Systematic Risk Management Approach for Construction Projects

TLDR

Construction projects inherently involve risk, yet they frequently fail to meet time, quality, and budget targets, and current practices rely on unsystematic, intuitive approaches. This study introduces the Construction Risk Management System (CRMS) to enable contractors to identify, systematically analyze, and manage project risks. CRMS employs influence diagramming and Monte Carlo simulation to evaluate risks and recommends strategies such as avoidance, transfer, retention, loss reduction, prevention, and insurance.

Abstract

Risk is inherently present in all construction projects. Quite often, construction projects fail to achieve their time, quality, and budget goals. A risk model entitled construction risk management system (CRMS) is introduced to help contractors identify project risks and systematically to analyze and manage them. The CRMS model is a logical substitute for the traditional intuitive unsystematic approach currently used by most contractors. The influence diagramming technique and Monte Carlo simulation are used as tools to analyze and evaluate project risks. Alternative risk management strategies are suggested. Such strategies include: risk avoidance, risk transfer, risk retention, loss reduction, and risk prevention and insurance.