ADDIS COLLEGE

DEPARTMENT OF PROJECT MANAGEMENT

PRACTICES OF RISK MANAGEMENT IN CONSTRUCTION PROJECT IN

ETHIOPIAN BUILDING CONSTRUCTION PROJECTS

BY

TOLOSA AMENTE
ID NO. 234/2012

Oct, 2021

ADDIS ABABA, ETHIOPIA

PRACTICES OF RISK MANAGEMENT IN CONSTRUCTION PROJECT IN
ETHIOPIAN BUILDING CONSTRUCTION PROJECTS

BY
TOLOSA AMENTE
ADVISOR
SHEMELIS ZEWDIE (ASSISTANT PROFESSOR)

THESIS SUBMITTED TO ADDIS COLLEGE SCHOOL OF

POSTGRADUATE STUDIES IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS FOR MASTER OF PROJECT MANAGEMENT

Oct, 2021

ADDIS ABABA, ETHIOPIA

 ADDIS COLLEGE SCHOOL OF POSTGRADUATE STUDIES

APPROVAL SHEET
This is to certify that the thesis entitled “PRACTICES OF RISK MANAGEMENT IN
CONSTRUCTION PROJECT IN ETHIOPIAN BUILDING CONSTRUCTION PROJECTS”
Department of PROJECT MANAGEMENT and has been carried out by recommended that the
student has fulfilled the requirements and hence hereby can submit the thesis to the department
for defense. We the examiners’ board approve that this thesis has passed through the defense and
review process.

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Name of chairman Signature Date

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Name of internal examiner Signature Date

Final approval and acceptance of the thesis is contingent upon the submission of the final copy of
the thesis to the postgraduate coordinator through the academic council of the candidate’s
academy.
I hereby certify that I have read this thesis prepared under my direction and recommended that it
is accepted as fulfilling the thesis requirements.
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Name of major thesis signature date
DECLARATION
I hereby stated that this thesis is for the Degree of Master of art entitled “PRACTICES OF
RISK MANAGEMENT IN CONSTRUCTION PROJECT IN ETHIOPIAN BUILDING
CONSTRUCTION PROJECTS” The research is the original work and has no submitted any
previous research on this title. The researcher then declared that the thesis is his own
authentic work and confirmed by his signature singed below.

Name: TOLOSA AMENTE

Signature: _________________

Date: Oct, 2021

This has been submitted for examination with my approval, as a university advisor.
Name: .
Signature: ________________
Date: Oct, 2021

ADDIS COLLEGE
Acknowledgment
First of all, my heartfelt thank goes to the Almighty God for his blessings, knowledge,
inspiration and diligence required for the successful completion of this thesis and for making my
dream real. My special thanks and recognition also goes to my research advisor SHEMELIS
ZEWDIE (ASSISTANT PROFESSOR), for his stimulating advice and constructive comments at
every step of writing this thesis as well as for his unreserved efforts to assist me.

My appreciation and thanks is also extended to my family who directly or indirectly contribute
their unlimited initiation and facilitation during my study.

Last but not least, I would like to thank all who have helped me in doing this research, especially
department of project management and Ethiopian building construction workers giving this
success.

Thank You All!!

 ABSTRACT
Risk management is the process of identifying, assessing and responding to risk and it is
important to work as an integrated project team from the earliest possible phases, in order to
identify and efficiently deal with risks when they arise. The aim of this study is to assess the
Practices of Risk Management in Construction Project in Ethiopian Building
Construction Projects. The sampling method was purposive and simple random sampling (SRS)
techniques. A sample of 319 responses were obtained (252 were building and general
contractors and 67 were consultants) was used on the study. The primary source has been done
using the quantitative approach, with the help of survey instrument, based on a survey
questionnaire. The secondary source has been done through the review of previously established
literature for achieving the research objectives. Descriptive statistics tools presented by using
tables, percentages and mean score were used to analyze information generated from
respondents with the help of SPSS v20 software. The study revealed that financial difficulty and
poor contract management were identified to be the most important causes of risk with a very
high level of occurrence and a high level of impact on project objectives in the Ethiopian
building construction projects. Thus the financial part of risk is very high than any other risk.
Political risk is substantially very low for the large firms when compared to other risk. The
overall use of risk management tools and techniques is minimal. Out of the five tools and
techniques, open and effective communication channels between/ among project team, the
contractors, consultants, client and using risk register/matrix reviewed by the project
team/project manager are ranked as the most frequently used risk management practices. Most
parties involved in Ethiopian building construction projects don’t use risk management
techniques in their projects because of lack of awareness about their significance and some don’t
use them fearing they need to hire additional staff and acquire more resources. Finally the study
recommends that contractors should learn how to share and shift different risks by hiring
specialized staff or specialized sub-contractors. A special attention should be given to managing
Financial and Contractual areas of risk since they were identified as most important risks in
Ethiopian building construction projects. Establishing a risk management team is highly
recommended in the Ethiopian building construction projects.
Keywords: Risk, building construction projects, project team, contractors, consultants and
client.
Contents
DECLARATION.............................................................................................................................4
Acknowledgment.............................................................................................................................5
ABSTRACT....................................................................................................................................6
List of tables....................................................................................................................................9
LIST OF ACRONYMS.................................................................................................................10
Chapter One...................................................................................................................................11
1. Introduction................................................................................................................................11
1.1 Background..........................................................................................................................11
1.2 statement of the Problem.....................................................................................................14
1.3. Objectives...........................................................................................................................16
1.3.1. General Objective of the Study....................................................................................16
1.3.2. Specific Objectives......................................................................................................16
1.4. Research questions..............................................................................................................16
1.5 Significance of Study...........................................................................................................17
1.6. Scope of the Study..............................................................................................................17
CHAPTER TWO...........................................................................................................................18
2. LITERATURE REVIEW..........................................................................................................18
2.1. Introduction.........................................................................................................................18
2.2. Definition of Project and Project Management..................................................................18
2.3. Project Management Knowledge Areas.............................................................................19
2.4 Building construction projects.............................................................................................19
2.5. The Risk Management Practices........................................................................................21
2.6. Risk Management Process..................................................................................................22
2.7 Risks in construction............................................................................................................22
2.8 Risk management in construction........................................................................................25
2.8.1 Risk identification (ID).................................................................................................26
2.8.2 Risk assessment/analysis Risk identification follows on risk assessment....................26
2.8.3 Risk responses (RRs)....................................................................................................27
2.8.4 Risk control...................................................................................................................28
CHAPTER THREE.......................................................................................................................33
RESEARCH DESIGN AND METHODOLOGY.........................................................................33
3.1. Introduction.........................................................................................................................33
3.2 RESEARCH METHODOLOGY........................................................................................33
3.3 Research Design..................................................................................................................33
3.4 Research Approach..............................................................................................................34
3.4.1 Target population of the Study.....................................................................................34
3.5 Sampling technique.............................................................................................................34
3.5.1 Sample Size Determination..........................................................................................35
3.6 Data Types and Sources.......................................................................................................36
3.6.1 Questionnaire design....................................................................................................36
3.6.2. Interview......................................................................................................................36
3.7. Methods of Data Analysis..................................................................................................37
3.8 Ethical consideration...........................................................................................................37
CHAPTER FOUR.........................................................................................................................38
4. DATA ANALYSIS, PRESENTATION, INTERPRETATION AND DISCUSSION.............38
4.1 Introduction..........................................................................................................................38
4.2 Results of the Demographic Characteristics of the respondents.........................................38
4.3 Attitude towards Risk and the Risk Management Process..................................................40
4.4 Knowledge in Relation to Risk Management......................................................................42
4.5 Risk Management Process...................................................................................................45
4.5.1 How do you respond to risks........................................................................................47
4.6 The level of use of construction contract risk management techniques..............................47
4.7 Risk management practices, tools and techniques/strategies applied to the project............51
4.7.1General Information about Risk Management Plan......................................................53
4.7.2 Risk Analysis Process...................................................................................................54
4.7.3 Risk Response Plan Strategies......................................................................................54
4.7.4 Risk Monitoring and Control........................................................................................56
4.7.5 Risk Management Techniques......................................................................................56
CHAPTER FIVE...........................................................................................................................58
5. Conclusions and Recommendations..........................................................................................58
5.1. Conclusions.........................................................................................................................58
 5.2 Recommendations................................................................................................................60
6. REFERENCES..........................................................................................................................61
APPENDIX Questionnaire............................................................................................................66
List of tables
Table 4. 1 Educational background...............................................................................................38
Table 4. 2 Profession of Respondents............................................................................................39
Table 4. 3 Distributions of Respondent with respect to their Work Experience...........................39
Table 4. 4 How do you perceive risk within the construction industry.........................................40
Table 4. 5 Attitude in relation to risk.............................................................................................40
Table 4. 6 Which stage/phase do you consider most important for Risk Management................41
Table 4. 7 Which Risk Management process is most important...................................................41
Table 4. 8 Have you taken any courses in Risk Management.......................................................42
Table 4. 9 How do you evaluate your knowledge of risk management principles?....................42
Table 4. 10 Are you aware of the concept of Risk Management..................................................43
Table 4. 11 How did you become aware of the principle of risk management.............................43
Table 4. 12 What is the reason for inadequate Risk Management in your organization...............44
Table 4. 13 Do your organization provide any education in Risk Management...........................44
Table 4. 14 How do you draw lessons learned from previous projects.........................................45
Table 4. 15 Does your organization has a clear risk identification process..................................45
Table 4. 16 How do you personally identify risks.........................................................................46
Table 4. 17 Which method do you use for risk identification.......................................................46
Table 4. 18 Probability of occurrence and level of consequence of different risk areas...............47
Table 4. 19 Importance of risk management at different stages of construction...........................49
Table 4. 20 Impact the Risk Areas Have On Project Objectives...................................................50
Table 4. 21 Does your company use risk management techniques...............................................51
Table 4. 22 Who is responsible for managing of risk in your company........................................52
Table 4. 23 General Information About Risk Management Plan..................................................53
Table 4. 24 Risk Analysis..............................................................................................................54
Table 4. 25 Risk Response Strategies............................................................................................55
Table 4. 26 Risk Monitoring And Control Process.......................................................................56
Table 4. 27 Risk Management Techniques/Strategies...................................................................57
LIST OF ACRONYMS
CM……………………..………………... Construction Management
GDP……………………..………………... Gross Domestic Product
PM……………………..………………... Project management
PMBOK……………………..…………….Project Management Body of Knowledge
PMO……………………..…………………..Project Management Office
PMI……………………..………………........Project Management Institute
RBS……………………..……………….......Risk Breakdown structure
RM……………………..………………........Risk Management
RMP……………………..………………..... Risk management process
SPSS……………………..……………………Statistical Package for Social Science
 Chapter One
1. Introduction

1.1 Background of the study

According to the Project Management Institute (PMI, 2004), project risk management is one of
the nine most critical parts of project commissioning. This indicates a strong relationship
between managing risks and a project success. While RM is described as the most difficult area
within construction management (Winch, 2002; Potts 2008) its application is promoted in all
projects in order to avoid negative consequences (Potts, 2008). One concept which is widely
used within the field of RM is called the risk management process (RMP) and consists of four
main steps: identification, assessment, taking action and monitoring the risks (Cooper et al.,
2005). In each of these steps, there are a number of methods and techniques which facilitate
handling the risks.
Risk management involves the establishment of risk consciousness, integration of basic
principles of risk policy and organizational integration. This allows, through proactive action, the
project to be prepared for unavoidable problems and an increased transparency (Schieg, 2006). It
is an ongoing process throughout the entire the project life cycle as risks will continually change.
Risk management is the process of identifying, assessing and responding to risk and it is
important to work as an integrated project team from the earliest possible phases, in order to
identify and efficiently deal with risks when they arise (Potts, 2008). The benefits of the process
are clearer understanding of the specific risks associated with a project, supported decisions by
detailed analysis and a buildup of historical data that can be used to assist future risk
management procedures. Unfortunately, many project managers have still not realized the
importance of implementing project risk as an integral part of the delivery of a project (Smith et
al., 2006).
Managing risks in construction projects has been perceived as a very important management
process so as to accomplish the undertaking goals as far as time, cost, quality, safety and
environmental sustainability (Euripides, 2008; Osipova, 2008). For this reason, consideration of
the risk management process is useful for project managers as well as project teams. The
implementation of risk management system in construction projects must be oriented towards the
progress of the project and encompass all areas, functions and processes of the project.
A project, by definition, is a temporary endeavor used to create something that we have not done
previously and will not do it again in the future (Kerzner, 2009). Because of this uniqueness, we
have developed a ―live with it‖ attitude on risk and attribute it as part of doing business
(Chapman and Ward, 2003). Risk is the chance or probability of something that may or may not
occur; it is something which can be quantified (using standard deviation). Risk is exposure to the
consequences of uncertainty. Uncertainty is something that cannot be predicted using statistical
confidence, normally because of insufficient information; risk is a measure of the probability and
consequence of not achieving a defined project goal (Chapman and Ward, 2003; PMBOK/PMI,
2013).
An inefficient implementation of risk management is often caused by the lack of formalized
procedures, the lack of continuity in the different project phases and an inadequate integration of
knowledge management and interaction between processes and parties. During the construction
process the major responsibility to deal with risks is laid upon contractors by deciding if the risks
should be reduced, avoided, transferred or retained (Liu et al., 2007). In order to manage risk
effectively the contractor needs to understand risk responsibilities, risk management capabilities
and event conditions (Banaitene and A. Banaitis, 2012).
If risk management is set up as a continuous, disciplined process of planning, identifying,
analyzing, developing risk responses, and monitoring and controlling, then the system will easily
supplement other processes such as planning, budgeting, cost control, quality, and scheduling.
Surprises that become problems will be diminished because the emphasis will now be on
proactive rather than reactive management. As Ofori (2013) indicated, building a culture of risk
management is primarily a process of developing people who think and plan projects effectively,
and who are supported by company systems that encourage them to think and plan effectively
ahead.
Construction projects can be extremely complex and fraught with uncertainty. Risk and
uncertainty can potentially have damaging consequences for the construction projects (Vargas-
Hernández, J.G, 2011) and Olamiwale, I.O. (2014).
Construction projects are always unique and risks raise from a number of the different sources
(Simu, K, 2006). Construction projects are inherently complex and dynamic, and involving
multiple feedback processes (Oztas, A. & Okmen, O, 2004). A lot of participants – individuals
and organizations are actively involved in the construction project, and they interests may be
positively or negatively affected as a result of the project execution or project completion
(Loosemore, M., Raftery, J., Reily, C. & Higgion, D, 2006). Different participants with different
experience and skills usually have different expectations and interests (Abassi, G. Y., Abdel-
Jaber, M. S. & Abu-Khajedart, A, 2005). This naturally creates problems and confusion for even
the most experienced project managers and contractors.
Construction is a vital sector contributing significantly to the economic development of all
nations. The construction industry must be dynamic to be able to respond to the changes that the
world is constantly facing (Alhassan, 2016; Marco, 2014). Thus, due to the development of
construction industry in the world in general and in developing countries in particular,
construction sector is considered as a vital sector in today‘s economy.
Therefore, construction projects are shown to be continually failing, getting more complex and
the literature points to an inadequacy of uncertainty and risk management prescription and
practice, particularly in the management of complexity, irrationality and non-linearity. It is
therefore concluded that empirical research on the management of uncertainty and risk in
complex project environments is considered a valuable contribution to knowledge (Harvett,
2013). There has been an increase in research on risk management practice in the construction
industry. However, little research has been conducted to systematically investigate the overall
aspects of risk management on the perspectives of various project participants.
According to the parties involved in Ethiopian building construction projects, most projects are
not completed in conformity to the original plan i.e. they face various problems and changes that
lead to delay, cost overrun or lower quality. The risks involved throughout the life of a building
project might be causes for variations in project objectives if they are not managed well.
According to Francis K. Adams, (2008), risk management in the contractual stage can especially
be very important in preventing the effect of risk on project objectives. There are different risk
management techniques used in different stages of the construction in the outside world; Risk
management in the contractual stage, i.e. before signing the contract is used very frequently. If
risks are identified and allocated to the contracting parties in the contract document, it makes
dealing with the risks if and when they arise very easy. A construction contract risk management
approach that uses a team of experienced construction professionals or experts will lead to better
achievement of project objectives.
Construction industry plays significant role in the economy of developing countries like
Ethiopia. It also has a crucial role to play to the Growth Domestic Product (GDP) of these
countries. For instance, according to the African Economic Outlook 2015 edition, Ethiopia‘s
GDP in construction sector is 9.4% which is preceded by Agriculture, forestry, fishing & hunting
(42.3%) and Wholesale & retail trade; repair of vehicles, household goods; restaurants & hotels
(18.7%) (Falcioni, 2017). This indicates that construction industry in Ethiopia has become
promising driver of GDP, as seen in the world‘s foremost emerging economies, such as
Indonesia and India (Chapman and Ward, 2003).
This research presumes lack of preparation for the different situations that might arise during the
construction process and lack of awareness of the parties about the significance of risk
management are some of the major causes for most building projects failing to meet their
objectives. This thesis tries to study the effect of lack of risk management on the Ethiopian
building construction projects and aims to identify the level of use of risk management especially
in the contractual stage and its significant role in meeting project objectives specifically in Addis
Ababa.

1.2 statement of the Problem

In order to accomplish project objectives with specific attention on time, cost quality, safety and
environmental sustainability, construction project Risk Management has been identified as a key
step to embark on (Alhassan, 2016). Therefore Risk Management should be emphasized in
construction project, regardless of the project size to assure the achievement of project
objectives. With construction projects becoming increasingly complex and dynamic in their
nature as well as the introduction of new procurement methods, many contractors have been
forced to have a rethink about their approach to the way that risks are treated within their
projects and organizations (Ejohwomu, 2014).
It is not realistic to consider a construction project with no risk. The risk is present in most of the
type of activities that comprehend a construction project. Based on (Loosemore M, Raftery J,
Reilly C and Higgon D, 2006) it is the presence of the risks that influence the non-
accomplishment of objectives of the project leading to a poor performance regarding the triple
constraint of cost, time and quality.
According to (Dervishi, 2015), there is a considerable number of projects in Albania that are
listed as a failure or they face different changes of the project objectives, resulting with time and
cost overrun low quality. (Dervishi, 2015) emphasizes that among many reasons of project scope
failure can be listed as important the lack or poor experience on building a stable risk
management process, many cases it is noticeable that risk response plan is based on reactive
actions and decisions and not proactive.
This systematic approach of dealing with risks and uncertainties in a reactive way lead to cost
and budget, time overrun, low quality and in the overall low performance of delivering the
project.
However, according to the parties involved in Ethiopian building construction projects, most
projects are not completed in conformity to the original plan i.e. they face various problems and
changes that lead to delay, cost overrun or lower quality (Addis, 2014). As a result, many
building construction projects in the country encounter considerable risk management problems
and fail to recognize proactive risk management approach or even fail to distinguish the
importance of this knowledge area (Addis, 2014; Dagmawit, 2016; Frezwed, 2016; Tewodros,
2017; Yimam, 2011).
The two knowledge areas of risk and safety management are the least matured knowledge areas
in Ethiopia. For practical purpose, the two knowledge areas could be considered to be totally
unknown in the management of construction project in the country or practiced little or by very
few in the industry. This is perhaps due to the low level of awareness and importance given to
the two knowledge areas (Yimam, 2011, p. 162).
Risk factors will cause different severity of the consequences. If one doesn’t consider these risk
factors at all, or ignore the main factors, they will cause damage because of decision-making
errors. Quality targets, time targets, cost targets are the three major objectives of construction
project management. Especially in the building construction projects, the time objective is
closely and inseparably related to the cost objective. Therefore, we cannot ignore risk
management of the effect on time objective caused by risks during construction phase.
It is the duty of the participants in the construction industry such as client, contractors, designers
and project managers to develop a risk management process that is led by the proactive
approach, to avoid the changes or non-accomplishment of the project scope, avoiding cost and
time overrun. According to (Kerzner, 2009) a risk management process can be improved only
once the project management and other stakeholders face new challenges, by changing the
approach, building a stable process, and involving all participant in this process.
This research is important, where it discovers the risk factors in the construction industry in
Addis Ababa and determines the importance of each factor in terms of severity and allocation.
Only by analyzing the influence, can we make a better predication and control of the schedule
and ensure the project complete successfully.
Research on risk assessment and management has been done by various people, mostly on
developed countries. In Ethiopia, only few research works have been done in this area, which
focuses on general constructions including roads and dams. Other researchers also work on risk
management from owners and insurances perspective. Thus to fill the gap this study focuses on
risk management in field of building construction and from contractors perspective.

1.3. Objectives

1.3.1. General Objective of the Study

The general objective of the study was to assess the Practices of Risk Management in
Construction Project in Ethiopian Building Construction Projects.

1.3.2. Specific Objectives

The study specific objectives are:
 To identify the level of use of construction contract risk management techniques in
Ethiopian building projects.
 To illustrate if risk analyzes can improve the process of finding the proper balance
between costs, time and quality.
 Examine the perception and attitude of risk and RM within the building construction
projects.
 Examine how knowledge is managed in relation to RM.
 Identifying key risk factors that the construction process faces.

1.4. Research questions

To achieve the aim of this research were drawn the below questions:
1 What is the level of use of construction contract risk management techniques in Ethiopian
building projects?
2 What are the risk management tools being used to control the identified risks in Ethiopian
building projects?
3 How the risk management methods and risk analysis affect project duration, quality, and total
cost?
4 What are the perception and attitude of risk and RM within the building construction
projects.
5 What are the key risks in building construction of Addis Ababa?
1.5 Significance of Study
This work will help to understand how it developed a risk management strategy on construction
projects in Ethiopia, what is the impact of risk analyses in a construction project.
Domestic building contractors to get valuable information on how a proactive risk management
practices influence the success of construction projects.
Risk management is adopted to contain the possible future risks proactively rather than being
reactive. It applies to any project to evaluate the most, major, and common risks which cause bad
effect on the construction project to achieve its objectives. The risk management concept is very
less popular technique in the construction industry, and then it is necessary to spread awareness
of the same.
In the transfer of new knowledge as regards PRM practices to the local public and private
construction industries, as a basis for further research. This study can be a motivation for another
researcher to focus on this area, to develop a clear strategy, to minimize the gap between
theoretical and practical construction risk management.

1.6. Scope of the Study

The scope of the research is limited to the building construction projects of Addis Ababa only
and will not take into account that other categories of construction industry like heavy
engineering construction (tunnels, bridges, dams, etc.), industrial projects (factories and
workshops), road and infrastructure projects (sewage and water supply). Only locally registered
Contractors are addressed by the study and above BC-3grade contractors are involved in the
study. The study also focused mainly on the project main actors such as project managers and
project teams. Clients, contractors and consultants were also included in the study so as to get
robust and valid data from the participants. From methodological perspectives, the study is
designed to employ mixed methods research approach so as to examine risk management
practices of the two building contractor firms. Thus, mixed method research design was
employed in the study.
 CHAPTER TWO
2. LITERATURE REVIEW

2.1. Introduction
This chapter presents the findings from different reviewed literatures on the subjects of
construction, project delivery systems, contract, risk and risk management. The risk facing any
project depends on the type and methods of construction, the stage of construction, the type of
contract and delivery system and project type and complexity etc. similarly the risk management
technique that should be applied also depends on the above factors. Hence, the literature review
tried to highlight these issues in relation to risk with the main focus being on management of
construction risk starting from the contractual stage.

2.2. Definition of Project and Project Management

Project is characterized by a distinctive set of coordinated temporary activities undertaken by an
individual or team to meet specific objectives within defined time, cost and quality/performance
constraints. Project management can be defined as the planning, organizing, monitoring and
controlling of all aspects of the project to achieve the objectives on time and to the specified cost,
quality and performance. According to Project Management Institute (PMI, 2008) Body of
Knowledge (PMBOK), projects, which are temporary endeavors undertaken to meet unique
goals and objectives within a defined scope, budget and time frame, typically go through a life
cycle. The project life cycle, which is a logical sequence of activities to accomplish the project‘s
goals, is made up of five stages viz., the Project Initiation stage, the Project Planning stage, the
Project Execution stage, the Monitoring and Controlling stage, and the Project Closure stage.
Attention to detail, along with the involvement of key stakeholders and proper documentation at
each stage ensures the success and quality of the project. The sequential phases are generally
differentiated by the set of activities that are carried out within the phase, the key actors
involved, the expected deliverables, and the control measures put in place (Project Management
Institute [PMI], 2008) Chatfield, (2007) as cited in Ofori, (2013), also defines project
management as the discipline of planning, organizing and managing resources to bring about the
successful completion of specific project goals and objectives.
2.3. Project Management Knowledge Areas
As Project Management Institute (PMI) identified, there are ten project management knowledge
areas that project managers should be familiar with in order to carry out their projects
successfully (PMBOK/PMI, 2013). These areas include Project Integration Management, Project
Scope Management, Project Time Management, Project Cost Management, Project Quality
Management, Project Human Resources Management, Project Communications Management,
Project Risk Management, Project Procurement Management, and Project Stakeholder
Management. For the purpose of this work, our discussions will be focused on project Risk
Management, its processes and practices. The PMI aligns these Knowledge Areas with the five
Process Groups of Project Management (PM).

2.4 Building construction projects

A construction in simple words is a process of constructing something by human for one purpose
or another. It may be a road, bridge, a dam, a private residence, an airport, a commercial
building, etc. According to Wikipedia, construction is a process that consists of the building or
assembling of infrastructure. Construction is the recruitment and utilization of capital,
specialized personnel, materials, and equipment on a specific site in accordance with drawings,
specifications, and contract documents prepared to serve the purposes of a client. According to
Moavenzdadeh F. (1976), construction contributes to the economic development of any country
by satisfying some of the basic objectives of development including output generation,
employment creation and income generation and re distribution; it also plays a major role in
satisfying basic physical and social needs, including the production of shelter, infrastructure and
consumer goods.

Wikipedia, the free encyclopedia, defines building construction as the process of adding structure
with walls to real property or construction of buildings. It further discuses that if this buildings
are not designed and constructed by professionals they might lead to undesirable results such as
structural collapse, cost overrun and disputes. A project is a temporary endeavor undertaken to
create a unique product, service or result (Project Management institute, 2008). According to
Hillson D., (2009), all projects are risky and there are three separate reasons for that. The first
reason is that all projects share common characteristics which inevitably introduce uncertainty.
Some of this common characteristics are projects are unique, complex, involve assumptions and
constraints, performed by people and involve change from a known present to an unknown
future. The second reason is that all projects are undertaken to achieve some specific objectives.
The final reason is that all projects are affected by the external environment they exist in.

A building construction project, like any other project, also faces different risks throughout the
life of the project. According to Nafishah B., (2006), this is due to the uniqueness of every
project, the uncertainties introduced by the project stakeholders, statutory or regulatory protocols
and other intrinsic and extrinsic constraints. He further discusses that risk can constrain the
achievement of key project objectives, time, cost and quality. Inability to achieve the project
objectives has great consequence on all project stakeholders involved in the construction. For the
client it could mean extra cost and less return on investment, for the consultants it could result in
loss of confidence placed in them by the clients, for the contractor it could mean loss of profit
and bad reputation etc. The construction industry is a very important part of any country. It
highly contributes to the growth and development of the economy in developing countries like
Ethiopia (JillWells. 2001; Moavenzdadeh F. 1976). According to these studies, the construction
industry plays a major role in developing countries since it constitutes a significant portion of
Gross national product and employment; at least three-quarters of the world’s construction
workers are in the less developed countries. The studies also state that construction workers in
the less developed countries are more exposed to accidents and endure much poorer terms and
conditions of work than workers in the developed countries. According to the general labor
office meeting report, Geneva, JillWells, 2001, the construction industry has a poor report image
due to poor construction and inadequate inspection. The report says this poor image is directly a
result of the nature of the work which is difficult and dangerous. Construction is a major
component of investment; hence expansion in construction activity is closely related to economic
growth. Numerous studies have shown that construction output grows particularly fast, often
exceeding the rate of growth of the economy as a whole, as countries put their basic
infrastructure in place during the early stages of development. This implies that construction
plays a major role in improving the economic growth of a country. Despite improvements in the
project risk management practices across the developed countries construction industry, in the
developing countries construction projects are still suffering from ill-defined scope, design and
mismanagement. And as a result, the projects are accompanied by clear time, cost and quality
gaps (Monvenzadeh F., et al, 1976; Jill Wells, 2001) Risk is unavoidable in almost all
construction projects. Because of exposure to the outdoors, construction is affected by both daily
and seasonal weather variations. It is also often influenced significantly by the availability of
local construction financing, labor, materials, and equipment etc. These and all the above
mentioned factors make construction a very risky undertaking. Construction is especially
important in developing countries since it can greatly contribute to the economic growth but as
mentioned above the industry is faced with a lot of problems. Hence, to make the construction
effective and efficient there should be some way to manage and control the risks and minimize
the problems. According to Hillson D., (2009), since all projects are exposed to risk, successful
projects are the ones where that risk is properly managed.

2.5. The Risk Management Practices

Risk management is one of the most critical factors in project management practices to verify a
project is successfully completed (Euripides, 2008). The construction industry faces constant
challenges both from internal and external aspects. From internal perspective, the increase in the
numbers of features such as internal policies, goals and objectives of the organization and the
interests of stakeholders in a project‘s scope, construction deadlines and restricted budgets raise
the complexity of building construction projects. From an external viewpoint, economic
uncertainty, increased competition within the industry and the growing influence of regulatory
agencies drive profit margins down. Antunes and Gonzalez, 2015 indicated, the construction
sector relies on management practices based on intuition, experience and poor risk management.
These practices usually impede the appropriate level of ability to handle the uncertainty and
complexity involved in construction projects, resulting in project failures in terms of finishing
projects within deadlines, budgets, quality and expected safety. As a common practice, the
building construction industry utilizes ordinary project management practices and frameworks
(Ibid, 2015). Practices that are limited to assessing the consequences of deviations from the
project plan rather than dealing with the causes of delays in the production system (Koskela in
(Antunes and Gonzalez, 2015). However, as (Chapman and Ward, 2003; Pieplow, 2012; PMI,
2008) state, much good project management practice can be thought of as effective uncertainty
management. For example, good practice in planning, co-ordination, setting milestones, and
change control procedures seeks to manage uncertainty directly. In addition, key ISO principles
according to (Robert, 2016) identified risk management as an ongoing process include: being a
systematic and structured process being dynamic, iterative and responsive to change being open
to continuous improvement and enhancement being an integral part of organizational decision
making process being based on the best available and dependable information.

Therefore, ISO 31000 applies to existing legacy management practices to formalize and improve
risk management processes (Robert, 2016). Nevertheless, most texts on project management do
not consider the way uncertainty management should be integrated with project management
more generally, in terms of a wide view of what a coordinated approach to proactive and reactive
uncertainty management can achieve (Chapman and Ward, 2003).

2.6. Risk Management Process

The overall goal of the risk management process is to maximize the opportunities and minimize
the consequences of a risk event even though variety of risk management models with different
numbers of stages can be found in the literature. For example, the international standard offers a
model with four steps: risk identification, risk assessment, risk treatment, and risk review and
monitoring. PMBOK‘s model (PMI 2000 in Osipova, 2008)) is similar but divides risk
assessment into two processes of qualitative risk analysis and quantitative risk analysis. Project
Management Institute (PMI, 2008) defines PRMP as a subset of project management with four
processes: risk identification, risk quantification, risk response planning and risk control. By
giving focus attention to risk analysis, (Chapman and Ward, 2003; Robert, 2016) categorized the
risk management into six process including plan risk management, identify risks, perform
qualitative risk analysis, perform quantitative risk analysis, plan risk responses and monitoring
and control risks. These processes can also be categorized into two main interrelated phases after
decision is made about risk management planning: (a) risk assessment phase and (b) risk control
phase (Williams, 2004). The risk assessment phase involves risk identification, risk analysis, and
risk prioritization whereas risk control phase comprises of risk plan, mitigate and risk monitor.

2.7 Risks in construction

The risk is attached to human life and is present in all human attempts. Nevertheless, the
complexity of the work involved in construction activities makes the latter more predisposed to
risk (Olamiwale, I.O; 2014). The part of the risk involved in construction is also more different
and varies in degree owing to this complexity (Dey, P.K. & Ogunlana, S.O; 2004). Several
researchers have tried to define risk in various ways; generally these definitions were tailored to
the objectives of the projects they were dealing with at a particular time. Nonetheless, the
definition of risk is highly dependent on the importance placed on applied management in an
establishment (Simu, K; 2006). Risk describes a situation where former documentation and
experience exist upon which measures are taken by obtaining a possible result (Oztas, A. &
Okmen, O; 2004). Every time a decision is taken as a continuum of possible outcomes in
addition to certain probabilities attached to the outcome, a risk exists (Smith, N.J., Merna, T., &
Jobbling P; 2006). Furthermore, (Abassi, G. Y., Abdel-Jaber, M. S. & Abu-Khajedart, A; 2005)
argue that risk is occasionally expansively defined, beyond financial, as a probability of loss,
injury, setback, disadvantage or destruction. Similarly, (Al-Salman, A; 2004) indicates that risk
relates to a dearth of information or previous experience in a given situation being managed by a
decision maker. Further, the risk is considered as the possibility of an investor’s claim in
construction work failing to achieve the predictable measures of feasibility (Warszawski, A., &
Sacks, R; 2004). All these authors proposed that risk was disagreeable occurrence; a
consequence of imaginable but unexpected circumstances. Imaginable circumstances are events
that announce their occurrence, whereas unexpected circumstances are events that occur without
any notice. Various definitions have divulged that risk has an impact or effect on any
construction project. The effects thereof may be computed using many terms: financial loss;
property damages; injury to people and even a combination of all of these (Chapman, R. 2001).
Klemetti, A. (2006) Indicates that project performance, quality, potency, capacity and financial
cost could be altered if an element of risk is involved. According to Baranoff, E., & Kahane, Y.
(2009), construction works such as planning, design and development are vulnerable to some
factors in an uncertain environment. Construction projects are thus executed in an environment
defined by a varying measure of risk and contingencies that could be from known or unknown
conditions (Smith, N.J., Merna, T., & Jobbling P; 2006). Such contingencies are chance
occurrences of events where the probability distribution is unknown. Risks, based on individual
views can be categorized in different ways; some are classified based on their probability of
occurring while others are classified as a consequence of the impact they may have on
construction activities, their types and sources. Despite these various classifications, they are
meant to attain a common objective, that is, they are an important aid in risk management and
assist in forming risk lists that are used when detecting a risk [Wong, J.T.Y. & Huie, E.C.M;
2006) ]. Klemetti, A. (2006) further indicated that that construction risks can be classified based
not only on the impact of the risk on the project but also the source of the risk, while (El-
KarimiAzari, A., Mousavi, N., Mousavi, F.S., & Hosseini, S; 2011) stated that risks are mainly
grouped into two categories according to their source, namely, internal and external. Risks
comprise three groups: known risks, known unknown risks, and unknown risks (Smith, N.J.,
Merna, T., & Jobbling P; 2006). The first category includes minimal variations and often occurs
and is inevitable features of construction works. The second category is foreseeable risk events
with a known probability of occurrence and impact. The last category is those which, the
probability of occurrence cannot be predicted. According to (Zou, P.X.W., Zhang, G. & Wang, J;
2007), the risk could also be grouped based on sources concerned with stakeholders. For
example, the time associated risks, environmentally associated risks, cost associated risks and
safety associated risks. The sub-categories of human risks associated with construction projects
include technical, political, social, economic, legal, financial, health, managerial and cultural
risks. (Kishan, P., Bhavsar, J.J., & Bhatt, R; 2014), grouped risk into ten categories, namely:
Design: Defective design, inaccurate quantities, not coordinated design, rush design, awarding
the design to unqualified designers, lack of consistency between bill of quantities, drawings and
specifications Physical: Occurrence of accidents, because of poor safety procedures, supplies of
defective materials, security of material and equipment, public security, varied labor and
equipment productivity Logistics: Improper site investigation, inaccurate project program,
unavailable labor, materials and equipment, high competition in bids, undefined scope of
working, poor communications between the home and field offices (contractor side) Legal:
Ambiguity of work legislations, difficulty to get permits delayed disputes resolutions, legal
disputes during the construction phase among the parties to the contract, no specialized
arbitrators to help settle fast Environmental: Adverse weather conditions, difficulty to access the
site (very far), environmental factors (floods, earthquakes, etc.) Construction: Gaps between the
implementation and the specifications due to a misunderstanding of drawings and specifications,
actual quantities differ from the contract quantities, design changes, lower work quality in the
presence of time constraints, rush bidding, undocumented change orders. Management: Poor
communication between involved parties, ambiguous planning due to project complexity,
changes in management ways information unavailability (include uncertainty), resource
management Cultural: Religion, cultural custom Financial: Delayed payments on contract,
unmanaged cash flow, inflation, financial failure of the contractor, exchange rate fluctuation,
monopolizing of materials due to closure and other unexpected political conditions Political:
New governmental acts or legislations, inflation, unstable security circumstances (invasions).

2.8 Risk management in construction

Olamiwale, I.O. (2014) Stipulates that managing risk makes a significant role in reducing the
risks encountered in the CI as it provides a systematic way of assigning risk to construction
projects, thus allowing projects to be managed with a higher degree of expectation and
anticipation. According to Simu, K. (2006), RM in the CI is the assessment and response to the
risk that will be inevitably attached to a project. In parallel, RM is the approach and activities
that are put in place to lessen the disturbances that may occur during the action of a project
(Skorupka, D; 2008). In essence, RM is required for the effective detection and proper control of
risk. Effective risk management means any likely future occurrences thereof in a proactive
manner (Kerzner, H; 1998). Consequently, RM that attaches value to proactive measures puts in
place an emergency plan that increases the probability of accomplishing the aims and objectives
of the project (Adnan, H; 2008). Klemetti, A. (2006) Emphasizes that RM involves increasing
the results of positive occurrences and curtailing the effects of adverse events. In other words,
RM is controlling occurrences that may result in a risk, instead of being passive before such
occurrences and reacting later. All the measures that are put in place to control risk are geared
towards achieving the project objectives. RM represents a major part of construction works.
Oztas, A. & Okmen, O. (2004) Asserted that the requirement to manage risk in construction
projects is incessantly increasing as a result of the complexity, size, competition, client consumer
requirements, politico-economic challenges and major difficult physical conditions involved in
such projects. Comprehensive RM will reduce the probability of an occurrence of an event just
as it will reduce the extent of its impact. In accordance with [http://www.finance.gov.au], RM
refers to a coordinated set of activities and methods that is used to direct an organization and to
control the many risks that can affect its ability to achieve objectives. RM ensures that the
decision-maker knows and understands the risks and prepares the necessary plan that can prevent
disasters or diminish their impact. It covers the process of Identification, Assessment, Allocation,
and Management of all project risks (APM; 2000). Risk management process (RMP) is the basic
principle of understanding and managing risks in a project. All steps in the RMP should be
included when dealing with risks, in order to efficiently implement the process in the project. It
consists of the main phases [Smith, N.J., Merna, T., & Jobbling P. (2006)] [Giannakis, M., &
Louis, M.(2011)] [Mazouni, M.H. (2008)] [Agwu, A., & Okogbuo,F.(2015)].

2.8.1 Risk identification (ID)

This is the first stage in the RMP, and it involves capturing all potentials risk that might occur
within the project (Tchankova, L; 2002). Risk Identification (RI) forms the base for the next
steps of risk analysis and control and enables organizations to learn about the areas that are
exposed to risk. If appropriately performed, RI ensures successful risk management as unknown
sources of losses escalate into unmanageable occurrences with unforeseen outcomes (Kuang, Z;
2011). The emphasis is not only aimed at the incapability to identify loss causing risks but also
includes the incapacity to determine opportunistic events. The effect of the non-identification of
positive risks equates to the effect of non-identification of negative risks (Kuang, Z; 2011). RI
involves the identification of all possible risks and circumstances that may affect the
organization, as well as the conditions giving rise to these risks and opportunities. Risk
identification, therefore, facilitates the efficient studying of areas and activities where
organizational resources are at risk, affecting their ability to achieve their business goals (Kuang,
Z; 2011). To conduct RI efficiently, primary project documentation must be in place. The project
charter, scope statement, and project management plan (Including the Work Breakdown
Structure) need to be available to build an exhaustive list of risks. Without these elements as a
frame of reference, it is difficult to assess the risks on a project effectively. The RM plan and the
organizational atmosphere also must be undoubtedly understood to carry out RI. These form the
environment in which the risks will be evaluated. The RM plan may also identify specific RI
practices that are either favored or banned by the organization as part of their risk culture.
According to Deat (2006), all this information can encourage thinking about different risk
matters and concerns when evaluated using the tools and techniques of RI. The tools and
technology that are employed in RI are as varied as the projects they serve. Nevertheless, some
groups of tool and technique types are most frequently used. The best known are Brainstorming,
Interviews, Questionnaires, Delphi technique, Expert systems, etc.

2.8.2 Risk assessment/analysis Risk identification follows on risk assessment.

Adams FK (2008) and Caltrans (2007) identified risk assessment as the next step of the risk
management process. According to Mills A. (2001), risk assessment is a method of using
available information to determine the frequency of occurrence and the level of consequences in
risk management. According to Carr V, Tah JHM (2001), after all, the risks in a project have
been identified; the process of qualitative risk assessment must follow which requires further
analysis through assessing and estimating the probability of risk occurrence as well as its impact
on each risk. Here, different factors need to be considered such as the degree of risk impact on
project objectives and its manageability, the timing of an occurrence, and the likelihood of an
occurrence and its relationship with other risks. All these factors provide a better understanding
of each risk and allow room for a proper and appropriate way of responding to each risk. Two
methods are developed for analyzing risk: qualitative and quantitative methods Raz Z, Shenhar
AJ, Dvir D (2002) and Zwikael O, Sadeh A (2007). The qualitative methods are most applicable
when risks can be placed somewhere on a descriptive scale from low to high level. The
quantitative methods on the other hand are employed to determine the probability and impacts of
the risks identified and are based on statistics, arithmetic’s estimations Hillson D (2000). The
table below summarizes the various techniques used for risk analysis; all these techniques are
used in construction.

2.8.3 Risk responses (RRs)

Risk response is a central component in the RMP that determines what action (if any) will be
taken to address risks evaluated in the identification, qualification, and quantification stages Raz
Z, Shenhar AJ, Dvir D (2002). According to Mills A. (2001), RRs are actions taken to eliminate,
reduce or transfer a risk or its consequence. The risk response process encompasses planning for
an obligatory action to be considered in case a risk event occurs. It also entails taking planned
action if required and following up with the consequences of these actions to ensure that the risk
plan results in the required outcome. A risk response is determined by proposing several
alternatives to eliminate or mitigate an anticipated risk and assign an optimum alternative as a
response (Jannadi OA, Almishari S; 2003). According to Simu K, 2006, RR is the “process of
identifying/developing risk response options and determining actions for treating the risk,
targeting enhancing opportunities and reducing any threats to projects objectives”. RR is, thus,
the selection of an appropriate policy to decrease the negative impact of a risk. Given the fact
that construction projects are distinctive, the risks involved are massive and dynamic in nature.
Hence, it is indispensable to invent appropriate responses to these risks after the initial stages of
risk identification, assessment and allocation. (Baloi D, Price ADF, 2012) Defined RR as the
planned documents procedure for RM that is used to manage risk throughout the project. It is the
stage that involves taking proper measures to accomplish project objectives. Some studies
recommend varied response techniques concerning risks in projects. Oyegoke AS, Khalfan
MMA, McDermott P, Dickinson M (2008), argued that there four distinct ways of responding to
risks in a construction project namely: risk avoidance, reduction, transfer and risk retention,
whereas (Uher TE, Loosemore M; 2004) divided the response techniques into three by
combining avoidance and reduction. Baloi D, Price ADF (2012) On the other hand, indicated
that risk responses can be grouped into mitigation or avoidance and acceptance.

2.8.4 Risk control

After risks have been identified, assessed, and appropriate responses have been developed, those
findings must be put into action. Risk monitoring and control include implementing the risk plan,
which should be an integral part of the project plan. Two key challenges are usually encountered
during monitoring and controlling; the first is putting the risk plans into action and ensuring that
they are still effective. The second is producing significant documentation to support the process.
The step in the description of the RM flow adopted in this study includes ensuring the use of the
previous steps. This is to ensure that the identified risks, which are regarded as important, are
also controlled exactly the way it was organized in the response step. In the control step, it is
also possible to identify new risks that emerge and the continuous process proceeds According to
Lester, A., (2007) risk control aims at controlling deviations, minimize risks and increase the
project value. This stage of the RMP handles risks in a way that project objectives are achieved
effectively. Risk control is based on a proactive approach other than a reactive approach to
having the right measures in place and refining on them continually. No ready-made solutions
are available to minimize risks. However the following corrective measures can assist in
handling the risks associated with construction projects (Schatteman, D., Herroelean, W.,
Vandvonder, S. & Boone, A, 2008): Adjust plans the scope of work and estimates to counter
risk implications. Monitor risks regularly, evolve alternate plans to manage predictable risks,
when needed. Make appropriate decisions. Keep all concerned informed about possible risks.

Various risk management tools are available, but unfortunately they are not suitable for many
industries, organizations and projects (Chapman C. & Ward S, 1997). Although today’s
organizations appreciate the benefits of managing risks in construction projects, formal risk
analysis and management techniques are rarely used due to lack of knowledge and to doubts on
the suitability of these techniques for construction projects.

There are four alternative strategies – risk avoidance, risk transfer, risk mitigation, and risk
acceptance, for treating risks in a construction project. As stated by Hillson,2000, risk mitigation
and risk response development is often the weakest part of the risk management process. The
proper management of risks requires that they be identified and allocated in a well-defined
manner. This can only be achieved if contracting parties comprehend their risk responsibilities,
risk event conditions, and risk handling capabilities Opolot, P.K., Buys, N.S. & Slabber, J.M.
2009.

Before the crisis (2004-2008), due to a lack of contractors’ responsibilities and control in various
steps of a project’s development, the time and quality performance levels of construction projects
in the Lithuania were generally inadequate or even poor. In construction projects, many parties
are involved such as owner, consultant, contractor, subcontractor, and supplier. Each party has its
own risks. Risk transfer means the shift of risk responsibility to another party either by insurance
or by contract. Wang and Chou, 2003 reported that contractors usually use three methods to
transfer risk in construction projects. Through insurance to insurance companies; through
subcontracting to subcontractor; through modifying the contract terms and conditions to client or
other parties.

Construction projects can be managed using various risk management tools and techniques.
Ahmed et al. 2007 reviewed techniques that can be used for development of risk management
tools for engineering projects. Techniques for context establishment, risk identification, risk
assessment and treatment were provided. Application of risk management tools depends on the
nature of the project, organization’s policy, project management strategy, risk attitude of the
project team members, and availability of the resources (Smith, N.J., Merna, T., & Jobbling P,
2006). A risk assessor model (RAM) presented by (Jannadi and Almishari ,2003) was developed
to determine risk scores for various construction activities. The model provides an acceptability
level for the risks and determines a quantitative justification for the proposed remedy.

Risks and uncertainties, involved in construction projects, cause cost overrun, schedule delay and
lack of quality during the progression of the projects and at their end (Giannakis, M., & Louis,
M.(2011) and Mazouni, M.H. (2008). As stated by Baloi and Price (2012), poor cost
performance of construction projects seems to be the norm rather than the exception, and both
clients and contractors suffer significant financial losses due to cost overruns.

Oyegoke et al. 2008 discusses the problems of managing risk and uncertainty in construction
project due to the owner dissatisfaction in project outcome and dynamism within agile
construction environment. The authors identified some areas in supply chain processes which are
prone to greater risks and uncertainty and propose an agile management principle based on the
concept of integration and fragmentation in product development and execution processes
respectively.

Many authors have reviewed problems on time performance in construction projects. Aibinu and
Odenyinka (2006) investigated and assessed the causes of delays in building projects in Nigeria.
The nine factor categories evaluated include: client-, contractor-, quantity surveyor-, architect-,
structural engineer-, services engineer-, supplier-, and subcontractor-caused delays, and external
factors (i.e. delays not caused by the project participants). Finally, ten overall delay factors were
identified, namely: contractors’ financial difficulties, client’ cash flow problems, architects’
incomplete drawings, subcontractors’ slow mobilization, equipment break-down and
maintenance problems, suppliers; late delivery of ordered materials, incomplete structural
drawings, contractors’ planning and scheduling problems, price escalation, and subcontractors’
financial difficulties. The authors pointed the poor risk management as one of the principal delay
factors and concluded that actions and inactions of construction project participants contribute to
overall project delays. According to Baloi and Price (2012), the construction contractors
highlight that delay in payments is common both in private and public projects, with the public
sector being the worse defaulter. Moreover, most types of contracts presume compensation
clauses for delay in payments, but clients rarely agree to pay the interests due to the contract.
Nasir et al. 2003 analysed schedule risks and developed a comprehensive construction schedule
risk model is referred to as Evaluating Risk in Construction–Schedule Model (ERIC-S). The
ERIC-S model provides decision support to project owners, consultants, and researchers as a
project delay prediction tool. Similarly, the Cost-Time-Risk diagram (CTR) proposed by
Aramvareekul and Seider (2006) helps project managers consider project risk issues while
monitoring and controlling their project schedule and cost performance in one diagram. The
performance by the project management team highly influences the success of a construction
project. Some of the incidental risks associated with poor project management performance are
(Chan APC, Chan DWM, Ho KSK, 2003):

Many authors have recognized the value of trust within the project business. Lewicki and Bunker
(1996) emphasize that trust is a critical success element to most business, professional, and
employment relationships. Trust is argued to improve the inter-organizational relationships
among principal actors in project development, such as owners, contractors, and suppliers Andi,
(2006). According by Krane et al. (2012) trust between project owners and project managers is
crucial for project success. In business relations, as stated by Kaklauskas et al. (2010), the global
economic crisis brought about distrust of other stakeholders. Trust reinforces the relationships of
the critical stakeholder that often determine the success of a project. Ward and Chapman (2008)
concluded that stakeholders are a major source of uncertainty in construction projects. Smyth et
al. (2010) note that trust provides an important resource for creating greater probability and
certainty. Wilkinson (2004) found that project management companies need to overcome
problems in their relationships with other professionals on the project team and with the client.
For the success of construction projects, there is a need for alignment of the project owners’
interests and the project management team's interests and trust between them.

Construction projects are tendered and executed under different contract systems and payment
methods (2001). According by Zaghloul and Hartman (2003), there is no possibility to eliminate
all the risks associated with a specific project. All that can be done is to regulate the risk
allocated to different parties and then to properly manage the risk. Chapman and Ward (2008)
argue that the contract choice decisions are central to both stakeholder management and the
management of risk and uncertainty. The authors proposed an integrated approach based on a
balanced incentive and risk sharing (BIARS) approach to contracting as well as a best practice
approach to risk management in terms of the whole project life cycle.

Contractors generally aim to make an acceptable range of profit margin. Profit margins in the
industry have been low for most contractors on projects in recent years. Correct understanding
and allocation of risk helps for contractors to avoid erosion of the profit margin. Ökmen and
Öztas (2010) proposed a new simulation-based model – the correlated cost risk analysis model
(CCRAM) – to analyses the construction costs under uncertainty when the costs and risk-factors
are correlated. The CCRAM model captures the correlation between the costs and risk-factors
indirectly and qualitatively. Baloi and Price (2003) determined the most critical risk factors
affecting construction cost performance. The authors stated that global risk factors pose more
challenges to contractors, which are less familiar with them. The authors introduced a fuzzy
decision framework for a systematic modeling, analysis and management of global risk factors
affecting construction cost performance from contractor’s perspective and at a project level.
Similarly, Ismail et al. 2008 provide a ‘Level-Severity-Probability’ approach to determine the
critical risk source and factors. Fuzzy logic is used in the proposed methodology for evaluation
of the risk level, severity and probability. As stated by Zeng et al. 2007, the application of fuzzy
reasoning techniques provides an effective tool to handle the uncertainties and subjectivities
arising in the construction project.

The review of the literature revealed a wide range of risk types and sources in construction
projects, and that various risk management methods and techniques can be employed in the
management of construction projects in order to control potential risks.

Generally two broad categories, namely, qualitative and quantitative analysis are distinguished in
literature on risk assessment. A qualitative analysis allows the key risk factors to be identified.
Risk factors may be identified through a data-driven (quantitative) methodology or qualitative
process such as interviews, brainstorming, and checklists. It is considered as an evaluation
process which involves description of each risk and its impacts or the subjective labeling of risk
(high/medium/low) in terms of both risk impact and probability of its occurrence (Zou PXW,
Zhang G, Wang J, 2007). Qualitative risk analysis assesses the impact and likelihood of the
identified risks and develops prioritized lists of the risks for further analysis or direct mitigation.
Carr and Tah (2001) introduced a hierarchical risk breakdown structure (HRBS), and the HRBS
represents a formal model for qualitative risk assessment. Quantitative analysis involves more
sophisticated techniques and methods to investigate and analyze construction project risks.
Quantitative risk analysis attempts to estimate the frequency of risks and the magnitude of their
consequences by different methods such as the decision tree analysis, the cost risk analysis, and
Monte Carlo simulation (2006). The application of the quantitative risk analysis allows the
construction project exposure to be modelled, and quantifies the probability of occurrence of the
identified risk factors as well as their potential impact.
 CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY

3.1. Introduction
This chapter focused on the research methods used to find answers to the research objectives.
The research methodology and design, target population, sampling procedures and sample size,
data collection methods, reliability and validity of the data collection instruments and
procedures, and finally, the data analysis and ethical considerations is presented in the chapter.

3.2 Research Approach

In order to attain the objective of the study and answer the research questions, the
researcher was adopted mixed research approach. The rationale of using a mixed approach is to
gather data that could not be obtained by adopting a single method (Creswell, 2003). Hence, the
basis of such approach helps to neutralize the limitations of applying a single approach in
connection with the qualitative and quantitative nature of the research questions.

3.3 Research Design

A research design is the arrangement of conditions for collection and analysis of data in a
manner that aims to combine relevance to the research purpose with economy in procedure. In
fact, the research design is the conceptual structure within which research is conducted; it
constitutes the blueprint for the collection, measurement and analysis of data (Kothari, 2004).
According to Robson (2002), the three purposes of conducting research are generally the
following: explorative, descriptive and explanative. Explorative research is characterized as the
seeking of new insights, the looking around, and the asking of questions or the bringing of some
phenomenon into new light. Explanative research aims at gaining an explanation of a specific
situation or problem, generally in the form of causal relationships. Finally, Descriptive research
is a type of research that is mainly concerned with describing the nature or condition and the
degree in detail of the present situation. Creswell (2003) stated that the descriptive method of
research is used to gather information about the present or existing condition.
This study was focused on describing the current situation of the problem and answer the
research questions which are in the form of ‘‘what’’, and to assesses the practices of construction
risk management in Ethiopian building Construction projects. Therefore, Descriptive research is
being used to achieve the research objectives.
3.4 Target population of the Study
Population defines statistically as the totally of all subjects having a certain common
characteristic that are being studied. It is the collection of all units or elements under
investigation, which consists of a specified type of a person or subject over a given space and
time. In this research, the population is the total numbers of building contractors of above grade
three who have valid registration, consultants, subcontractors, national government officials and
project owners or clients in Ethiopia are addressed by the study.

3.5 Sampling technique

According to Kumar, R. (1999;148) sampling is the process of selecting a few(sample) from a
bigger group the sampling population to become the basis for estimating or predicting a fact,
situation or overcome regarding the bigger group. Walliman (2005) indicated that sample should
be free from bias. Otherwise, the type of selected sample will greatly affect the reliability of
subsequent generalization. Sampling strategies are categorized into main groups, namely
probably and non-probably sampling (Blaxter,et,al) both sampling strategies will be used in the
study.
To conduct the research; the researcher used two sampling techniques. These are purposive and
simple random sampling (SRS) techniques. This sampling technique was selected because it
gives equal and independent chance for all building constrictions in the define population of
being select as a sample.

3.5.1 Sample Size Determination

There are several approaches to determining the sample size. These include using a census for
small populations, imitating a sample size of similar studies, using published tables, and applying
formulas to calculate a sample size and this is preferred by the researcher. In the case of the
research population, it does not mean that all members of stakeholders are possible respondents
for the questionnaire. Rather the questionnaire was distributed to engineers & other professionals
who know the concerned construction projects during the specified time. Yamane (1967), cited
in Glenn (2012) provides a simplified formula to calculate sample sizes. This formula was used
to calculate the sample sizes, the formula is: Simple random sampling was used for selecting
samples within the group of consultants and contractors. A level of confidence of 95% and a
margin of error of 0.05 were used in selecting a sample size of 376 for a population size of 6284.
Since grades one to six were only used for the research a representative sample size of 319 were
believed to be enough.

N
n= 2
1+ N (e)
6284
n= 2
1+6284 (0.05)
n=376
Where
n is the sample size
N is the population size 6284, and
e is the level of precision. When this formula is applied to the above sample with 95%
confidence level.
A total of 376 questionnaires were sent to contractors and consultants in the Ethiopian building
construction project. 319 (84.84%) responses were collected, whereas 57(15.16%) questionnaires
were not responded and this small number of unreturned questionnaires does not affect the data
required for the analysis of the study.
A total of 319 respondents were used for the research, out of which 252 were building and
general contractors and 67 were consultants. Grades one up to five were used for the research.

3.6 Data Types and Sources

There are two types of data sources namely primary and secondary data (Kothari, 2004). The
primary data are those which are collected afresh and for the first time, and thus happen to be
original in character (e.g. interview and questionnaire). Secondary data is defined as data that
have been previously collected for some other purpose. Hence, for this study, both primary and
secondary data sources are proposed. As regards primary data, information will be obtained
through the administration of different data gathering tools such as interview and survey
questionnaire to the respondents that will be selected using purposive sampling technique.
Regarding secondary data, documents available will be analyzed and reviewed in line with
literature pertinent to the study.

3.6.1 Questionnaire design

The questionnaire had four sections. The first section consisted of questions about the general
profile of the respondent. The second section was compromised of questions to test the level of
awareness of the parties about risk management. In the third section questions that were believed
to test the level of use of construction contract risk management techniques were asked. The
fourth and final section of the questionnaire investigated the causes and effect of different areas
of risk on building project objectives.

Both close and open ended questions were asked in the questionnaire. The close ended questions
had a number of choices of possible answers and the respondents selected whatever they feel was
most appropriate. The closed ended questions were selected because they are easier to assess and
answer considering how busy the respondents were. Open ended questions were used only in few
places where the response options were relatively wide and not known but unfortunately none of
the respondent used these parts to specify their answers.

3.6.2. Interview
Interview with project participants aimed to get a deeper analysis of the risk management process
and find risk management practices of the companies under study to get some insights. Before
conducting an interview, the researcher prepared an interview schedule consisting of semi
structured questions. Based on these questions, some probing questions were also asked to obtain
an in depth information from the participants. The willingness of the participants was assured
before the interview was conducted to address ethical considerations. Four of the interviews took
place in the respondents ‘site office; the interview was conducted via translation. Since there was
only one translator, it was difficult to address each interviewee separately. So, the interview was
held with all respondents at a time as though it were focus group discussion. Whereas two of the
interviews done at respondents ‘office. Five allowed the interviewer to record the interview
while one allowed only notes to be taken.

3.7. Methods of Data Analysis

For analyzing data we used descriptive statistics and inferential statistics. Descriptive statistics is
the most famous for describing the characteristics of the sample and major study variable
through frequency distribution and consists of method of organizing, displaying and describing
the characteristics of the sample and major study unviable through frequency distribution and
consists of method of organizing displaying and describing data by tables, graphs and summary
measurement for the study we used histogram and frequency table to describe the construction
risk management project. Inferential statistics is used to draw inferences about population from
which the sample is selected. Some inferential statistics that we used for the study are multiple
linear regression and correlation Analysis.

3.8 Ethical consideration

An ethical concern is one of the most important things in a research. It is related mostly with
confidentiality as well as with efforts to guarantee and to reduce possible risks and dangers for
the participants in the time of field work research to the respondents. All the study participants
were informed about the purpose of the study and finally their permission was obtained before
the actual data collection process started. The researcher also were try to make the respondents at
ease when they feel stress and did not want answer questions by omit the question for later time
consumption, these stances played a significant role to the development of trustful relationships
and to the collection of rich and meaningful data from the field. Above all, the researcher was
made an attempt to develop a sense of trust and gain the genuine permission of all of the
participants of the study including confidentiality of their information, the information provided
by each respondent had been confidential in order to safeguard them from different difficulties.

3.9. Validity and Reliability of Research Instruments

3.9.1 Validity of the Instruments
Expert opinions, literature search and pre-testing of close and open-ended questions helped to
establish content validity (Wilkinson, 1991). The researcher prepared the instruments in close
consultation with advisor to ensure that the items in the questionnaire covered all the areas under
investigation. Advisor was given the instrument to validate. After getting feedback, questionnaire
was distributed to the sample population.
3.9.2 Reliability of the Instruments
Reliability is the consistency of a certain measurement, or the degree to which an instrument
measures the same way each time it is used under the same condition with the same subjects. In
short, it is the repeatability of a certain measurement. Reliability is not measured, it is estimated.
Jonathan (2007) defines reliability as the degree to which a measurement technique can be
depended upon to secure consistent results upon repeated application. Test-retest technique was
utilized whereby the questionnaires were administered twice to some respondents, with two
weeks interval, to allow for reliability testing.
 CHAPTER FOUR
4. DATA ANALYSIS, PRESENTATION, INTERPRETATION AND DISCUSSION

4.1 Introduction
This chapter presents data analysis and interpretations, which draws from the objectives of the
study. Descriptive statistics tools presented by using tables, percentages and mean score were
used to analyze information generated from respondents with the help of SPSS v20 software.
The analyses are both qualitative and quantitative. The chapter is structured according to the
questions in the questionnaire and provides discussion of the findings, their implications.
Moreover the additional data and observations, gained from the survey will be as well
incorporated into the discussion.

4.2 Validity and reliability test

4.2.1 Validity Test

To test the validity of the questionnaire Kaiser-Meyer-Olkin (KMO) measures of sampling
adequacy and p-values for Bartlett’s Test of Sphericity were evaluated and the results showed
that the variables had KMO measures of sampling adequacy way high above the threshold of
0.65. The p-value gotten was less than the significance level of 0.05 and meant that the
questionnaire was valid.

Table 4. 1 Validity Test KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .718

Approx. Chi-Square 7366.113
Bartlett's Test of Sphericity Df 325
Sig. .000

4.2.2 Reliability Test

Cronbach’s alpha was used to determine the reliability of the questionnaire used in the study.
Cronbach’s values range between 0 and 1.0; while 1.0 implicates perfect reliability, the value
0.70 is deemed to be the lower level of acceptability (Lohr, 2010).

Table 4. 2 Reliability test Statistics

Cronbach's Alpha N of Items

.752 77
The findings indicated that the reliability statistics of Cronbach's Alpha are 0.752. The result
means that the questionnaire had a high level of reliability and could be accepted for the study.

4.3 Results of the Demographic Characteristics of the respondents

Table 4. 3 Demographic characteristics` of the respondents

Frequency Valid Percent

Educational Level PhD degree 7 2.2
Master’s degree 40 12.5
First degree 223 69.9
Diploma 49 15.4
Profession of Respondents Project Manager 78 24.5
project engineer 122 38.2
risk auditor 36 11.3
Risk chief /officer 45 14.1
Member of Project Implementation Team 31 9.7
Other 2.2
7
years of Experience Less than 5 years 75 23.5
5-10 years 134 42.0
More than 10 years 110 34.5
As shown from the above table 4.1 the respondent education level divided in to four groups i.e.
2.2% were PhD degree, 12.5% were master’s degree holders 69.9%`were first degree holders
and the remaining 15.4% were diploma holders.

The percentage distribution of the various professionals indicates that the majority of the
questionnaires were completed directly by professionals involved in the construction
performance.
The survey also shows that it was well represented by better qualified professionals in the
construction management and these groups of respondents are expected to have plenty of
knowledge on the subject matter.
Regarding to profession of respondents from the above table 4.3, Out of the 319 respondents
78(24.5%) were Project Manager, 122(38.2%) of them were project engineer, 36(11.3%) of them
were risk auditor, 45(14.1%) of them Risk chief /officer, 31(9.7%) of them were members of
project and 7(2.2%) of them were Implementation Team.
In the above table 4.3 With regard to their years of experiences in the project, majority the
respondents have accumulated sample amount of experiences in construction projects, and it is
elaborated as follows: 75(23.5%) of the respondents have participated in construction projects
for less than 5 years and 134(42%) of them have between 5-10 years of experiences. Only 110
(34.5%) of the respondents have more than 10 years of experiences in dealing with construction
projects. This indicates that most of the employees have well experienced in the Addis Ababa
building construction project management. This might indicate that the more they are
experienced in undertaking construction projects, the better they might become familiar with
construction project risk management practices.

4.4 Attitude towards Risk and the Risk Management Process

Table 4. 4 Attitude towards Risk and the Risk Management Process

Attitude towards Risk and the Risk Frequency Valid Percent

Management Process
How do you perceive risk within the Positive 139 43.6
construction industry negative associations 114 35.7
positive and negative
66 20.7
associations
Positive 139 43.6
Attitude in relation to risk risk-averse 158 49.5
risk-seeking 111 34.8
risk-neutral 50 15.7
Which stage/phase do you consider most planning phase 175 54.9
important for Risk Management Production 56 17.6
conceptual phase 55 17.2
completion and closeout phase 33 10.3
Which Risk Management process is most Risk assessment 85 26.6
important risk response 61 19.1
risk monitoring phase 38 11.9
risk identification 135 42.3
From the above table 4.4, Out of the 319 respondents 139(43.6%) respondent’s perceived risk as
being something positive, i.e. solely an opportunity, 114(35.7%) of them were negative
associations with attitudes towards risk. However, approximately 66 (20.7%) of the respondents
perceived risk within the construction industry as a combination of both positive and negative
associations.
From the above table 4.4 around 49.5% (158) of the respondents perceived themselves having a
risk-averse personality while 34.8% (111) of the respondents perceived themselves having a risk-
seeking personality. The remaining 50 (15.7%) respondents had a risk-neutral approach and
being able to balance between avoiding and seeking risks. This contradicts the results presented
by Akintoye and Macload (1997) were the construction industry is predominantly risk averse.
However, the findings in this study corresponds to the explanation given by Hillson and Murray
Webster (2005) concerning how risk is perceived when observing official risk management
standards, i.e. including both opportunity and threat rather than solely a negative connotation
which was more common before the turn of the millennium. Furthermore, the overwhelming
majority of the respondents in the questionnaire described themselves as being risk-neutral rather
than risk-averse or risk-seekers, which coincides with previous studies such as Lyons and
Skitmore (2004). Hence, their attitudes and perception of risk is in line with their risk approach
profile as risk-neutral decision makers.
The respondents answer differed quite a bit when asked at what stage they considered the
implementation of risk management to be most important.
The finding shows that out of 319 respondents 175(54.9%) respondents considered the planning
phase as the most important phase to implement risk management, 56(17.6%) respondents
considered the production phase as the second most important phase to implement risk
management, 55(17.2%) respondents considered the conceptual phase as the third most
important phase to implement risk management. lastly 33(10.3%) respondents the completion
and closeout phase was the most important phase to implement risk management.
The finding shows that out of 319 respondents 135(42.3%) respondents risk identification are the
most important Risk Management process, 85(26.6%) respondents considered Risk assessment
are the second most important Risk Management process,61(19.1%) respondents considered risk
response are the third most important Risk Management process. lastly 38(11.9%) respondents
risk monitoring phase was the most important Risk Management process. Furthermore, out of the
four core processes in risk management the respondents viewed risk identification to be most
important while assessment, response and monitoring where rather equally significant. This
parallels the claim by Banaitene and Banaitis (2012) that the identification process might be
viewed as the most crucial step.

4.5 Knowledge in Relation to Risk Management.

As shown below table 4.5 the respondents’ answers varied somewhat, approximately 69.9%
stated that they have taken courses in risk management while 30.1% of the respondents didn’t
take any courses in Risk Management. Regarding how do you evaluate your knowledge of risk
management principles 53(16.6%) respondents perceived low knowledge, 158 (49.5%)
respondents perceived fair knowledge and 108 (33.9%) respondents perceived high knowledge.
Table 4. 5 Knowledge in Relation to Risk Management.

Knowledge in Relation to Risk Frequency Valid Percent

Management.
Have you taken any courses in Risk yes 223 69.9
Management no 96 30.1
How do you evaluate your knowledge of low 53 16.6
risk management principles? fair 158 49.5
high 108 33.9
Are you aware of the concept of Risk Yes 223 69.9
Management No 96 30.1
How did you become aware of the Through study 117 36.7
principle of risk management Word of mouth 22 6.9
Through workshop and training 160 50.2
Through other means 20 6.3
What is the reason for inadequate Risk lack of time 80 25.1
Management in your organization lack of competence 49 15.4
lack of resources 112 35.1
lack of information 72 22.6
Other 6 1.9
Do your organization provide any yes 139 43.6
education in Risk Management? No 180 56.4
How do you draw lessons learned from Communities of practice 46 14.4
previous projects? Workshop 116 36.4
knowledge responsibility 107 33.5
no methods for capturing
50 15.7
knowledge
How efficient are the communication high efficient 156 48.9
regarding risks in your construction medium efficient 87 27.3
projects low efficient 76 23.8
This result shows out of those who claim to have knowledge of risk management, most of them
are not fully confident enough to rate their knowledge as high. This implies that a lot needs to be
done in increasing awareness and making the parties involved in the Ethiopian building
construction projects confident enough to implement their knowledge of risk management to
increase the efficiency and effectiveness of their projects. This shows that most of the
respondents may feel like their knowledge about the principle of risk management is not enough
to implement its applications in their building construction projects. Hence, as stated above it is
very necessary to increase their knowledge of the principle of risk management techniques.
From the above table 4.5, shows the responses of the respondents when they were asked if they
were aware of the concept of risk management. Among the 319 respondents 223(69.9%) were
aware of the concept of risk management only 96 (30.1%) respondents are not aware the concept
of risk management. This shows that most of the parties involved in Ethiopian building
construction projects, 69.9%, know about the concept of risk management, the next question
tried to assess how they became aware and if they are confident enough to implement their
knowledge into action.
Regarding to the awareness of the principle of risk management most of the respondents who
answered yes to the above question became aware of the principle of risk management through
study and training. Table 4.5 shows 50.2% of the parties became aware of the principles of risk
management through workshop and training and 36.7 % became aware through study the
remaining 6.9% and 6.3% are aware through word of mouth and Through other means.
Most of the respondents answered the questionnaire what is the reason for inadequate Risk
Management in your organization Among the 319 respondents 112 respondents lack of resource
was the main cause for inadequate risk management within the organizations of respondents.
Followed by reasons such as 80 respondents answer lack of time and 72 respondents answered
lack of information. And the remaining 49 and 6 respondents lack of competence and other are
the main reasons of for inadequate Risk Management.
The contrast between lack of information and lack of competence is distinguishable, exposing
that the organizations might have the available information needed in order to improve their risk
management but since competence is one of the biggest factors for inadequate implementation it
may fall short. Respondents who chose other reasons expressed that clear processes for risk
management is the biggest liability. The results from the questionnaire indicate that lack of time
and lack of resource is the biggest obstacle for an insufficient risk management implementation
which is consistent with research by Lyons & Skitmore (2004) and Ly et al (2005). Insufficient
knowledge in this area might stem from the lack of time within the construction industry. The
findings suggest that there is no shortage of information but the lack of competence is noticeable.
Tan et al (2010) states that the phases in the construction industry are temporary and fragmented
which complicates the process of managing knowledge.
 The respondents were asked if their organization provided any courses or other education in risk
management. Approximately 43.6% of the respondents said that their organization offers risk
management education while 56.4% doesn’t provide any education in Risk Management.
In regards to storing lessons learned the respondents were asked how they draw knowledge and
lessons from previous projects. The results unveiled that knowledge responsibility and a
community of practice was the most frequently adopted methods used, at 50.8% according to
table 4.5. Workshops seem to be used moderately at 36.4% while 15.7% of the respondents
didn’t use any specific methods for capturing knowledge within their organization. The majority
of the respondents 156 are high efficient in communication regarding with risk, 87 respondents
are medium efficient and 76 respondents are low efficient.

4.6 Risk Management Process

Table 4. 6 Risk Management Process

Risk Management Process Frequency Valid Percent

Does your organization has a clear risk yes 156 48.9
identification process no 163 51.1
Knowledge 115 36.1
How do you personally identify risks? analyses 69 21.6
experience 129 40.4
other 6 1.9
Which method do you use for risk experience from previous project 121 37.9
identification? Brainstorming 42 13.2
source identification 104 32.6
Interviews 26 8.2
third party 14 4.4
no method 6 1.9
Other 6 1.9

The finding shows that out of 319 respondents 156(48.9%) respondents answered the
organization has a clear risk identification process while 163(51.1%) respondents answered the
organization has not a clear risk identification process.

Approximately 36.1% of the respondents (115 people) stated that they identify risks by
Knowledge, 21.6% (69 people) was using analysis for risk identification and 129% chose
experience as their answer as presented in table 16. Around 1.9% chose other as an answer
stating they usually combine all of the options when identifying risks or only some of the
options.
Experience from previous projects as well as the usage of checklists was equally chosen amongst
the respondents, at approximately 37.9% (121 out of 319 respondents) and thus exposing them as
the most frequently used methods for risk identification. Thereafter source identification at
around 32.6% as presented in table 17 and brainstorming at 13.2%. Finally interviews at around
8.2%, third party at 4.4%, no method at 1.9% and other at about 1.9%.

4.6.1 How do you respond to risks

Table 4. 7 respond to risks

strong disagree disagree Agree strong agree Total

Avoidance Frequency 49 34 37 199 319

Percent 15.4 10.7 11.6 62.4 100.0
Transfer Frequency 62 60 32 165 319
Percent 19.4 18.8 10.0 51.7 100.0
Mitigation Frequency 84 66 34 135 319
Percent 26.3 20.7 10.7 42.3 100.0
Acceptance Frequency 90 70 35 124 319
Percent 28.2 21.9 11.0 38.9 100.0

The questionnaire consisted of additional statement questions in regard to risk response methods
in order to estimate which methods they usually implement within their organizations. The
majority of the respondents chose the ”agree” option regarding the respondents most often chose
avoidance at 74%, mitigation at 53% and acceptance at 49.9% while transfer had a response rate
of 61.7%. Regarding the ”disagree” option the respondents most often chose acceptance of risks
at 51.1%, transfer of risks 38.2%, Mitigation 47% while avoidance had a response rate of 26.1%.

4.7 The level of use of construction contract risk management techniques

In this section, the respondents were asked to rate the probability of occurrence of the different
areas of risk and the level of consequence they lead to if they occur. Table 4.8 shows the
different areas of risk with their probability of occurrence and level of consequence on project
objectives with value ‘1’ representing low, ‘2’ representing medium and ‘3’ representing high
probability of occurrence and level of consequence.
 Table 4. 8 Probability of occurrence and level of consequence of different risk areas

risk areas Number of responses

Probability of occurrence Mean Level of consequence/significance Mean
Low Medium High Total Low Medium High Total
Contractual 110 136 73 319 1.884 68 92 159 319 2.2853
Financial 24 98 197 319 2.542 33 101 185 319 2.4765
Political 25 112 182 319 2.492 29 102 188 319 2.4984
Performance 32 120 167 319 2.423 34 103 182 319 2.4639
Technical 28 124 167 319 2.435 29 103 187 319 2.4953
Geographical 45 117 157 319 2.351 28 104 187 319 2.4984
Operator 34 111 174 319 2.438 21 143 155 319 2.4201
The respondents were asked which areas of risks occur more frequently in your building project
and which areas of risk cause major problems.
Out of 319 respondents 136 respondent’s says contractual risk were medium probability of
occurrence and 159 respondents were high level of consequence, 197 of the respondent’s says
financial risk were high probability of occurrence and 185 respondents were high level of
consequence.
Accordingly, Out of 319 respondents 182 respondent’s says political risk were high probability
of occurrence and 188 respondents were high level of consequence, 167 of the respondent’s says
performance risk were high probability of occurrence and 182 respondents were high level of
consequence.
These results show that the risk area with the highest probability of occurrence and the highest
level of consequence is financial risk with mean 2.54 and 2.47. This tells us that financial
problems almost always occur in Ethiopian building construction projects and their effect on
objectives is very high. Because of financial shortage and delay on payment certificates, projects
are most of the time finished with delay, beyond budget and without meeting quality
requirements. Hence, to improve the situation, financial sources should be available on time
starting from the beginning of the project till the end and all payment certificates should be
issued, approved and paid on time.
Political risk is rated to have the highest probability of occurrence as well as the highest
consequence on project objectives. This is because this kind of risk is very significant when the
construction is being done in a host country which relatively has an unstable environment. When
we see the situation in Ethiopia, the respondents believe it is relatively a conflict environment
and there is limited risk posed by the government on construction companies undertaking
different building constructions.
As shown in the above table 4.8 contractual risk is among the top risk areas which have a high
probability of occurrence and high level of impact or consequence on project objectives. These
risks are caused by poor contract formulation and bad or no contract administration or generally
lack of contract management. The contract can be a very useful tool to minimize risks and their
consequences if utilized well. If the contract agreement is not clear, it might lead to different
problems which in turn will have great consequence on project objectives. On the other hand if
the contract is unambiguous and if it contains different provisions which deal with identified
risks and their management techniques it might serve as a very important tool in achieving
project objectives.
Generally these findings help to identify the areas of risk that have high probability of
occurrence and great impact on project objectives and these areas of risk need to be thoroughly
investigated and managed to successfully complete building construction projects.
Table 4. 9 Importance of risk management at different stages of construction.

Project stage Importance of risk management

very low Low moderate very high Total Mean
Inception and feasibility 56 49 80 134 319 2.9154
Planning and design 43 41 64 171 319 3.2633
Tendering stage 76 79 79 85 319 2.5423
Construction stage 3 5 73 238 319 3.7586
Commissioning and acceptance 38 49 112 120 319 2.9843
To test the importance of risk management during each stage of construction in Ethiopian
building construction projects, the respondents were asked to rate the importance of risk
management as Very low (1), low (2), moderate (3) and very high (4). The results are shown in
table 4.19; the numbers of respondents were placed under each category for each stage of
construction. The mean values were calculated to get the average values of the importance of risk
management at each stage of construction.
As can be observed from table 4.9, risk management is believed to be important at all stages of
the project lifecycle, i.e. above moderate. But it was discovered that it is especially very
important during the construction stage and during the planning and design stage. This implies
 that the different risks should be identified and managed starting from the planning and design
stage. The identified risks should be considered in the contract formulation and discussed before
signing the contractual agreement. And as can be seen from the findings, risk management is
mostly needed during the Planning and design stage and construction stage; this implies contract
administration is essential to make sure the risks included in the contractual documents are
managed according to the agreement. Risks which were not anticipated during the contractual
stage should also be dealt with if they ever manifest. A risk management team should work
closely with the contract administrators to decrease the effect of all risks on project objectives.
Table 4.10 below shows the number of responses under each category of risk and the level of
impact the risk areas have on project objectives. The impact each risk area has on different
objectives, i.e. time, cost, and quality were calculated separately and the average of these values
was taken to get the total effect of these risk areas on the overall project objective.
Table 4. 10 Impact the Risk Areas Have On Project Objectives.

Number of responses
Time impact Cost impact Quality impact
High Medium Low Mean High Medium Low Mean High Mediu Low Mean
m
Contractual 124 135 60 2.201 133 135 51 2.341 136 123 60 2.197
Financial 115 121 83 1.899 113 121 85 1.912 113 122 84 1.909
Political 159 118 42 1.633 156 120 43 1.648 155 121 43 1.649
Performance 201 75 43 1.505 199 75 45 1.572 199 76 44 1.514
Technical 64 136 119 2.172 60 135 124 2.206 60 136 123 2.197
Geographical 115 121 83 1.899 113 121 85 1.922 113 122 84 1.909
Operator 147 115 57 1.718 156 120 43 1.648 155 121 43 1.649

Table 4.10 shows the impact the different areas of risk have on project objectives, with ‘1’
representing ‘low’, ‘2’ representing ‘medium’ and ‘3’ representing ‘high’ impact. It can be
observed form this table, that the majority of the respondents believe contractual, technical,
financial, geographical risk area have the highest impact on time followed by operator risk.
While political risk and performance risk has the lowest impact on time. The contractual,
technical, financial risk areas were found to have the highest impact on cost while political and
performance risk was said to have the lowest impact on cost. Technical, contractual and financial
risk areas were evaluated to have the highest influence on quality while political, operator and
performance risk area was believed to have the lowest impact on quality. Overall the respondents
believed financial, technical and contractual risk areas have the most influence on project
objectives. As already discussed earlier performance, operator and political risk has low
probability of occurrence and even if it occurs, its impact on project objectives is very low.
Hence performance, operator and political risk is not a major concern in the Ethiopian building
construction projects. On the other hand, technical, financial and contractual risks have high
probability of occurrence and high impact or consequence on projects. Geographical risk was
also identified to have a big effect on time, budget and quality in Ethiopian building construction
projects.

4.8 Risk management practices, tools and techniques/strategies applied to the

project
Table 4. 11 Does your company use risk management techniques

Does your company use risk management techniques?

Frequency Valid Percent

Yes 201 63.0

Valid No 118 37.0

Total 319 100.0

Majority of the respondents, 63% said they use risk management techniques while the remaining
37% stated they don’t use any risk management techniques.
If your answer to (Does your company use risk management techniques?) is no, what is the reason
Frequency Valid Percent

Valid Lack of awareness 56 47.1

They are expensive 21 17.6

They are unnecessary 10 8.4

They are time consuming 17 14.3

The need to hire additional staff 11 9.2

Other 4 3.4
 Total 119 100.0

Among the group which don’t use risk management techniques around 47.1% put down lack of
awareness as their main reason. From the other hand 17.6% put they are expensive as an excuse
for not using risk management techniques. A small portion 14.3% doesn’t use this techniques
fearing they are time consuming.

If your answer to (Does your company use risk management techniques?) is yes, at what stage of the
construction does your company use risk management?
Frequency Valid Percent

before the start of construction stage 25 12.5

at all stages 128 65

Valid
during construction 47 22.5

Total 200 100.0

As mentioned above, even if most of the parties involved in the building construction industry
have awareness about the general concept of risk management, only a few have high knowledge
about the principles and techniques involved in managing risk. This is why the majority of the
respondents that don’t use risk management techniques put down lack of awareness as an excuse
for not using it. Therefore, regular trainings on the subject need to be given to the parties
involved in different Ethiopian building projects to create better awareness.
The literature review showed that if risk management is performed throughout the project life,
the project objectives can be achieved successfully. But it was also observed from the literature
that most parties don’t estimate the effect of risk throughout the project lifecycle. This research
contained a question to assess when the risk management techniques are used in Ethiopian
building projects. Most respondents, 65%, say their company uses risk management techniques
at all stages of construction i.e. different risk management techniques are applied starting from
the contractual stage up to the end of construction. 22.5 % of the respondents only apply risk
management techniques during the construction stage; this is not recommended since the risks
involved in any project should be identified first in the contractual stage and management
 techniques put in place so that the parties can be better prepared to deal with them if they arise
during the construction stage.
Table 4. 12 Who is responsible for managing of risk in your company

Who is responsible for managing of risk in your company?

Frequency Valid Percent

the project manager 187 58.6

the consultant 30 9.4

the client 20 6.3

Valid
a specialized risk management team 60 18.8

Others 22 6.9

Total 319 100.0

According to majority of the respondents, there is no specialized risk management team

responsible for managing risk (table 4.12); 58.6% believe the project manager is responsible for
managing of risk. This practice might work on small construction projects but when the project is
big and complex a team of people need to be organized to identify the risks and manage their
consequences on project objectives. Only 6.3% of the respondents believe the client is
responsible for managing risk, 18.8% of the respondents believe a specialized risk management
team is responsible for managing risk and only 9.4% believe the consultant has a risk
management responsibility.

The fact that most respondents believe there is no need to have a specialized risk management
team shows that a lot needs to be done to disclose the importance of risk management in
achieving project goals. The project manager alone cannot be expected to deal with all the risks
that are encountered in his project especially for big and complex projects.

4.8.1General Information about Risk Management Plan

Table 4. 13 General Information About Risk Management Plan

General Information About Risk Management Plan NA ASE WA GA AVGE Mean

The presence of efficient risk management plan Frequency 51 34 21 178 51 3.351

in your company. Percent 16.0 10.7 6.6 55.8 16.0
Hold planning meetings to develop the risk Frequency 38 19 47 179 36 3.489
management plan. Percent 11.9 6.0 14.7 56.1 11.3
Develop Risk Breakdown Structure (RBS) to Frequency 29 28 101 134 27
3.319
define risk categories. Percent 9.1 8.8 31.7 42.0 8.5
Estimated resources and costs needed for risk Frequency 65 31 31 169 23
3.169
management activities and include them in the
Percent 20.4 9.7 9.7 53.0 7.2
project budget.
Define and include risk management activities in Frequency 64 43 30 162 20
3.097
the schedule. Percent 20.1 13.5 9.4 50.8 6.3

It is believed that participants working in different positions with different years of experiences
as well as educational levels in construction projects in Ethiopian building construction, it is
important to investigate their experiences of project risk management practices. Hence, in a
Likert scale of 1 to 5, the respondents were required to indicate the level of applicability of
RMPs to the projects they were engaged in. A level of 1 indicated RMP is not applied to the
projects while a level of 5 indicated that the process is very greatly applied to the projects. Thus,
table 4.13 sought the general information about risk management practices of the companies
starting from risk management planning. As indicated in the table, the respondents rated there
was efficient risk management plan with mean 3.351 a frequently applied technique in the firms
to determine the success of a projects. Hold meeting to develop risk management plan and
Develop Risk Breakdown Structure (RBS) to define risk categories were techniques applied to
some extent with mean of 3.489 and 3.319 whereas Define risk management activities in the
schedule and estimating resources and cost required for RM were the least applied methods,
recording 3.097 and 3.169 respectively. This was done in order to determine which technique
was frequently practiced in the companies.

4.8.2 Risk Analysis Process

Table 4.14 shows that using risk matrix to identify risks that require the most attention by
quantifying their relative contribution to the overall project risk and using a risk matrix that
defines probability/likelihood, assess the probability of achieving specific project objectives and
impact exist in the company to define the probability and impacts of risks in achieving specific
project objectives are the most widely used tools/techniques to qualitatively assess risks. This is
depicted through the corresponding mean scores of 3.3386, 3.2006 3.0846 and respectively. On
 the other hand, having well established qualitative risk analysis system, and having processes in
place to quantify risks are applied to the lesser extent by the companies.

Table 4. 14 Risk Analysis

Risk Analysis NA ASE WA GA AVGE Mean

There are established qualitative risk analysis Frequency 61 93 61 80 24 2.7273
methods and tools. Percent 19.1 29.2 19.1 25.1 7.5
Frequency 46 54 38 152 29
There is a process in place to quantify risks. 2.3417
Percent 14.4 16.9 11.9 47.6 9.1
Assess the probability of achieving specific Frequency 82 17 42 148 30
3.0846
project objectives. Percent 25.7 5.3 13.2 46.4 9.4
Identify risks that require the most attention by Frequency 52 6 87 130 44
quantifying their relative contribution to the 3.3386
Percent 16.3 1.9 27.3 40.8 13.8
overall project risk.
A risk matrix that defines probability/likelihood Frequency 109 88 45 58 19
3.2006
and impact exist in the company. Percent 34.2 27.6 14.1 18.2 6.0

4.8.3 Risk Response Plan Strategies

Regarding risk response strategies of the companies, acceptable mitigation steps of treating risk
must be employed once the project risks have been known and analyzed. These mitigation steps
are based mostly on the nature and potential consequences involved in the risk. There are a
number of risk response strategies that determine or assist the success of construction project.
Table 4.15 shows the arithmetic mean of the rankings rated by respondents. As indicated in the
table, risk acceptance/ retention is the highest ranked by the respondents with the average mean
of 3.469 followed by Contingency plan is allocated for cost and Based on the analyzed risks, risk
management plan is developed and communicated to all stakeholders with the average mean
3.257 and 3.25 respectively.

Table 4. 15 Risk Response Strategies

RISK RESPONSE STRATEGIES NA ASE WA GA AVGE Mean

Frequency 86 25 21 157 30 3.067

Risk avoidance (Taking another course of action).
Percent 27.0 7.8 6.6 49.2 9.4
Risk Transfer to third party (e.g. Insurance Frequency 81 20 21 177 20
3.197
company). Percent 25.4 6.3 6.6 55.5 6.3
Risk acceptance/ retention. Frequency 57 19 12 196 35
3.469
Percent 17.9 6.0 3.8 61.4 11.0
 Frequency 84 19 19 182 15
Reduce risk to acceptable threshold level. 3.078
Percent 26.3 6.0 6.0 57.1 4.7
Frequency 65 27 15 190 22 3.244
Contingency plan is allocated for time.
Percent 20.4 8.5 4.7 59.6 6.9
Frequency 61 25 23 193 17 3.2508
Contingency plan is allocated for cost.
Percent 19.1 7.8 7.2 60.5 5.3
Based on the analyzed risks, risk management Frequency 68 24 14 194 19
3.257
plan is developed and communicated to all
Percent 21.3 7.5 4.4 60.8 6.0
stakeholders.
Frequency 72 25 24 183 15
A risk matrix was/is developed for the project. 3.179
Percent 22.6 7.8 7.5 57.4 4.7
The risk matrix was/is reviewed and updated Frequency 96 26 15 175 7 2.909
throughout the life cycle of the project. Percent 30.1 8.2 4.7 54.9 2.2
Undertaking continuous performance improvement Frequency 79 26 25 173 16
3.068
through learning and innovation exists Percent 24.8 8.2 7.8 54.2 5.0
From the above description, the respondents indicated that risk matrix reviewed and updated
throughout the life cycle of the project, risk avoidance and continuous performance improvement
are the least applicable techniques with the mean of 2.909, 3.067 and 3.068. The rest strategies
were rated by respondents as applicable to some extent in both companies. The intent to transfer
risk is surprisingly the highest on the table; this may indicate that Ethiopian building construction
is risk aversive.

4.8.4 Risk Monitoring and Control

Table 4.16 presents the description of questions related to risk monitoring and control. Identified
risks need to be monitored, new risks need to be identified and risk responses must be controlled.
This process includes updating the risk register as necessary. As depicted in the table, holding
periodic meeting for risk discussion was ranked as highest among respondents. Respondents
greatly applied that risks are often discussed in team meetings with the average mean 3.508.
Respondents greatly applied that Risk management is always considered as part of the agenda in
the project‘s progress meetings with the average mean 3.226. In addition to the regular meetings,
respondents indicated that they hold special meetings to discuss project risks. Another important
activity in this process is risk auditing which includes checking the effectiveness of risk response
strategies. The respondents indicated that they are making improvements in risk management
procedure as a result of lessons learned with average mean 3.191. The rest risk monitoring and
control process were rated by respondents as applicable to some extent in the Ethiopian building
construction.
 Table 4. 16 Risk Monitoring And Control Process

RISK MONITORING AND CONTROL PROCESS NA ASE WA GA AVGE Mean

Frequency 38 27 26 191 37 3.508

Risks are discussed in team meeting.
Percent 11.9 8.5 8.2 59.9 11.6
Risk management is always considered as part of Frequency 86 37 25 159 12
3.226
the agenda in the project‘s progress meetings. Percent 27.0 11.6 7.8 49.8 3.8
The controlling process includes a risk log/ risk Frequency 57 19 12 196 35
2.918
check list. Percent 69 25 21 174 30
Project risks are actively and routinely tracked and Frequency 82 38 24 163 12
2.953
reassessed. Percent 25.7 11.9 7.5 51.1 3.8
The project team holds periodic meetings Frequency 93 23 22 164 17
2.965
specifically for risk discussions. Percent 29.2 7.2 6.9 51.4 5.3
You are making improvements in risk management Frequency 66 33 23 168 29
3.191
procedure as a result of lessons learned. Percent 20.7 10.3 7.2 52.7 9.1

4.8.5 Risk Management Techniques

The risk management tools and techniques is presented in Table 4.27. The overall use of risk
management tools and techniques is minimal. Out of the five tools and techniques, open and
effective communication channels between/ among project team, the contractors, consultants,
client and using risk register/matrix reviewed by the project team/project manager are ranked as
the most frequently used risk management practices. The use of strategic risk identification
techniques, incorporating risk database system and the use of statistical analysis is rather limited.
Ethiopian building construction rely on expert judgment, experience and intuition to manage
project risks.

It is surprising to see that some of the fundamental risk management tools, such as sensitivity
analysis, decision trees and influence diagrams, are rarely used for construction projects. These
results confirm the findings of Akintoye and MacLeod (1997 in El-Sayegh, 2014) that almost all
organizations depend on intuition or expert judgment/experience to manage risks involved in
construction projects.

Table 4. 17 Risk Management Techniques/Strategies

RISK MANAGEMENT TECHNIQUES/STRATEGIES NA ASE WA GA AVGE Mean

Have open and effective communication channels Frequency 52 33 30 181 23
between/ among project team, the contractors, 3.282
Percent 16.3 10.3 9.4 56.7 7.2
consultants, client and other project stakeholders.
Strategies were/are developed to manage the identified Frequency 90 29 20 174 6
2.929
risks. Percent 28.2 9.1 6.3 54.5 1.9
Risk register/matrix/database system is developed Frequency 47 31 31 189 21
incorporating the risks identified, controls, responses 3.323
Percent 14.7 9.7 9.7 59.2 6.6
and residual risks.
Project risk manager is appointed to advice and/or Frequency 92 30 17 173 7
2.954
manage the risks in the project. Percent 28.8 9.4 5.3 54.2 2.2
The risk register/matrix is continuously reviewed by Frequency 72 25 26 178 18
3.141
the project team/project manager. Percent 22.6 7.8 8.2 55.8 5.6

CHAPTER FIVE
5. Conclusions and Recommendations

5.1. Conclusions
Risk management is one of the most critical factors in project management practices to verify a
project is successfully completed (Euripides, 2008). The reviewed literature showed that
construction contract risk management is vital in any construction and that different risk
management techniques should be used starting from the contractual stage to make projects
successful. Most building construction projects in Ethiopia fail to meet their objectives and the
questionnaire was devised to discover if lack of proper risk management procedures might be
contributory to this effect among other things. The questionnaire survey was believed to contain
all the important research questions which were helpful in fulfilling the research questions.

Based on the findings of this study the following conclusions are drawn in line with the research
objectives.

The importance of implementing an effective risk management is shared among actors in the
industry, especially in the planning and production phase while risk identification was perceived
to be most important out of the four core processes.
Most of the parties involved in the Ethiopian building construction projects are aware of the
concept of risk management but only a relatively smaller number of this group believe they have
an adequate knowledge needed for applying these risk management techniques to make their
projects successful.

Most parties involved in Ethiopian building construction projects don’t use risk management
techniques in their projects because of lack of awareness about their significance and some don’t
use them fearing they need to hire additional staff and acquire more resources.

Financial difficulty and poor contract management were identified to be the most important
causes of risk with a very high level of occurrence and a high level of impact on project
objectives in the Ethiopian building construction projects.

The type of contract selected for the construction has a great influence on the level of risk
encountered. The most widely used type of contract in the Ethiopian building construction
projects is believed to be the unit rate contract and it is found to involve least level of risk.

The methods and techniques mostly used in the building projects to identify, assess, allocate and
mitigate the risks are highly dependent on an individual’s judgment and past experience. In most
projects, there is no specialized risk management team to deal with different risks that might
arise during the life of the project.

However, overall the ratings on the application of risk management techniques is not high, and
qualitative techniques obtained much higher ratings than quantitative techniques, suggesting
there is much room for improvement for using different risk management approaches, especially
quantitative techniques. For instance, some of the risk management activities that are found to be
insufficient include developing RBS to define risk categories, estimating resources and cost
needed for risk management, conducting brainstorming session with all project key participants
during risk identification, establishing qualitative and quantitative risk analysis methods and
techniques, and reduction strategies etc. are among others.

For risk analysis, the preferred tools used were risk matrix that defines probability/likelihood and
impact exist in the company’ and assess the probability of achieving specific project objectives‘.
For Risk response, respondents stated that the tools avoid the occurrence through proactive way
and Transfer to third party was the most common methods used when responding to risk. For
risk monitoring, it was found that the majority of the respondents indicated the project team
holds periodic meetings specifically for risk discussions as predominant technique. The
predominant risk mitigation technique used in the companies was risk transfer strategy.

Inflation rate is very high in the country and increasing proportionately with time, this causes the
increase in prices of materials like cement, steel which in turn causes financial risk to the land
developers and construction firms. Banks have also raised their interest rates for the loan given
by them, this have affected the construction market hugely. Thus the financial part of risk is very
high than any other risk. Political risk is substantially very low for the large firms when
compared to other risk.

The overall use of risk management tools and techniques is minimal. Out of the five tools and
techniques, open and effective communication channels between/ among project team, the
contractors, consultants, client and using risk register/matrix reviewed by the project
team/project manager are ranked as the most frequently used risk management practices.

5.2 Recommendations
Based on the findings of the research collected by personal observation and though the
questionnaire conducted in the organization; it is necessary to offer the following
recommendations are expected from key role players in construction projects.
 Contractors may learn how to share and shift different risks by hiring specialized staff or
specialized sub-contractors.
 Since lack of awareness was identified as a major cause for not having enough confidence for
using risk management techniques, regular trainings and workshops on the subject need to be
provided for the parties involved in building construction projects. All parties should be
encouraged to take part and participate in trainings and workshops and try to increase their
knowledge of risk management.
 A special attention may be given to managing Financial and Contractual areas of risk since
they were identified as most important risks in Ethiopian building construction projects.
 Establishing a risk management team is highly recommended in the Ethiopian building
construction projects.
  Relevant clauses that deal with risk may be included in the construction contract and the risk
allocated to the party that is in the best position to control and manage it in order to increase
the odds of achieving the project objectives.
 Recommendations for further research is to investigate how the combination of risk
management and knowledge distribution is applied in a particular construction company,
supporting the development of standardized definitions and concepts in the industry.

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APPENDIX Questionnaire
Questionnaire Survey
Dear respondent”, I am Student of Masters of project Management, at Addis Collage. As partial
fulfillment of the program, I am undertaking a research on the topic of Practices of Risk
Management in Construction Project in Ethiopian Building Construction Projects. The research
result could be used as an input for decision makers, professionals, academician and other
interested groups to play their respective role for the achievement of project objectives.

It is believed that your participation in this research will contribute in achieving the objectives of
the research. Thus, the quality of your response towards the question items determines the
quality of the research results. Therefore, please answer the questions as thoroughly, objectively
and honestly as possible according to the instructions contained in the body of the questionnaire.
Finally, I want to assure you that all information provided in this survey will be treated with
strict confidentiality and allowed to serve only for the purpose of the research under
consideration.

Interested participant of this study will be given feedback on the overall research results after the
completion of the research work.

Thank You in Advance for your cooperation!!

Part one: Demographic Profile of respondents.

A) Please encircle only one that represents you most appropriately.

1. What is your position?
A) Project Manager B) Project Engineer C) Risk Auditor D) Risk chief /officer
E) Member of Project Implementation Team F) other _____________________
2. What is your highest Educational Level?
A) PhD degree B) Master’s degree C) First degree D) Diploma
3. How many years of Experience do you have in construction project implementation (including
previous tenure)?
A) Less than 5 years B) 5-10 years C) More than 10 years
 ATTITUDES TOWARDS RISK AND THE RISK MANAGEMENT PROCESS
1. How do you perceive risk within the construction industry?
A, positive B. negative associations C, positive and negative associations
2. What is your attitude in relation to risk?
A, risk-averse B, risk-seeking C. risk-neutral
3. Which stage/phase do you consider most important for Risk Management?
A, planning phase B, production C, conceptual phase D, completion and closeout phase
4. Which Risk Management process is most important?
A, Risk assessment, B, risk response C, risk monitoring phase D, risk identification
 KNOWLEDGE IN RELATION TO RISK MANAGEMENT
5. Have you read any courses in Risk Management and how knowledgeable are you in this
area? A, Yes B. no
6. How do you evaluate your knowledge of risk management principles?
A, Low B, fair C, high
7. Are you aware of the concept of Risk Management?
A, Yes B, No
8. How did you become aware of the principle of risk management?
A, Through study B, Word of mouth C, Through workshop and training
D, Through other means, please specify _______________
9. What is the reason for inadequate Risk Management in your organization?
A, lack of time B, lack of competence C, lack of resources D, lack of information
10. How do you draw lessons learned from previous projects?
A, Communities of practice B, workshop
C, knowledge responsibility D, no methods for capturing knowledge
11. How efficient are the communication regarding risks in your construction projects?
A, High Efficient B. medium efficient C, low efficient
 RISK MANAGEMENT PROCESS
12. Does your organization has a clear risk identification process”
A, Yes B, no
13. How do you personally identify risks?
A, Knowledge B, analyses C, experience D, other
14. Which method do you use for risk identification?
A, Experience from previous projects B, brainstorming C, source identification
D, interviews E, third party F, no method G, other
15. How do you respond to risks? Strong disagree Disagree agree Strong agree
1 Avoidance
2 transfer
3 Mitigation
4 Acceptance

16. Which areas of risks occur more frequently in your building project and which areas of
risk cause major problems? Please rate them with their probability of occurrence and
level of consequence (1= low, 2= moderate, 3=high) and tick accordingly.

PROBABILITY OF OCCURRENCE LEVEL OF CONSEQUENCE/SIGNIFICANCE

Risk Areas 1 2 3 1 2 3
Contractual
Financial
Political
Performance
Technical
 Geographical
Operator

Other
17, Please rate the importance of risk management during every stage, (1=very low, 2=low, 3=
moderate, 4=high, 5=very high)

Importance of risk management during every stage 1 2 3 4 5

1 Inception and feasibility
2 Planning and design
3 Tendering stage
4 Construction stage
5 Commissioning and acceptance

18, which area of risk, do you think, affects project objectives more? Please rank the impact the
risk areas have on project objectives.

Impact
Time Cost Quality
Risk Areas High Moderate Low High Moderate Low High Moderate Low
1. Contractual
2. Financial
3. Political
4. Performance
5. Technical

6. Geographical
7. Operator

8. Other
 Risk Management Practices, Tools And Techniques/Strategies Applied To The Project.
1. Does your company use risk management techniques?
A, Yes B, No
 2. If your answer to (Q. 1) is no, what is the reason (you can tick more than one box)
A, Lack of awareness B, They are expensive C, They are unnecessary D, They are time
consuming E, The need to hire additional staff D, Others, please specify ___________
3. If your answer to (Q. 1) is yes, at what stage of the construction does your company use
risk management?
A, before the start of construction (contractual stage) B, at all stages C, during construction
4. Who is responsible for managing of risk in your company?
A, the project manager B, the consultant C, the client D, a specialized risk
management team E, Others, please specify ___________________________
Kindly indicate the extent to which the following project risk management practices and
Strategies are applicable in your project(s) on a 5-point scale where, 1= Not Applied (NA) 2=
Applied to some extent (ATSE) 3= well applied (WA) 4= greatly applied (GA) and 5= Applied
to very great Extent (VGA). And Mark with a tick (√) against the most applicable response.
1. GENERAL INFORMATION ABOUT RISK MANAGEMENT PLAN
General information about Risk Management Plan 1 2 3 4 5
1 The presence of efficient risk management plan in your company.
2 Hold planning meetings to develop the risk management plan.
3 Develop Risk Breakdown Structure (RBS) to define risk categories.
4 Estimated resources and costs needed for risk management activities and
include them in the project budget.
5 Define and include risk management activities in the schedule.
2. RISK ANALYSIS

Risk Analysis 1 2 3 4 5
1 There are established qualitative risk analysis methods and tools.
2 There is a process in place to quantify risks.
3 Assess the probability of achieving specific project objectives.
4 Identify risks that require the most attention by quantifying their relative
contribution to the overall project risk.
5 A risk matrix that defines probability/likelihood and impact exist in the
company.
3 RISK RESPONSE STRATEGIES

Risk Response strategies 1 2 3 4 5

1. Risk avoidance (Taking another course of action).
2. Risk Transfer to third party (e.g. Insurance company).
3. Risk acceptance/ retention.
4. Reduce risk to acceptable threshold level.
5. There is a personnel assigned for each agreed risk responses (e.g. safety
personnel, safety management, risk officer)
6. Contingency plan is allocated for time.
7. Contingency plan is allocated for cost.
8. A risk matrix was/is developed for the project.
9. The risk matrix was/is reviewed and updated throughout the life cycle of
the project.
10. Undertaking continuous performance improvement through learning and
innovation exists
4 RISK MONITORING AND CONTROL PROCESS

Risk monitoring and control process 1 2 3 4 5

1 Risks are discussed in team meeting.
2 Risk management is always considered as part of the agenda in the project‘s
progress meetings.
3 The controlling process includes a risk log/ risk check list.
4 Project risks are actively and routinely tracked and reassessed.
5 The project team holds periodic meetings specifically for risk discussions.
6 You are making improvements in risk management procedure as a result of lessons
learned.
5 RISK MANAGEMENT TECHNIQUES/STRATEGIES

Risk Management Techniques/strategies 1 2 3 4 5

1 Have open and effective communication channels between/ among project team, the
contractors, consultants, client and other project stakeholders.
2 Strategies were/are developed to manage the identified risks.
3 Risk register/matrix/database system is developed incorporating the risks identified,
controls, responses and residual risks.
4 Project risk manager is appointed to advice and/or manage the risks in the project.
5 The risk register/matrix is continuously reviewed by the project team/project
manager.