RISK MANAEGMENT

MGMT 5613

MARCH SEMESTER 2020

Assignment 2

Ehab Salem Al Fahadi

192921209

MASTER BUSINESS ADMINISTRATION (MBA)

FACULTY OF BUSINESS, INFORMATION AND HUMAN SCIENCE

1. Background

Construction is a risky business. Project managers need to manage risks properly in

order to deliver projects successfully. Successful project delivery means completing

projects on time, within budget and within quality and safety expectations. Risk can be

defined as an uncertain event or condition that, if it occurs, has a positive or a negative

effect on at least one project objective (PMBOK, 2004). Risk is concerned with

unpredictable events that might occur in the future whose exact likelihood and outcome

is uncertain (Loosemore et al., 2006). Risks in construction projects can be divided into

internal and external risks. Internal risks include owners’, designers’, contractors’,

subcontractors’, and supplier’s risks while external risks include economic, financial,

political, social and cultural risks. Regardless of the source of risk, if it occurs, it will

have an adverse impact on project objectives.

The construction industry in the United Arab Emirates (UAE) has experienced

unprecedented boom. The UAE economy is one of the fastest growing economies of

the Middle East. This boom is fuelled by the increase in oil prices. Oil is abundant in

the UAE and has been for a long time the catalyst for economic growth. The UAE

Government is taking measures to reduce dependency on oil by diversifying its

economy into the commercial, tourism and industrial sectors. Construction projects are

increasing in size and complexity thus increasing the risks. Owners demand that their

mega projects be completed in a record time to achieve time to market objective. This

puts extra pressure on designers and contractors which leads to increased risk of delays.
2. Objectives

Construction companies respond to risks by adopting various risk management

practices. There is a need to evaluate these practices in order to identify deficiencies

and to identify key barriers impeding the successful implementation of comprehensive

risk management process.

3. Risk management practices

Careful planning is a must for successful risk management results. The main output of

this process is the project risk management plan that details the risk management

methodology, roles and responsibilities, budgeting and timing requirements, ris

categories and probability and impact matrix (PMBOK, 2004). Table 1 presents the

WASs for questions 3–7 related to risk management planning. The responses indicate

that most companies engage in risk management planning and they perform the

planning activities often. Project teams hold risk management planning meetings to

define risk management activities and develop the risk management plan for the project.

International companies put a little more emphasis on planning meetings.

As for the risk breakdown structure (RBS), the overall average is 3.36 and is the same

for both international and local companies. This is a low value considering that

identifying the risk categories is crucial to assist team members in identifying potential

risks. Estimating the cost and resources needed for risk management activities is

important to allow enough budgets for these activities. Companies realise that as the

average for this activity is 3.8. This is not the same for scheduling these risk

management activities. The average is only 3.09. As always, project management teams
 in construction focus on cost rather than time objectives. The final step in risk

management planning is defining the scales for the risk probability and impact. The

team needs to be consistent and work with the same scale. Also, the impact scales for

project objectives should be identified. The average score for this question is 3.58.

Clearly, international companies (3.93) perform this activity more often than local

companies (3.42).

4. Risk identification

Identifying project risks is a key to managing them. The project team needs to identify

all potential project risks regardless of their probability or impact. Risk identification is

an art not science (Barkley, 2004). Risk identification relies heavily on the experience

and insight of the key project personnel (Bajaj et al., 1997). Grey (1995) attributed the

difficulty of risk identification to the pace of technological and commercial change,

increasing project complexity and the relatively less experienced project teams.
5. Conclusion

Local companies have more work to do to overcome the barriers to risk management

implementation and to increase the frequency of use of risk management practices and

tools. Local companies are lagging behind their international counterparts in almost

every aspect of project risk management. It is recommended that local companies

implement project risk management processes as a standard way of doing business.

There has to be continuous support from top management for implementing proper

practices and providing training for managers and other key participants. There is also

a need to increase the use of quantitative risk analysis tools such as the expected

monetary value and the use of probability distributions. This means that they also need

to improve on their record keeping and develop historical database of previous projects.

Additionally, local companies need to devote more time during the planning phase to

properly plan risk management activities and identify risks. They need to use the WBS

not only for scheduling purposes but also to identify risks.

Risk management is vital for successful project completion. Project participants realise

this fact and employ risk management methods in the UAE construction industry.

However, there is still room for improvement in certain processes especially for local

companies.
6. References

Akintoye, A.S. and MacLeod, M.J. (1997) ‘Risk analysis and management in

construction’, International Journal of Project Management, Vol. 15, No. 1, pp.31–38.

https://www.tandfonline.com/doi/abs/10.1080/01446190600827033?src=recsys&jour

nalCode=rcme20

https://www.flandersinvestmentandtrade.com/export/sites/trade/files/market_studies/

UAE%20Construction%20Sector%202016.pdf