ASSESSMENT OF RISK MANAGEMENT ON PROJECT DELIVERY IN OYO STATE

ABSTRACT

This study assessed the impact of risk management on project delivery in oyo state The major requirement of every construction project is meeting client’s need of cost, quality and time. However, the construction industry is overwhelmed with risks more than any other industry due to the fact that they are present in every activity from design to completion. These risks need to be controlled early or face the possibility of cost overruns, time delays and poor quality work leading to displeasure of client and public. This study assesses the ways of managing the most occurring risk factors and improving risk management practice in Nigerian construction industry. Questionnaire survey was used as the instrument for data collection due to distance and logistical reasons. The questionnaire was distributed via email and respondents returned it through the same channel.

The study identifies that the main problem of risk management application in Nigeria is knowledge. It was found that the best knowledge that will effectively manage project risks in the country is cost management and quality management. Materials price fluctuation has been identified as the most occurring risk in construction projects in Nigeria though increase in inflation rate has a higher possibility but its major effect is on the price of material which makes it the highest occurring risk factor in Nigeria. The attitude of construction participants is another problem to risk management practice.

 

Chapter 1

1 INTRODUCTION

1.1 Introduction

Risk management is a comprehensive and systematic way of identifying, analyzing and responding to risks to achieve the project objectives (Banaitiene and Banaitis, 2012). It is also defined as a planned form of identifying and evaluating risk and selecting, establishing and applying options for the handling of the risk (Kremljak, 2004). It is the recognition, prioritization and appraisal of risk followed by an organized resource application economically to reduce, monitor and manage the possibility of unfortunate events or to maximize production or outcome (Ehsan et al. 2010).

Construction projects due to its nature allows a lot of possibilities for many environmental, socio-political and other problems during pre-contract, contract and post-contract stage leading to completion time problem, cost overruns or exceeding budget in projects and poor quality finish (Akintoye and Macloed, 1997). In order to avoid or reduce the losses, management of the risk involved in the construction project is required. Nevertheless, saying Nigerian construction industry is poor, is an understatement as the industry is characterized by frequent setbacks or interruptions, cost overruns and abandonment of projects (Awodele et al., 2009). These are caused by different kind of risks involved in construction projects. Risk factors are believed to be familiar to Nigerian construction professionals, yet the probability of occurrence and its impact at precontract and post-contract stage is yet to be investigated. However, there are few researches conducted on risk management within the construction industry in  Nigeria. In Nigeria, the construction industry mainly depends on government’s budget and the industry is performing very poor due to avoidable risk factors. The need for understanding how to manage project risks becomes a very important issue. Researches on risk management will be of great help to the construction industry in Nigeria but we presently have very few. Therefore, this study made an assessment of risk management on project delivery in Oyo state, Nigeria.

1.2 Problem Statement

Construction industry is overwhelmed with risks more than any other industry (Deviprasadh, 2007). The industry is prone to various types of risk which if care is not taken can destroy projects. When these risks are not managed or tackled adequately, the industry will suffer poor performance which is exactly the situation in Nigeria. In construction most or all decisions including the simplest ones involve risks (Pritchard, 2001). According to Akintoye and Macloed (1997), risk sources are identified in construction from pre-contract stage which includes design risk, tender risk and estimating risk. Risk factors were identified at post contract stage which include; substantial risk, condition of site, unfavorable weather, authorized risk, ecological risk, logistic risk, political risk, fiscal risk and contract risk.

This research is performed to provide an appropriate answer to the question “How to improve Nigerian construction industry’s risk management practice?” and also “How to identify the ever-present risk factors in Nigerian projects?” The whole of the study is trying to find the answers to this questions which will be beneficial for the construction industry in Nigeria.

1.3 Objectives of Study

The general objective of this study is to make an assessment of risk management on project delivery in Oyo state. The specific objectives of this study are:

1. To identify the areas or factors that will help to develop risk management practice in Nigeria,
2. To identify the factors responsible for poor risk management practice in Nigeria
3. To identify most important knowledge areas that will improve risk management in Nigeria, and
4. To identify and recognize those risk factors with high possibility of occurring during construction projects.

1.4 Significance of the Study

1. Some factors were listed for respondents to choose the ones they feel will help develop the practice of risk management in Nigeria. The factors are: attitude of contractors, project program scheduling; introduction of risk management model, cost of risk management and availability of knowledge and expertise. The study finds that availability of knowledge and expertise is the most important factor that will help the development of risk management practice in Nigeria.
2. The opinion of respondents was asked on the barriers to risk management i.e. the factors responsible for poor risk management practice in the country. The factors were: ineffective implementation of risk control strategies, absent of joint risk management mechanism by participants, lack of risk management knowledge and dissimilar risk control strategies views. Based on the opinion of the respondents, the study finds that shortage of risk management knowledge is responsible for poor risk management practice in Nigeria.
3. The study explored the areas of knowledge or experience that will help in managing project risks effectively. Knowledge on cost management, resource management, quality management, time management and scope management were investigated. It was found that cost management knowledge or experience is the most important area that will help to manage project risks effectively.
4. The study tried to identify the risk factors that have a high probability of occurrence. Some risk factors are listed for respondents to choose a scale the likelihood of occurrence in projects. This will help to know the kind of risks participants are expecting when undertaking a construction project in Nigeria. It was found that materials price fluctuation is the highest occurring risk in Nigeria. Other risks factors with high possibility of occurring are insufficient skilled labor, inaccurate cost estimate and unfavorable weather condition.

1.5 Thesis Outline

A better understanding of risk management procedure and practice in the construction industry is an important model for exploring the application and barriers of risk management in Nigeria. It will also help in identifying the everpresent risk factors and their probability of occurrence in Nigerian projects. Chapter one summarizes the whole work carried out for this study

An extensive review of risk management in construction industry was conducted for this study. In chapter two past studies related to risk management in construction industry will be reviewed in order to have an insight on what has been done regarding risk management especially in Nigeria. The aim is to find the research gap in the field of risk management and area that needs more attention or improvement for further studies.

The main problem with data collection is reliability of the information. The information given by respondents needs to be reliable in order to have a good and accurate result. Chapter three will give details of the type of survey method used for data collection stating the reasons why the method was chosen and why other methods were not used. It will give a report of the extent of reliability of the obtained data and how they were collected. This is important because the quality of any research depends on the accuracy and reliability of data.

Chapter four will outline the results of the returned questionnaires. Each question has different options for the respondent to choose. Any chosen option will be represented as a percentage of the total returned questionnaire in order to show the number of respondents that choose a particular answer. It would be followed with a pie chart to help in understanding the responses. Normally, it is difficult to get 100 percent of the questionnaires returned but according to Akintoye and Macleod (1997) a return rate above 40% is sufficient. In this research, it was believed that a return rate of above 50 percent would be satisfactory because of the distribution method and due to the distance between Cyprus and Nigeria as the respondents cannot be contacted in person.

Chapter five looks at the views of respondents and how they relate to the real situation in Nigeria and global construction. The questionnaire results would be analyzed in order to see if they are in line with some construction professionals’ views and how they differ with past researches.

Chapter six outlines the finding of this study i.e. stating the conclusions of the study based on the returned questionnaires and analysis.

ASSESSMENT OF RISK MANAGEMENT ON PROJECT DELIVERY IN OYO STATE

Sharing is caring!