Risk identification and response methods: Views of large scale contractors working in developing countries

Abstract

Risk management, as it relates to construction, is vital to the successful undertaking and completion of any construction project. One way to effectively manage project's risks is to develop more reliable means of identifying the most critical risks and the associated effective response methods. Research studies have extensively addressed this aspect of risk management. However, a small fraction of this research focused on identification of the critical risks encountering contractors working in the construction industry of developing countries, and few tackled identifying the risk mitigation measures employed in such an industry by domestic, international, and multinational contractors. This paper presents a comprehensive methodology that addresses the risk identification and response methods for developing countries represented by Egypt. The paper is based mainly on the approaches used by large contractors either domestic or international. The investigation, via a comprehensive questionnaire survey, tries to identify the most critical and significant risks that face the contractors working in the Egyptian construction industry and their associated effectively employed risk mitigation/elimination measures. Twenty-nine (29) construction project risks are classified into six (6) main categories according to their type and hundred and forty (140 risk) mitigation/elimination measures are introduced to overcome the impact of risks under each of these risk categories. According to the collected data and the results of the statistical analysis procedures employed, the most critical risk encountered by the contractors working in the Egyptian construction industry are: 1)the financial inability of the client; 2)the improper management of construction projects; 3)inflation and interest rates; 4)in-house cash shortage; and 5)Foreign exchange and convertibility. 101 risk response methods were found to be effective from the 140 methods introduced. The most commonly used risk response method was the risk reduction technique. © 2006 Springer.