Republic of the Philippines

Science City of Muῆoz, Nueva Ecija

Central Luzon State University
College of Engineering
Department of Civil Engineering

RISK evaluation AND MANAGEMENT

IN large CONSTRUCTION PROJECTS

Blanco, Evaline faith t.

Fernando, Samuel king Dwight

Gregorio, ma. Lourdes

Joaquin, mark Lawrence

Monteverde, xenah s.

A STUDY ABOUT THE RISK EVALUATION AND MANAGEMENT

 IN LARGE CONSTRUCTION PROJECTS

Authors

Blanco, Evaline Faith T.; Fernando, Samuel King Dwight;

Gregorio, Ma. Lourdes; Joaquin, Mark Lawrence; Monteverde, Xenah S.

Abstract

Construction industry has changed significantly over the past several years. It is

an industry driven primarily by private investors; the presence of securitized real estate

has increased considerably. It is vulnerable to the numerous technical & business risks

that often represent greater exposures than those that are traditional. Thus, risk assessment

need arises. Risk assessment is a tool to identify those risks in a project and manage it

accordingly with proper treatment. Risk assessment is defined in this study as a technique

that aims to identify and estimate risks to personnel and property impacted upon by a

project.

The general methodology of this study relies largely on the survey questionnaire

which was collected from the local building contractors of different sizes by e-mail or by

personal meeting. A thorough literature review is initially conducted to identify the risk

factors that affect the performance of construction industry.

The survey questionnaire is designed to probe the cross-sectional behavioral

pattern of construction risks in construction industry. The questionnaire prepared for the

pilot survey was formulated by seeing the relevant literatures in construction risk

management. The questionnaires were given to 75 engineers, out of which 45 had an

ii
effective reply and two were rejected due to improper answering. Thus, the response rate

is 60% which is considered a good response in this type of survey. This research seeks to

identify and assess the risks and to develop a risk management framework which the

investors or developers or contractors can adopt when contracting construction work in

Philippines.

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 TABLE OF CONTENTS

TITLE

PAGE

TITLE PAGE
i

ABSTRACT ii

TABLE OF CONTENTS
iv

LIST OF TABLES
vii

LIST OF figures
viii

LIST OF symbols
ix

Chapter I : INTRODUCTION

I.I Introduction
1

I.II RISK IN REAL ESTATE AND CONSTRUCTION INDUSTRY

2

Chapter Ii : CONCEPTS OF RISK ANALYSIS AND MANAGEMENT

II.I Risk concepts

4

II.II PROJECT RISK MANAGEMENT

7

II.III Risk assessment

8

iv
 II.IV DETERMINATION of risk
9

II.V Risk exposure

9

II.vI GENERAL TYPES OF RISKS

11

II.VII SOURCES OF RISK IN CONSTRUCTION PROJECTS

18

II.VIII OVERVIEW OF RISK MANAGEMENT

18

II.ix MAJOR PROCESSES OF PROJECT RISK MANAGEMENT

20

II.ix.I Risk identification

21

II.ix.II Risk quantification

22

II.ix.III Risk response development

25

II.ix.IV Risk response and control

27

iI.x Response to risk

28

II.xi ADVANTAGES OF RISK MANAGEMENT

31

II.xii LIMITATIONS OF RISK MANAGEMENT

32

Chapter Iii : Objective of the study

Iii.I purpose of the study

33

Iii.II objective of the study

35

v
 Iii.Iii scope and limitation of the study
36

Iii.Iv significance of the study

37

Chapter Iv : Review of related literature

Iv.I review of related literature

38

Chapter v : Methodology

v.I methodology
54

v.Ii METHOD OF SURVEYING

54

v.Iii QUESTIONNAIRE STRUCTURE

55

v.Iv QUESTIONNAIRE DESIGN

56

v.v RISK RATING

56

v.vi design of survey

57

v.vii ANALYSIS OF SURVEY RESULTS

58

v.viii PILOT STUDY

59

Chapter vi : Results and discussion

60

vi.i GENERAL ANALYSIS

63

vi
 vi.ii FINANCIAL RISK
64

vi.iii MANAGEMENT RISKS

66

vi.iv MArket RISKS

69

vi.v Technical RISKS

71

vi.vi Technical RISKS

73

vi.vii Technical RISKS

74

vi.viii environmental RISKS

76

Chapter vii : conclusion

80

Chapter viii : recommendation

viiI.I recommendations/suggestions for the companies

83

viiI.Ii recommendations/suggestions for future work

85

REFERENCES

86

Appendix A - Questionnaire Survey booklet

88

vii
 List of tables

PAGE

Table 6.1 Results of Survey

61

Table 6.2 Ranking of Financial risks

65

Table 6.3 Ranking of Management risks

67

Table 6.4 Ranking of Market risks

69

Table 6.5 Ranking of Technical risks

71

Table 6.6 Ranking of Legal risks

73

Table 6.7 Ranking of Political risks

75

Table 6.8 Ranking of Environmental risks

76

Table 6.9 For project costing more than 50 crores top ten risks

77

viii
Table 6.10 For project costing less than 50 crores top ten risks

79

ix
 List of figures

PAGE

Figure 2.1 Hierarchical risks involved in a project

Figure 2.2 Graphical representation of risk ratings

Figure 2.3 Overview Risk Management

19

Figure 3.1 Risk Management as an Integral Element

34 of Project Management

Figure 6.1 Bar chart for Financial risks

66

Figure 6.2 Bar chart for Management risks

68

Figure 6.3 Pie chart for Market risks

70

Figure 6.4 Bar chart for Technical risks

72

Figure 6.5 Pie chart for Legal risks

74

x
Figure 6.6 Pie chart for Political risks

75

Figure 6.7 Pie chart for Environmental risks

76

Figure 6.8 Bar chart for project costing more

78 than 50 crores - Top ten risks

Figure 6.9 Bar chart for project costing less

79 than 50 crores - Top ten risks

LIST OF SYMBOLS

1. α - the probability level of the risk occurrence

2. β - the degree of impact or the level of loss if

the

risk occurs

3. ∑ - Summation

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