms of economic risk, inflation and unexpected price fluctuations are the most significant [18].
Currency fluctuations are an economic risk to consider when designing a significant construction
project, especially for international enterprises. Many countries have recently used foreign cash to
iew
build privately financed infrastructure, putting their local currencies in danger of depreciation.
International lenders are rarely willing to take such a risk, preferring to get payments in foreign
currency. In the past, public corporations or governments were willing to absorb currency risk; but
now, with the increased need for private financing, the risk of currency depreciation now falls
ev
mostly on the project promoter, and the lender is unwilling to assume it [19]. This risk factor refers
to challenges or concerns about the project's macroeconomic impact on the community and region
in which it will be built [20]
r
1.1.4 Legal and order
er
Some of the legal and order-related risks include project partner breach of contract, lack of enforcement of
legal judgment, improper verification of contract documents, lack of knowledge of arbitration, and
uncertainty and unfairness of court justice [14].
pe
1.1.5 Natural risk
1.2 Internal risk
Internal risks in large building projects are frequently linked to the management team's control.
ot
Defects in the design that cause the asset to be built yet fail to meet the specified standards, legal
requirements, and any environmental or other constraints. Such situations necessitate a revision to
the project, resulting in delays and, most importantly, cost increases. Defects or failures in the
rin
design that cause the project to fall short of the contract's service standards, or that cause a rise in
operation and maintenance (O & M) expenses to fulfill the contract's service requirements.
Some design risks include design flaws and omissions, the design process taking longer than
ep
expected, stakeholders requesting late revisions, and failing to complete the work in line with the
contract [21].
Pr
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4072468
1.2.2 Technical Risk
ed
Anything that prevents from creating a product that fits a customer's desire is considered a
technical risk. This can be due to a lack of funding and materials, a lack of site assessment, or an
imperfect design. Changes in project scope and needs, as well as design flaws or omissions, are
iew
major causes of these risks.
Material shortage, poor quality of procured material, unknown site physical condition,
Obsoleteness of building equipment, wastage of materials by work. are also some of the technical
risks [14].
ev
1.2.3 Construction Risk
Contractors and subcontractors are more likely to be the sources of most construction risks.
Experienced contractors must be involved in the project as early as possible to make sound
r
preparations for generating legitimate construction programs in order to keep the construction
er
activity on schedule. Construction phase risks include machinery, delays due to rain and other
factors, uncertain market conditions, contractor productivity issues, time [21]. Construction risks
also include labor productivity, labor disputes, site conditions, equipment failures, design
pe
revisions, too high-quality standards, and new technologies [22].
1.2.4 Management risk
The wrong project team selection, lack of a proper project manual, lack of procedures, a project
being too complex for the available resources, inability to take prompt remedial actions, poor
ot
quality control, poor control of status review, lack of an experienced person in the project team,
and inadequate communication infrastructure are some of the construction management risks.
tn
Short tendering time, improper project feasibility study, time constraint, and no past experience in
similar projects, are also some of the management risks [14].
1.2.5 Finance Risk
rin
The ability to overcome the project's financial risk all the way to ultimate completion and operation
is referred to as "financial risk." This risk factor refers to challenges or concerns about the project's
funding, such as the execution period, operations, or equity financing [20].
ep
Finally, the findings of the study will contribute to risk management practice in the Ethiopian
construction sector, more specifically in Gondar city, as well as provide useful information to
international companies interested in providing construction project management services to
Pr
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4072468
Gondar city and the country of Ethiopia. The objective of this research is to identify the major
ed
risks that will be encountered in building construction projects in Gondar city, Ethiopia.
2. Methodology
2.1. Research Flow Process
iew
Identification of the
Problem
ev
Review Literature
r
Selection of Study Area
er
pe
Research Questionnaire
Design
Data Collection
ot
tn
Conclusion
Pr
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4072468
ed
2.2. Study Area
Gondar is located in Ethiopia, Amhara Region's North Gondar Zone. The zone connects Bahirdar,
the Amhara Regional State's major administrative city, Lake Tana, the Simien Mountains, and
iew
Sudan. Gondar has a population of 299,969 people as of 2016. Gondar was originally the capital
of the Ethiopian Empire and, afterwards, the Begemder Province. The city is home to the ruins of
several royal castles, including those in the Fasil Ghebbi UNESCO World Heritage Site, which
has earned Gondar the moniker "Africa's Camelot." The data was collected from different building
ev
construction stakeholders in the city like owner/client, contractor, and consultant.
r
Building construction risk information was gathered by looking through old journals and reviews.
The information was then gathered from people who were involved in construction projects. This
er
information pertains to the risk variables that the construction company faces during project
implementation. These facts are gathered from team leaders, managers, site engineers, office
pe
engineers, project managers, and laborers participating in building projects.
company name, project name and details, and interviewer information (name, email, and phone
numbers). Then, in the second part of the questionnaire survey, the risk variables that are involved
in building construction projects were input and arranged according to the type of risk involved.
tn
Ten main categories of risk involved in construction projects are selected, such as: Construction
and design risk, management risk, financial risk, Economic risk, political risk, Law and order risk,
technical risk, climate condition risk, Accidental risk, and others. Under these ten categories of
rin
After the questionnaire Structure is done, the data collection process is started. The questionnaire
was prepared in the form of a five-point Likert scale, i.e., 1-very low, 2-low, 3-moderate, 4-high,
and 5-very high importance. A total sample of 32 questionnaires were distributed to the
Pr
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4072468
Table 1: Distributed questionnaire and response returned/based on parties
ed
Parties in the Questionnaire Questionnaire % Of responses
construction industry distributed returned
Owner/client 11 9 81.82
iew
Contractors 11 8 72.73
Consultants 10 9 90.00
Total 32 26 81.25
ev
Under Under Number of Percentage of
Stakeholders Under Contractor
owner Consultant Respondents responses
Office 3 2 2 7 26.93
r
Engineer
Architect 1 0 3 4 15.38
Project
Manager
Site Engineer
General
1
3
3
2
er 0
1
4
6
15.38
23.08
pe
1 1 3 5 19.23
Manager
Total 9 8 9 26 100.00
The required information from the questionnaire survey is retrieved and graded using the
quantitative method of the relative importance index. The RII approach is used to analyze the data.
tn
Following the analysis, the various hazards were graded according to the severity of their influence
on the construction project. The relative importance index (RII) was determined as follows:
∑𝐖 𝟓𝐧𝟓 + 𝟒𝐧𝟒 + 𝟑𝐧𝟑 + 𝟐𝐧𝟐 + 𝐧𝟏 𝟓𝐧𝟓 + 𝟒𝐧𝟒 + 𝟑𝐧𝟑 + 𝟐𝐧𝟐 + 𝐧𝟏
𝐑𝐈𝐈 = 𝐀𝐍
= 𝟓𝐍
= 𝟓 (𝐧 𝟓 + 𝐧 𝟒 + 𝐧 𝟑 + 𝐧 𝟐 + 𝐧 𝟏 )
(1)
rin
Where,
w = Weight allotted to each risk (by response to questionnaire survey)
ep
The process of recognizing risk and choosing how and to what degree it should be shared is known
as risk allocation. The majority of owners recognize that risk is an unavoidable aspect of the
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4072468
construction process. Many owners are unaware that by allocating risks to the right members of
ed
the construction team - the contractor, designer, or owner - the cost of risk management, and hence
the project's construction expenses, can be decreased [23].
iew
Risk Allocation (%) = 𝐍𝐨 𝐨𝐟 𝐐𝐮𝐞𝐬𝐭𝐢𝐨𝐧𝐧𝐚𝐢𝐫𝐞 𝐀𝐧𝐚𝐥𝐲𝐳𝐞𝐝
× 𝟏𝟎𝟎
(2)
Table 3: Risk Allocation to the Shareholders in Gondar City
ev
ID Owner Contractor Consultant Shared
R1 Changes in work 23.53 29.41 29.41 17.64
R2 Defective design 0.00 0.00 82.23 17.64
R3 Quality problems of material 17.64 52.96 11.76 17.64
r
R4 Contractors' incompetence 11.76 52.96 17.64 17.64
Lack of coordination with
R5 5.88 88.24 0.00 5.88
R6
R7
subcontractors
Poor quality of work
Change order negotiations
er 11.76
23.53
47.07
35.30
17.64
17.64
23.53
23.53
pe
R8 Labor strikes and disputes 0.00 82.36 0.00 17.64
Labor, material and equipment
R9 23.53 64.70 0.00 11.76
availability
Labor and equipment low
R10 23.53 70.58 0.00 5.88
productivity
ot
regulations
R14 Delays in resolving disputes 0.00 41.764 0.00 58.82
R15 Permits and ordinances 17.64 35.29 29.41 17.66
R16 Lack of Scope of work definition 11.76 35.29 35.29 17.64
rin
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4072468
ed
Table 4: Risk Analysis Using Relative Importance Index (RII) Method
Risk Risk Factors RII Rank
Risk category
ID
iew
R1 Changes in work 0.569 14
R2 Defective design 0.715 2
R3 Quality problems of material 0.692 3
Construction and Design R4 Contractors' incompetence 0.577 13
Lack of coordination with
R5 0.562 16
subcontractors
ev
R6 Poor quality of work 0.662 5
R7 Change order negotiations 0.585 11
Management
R8 Labor strikes and disputes 0.538 19
r
Labor, material and equipment
R9 0.646 6
Finance availability
R10 Labor and equipment low productivity 0.638 7
Economic
R11
R12
er
Inflation and changes in prices
0.546
1
18
pe
Changes in governments laws and
Political R13 0.477 21
regulations
R14 Delays in resolving disputes 0.608 10
Law and order R15 Permits and ordinances 0.623 8
ot
10
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4072468
ed
3. Result and Discussion
iew
Delayed payment to contractor
Accidents during construction
Unexpected weather
Unforeseen site conditions
ev
Lack of Scope of work definition
Permits and ordinances
Delays in resolving disputes
r
Changes in governments laws and regulations
Delays in obtaining site access
Inflation and changes in prices
Labor and equipment low productivity
Labor, material and equipment availability
er
pe
Labor strikes and disputes
Change order negotiations
Poor quality of work
Lack of coordination with subcontractors
ot
Contractors' incompetence
Quality problems of material
tn
Defective design
Changes in work
0 10 20 30 40 50 60 70 80 90 100
rin
The risk ranks and importance are attained from the analysis done by using Relative Importance
Index (RII) method, based on the obtained responses via the Questionnaire survey. The ranks of
Pr
the risks are based on how much harm they can cause to the project. The importance of the risks
is based on the obtained ranks. In this analysis, according to 21 risk factors survey, the obtained
11
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4072468
top ten major risks analysis are R11, R2, R3, R20, R6, R9, R10, R15, R17, and R14 respectively
ed
shown in Figure 3 and the five least harmful risks to the building project analysis are R16, R12,
R8, R19 and R13 respectively, shown in Figure 4
iew
R14
R17
R15
R10
ev
R9
R6
R20
r
R3
R2
R11
0 2 4
er 6 8 10 12
pe
R11 R2 R3 R20 R6 R9 R10 R15 R17 R14
RII Value 0.746 0.715 0.692 0.692 0.662 0.646 0.638 0.623 0.623 0.608
Rank 1 2 3 4 5 6 7 8 9 10
Figure 3: Bar chart Analysis of top harmful five obtained major risks
tn
R13
R19
R8
rin
R12
R16
0 5 10 15 20 25
R16 R12 R8 R19 R13
ep
12
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4072468
Figure 4: Bar chart Analysis of least harmful five obtained major risks
ed
Risk Assessment is a crucial task which is to be conducted to avoid harmful effects that could pop-
up while initiation of Building project construction. This study was conducted to obtain better
iew
knowledge of risk assessment and how important it is for a project to run smoothly. Risk
assessment will help to better understand the consequences that could occur in the building
construction period. It helps avoid certain disasters through decision-making and planning for
preventive measures. With Risk assessment, there will be certain performance improvements in
ev
the project. In this study, it was made clear that mainly inflation and changes in prices, defective
design, quality problems of material, delayed payment to the contractor, and poor quality of work
are the top five major risks in the building construction project, and that lack of scope of work
r
definition, delays in obtaining site access, labor strikes and disputes, accidents during construction,
and changes in government laws and regulations are the five least harmful risks to the building
er
construction project. Knowing these major and minor risks will help in developing preventive
mechanisms so there will be negligible problems, less time lost, and better budget planning during
pe
the execution of the construction project.
From the top five major risks, this study showed 40% of the risk to the construction project is from
the owner's side, another 40% of the risk is from the contractor's side, and the remaining 20% of
the risk is from the consultant's side.
ot
Again, from the above top five major risks, this study showed 60% of the risk to building
construction is from the construction and design risk categories, 20% of the risk to building
tn
construction is from the economic risk category, and the remaining 20% of the risk to building
construction is from other risk categories.
According to previous research focused on analysis of major risks in construction projects (a case
rin
study in India), the top five major risks in the construction project are environmental risks, design
risks, financial risks, physical risks, and market risks [24]. This showed that the ranking risk in
construction projects varies from one country to another. In India, environmental risks are the
ep
dominant risk factor, but in Gondar, Ethiopia, environmental factors are not even in the top ten
risk factors. And the result showed that the defective design factor is almost the predominant risk
factor everywhere.
Pr
13
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4072468
ed
4. Conclusion
In Gondar, Ethiopia, risk management is still a new term in the construction industry, and this
iew
needs to change as quickly as possible.
This research determined that an effective risk assessment is determination of a quantitative
estimate of risks as risks are involved at every stage of building construction project. This research
provides a thorough grasp of the risk assessment process, which will aid in determining the risks
ev
that may arise during construction. In the construction industry, risk assessment is a useful tool for
assisting decision-making and corrective actions. This assessment of risk factors will help assist
in risk planning and risk management of any building construction project. Furthermore, this will
r
aid in enhancing the performance of building construction projects in ways such as maintaining
project cost and quality, and completing projects on time.
er
The study indicated that the top 5 most significant risk factors in building construction projects in
Gondar city are (1) inflation and changes in prices, (2) Defective design, (3) Quality problems of
pe
material, (4) Delayed payment to contractor, (5) Poor quality of work. And the study showed 60%
of the risk to the building construction is from the construction and design risk categories/internal
risks, 20% of the risk to the building construction is from the economic risk category/external
risks, and the remaining 20% of the risk is from other risk categories.
ot
5. Recommendation
The majority of building construction stakeholders in Gondar city, Ethiopia is unaware of proper
tn
risk management techniques. As a result of this discovery, it is critical and must be implemented
to educate stakeholders about risk management. Academic institutions such as universities,
colleges, and construction management institutes should incorporate risk management in their
rin
The results of this research also recommended that in Gondar, Ethiopia, there is an essential need
ep
for more standardization and effective forms of contract that address issues of clarity, fairness,
roles and responsibilities, allocation of risks, dispute resolution, and payment. All building
construction stakeholders are called for the identification of possible risk factors that could be
Pr
14
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4072468
ed
References
iew
[1] P. R. Berke, "Does sustainable development offer a new direction for planning? Challenges
for the twenty-first century," Journal of planning literature, vol. 1, pp. 21-36, 2002.
ev
current issues and challenges, pp. 429-448, 2012.
r
[4] J. M. Siegelaub, "How PRINCE2 can complement PMBOK and your PMP," 2004. [Online].
er
[5] A. Mills, "A systematic approach to risk management for construction," Structural survey,
2001.
pe
[6] J. L. T. S. L. Bahiru Bewket Mitikie, "The Impact of Risk in Ethiopian Construction Project
Performance," open access Library Journal, vol. 4, 2017.
p. 03119004, 2019.
[9] C. r. m. i. W. R. p. o. H. Kong, "Cost risk management in West Rail project of Hong Kong,"
AACE International Transactions, p. IN91, 2004.
rin
[11] P. Rezakhani, "Classifying key risk factors in construction projects," Buletinul Institutului
Politehnic din lasi. Sectia Constructii, Arhitectura, vol. 58, p. 27, 2012.
ep
15
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4072468
[13] P. a. A.-R. K. a. K. N. Koushki, "Delays and cost increases in the construction of private
ed
residential projects in Kuwait," Construction management and economics, vol. 23, pp. 285-
294, 2005.
iew
(IJCIET), p. 401–409, 2017.
[16] L. a. R. R. a. Z. Q. Zhuang, "Managing business risks in China," Long Range Planning, pp.
ev
606--614, 1998.
r
[18] S. M. El-Sayegh, "Risk assessment and allocation in the UAE construction industry,"
International journal of project management, pp. 431--438, 2008.
er
[19] A. J. M. a. R. G. S. a. L. '. R. Ant'on, "Financial risks in construction projects," African
Journal of Business Management, pp. 12325--12328, 2011.
pe
[20] K. J. a. B. Vidivelli, "ANALYSIS OF MAJOR RISKS IN CONSTRUCTION PROJECTS,"
ARPN Journal of Engineering and Applied Sciences, pp. 6943-6950, 2016.
[22] J. R. P. J. J. B. Patel Ankit Mahendra, "A Study of Risk Management Techniques for,"
International Journal of Innovative Technology and Exploring Engineering (IJITEE), 2013.
tn
16
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4072468