THE RISK FACTOR OF CONSTRUCTION INDUSTRY IN GUANGDONG, CHINA HAVE HAMPERED DEVELOPMENT AND INVESTMENTS

Abstract

This study is a research of key risk elements in a construction project. Although this study is concentrated on Guangdong, China, but this study is a comprehensive research of finding the key risk elements in construction projects all around the world. A number of key risk elements are identified in this study. Also, ways have been devised in order to mitigate those risks altogether.

The measures of this study’s results are both quantitative and qualitative. Questionnaire technique has been used in order to collect the data. Questions in the questionnaire are closed ended and open ended questions. Likert scale and dichotomous questions with answers yes and no have been used in the questionnaire. This technique has been used because deciding the key risks related to construction projects needs a lot of opinions. So, in order to make a firm and reliable view about the risks both closed and open ended questionnaires are used in the questionnaire in order to collect many views. The sample chosen for this study is 100. 100 questionnaires have been distributed among employees of construction projects in Guangdong, China.

Studies have been conducted in order to find the risks in construction projects, but usually their scope has been restricted to one market. This is a comprehensive study relating the key risks of construction projects generally. Results that have been yielded can be generally applied to all the construction projects in the whole world. Numerous key risks have been identified that are being faced by the construction projects in Guangdong, China. Finally, in the conclusion portion some recommendations have been made in order to mitigate the effect of the identified risks. With the help of these recommendations, either these risks can be completely eliminated or their effects can be reduced to minimal impact.

 

 

Chapter One

Introduction

1.1.Background

  With the rapid development of science and human lifestyle the social environment has become volatile. This volatility is not confined to the day to day transactions but effects every walk of life. In this research study the effect of more and more uncertainties in the construction industry are reviewed. The construction industry has to face a lot of risk in today’s world. Construction of a specific project is a complex process, which comprises of various steps. Construction projects always have to face high risks because of the nature of characteristics it possess (Yi, 2011). Construction quality and risk management needs to be focused upon as there has been a drastic improvement in the living standard of general public. Now the consumers are informed and have a know-how about their rights and responsibilities. The construction projects require usually need big investment and are lengthy cyclic activities which exposes the projects to many uncertain factors. That is the reason the construction projects are always faced with high risks. The managers are required to pay great attention to the risk factors and strengthen the consciousness of construction risk so the overall process can be improved and the level of risk is mitigated. The risk management in the construction project needs to be focused upon. This additional aspect has been laid stress upon because it will ensures the quality of construction project, ensures the project runs successfully and finishes on time. This improvement in the project can benefit the whole enterprise and meet the requirements of the market. So the risk of construction project is very necessary to study.

With the rapid development of the modernized industrial technology in Guangdong, a lot of building projects have been started into the Guangdong market with the rapid development of real estate in recent years. But there are many problem and risk in the Guangdong construction projects as the market is extremely volatile and dynamic. In 2012, Guangdong had the highest accident rates in construction projects in China, this has added a negative mark on the construction industry. They also have had some financial risks because of which frills from all the projects had to be cut, and some even did not get completed on time. This financial risks were the effect of global financial crisis (CIC, 2013). In Guangdong like any other place in the world, construction projects are significantly affected by policy development, low level of legal awareness of people, complicated and important relationships, lack of corresponding institutes and so on. These are the particular issues the construction industry especially in Guangdong have to face. Considering these factors, this study on the analysis of risk factors during the construction projects in Guangdong is being studied and evaluated.

A lot of research has been carried out previously in risks attached to the construction industry. Most of studies have focused the developing or developed areas which considerably have a low level risk. The under developed areas have not been touched upon while talking about this topic. It should be noted down, that the level of risk, in the underdeveloped areas have to be extremely high, since there is a lack of awareness, legal systems, labour rights etc. For example, Baker examined the usage of techniques at different risk management stages of major United Kingdom companies (Baker et al., 1999). Various analytical techniques for risk management in Hong Kong from the contractor’s perspective have been analysed (Shen, 1997). In another study focus on risk management has been laid in whole mainland China (Sun, 2008).However, there is a gap that only a very few investigations have been made in the developing and underdeveloped areas. That is the reason that the province of Guangdong has been chosen for this study. Even though the Guangdong market has a history of which dates backs long time of planed economy but still the development of private economic activity just started about 30 years ago (Zhu, 2010). The influence of planned economy in Guangdong is very large. In public economy, government undertook most of the risks and losses and enterprise did not pay much attention to these risks. Another reason for late development of private economic activity of Guangdong, and thus high level of risks in the construction industry is due to the low level of people’s awareness of risk. They are not even aware of the severity of situation. In their evaluation this risk is low but in reality it is quite a big risk, which needs to be addressed. This is the proof that enough research did not focus on the risk of Guangdong construction projects. A research study about the risk of construction projects in Guangdong addresses two main points: What is the main risk faced by the construction projects in Guangdong and how can it be mitigated.

1.2.Aims and Objectives

The aim of the study is to analyse the risk factors associated with the construction industry and the effectiveness of the risk management systems in place of Guangdong’s construction project. The objectives are stated below:

  • Identify the main risk in construction industry of Guangdong and even all over the world.
  • Investigating the number of risks which hampers the development rate in construction in Guangdong.
  • Propose ways to avoid and mitigate the level of these risks and build an effectives risk management system.

1.3.Problem Statement

The risk factor of construction industry in Guangdong, China have hampered development and investments.

1.4.Research methodology

The aim and objectives of the study helps the researcher to determine which research methodology should be used to investigate this research study. The researcher has used a mixed methodology for this topic i-e, both qualitative and quantitative. This mixed methodology leads to collection of both types of data numeric and relative. Quantitative data is collected using questionnaires survey technique while qualitative data using interviews.

 Along with interviews qualitative is also linked to in-depth exploratory studies and answers the why questions the presence of these risks and what adds to this concept (Denzin and Lincoln, 1994). Qualitative research is useful during the early stages of a study when the researcher may be unsure of exactly what will be studied or what to focus on. The presence of qualitative data provides the basis of every research study. The data is collected using questionnaires techniques. The study requires case study and interview analysis for the collection of qualitative data. The use of qualitative approach makes the analysis easier as the data is in black and blue and the main risk factors in the construction project can be pin-pointed easily. The construction sites in Guangdong, China have been visited to collect real life data. The workers/ employees of Construction Company in Guangdong have been provided with questionnaires to get their views and input about the breaches in risk management systems. Moreover the higher officials of the company have been interviewed and qualitative data is gathered.

1.5.Research Questions

Every research study needs to have a set of questions upon which the entire study revolves. These research questions provides a basis for the study, the data is collected keeping these as the central questions, whether it is a questionnaire or an interview.

 

  • What is the process of management of risk factors in construction project?
  • What risk factors does the construction industry has to face?
  • How does the risk factors impact the construction industry?
  • The development and current situation of Guangdong adds to the risk factors?

1.6.Structure of the dissertation

This research has been divided into following chapters: Introduction, literature view, research methodology, analysis, and conclusion. Further details of these chapters are as follows.

•           Chapter one contains the introduction on the dissertation and has in it the problem statement, background, research objectives and questions etc. Research rationale has also been discussed to provide insight on the research problem. 

•           Chapter two contains the literature review. The chapter has secondary research already carried out by researchers. In this chapter different risk factors that influence the construction industry are highlighted.

•           Chapter three is on research methodology. The research methods are selected with utmost caution and accordingly written in this chapter.

•           Chapter four provides the analysis of the data that has been collected throughout the research process and critically analyses it and makes analysis based on that.

 

•           Fifth chapter deals with results and their interpretation. The main focus of this chapter is to either accept or reject the hypothesis in the light of the results and analysis.

Chapter Two

Literature Review

2.1. Introduction

Risk management is the science which applies aptitudes, apparatuses and methods to satisfy venture exercises in a manner that the desires and necessities of stakeholders are satisfied or surpassed (Zolfagharian, et. al 2014). Project risk management is an essential piece of the procedure which goes for recognizing the potential dangers connected with an undertaking and reacting to those dangers. It incorporates exercises which mean to augment the outcomes connected with positive occasions and to minimize the effect of negative occasions (Ehsan et. al, 2013). It is accepted for the most part that hazard in an environment is a decision as opposed to destiny, and the innate vulnerability in the arrangements can influence the fancied result of accomplishing task and business objectives. Danger is available in all the exercises in a task; it is just the sum which fluctuates starting with one movement then onto the next (Zolfagharian, et. al 2014). Trinkuniene (2008) defined risk as an undecided condition or happening with capability to influence the objectives of the project in a positive or negative manner. Tomlinson and Fai (2013) described risk as an amalgamation of likelihood of a defined threat and enormity of outcomes of its incidence.

Development dangers might be identified with specialized, administration, logistical, or socio-political viewpoints or could be identified with common debacles. In the area of venture administration, a percentage of the discriminating impacts of dangers are disappointment to accomplish operational prerequisites and the obliged quality, non-consummation of the task inside stipulated time and evaluated expense. The current study is cantered on ideas of risk management and will blanket the related writing on the subject, advancement of an overview poll and proposals identified with risk management hones in construction industry of China.

2.2. Concepts of Risk Analysis and Management

The idea of risk is multi-dimensional. In the setting of development industry, the likelihood that a distinct element unfavorable to the general undertaking happens is constantly exhibit (Hou,et., al, 2014). The subject of risk management is considered to be as one of the key knowledge area of project management and substantive research in this area has greatly contributed to enrich the under stability of this topic as well as to enhance the knowledge to deal with the risks that may come across while execution of the construction projects (Baker, and Reid, 2005).

An absence of consistency identified with the outcomes of an arranging circumstance and the related vulnerability of evaluated results prompts the outcome that comes about can either be superior to expect or could be more awful. Notwithstanding the diverse meanings of risk, risk might be arranged for distinctive purposes also (Sousa, et. al, 2014). The general classifications of construction risks are outer dangers and inner dangers; while some different classes reduce chances as political, social and danger and so forth. Kishk (2004) defined risk management as an arrangement of structures, processes and culture that leads to actual realisation of potential opportunities while management of undesirable impacts at the same time.

2.2.1. Project Risk

Risk management in construction includes the distinguishing proof of impacting variables which could adversely affect the expense timetable or quality destinations of the undertaking, evaluation of the related effect of the potential risk and execution of measures to alleviate the potential effect of the danger (Hou,et., al, 2014). The less secure the movement is, the costlier will be the results in the event that a wrong choice is made. Fitting assessment and examination of risk will help choose avocation of expensive measures to lessen the level of danger. It can additionally help to choose if imparting the danger to an insurance agency is supported. A few dangers, for example, common debacles are for all intents and purpose unavoidable and impact numerous individuals. Truth be told, all decisions in life include dangers. Dangers can't be completely stayed away from yet with fitting administration these might be minimized (Hou,et., al, 2014).

2.2.2. Determination of Risk

There are two strategies to focus risks in a project, specifically the qualitative and quantitative methodology. The quantitative investigation depends on detail to ascertain the likelihood of event of danger and the effect of the danger on the venture (Ehsan et. al, 2013). The most well-known method for utilizing quantitative investigation is to utilize choice tree dissection, which includes the application of probabilities to two or more conclusions. An alternate technique is Monte Carlo reproduction, which produces esteem from a likelihood circulation and different elements. The qualitative methodology depends on judgments and it utilizes criteria to focus conclusion. A typical qualitative methodology is the priority charting technique, which utilizes ordinal numbers to focus necessities and results (Zou, et, al., 2013).

An alternate method for utilizing qualitative methodology is to make a rundown of the techniques of an undertaking in plummeting request, ascertain the dangers connected with each one procedure and rundown the controls that may exist for each one danger (Chapman, 2001).

2.2.3. Factors affecting Risk

A few components lay open tasks to typical than higher danger (Ehsan et. al, 2013)

  • History:  Newer tasks posture more hazard in light of the fact that the procedure has not been refined with the progression of time. In the event that an undertaking of comparable nature has been carried out ordinarily in the recent past, then the probability of accomplishment with the current venture is likewise improve (Esmaeili, and Hallowell, 2013).
  • Management Stability:  Management steadiness implies that the entire administration group has the same vision and heading, subsequently heading effective accomplishment of objectives. In the event that the administration is flimsy then it can prompt impossible and unfeasible calendars for the undertaking and wasteful utilization of assets. (Esmaeili, and Hallowell, 2013).

Staff mastery and experience:  In the occasion that the parts of an undertaking group fail to offer the immediate working information and knowledge of the range, there is a probability of time postponements, evaluated expense miracles and low quality (Chapman, 2001)..

  • Team Size:  in the event of vast groups, the likelihood of issue event builds because of the group size. One of the reasons might be the trouble of correspondence because of the extensive group size (Zou, et, al., 2013).

Resource Availability:  If the accessibility of assets is simple, the likelihood of reacting to issues progressively additionally expands. Case in point, simple accessibility of cash makes securing human, material and gear assets simple on as required premise(Chapman, 2001). Be that as it may, a wealth of assets does not give ensure against dangers, everything it does is to outfit the task group with the strategies to react to dangers. (Zhang, et. al, 2013)

Time Compression:  in the event of exceedingly compacted time plan, the dangers are amplified in the venture. At the point when more of an opportunity is accessible, more adaptability is available in the undertaking and there is a chance to relieve and diminish the effect of happening dangers (Chapman, 2001).

  • Multifaceted nature:  if there should arise an occurrence of an exceedingly intricate or advanced undertaking, the chance of an oversight or an issue is additional (Edwards, L. (1995).

2.3. Types of risks

The features of projects like technical, operational or business can be linked with the risks. When a company fails to make a product that can fulfil the requirement of customers then it is known as technical risk. When the team members of the project do not work with each other completely then operational risk comes. There can be a possibility of acceptance or rejection of risks (Zhu, 2010). Application of skills, tools and techniques to accomplish activities related to project in such a way that the prospects and needs of stakeholders are satisfied or go beyond (Zolfagharian et al, 2014). While talking about project risk management it is defined as an important part of course which focus on recognizing the possible risks connected with the project and work out to eliminate those risks. Its focus is on maximizing the positive happenings and reducing the negative happenings (Ehsan et. al, 2013).

It is thought normally that risk in a situation is not a fortune but it is an alternative, and the intrinsic ambiguity in the strategy can influence that outcome of goals and achievement of projects related to business. The presence of risk is there in the entire project. But the amount varies from one to another activity (Zolfagharian, et, al, 2014). 

The risk that affects the project in a negative way is known as unacceptable risk. The duration of risks can be short term or long term. When the risk is short term then there can be a visibility of impact immediately like change that is required in a deliverable. When the risk is long term then the visibility of impact is possible in faraway future like when without testing the product, it is released in the market. Some risks can be managed and some cannot be managed by the company (Rwamamara, and Simonsson, 2012). The companies can accommodate manageable risk, for example making small changes in the requirements of projects. On the other hand, it is impossible to accommodate the unmanageable risk like turnover rate of difficult team members. In the end there can be both internal and external risks (Zhu, 2010). The internal risk is specific to a project and the sources that are involved in the project are responsible for this type of risk, for example if the product is unable to work properly. Whereas the risks that are caused by the external sources involved with the project are responsible for creating external risks like when senior management cut the cost. The risks that are linked with the industry of construction can be mainly categorized into (Zhu, 2010). There are different types of risks which are associated to projects and these are technical or operational related risks. Technical risks are those types of risks which have lack of ability to manufacture a product that fulfil with the consumer’s prerequisite.  When the members of project find it difficult to work with consumer then such types of risks are known as operational risk. Other types of risks are acceptable or unacceptable (Zhu, 2010). When the risk has negative effect on the crucial lane of the project then it is known as unacceptable. Risks can be of long term or of short term. When the influence is observable instantaneously and changes is deliverable then it is known as short term risk. When the influence is observant in far-flung future like when a product is released without sufficient trying. Another of risk is manageable and unmanageable risk (Rwamamara,  and Simonsson, 2012). When the risk is in the state of accommodation like small changes which are needed in the project can accommodate then it is known as manageable risk whereas those risks which are not accommodative like turnover of decisive members of team. Similarly risks are defined as internal and external (Zhu, 2010).

The risks which are created by sources innate in the project and are unique for instance when there is some inability in the functioning of the product are known as internal risks whereas when there is a risk of cost cuts by senior management and has origin in source external to the scope of project then it is known as external risk. While taking under consideration of construction industry following risks are possible (Zhu, 2010).

Technical risks: (Manu, et. al., 2013)  

• Inadequate investigation of site / insufficient analysis of site

•   Unfinished devise

•   Suitability of qualifications

•   Ambiguity over the resource and accessibility of equipment

•   Design that is incomplete

•   Specifications appropriateness

• Sources uncertainty and materials availability

Logistical risks:  (Esmaeili, and Hallowell, 2012)

•   Availability of enough facilities of transport

•   Availability of different resources required for the project- like equipment required for construction, spare parts, fuel and labour

•   Accessibility of adequate shipping services

•   Accessibility of sources especially the spare parts of construction materials like manual labour and energy

Management related risks:  (Hallowell, et al., 2011)

  • Not known effectiveness of resources
  • Problems related with relations of industry
  • Indecisive output of capital
  • Manufacturing association inconvenience

Environmental risks:  (Mitropoulos,  and Namboodiri,  2011)

•   Implications related to weather and seasons.

•   Natural calamities

•   Climate allusion

•   Natural tragedy

Financial risks:  (Bansal,2011)

•   Availability and variation in foreign exchange

•   Making the payments late

•   Inflation

•   Local taxes, reconstruction of funds

•   Accessibility and rise and fall in exchange with foreign

•   Postponement in imbursement

•   Price increases

•   Local taxes, funds Repatriation

Socio-political risks:

  • Hindrances on the availability and employment of emigrant staff
  • Restriction and processes of customs and imports
  • Problems in discarding of plant and equipment
  • limitations on the accessibility and service of emigrant employees
  • civilization and trade in limitations and dealings
  • obscurities in disposing of deposit and utensils
  • persistence with the usage of  local firms and representatives
  • Urging on use of local organizations and agents (Edwards, 1995)

2.4. Common sources of risk in construction projects

The common sources of risks that are associated with industry of construction are listed below: (Zhao, et. al., 2011)

•   Changes in scope and needs of projects

•   Errors and omissions related to the design

•   Roles and responsibilities that is inadequate

•   Staff that is skilled insufficiently

•   Alteration in the scope and needs of the project

•   devise faults and exclusions

•   Insufficiently in defining the positions and responsibilities

•   Not sufficiently expert workforce

•   Insufficient supplier understanding

•   Ambiguity in the essential dealings of venture contributors

•   Addition of novel equipment

•   Unawareness with local circumstances

•   Energy majeure

•   Subcontractors

•   Inadequate experience of contractor

•   Not knowing about the important relationships between participants of project

•   New technology

•   Less knowledge of local conditions

•   Casualty that is unavoidable

2.4.1. Major processes of project risk management

Four processes are involved with management of risk (Mcmillan and Weyers, 2011).

  1. Risk Identification:  Determining the risks that can mostly affect the project and authentication of features of every risk. it involves recognition of those risks which effect project and citations of features of every risk
  2. Risk quantification:  Assessing the risks and all the interactions of risks that can be possible with the activities of project for evaluation of possible results os project. It involves the evolution of risks and its interaction with project actions so that it can help to assess the potential conclusions of the project. 
  3.  Development of response of risk:  Defining the steps for response to opportunities and threats linked with risks. It is explanation of reaction stepladder for prospects and coercions linked with threat.
  4. Risk response control:  Response to the changes executed to detach risks throughout the duration of project   (Tserng, et. al., 2009). Basically, it is reaction to the alterations applied to eliminate threat all over the venture time interval.

2.4.2. Response to risk

It has five categories which are following:

a)   Accepting the risk:  In this category, one should completely understand the risk, results of that risk and its occurrence possibility and not to do anything related to it. When the risk occurs then the team of project should make a reaction to that risk. This strategy is used by team members when the possibility of occurring of specific problem is minimum (Burnett, 2009). It involves understanding related to risks, its effects, possibilities of happen and not taking any action related to it. At the time of risk occurrence, project team will act in response. It work when the possibility of risk happening is least and it works when costs are cheaper than treat (Burnett, 2009).

b)   Risk quantification: When the team members do not do that part of project in which there is risk then in that case, the risk can be minimized to zero. In this regard, the scope of the project varied, due to which there can be a possibility in changing the whole business as well. This can result in decreasing the revenue and also the opportunities of saving cost (Tserng, et. al., 2009). A project in which there is higher risk then there will also be higher rate of return in that. one of the ways to shun threat is by not working on that project which already contains any threat. Extent of the project is transformed in this approach which can transform the company case also. As a less income or cost saving opportunities are brought by scaled down products (Tserng, et. al., 2009). High return on an investment involves more threats.

 c)   Monitor the risk and prepare contingency plans: There must be employment of indicator that can predict the risk involved in the project in order to monitor the risk. Monitoring the risk by being a part of that team is a strategy of risk (Burnett, 2009). The contingency plans can also be made in order to make preparations before occurring of any type of risk event. The most important of all contingency plans is setting aside enough money for facing any kind of mis-happening (Burnett, 2009). Examine the risk and get ready for emergency tactics: predictive indicators can be used to examine the risk factor in the project. By being the part of risk team, risk tactics can be monitored (Burnett, 2009). Emergency tactics are considered as the substitute actions which are organized before the occurrence of any risk. One of the most common emergency tactics is save extra money for the rainy time or emergency fund. Emergency strategy can be use insurance like it can use insurance policies but it is considered as costly (Burnett, 2009).

d)   Transfer the risk: The risks can be transferred from projects that are on large scale. Insurances can be purchased in order to save projects from risks of theft or fire etc. In this way, the projects can be saved from risk of calamities (Edwards, 1995). one of the most famous and useful method for the transference of risk is insurance. By doing so at the time of risk or loss the insurance company is accountable to pay the cost of risk it is considered as the direct method to transfer the risk (Tserng, et. al., 2009) another method is known as fixed price contract is also use for the transference of risk.  In this method work is done for a pre specified amount (Denzin and Lincoln, 1994). Another way to transfer risk is by hiring an expert. In this way by transferring risks to another party bring benefit but it is also responsible for bringing novel risk (Baker et., al, 1999).

e)   Mitigate the risk: Mitigation is making response after the occurring of risk and after impacting the project. In this all the actions are covered that can help in overcoming the risk. It is a process of reaction to the threat when it already affects the project. It holds all the activities which the members of project take to conquer the threats from the overall atmosphere of project (Hallowell, and Gambatese, 2009)

2.4.3. Advantages of risk management

Following are advantages of risk management: (Rozenfeld, et. al., 2009)

  • Objectives achievement
  • Reliability of shareholders
  • Reduction in cost of capital
  • Decrease in level of uncertainty
  • Creating the value
  • Accomplishment of goals
  • Trustworthiness of shareholders
  • Diminution of resources charge
  • A smaller amount of ambiguity
  • construction of worth

2.4.4. Limitations of risk management:

When there is assessment of risks that is improper then the time is wasted. There can be diversion of fundamental resources when they are used for assessment of risks. As low risk level lead to low outcome and profit so assessment can lead to less profit and wastage of resources (Meloy, 2001).

2.5. Previous studies

Previously different studies have been conducted related to the risk management. The studies that have been carried out in the past relative to construction risk management practices mainly concentrated on the scope of level of project with regard to areas including: 1) determining innovative ways for appraisal of risk and updating framework to enhance the project performance (Harner, 2010). 2) Examining attitudes of main stakeholders like contractors and risk perceptions (Fang, et, al., 2004).

 

As per the opinion of Thompson and Perry, (1992), an effectual assimilation of project risk management and enterprise risk management for construction firms is very crucial. Mayo and Liu, (1995) delineated the conceptualisation of enterprise risk management as a practice that is particularly applied in the corporate strategies and is evidently influenced by the decisions of management and entity’s board of directors. The study of Akintoye and Macleod (1997) said that there are three factors that influence the risk management in the construction industry and that are experience, judgement and intuition of the managers and their team members. On the other hand, Uher and Toakely (1999) studied the few cases from contraction industry of the Australia and they found that implementation of risk management is very rare even that its familiarity is very common. Thompson and Perry, (1992) shed light on the key points of variations between PRM as well as ERM relative to person in charge, methods and frameworks, risk categories, scope and objectives. Enterprise risk management takes in to consideration external as well as internal risk events having the potential to influence the overall performance and achievements of construction firms (Edwards, 1995). On the other hand, the key focal points in project risk management are specific objectives of the project like environmental risks, safety, quality, time and cost. As per the opinion of Mayo and Liu, (1995) , the key objectives of enterprise risk management entails conformity with applicable regulations and laws, reliability of reporting, effective use of resources during operational activities and strategic- high-level goals consistent with mission of enterprise and corporate strategy.

2.6. Product Life cycle

Albert, et, al, (2004) opined relative to project risk management that it is primarily about dealing with external risks, administration procedures, contracting, planning, project preparation, project execution, subcontractor conditions, owner-contractor agreement and site conditions. In contrast to this, at enterprise level, risk management concentrates on compliance risks, financial risks, operational risks, market risks as well as strategic risks. Eight successive phases are entailed in a PLC model i.e. pre-feasibility, feasibility, plan, procurement, execution, commissioning, devolving and finally operation. In contrast,  a four phased PLC framework presented by Albert, et., al, (2004) is accepted as being the most extensively used one particularly in the construction projects incorporating conceptualisation, scheduling, implementation and cessation as the key phases. Kishk (2004) also made use of an analogous model in which the key project steps included commencement, designing, implementation and closure. Likewise, Identification stage, construction stage, operation stage, and finishing stage are termed as main steps in the lifecycle introduced by Taylor (2006).

.Identification stage, construction stage, operation stage, and finishing stage are termed as main steps in this lifecycle. These stages are discussed briefly as follows.

Identification stage: this stage is termed as initiation period of the project. At this stage the detection, assessment and choice of opportunities in business market are deemed as key objectives.

Construction stage: the particular tasks that are associated with this stage are making decisions about the workforce selection, design and plan of the project as well as design and configuration of information and communication systems (Albert, et., al, 2004).

Operation stage: monitoring of expenses and resources, conducting project processes and analysing the management risks are key steps during the operation stage.

Finishing stage: during this stage, the project team members are extricated and project processes are finally terminated (Edwards, 1995). 

 

2.7. Project Risk Management

In words of Septellaa et al (2014), a systematic process is quite important for managing the construction processes in an effective manner. So it can be said that In order to achieve objectives of the project particularly in the case of construction companies, the key process entail risk identification, evaluation of likelihood of occurrence of risk and finally an approximation of risk effects for its effectual management (Flanagan and Norman, 2003).

Risk management is viewed as a logical process that is particularly aimed at detection as well as quantification of all the risks pertinent to the project or businesses to which these are exposed to for the purpose of arriving at correct decisions relative to risk management (Flanagan and Norman, 2003). Different researchers have presented the risk management process in a different manner.  The process told by Serperlla et al (2014) starts with risk identification. Then risk assessment is done and risk analysis is conducted. After that risk response is recorded. Then risk monitoring and control is performed.

2.8. Risk Management Process

For the purpose of effectually attaining the objectives of the projects, it is usually emphasised that a well organised process of project risk management should be applied to construction project management (Flanagan and Norman, 2003). The past studies relative to risk management in the construction related projects have sufficiently discussed the overall process of risk management and Albert, et., al, (2004) summarised this process into the following key phases:

  1. Identification of risk
  2. Assessment of risk via qualitative and quantitative methods;
  3. Analysis of risks
  4.  Rejoinder of risks
  5. Control and monitoring of risks

2.8.1. Risk identification

It is difficult to completely eliminate the risks and threats. Once these risks are identified, it becomes easy to do something to get control over these risks. the effectiveness of management of risk increases quite a lot if the risk is identified in an appropriate manner (PMI, 2004). The essence of risk management is not only to solve the problems before they occur but it also means that be ready for the uncertain potential problems. By doing so, one cannot only manage risks but these risks can be converted into opportunities and many economical, environmental benefits can be attained (Wang and Liu, 2004)

Albert, et., al, (2004) opined that emphasised that if the threats and risks associated with certain projects are correctly identified and estimated, their elimination becomes quite easier. Likewise Kishk (2004) further added that control of project risks become uncomplicated once these are fully identified.  The process of risk management is also said to become more effectual once foundation of risks are detected and apportioned prior to occurrence of any problem (PMI, 2004). Thus it can be stated that the process of risk management has proved in effectiveness relative to solving the predicaments beforehand and getting geared up for unexpected potential problems. This practice of handling the prospective risks proves to be very beneficial not only in curtailing project losses but also open up prospects to convert risks into opportunities subsequently leading to manifold advantages like environmental protection and economic profitability (Fang, et, al., 2004).  With identification of impending risks, it becomes easier to manage them effectually (Harner, 2010). Different methods and techniques are generally applied for the purpose of determining all prospective threats and risks that might have an impact on a particular project. The appropriateness of a particular technique is evaluated on the basis of its specific advantages and familiarity of project team with it. 

Fang, et, al., (2004) presented a summary of the methods and techniques that are mentioned in the past studies relative to detection of risks.

Table 1: Techniques of risk identification

Information Gathering Methods        

Workshops

 

Visit location

 

Risk breakdown structure

 

Delphi technique

 

Past experience

 

Consulting experts

 

Benchmarking

 

Questionnaires

 

Interviews

 

Brainstorming

Documentation

Study professional literature

 

Study project documentation (files, plans etc.)

 

Checklists

 

Templates

 

chronological data from related projects, Databases,

Research

Research interfaces

 

Assumptions of research

 

Analysis of stakeholders

 

2.8.2. Risk Analysis

This step of risk management process is also known as the risk quantification and it evaluates the potential impacts of risk on the respective project. Basically, in this step cost, magnitude, schedule is determined (Chileshe and Kikwasi, 2004). This risk analysis is useful for getting the insight of the risk elements that influences the project implementation phase. Risks analysis provides insight into the components which make a particular aspect of project implementation to be considered risky (Flanagan and Norman, 2003).

According to Chapman and Ward (2003) there are approaches that can be applied in risk evaluation. The very first approach is known as the scenario analysis. In this approach the concerned managers develop the scenarios on two extremes like best and worst case scenarios are formulated. The best case scenario is that when all the identified risks occur and as planned managers mitigate with the risk by using the different mitigation strategies. Thus, ultimately the risk is minimized (Chileshe and Kikwasi, 2014). This approach has proved quite effective but there are critics who said that the assumption of this approach to quantify risk does not consider the magnitude of the risk. So the assumption of homogeneity of the risks makes this approach bit doubtful (Flanagan and Norman, 2003).

Another approach of analyzing risk is the sensitivity analysis technique that was introduced by PMI (2004). This approach basically analyzes the potential impact of each risk factor on the implementation of the project. It also considers the magnitude of the risk and it assign value to each risk in accordance with the magnitude of this risk ((Bouma and Atkinson, 1995). The graphical representation of all identified risks then give insight about the critical risks thus management shifts their focus towards that critical risk. The only criticism of this approach is that it basically does not consider the interdependence of different risks in the risk analysis and it treats all risks separately(Flanagan and Norman, 2003). The good thing about this approach is that it does assign values to the risks according to their importance or magnitude.

According to Garvey (2000), another risk analysis approach is probabilistic risk analysis. This approach considers the critique of the sensitivity risk analysis and it also focuses on the interdependence of the risk factors. In this approach, seeking and assessing of the risk occurrence is performed simultaneously. The most critical and challenging aspect of this approach is to determine the probability of all risks (Wang et al, 2004).

Another approach for risk analysis is known as decision tree analysis. The basic assumption of this approach is that manager always has many options through which they can complete an objective. So this approach does analysis of all risks that are associated with an approach and then after doing comparison one option is selected from array of decisions (Wang and Liu, 2004).

2.8.2. Risk Response

This is a step in which reaction of risk by organization is analyzed. According to Chapman and Ward (2008), risk responses can be of two types. A manager can either transfer or retain the risk. In risk transfer, basically another party is here to share the burden of risk so delegation or transfer of risk is done in this stage (Wood and Ellis, 2003). The other risk response type is the risk retention in which a decision is made regarding mitigation of the risk and managers take this risk and mitigate this risk. Now, the all delegation of risk is on project managers. This approach is suitable for only that situation when project managers have ability to cope up with such risks (Zou et al, 2007). It was criticized by Mitkus and Trinkuniene (2008) where they said that to have such situation is quite difficult where one party has full ability to deal with the risk. According to Kerzner (2006), organizations should have such strategies that they should respond to risks with the help of proper contract strategy. By doing so, every party involved or associated with the project can share the manageable risk. Kerzner (2006) indicated that certain unique features that are often pronounced as to be associated with construction projects structures, financial intensity, offensive environment, complicated processes as well as long period.

 

2.8.3. Risk monitoring and control

This is the periodic review of identified risks in order to successfully mitigate those risks. According to Tixer risk monitoring is a very necessary in project implementation because risk changes as the project matures (Tixier, et al., 2002). Some of the risks disappear and new risks are identified.  Risks monitoring and control thereby enables the management to identify new risks as well as risks which have been mitigated and the effectiveness of risk responses applied by the project managers (Kamara et al, 2002). Risk monitoring identifies whether the risk response plan formulated by the project manager has been implemented as scheduled and within the specified costs (Flanagan and Norman, 2003). Also in risk monitoring it should be identified whether the risks responses have been effective in mitigating the risks. It should also inform whether there are new risks sources which had not been identified. Tomlinson and Fai (2013) also noted that most of the risks identified in a project are based on assumptions and therefore risk monitoring should investigate whether those assumptions are true or not.

Communication is an integral part in risk monitoring and control. The information derived from the monitoring process should be relayed to the concerned parties with immediate effect so that they can act on it. According to (Carrillo and Chinowsky, 2006) risk can be monitored using risk response audit which monitors how the risks identified have been responded to. Once the audit has been done, the changes identified and recommended adjustments should be communicated to the relevant parties tasked with implementation of those changes (Zou, et., al, 2007).  

 

2.8.4. Recording the risk management process

Recording risk management process is very important aspect of risk management as it provides the relevant information about project activities. According to Tomlinson and Fai (2013) all activities carried out in the risk management process should be recorded in a database. All the risks identified in the risk identification process should be recorded in checklist and methods used to asses those risks should be recorded against each risk as well as risks response (Kamara et al, 2002).

Another risk recording should be preparation of project report after every phase of risk management process. Each report should contain detailed information about the process such as who did what activity and the reason why the activity was carried out and its overall impact on the project implementation. Tomlinson and Fai (2013) have recommended the reports over checklists due to their ability to store qualitative information which is very necessary for future reference.

2.9 Project risk management issues in Chinese construction industry

Albert, et., al, (2004) opined that uncertainties and risks prevalent in the construction industry are far more complicated and frequent as compared to other industries.  It was further added by Albert, et., al, (2004) that the process of designing, implementing as well as maintaining overall activities of the project is a quite time taking and complex task. As the process of risk management tends to be effected by many external factors, so it is required that this process should be carried out in a well coordinated manner involving a good synchronization of all intricate and interrelated activities (Yiu, et. al., 2006)

Kerzner (2006) presented their opinion relative to the record of construction industry pertinent to dealing with risks and stated that this record is very unsatisfactory. It was added that the incapability to deal with the risks often lead to collapse of the projects in terms of meeting scope of work, targets of budgets and time schedules. The stakeholders of the projects like general public, contractors and clients also suffer a lot in such circumstances (Albert, et., al, 2004). As per the opinion of Kerzner (2006)  in construction industry, risk is viewed as an amalgamation of such activities that negatively influence the objectives of project relative to quality, scope, cost and time. It is further added by Kerzner (2006) in this respect that some risks in the construction projects are easily identifiable whereas certain risks remain totally unpredictable.

 

Some of the major project risk management implementation issues in China construction industry entailed tendering processes in China, contract management, limited project risk management knowledge and cultural influences (Kerzner, 2006). In project risk management implementation, tendering process is one of the issues which affect the implementation of project risk management (Harner, 2010). This is because the tender evaluation criterion in China gives the least marks to contractors who have prices which are considered as unreasonably low (Taylor, 2006).

 

Tender committees and construction project owners expect the contractors to include high mark-up margin on price of commodities and services to cater for any possible risk. According to Kishk (2004) this discourages the management from active engagement in project risk management implementation because the risks are transferred to the contractor. Contractors with ability to minimise risks hence have efficiency to achieve low project costs are not rewarded with tenders for this efficiency, instead they are considered to be dishonest (Fang, et, al., 2004).  Also time allocated for tender committees is not sufficient to identify grey areas which could be sources of potential risks.

The other main issue in the implementation of PRM practice in China is the lack of extensive knowledge on risk management systems appropriate for construction industry. According to Kishk (2004) there is limited knowledge on the best project risk management implementation techniques which are relevant to Chinese construction industry. Most of the knowledge available in the country is borrowed from foreign risk management practitioners hence cannot fully address challenges in project risk management implementation (Kerzner, 2006). Consultants and experts are needed to provide guidance on the relevant PRM software, database management which is appropriate for construction companies in China (Chapman and Ward, 2003).    

 

The other issue in the implementation of PRM in china is that construction project owners value interrelationships as a risk management practice over standard project risk management practices (Kerzner, 2006). The project risk management was considered to be important when the project owners and contractors did not have any kinship ties (He, et. al., 2014). Kerzner (2006) mentioned that in the past, kinship ties were thought to as a way of fortification from the upcoming risks as mostly the relatives and family members were involved in accomplishing the projects. This cultural inclination acts as a hindrance to project risk management implementation in construction industry (Fang et al, 2004). Kinship ties blurred risk identification and analysis as relatives and family members were unlikely to be sacked or removed even when they were a source of risk.

2.10 The Urgent Need for Construction Risk Management

Risk management is viewed as a logical process that is particularly aimed at detection as well as quantification of all the risks pertinent to the project or businesses to which these are exposed to for the purpose of arriving at correct decisions relative to risk management.

The research carried out by Trinkuniene (2008)  stated that many construction projects remain incapable to deal with the risks that often lead to collapse of the projects in terms of meeting scope of work, targets of budgets and time schedules. Albert, et., al, (2004) opined that emphasised that if the threats and risks associated with certain projects are correctly identified and estimated, their elimination becomes quite easier. Likewise Kishk (2004) further added that control of project risks become uncomplicated once these are fully identified.  Kerzner (2006) further added in this respect that it is quite impossible to eliminate all risks associated with the construction projects but it is sufficiently possible to lessen and manage these risks by proper application of risk management principles that lead to effective management. The adverse effects of risks include quality problems, overrunning time and costs etc that in extreme cases also turn profits in to losses (Fang et al, 2004). If seen in context of construction industry in China, it will become obvious that over the last few decades many imperative structural alterations have occurred owing to economic reform (Kerzner, 2006). The main changes pertain to excessive use of new technologies in the industry and globalisation of many Chinese construction companies. Competition is also increased in spite of growth of these companies. Trinkuniene (2008) mentioned in their research that currently, the Chinese construction companies are facing two main threats that are particularly resulted from certain activities of new entrants. One threat is that after entry of China in WTO, many foreign contractors are penetrating into the industry with superior technology and capital at the top end of market (Hallowell  and Gambatese,  2009). The other threat is that rural construction teams with considerably low costs are making an entry at the lower market end. Liu, et. al., (2003) further reported that construction industry in China faces huge deficit each year because of losses due to inadequate dealing with risks, low construction technology and poor management level.

2.10.1 Competitiveness

Chinese construction industry has been remained in control of Chinese government and had played a vital part in supporting the national economy (Mayo and Liu, 1995). The construction projects that have been accomplished in the country were mainly assembled by state owned construction companies, planned by state owned design institutions and financed by the government depicting a considerable control of the state (Hallowell  and Gambatese,  2009). As a consequence of insufficient project management skills of the companies and this bureaucratic system, numerous complications were created like late completion of projects, costs overruns, low quality work etc. As mentioned by Trinkuniene (2008), the economy of country is being reformed in China after 1979 so in continuation of these transformations,  Chinese Party Congress Convention announced construction industry reforms in China in 1992. The purpose of these reforms were in fact to enhance the competitiveness of Chinese construction companies relative to international enterprises, establishing construction markets and enhancing the efficiency of state owned construction companies (Hallowell  and Gambatese,  2009). As outlined by Kishk (2004), these reforms were based on certain fundamental objectives i.e. enhancing project management skills, implementing practices of professional construction management, ascertaining a competitive bidding system, allowing self sufficiency in those construction firms that are state owned, opening construction markets and restructuring the administration system of the industry.  Establishing efficient ways to control cost, developing schedules and managing quality along with encouraging the development of professional management were two main points in the Chinese construction reforms put forth in 1993 (Liu et al. 2003).   Chinese government pays more attention than before to project management technology and knowledge to increase the competitiveness of construction industry.

2.10.2. Knowledge competitiveness

There are three distinct views on competitiveness as follows (Wignaraja, 2003):

Innovation and technology perspective put emphasis on development of active public policies for creation of competitiveness, initiating and encouraging learning at both organizational and national level as well as on inducing innovation (Hallowell  and Gambatese,  2009).

The business strategy perspective is related to part played by the public polices in promoting competitiveness and rivalries between the organizations at the international level. 

As per the macroeconomic perspective, principal tool for competitiveness is real exchange rate management (Trinkuniene, 2008).

Technology has gained a sound position relative to its significance as a key determining factor of competitive advantage. The key determinants of international competitiveness as per the opinion of Kishk (2004) are information and knowledge that stresses the need of quick and efficient response to rapid changes coming ahead (Wignaraja, 2003). But owing to information and knowledge revolution and daunting internal challenges, China is facing many challenges in enhancing competitiveness of its industries at the international level (Liu, et. al., 2003). Chinese construction industry should focus on developing technology and innovation to strengthen competitiveness (Liu, et. al., 2003).

2.10.3. International competitiveness

Kerzner (2006) opined that China can attain international competitiveness by bringing in technology and knowledge revolution in the country (Liu, et. al., 2003).  As per the opinion of Kishk (2004), mere switching to technology will not enhance competitiveness of Chinese construction industry but this also require acquisition, creation, dissemination  and utilisation of knowledge in an effectual manner for social as well as economic development (Mayo and Liu, 1995). China should utilize this period to improve the competitiveness of its construction industry.

2.10.4 Sustainable development in construction industry

Trinkuniene (2008) stated that increasing complexity of construction projects is emphasising a need to rethink the approaches that are particularly employed in management of risks (Flanagan and Norman, 1993).  Kerzner (2006) opined that uncertainties and risks prevalent in the construction industry are far more complicated and frequent as compared to other industries.  It was further added that the process of designing, implementing as well as maintaining overall activities of the project is a quite time taking and complex task. Deficiency of investment technology, processes and in people is costing the industry from major contractors to specialist subcontractors (Kerzner, 2006). Dealing with variations on health and safety issues on an individual project is all very well but what about the less tangible issues? (Thompson & Perry 1992).

The risk of accepting the wrong client, tendering at lowest price, and lack of succession planning or destroying a brand - these issues have a much greater long term effect on the risk profile of a business (Flanagan and Norman, 1993). Trinkuniene (2008) opined that shortage of precise data to develop decision, an uncertain economic environment and deficiency of capability in construction sector are some of the key obstacles in ensuring sustainable construction.

2.10.5 Construction risks in China

Kishk (2004) reported that around 2020, construction market in China will become the largest in the world  in an attempt to meet the huge requirements pertinent to buildings, education, health care, housing and infrastructure. But lack of any background in risk management seems to be a great dilemma in Chinese construction industry (Wignaraja, 2003). The risks that are particularly linked with construction projects in China are of operational, technical, financial, physical nature.

2.11. Barriers to risk management in China

Trinkuniene (2008) opined that risk management in the Chinese construction projects is very desirable but in spite of its significance, the number of firms that have actually used risk management measures and techniques is not very impressive. This owes to many barriers that need to be removed. Albert, et., al, (2004) added that risk management in construction projects in China has not gained much significance as it requires and the companies that are attempting to practice risk management approaches is not very satisfactory (Liu, et. al., 2003). Kishk (2004) outlined certain impediments in this regard and stated that prejudices, ingrained habits and reluctance to practice risk management are certain factors that have left behind the Chinese construction companies in this field. The companies that have decided to practice risk management are finding cultural aspects and behaviours as main impediments that seems very hard to prevail over (Flanagan and Norman, 1993). Though the significance of risk management in Chinese industries is very much pronounced and accentuated but its application is not widespread. Albert, et., al, (2004) pointed out towards a fact that many managers in the construction companies in China are of the view that risks are something beyond control so getting involved in practices of management of these risks will not prove much beneficial. Instead of management of project risks in an effectual manner, most of the managers deem it easy to make use of their capabilities to minimise the loss resulting from different risk factors that the business is exposed to (Liu, et. al., 2003). Many Chinese construction companies are familiar with risk management but few can understand its contribution to good project outcomes (Liu, et. al., 2003). From the researches that have particularly concentrated on obstacles faced by Chinese construction industry, certain key barriers in the way of risk management are identified. The prime one is that project managers in construction related projects have little understanding of what risk management is and what key benefits its can yield (Flanagan and Norman, 1993). There is also non availability of any standard procedure and most of practitioners are of the view that risks can also be managed via elaboration of network of personal relationships. In addition, there exists a reluctance to make decisions and take initiatives (Albert et. al, 2004). The cultural values are given much significance and significance of risks management is normally overlooked. Lack of availability of most accurate risk evaluation and management tools and approaches is also viewed as a barrier in effectual implementation of risk management concept. Trinkuniene (2008) opined that shortage of precise data to develop decision, an uncertain economic environment and deficiency of capability in construction sector are some of the key obstacles in ensuring sustainable construction. The other main issue in the implementation of project risk management practice in China is the lack of extensive knowledge on risk management systems appropriate for construction industry (Flanagan and Norman, 1993). According to Kishk (2004) there is limited knowledge on the best project risk management implementation techniques which are relevant to Chinese construction industry.  Albert, et., al, (2004) stated that risk management in construction industry of China can become a very popular practice but for this purpose support and initiatives from government is mandatory. It is required that efforts should be made at the national level to spread awareness because of the fact that if used in an inappropriate manner, sophisticated risk management techniques can also prove costly (Flanagan and Norman, 1993). 

2.12. Summary

In second chapter which is the literature review, the researcher has critically reviewed the theoretical knowledge and the researches available on the research variables. The literature reviewed has been analysed critically and the whole process of risk management has been discussed in detail.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chapter 3 - Research Methodology

3.1. Introduction

While conducting a research study it is important to fully consider the importance of selecting appropriate research methodology as this plays an effective role in generating the most suitable research results. In this section of the research work, the methodology applied by the researcher is presented along with the justification for each method selected. Before the selection of a particular research method, the researcher carefully evaluates the options available and then selects the research method that is effective enough to achieve the research results.

This research work has been conducted to understand the concepts of risk management in the construction projects in Guangdong, China. The situation under consideration is being taken into account while selecting the research methods as the most appropriate methods when selected by the researcher, brings an ease in achieving the aim and objectives of the research.  Through, developing the research methodology the data collection will become easy for the research.

3.2. Research Methodologies Available

The choice of a suitable research methodology is dependent upon the kind of the problem which is at hand. The choices are plenty, but only the appropriate method of research is used which is in accordance with the nature of problem statement. It is a process that ads add surety to generate a strong research and brings a shape to the study (Cohen et al 2000).The research questions are designed in the introduction of the research as soon as the problem statement is identified. The research questions, provide transparently provides the description of the research methods.

However, there is again a need to use the critical thinking of the researcher. It is dependent on the knowledge, skills and abilities as according to Coe (2004). As it has been stated with the research questions that both the primary and the secondary data collection tools are used in the research and through these methods and tools information has been gathered. The primary source in this respect is the employees whereas the secondary sources are articles, books and the company information. In addition to this the philosophy used in the research becomes positivism because employees are the respondents of the research. This is the basic research methodology and it can bring rigor to the research. Moreover, other methods and minor details regarding research methodology are explained in detail in the forthcoming headings of the research.

3.3. Quantitative versus Qualitative

The choice of the researcher about the research work is either qualitative or quantitative or both the qualitative and quantitative. According to some of studies, these choices also refer to as the research designs and all the research process is determined on the basis of the chosen research design (Gummenson, 2009). The main difference between the two is the type of data which is numeric in case of quantitative and non-numeric in case of qualitative. The type of research in which the researcher collects only one type of data using one technique for data collection and also a single corresponding technique for data analysis is a mono method research while the type of research in which the researcher for the purpose of answering the research questions, uses more than one technique for data collection and also more than one corresponding technique for analysis of the collected data refers to as a multiple method (Craswell, 2009). However the techniques which are used for the collection of both the qualitative and quantitative data and also different corresponding procedures for analysis of data are applied refers to the mixed method (Gummenson, 2009). The different techniques followed in mixed method for data collection and data analysis can be used at the same time and also at different times

3.3.1. Qualitative Versus Quantitative choice

All the research choices also called the research designs have their own purposes and advantages, but the one that has been chosen by the researcher for this specific research work in order to better compare the important of training and development at the organisations is the qualitative approach (Gummenson, 2009). According to the methods chosen earlier by the researcher and as per the requirements of this research work for answering the research questions, it is more appropriate to collect a quantitative data using quantitative data technique and analyse the data using quantitative data analysis technique (Craswell, 2009).

3.3.2 Mixed Method

When the research uses a blend of both qualitative and quantitative analysis then it is known as the mixed method of research study. This method as very elaborated and in detail, as it has both the methods involved in it. The researcher uses the quantitative approach while using questionnaire technique which is circulated among a large sample size (Craswell, 2009). The results obtained from this method are mathematical and is analysed using various software. The results obtained by qualitative analysis are descriptive in nature and is analysed using theories and previous literature available.

3.4. Research Process

One of the most effective research designs that a researcher could follow in order to successfully complete the research work and generate research results that are useful in the selecting field of interest is the Saunders’ research onion. The reason that has made the researcher choose this research design is that it comprises of different layers and moving from the first to the very last layer, the researcher evaluates all the methods carefully and then selects the different methods of conducting the research process according to the problem under study. Every different layer of the Saunders’ research onion provides a complete set of the research methods from which the researcher could choose the most appropriate one for the research work.

3.4.1. Research philosophy

Although there are ten research philosophies briefly explained by Saunders’ research onion about their use and implications in the research studies. However the most widely used research philosophies are few of them. But it is important for every researcher to carefully consider all the different options for the research philosophies and then select only the one that seems to be most suitable for the achievement of the research aim and objectives. The research philosophy basically refers to the behaviour and attitude that a researcher needs to adopt in order to conduct the research work and get the most useful data for the research work (Saunder, et. al, 2008). There are ten distinct research philosophies but the most used research philosophies are three. The different research philosophies are as under:

  • Positivism: In this particular way, the researcher acts as a social scientist in order to develop particular knowledge about the case that is importance of training and development for the organisations. The researcher here prefers to work on factors of social reality that is observed and mostly the results that the researcher obtains by using this research philosophy are law like generalisations (Collis & Hussy, 2009). The results are mostly the credible data and the researcher plans to apply such a research strategy that could bring the possibility of testing the hypotheses that are developed from the existing knowledge. Mostly the research collects the quantifiable data but the researchers can also adopt the qualitative methods and collect qualitative data. However the methodology in case when positivism is used as the research philosophy, is a highly structured one and this is why most of the researchers prefer positivism.
  • Interpretivism: This philosophy greatly opposes the positivism in the sense that positivism reduces the complexity of the case to a few laws like generalisations while the area of business and management is very complex and that could not be explained using few law like generalisations (Collis & Hussy, 2009). The focus of the researcher by adopting this philosophy is on the development of knowledge by using his own insights and deeply investigating the case under consideration. Most business and management related researches prefer to consider the interpretivism as their research philosophy only and only because of its focus on deep investigation and deep insights into the research phenomenon (Saunders et al, 2007). However, this philosophy greatly involve the role of human as the social actors in the business and management world and the researcher at every step involves the influence of humans and influence on the humans but this is not the case always, and most of the researchers argue that humans should be involved in researches where the researcher plans to investigate the influence on them or their influence or role on other things of consideration.
  • Realism: This philosophy deals with the fact that reality about the business situations is independent from what the mind thinks about it. According to this philosophy, the researcher is going to interpret about the research case whatever the researcher observes irrespective of the real facts about the case (Collis & Hussy, 2009). However, there are many researchers that argue upon the fact regarding the realism that there are many things that one cannot see or is unable to observe, and the unseen observations also influence the variables under consideration. But the realism is opposite to this, and according to this philosophy, only those facts are revealed by the researchers that are observed. 

3.4.1.1. Philosophy used in Research

The philosophy which has been used in this research is positivism. This philosophy greatly helps the researcher in the development of knowledge about the particular case under consideration. It determines the views of the researchers about a particular case and how the issue or problem could be resolved by applying a particular strategy. This also provides the researcher with a view how the research should be conducted.

3.4.2. Research approach

Every research project involves certain theories and the preliminary literature. Sometimes the theories are clear and sometimes they are not clear to the researcher so that they could be used in the research work or assumptions could be made on the basis of those theories. These affect the research findings and the conclusions drawn by the researchers about the problem taken into consideration. The researcher on the basis of the theories and the preliminary research work, which are in support of the problem area, takes decision regarding the selection of a particular research design. The researcher then either selects the deductive approach or inductive approach.

  • Deductive approach: In this approach, the aim of the researcher is to develop a theory or a hypothesis and then selection of an appropriate research strategy for the purpose of data collection in order to test the theory or hypothesis. This approach owes much to a scientific research and is considered as one of the dominant research approaches in case of natural sciences. The laws generated or developed by the researcher explain the problem area, further the occurrences of the problems are predicted and also permission for control of the situation is allotted (Collis & Hussy, 2009). Using deduction as the research approach, the researcher is being provided with a guideline about the steps to be followed. The main characteristics of this approach are the explanation of casual relationship among the chosen research variables, development of a hypothesis on the basis of discussed preliminary literature or the theories, collection of either qualitative or quantitative data or both the qualitative and quantitative data, control over the research process and research variables in order to test the developed theory or hypothesis (Creswell, 2009).
  • Inductive approach: This approach allows the researcher to better understand the problem by deeply investigating the case under consideration. This is mostly conducted interviews and gaining sufficient information about the research problem. However this approach is different from deductive approach in the sense that after the collection of research data and analysing the data regarding the problem area, theory is formulated. The use of inductive approach increased with the emergence of the social sciences and the increased investigations into the area of concerns related to social sciences because the deduction only dealt with the formulation of hypothesis and testing of causal relationships, however the inductive approach played an important role in investigation about the problem and development of a theory (Creswell, 2009).

3.4.3.1. Approach used in Research

Deductive approach has been used in the research because the research was of exploratory nature and a single type of research approach could have not worked well in answering the research questions.

3.4.3. Research strategy

The process used for conducting research work at a particular place refers to the research strategy. More importantly, there are few research strategies that are being used with the deductive approach while others are relevant with the inductive approach. All the researcher strategies are equally important for the researchers to serve the very definite research purposes. It enables the researchers to answer the research questions and to achieve the aim and objectives of the study (Collis & Hussy, 2009). The choice of the researcher regarding the research strategy for a particular research study and a particular research purpose depends upon the research aim and objectives, the amount of knowledge available about the research problem, the available time and other research resources and also upon the research philosophy chosen by the researcher. These are experiments, case studies, ethnography, surveys, action research, grounded theory and archival theory.

3.5 Method of data collection

The use of positivism as research philosophy in this study has enabled the researcher to test the generalisations made by the researcher. Furthermore, it also enabled the researcher to systematically conduct the research work. Also positivism has proved to be useful in achieving the purpose of this particular research work that is to analyse the effect of risks involved in the construction projects in China. This philosophy also brings the possibility of carrying out the further researches on the particular field of interest as far as possible and also in a value free-way.

The choice for the research data and data analysis chosen by the researcher is mixed i-e a blend of both qualitative and quantitative analysis.  The reason behind the selection of this choice is that the researcher has chosen case study approach for deep comparison about the Analysis of risk factors in construction projects in Guangdong, China Therefore quantitate method gives stronger data that supports the case study approach and deep insights about the importance of risk management in construction industry, and for the comparison qualitative analysis is selected.  

The deductive approach has the most appropriation with the aim and objectives of this study, thus the researcher has used the deductive approach as a hypothesis has been developed first and then it is tested. There is a lot research work and discussion analysis of risk factors in construction projects in China, in Guangdong. Previous researchers have identified various important aspects of risks and how they have been mitigated in the construction industry of China which have been briefly demonstrated in various research works. Therefore, the researcher chose the deductive approach.

Survey research strategy has been used by the researcher in achieving the aim and objectives of this study and answering the research questions. This is used because a survey has been carried out among the workers of construction firm employees. Survey study allowed the researcher to deeply investigate the area under consideration.

3.6 Sampling Method and Population Sample

As already mentioned above survey research strategy has been used in achieving the aim and objectives of this study and answering the research questions. For this purpose a questionnaire has been developed to conduct a survey. The strategic location chosen is for analysis of risk factors in construction projects is Guangdong, China. The sample size selected is 100 which is chosen as the workers of contrition firm. As these employees are the ones who can answer the situation in the best way that what are the risks attached in this construction industry.

3.7. Research Instrument

The survey is based on a series of structured questions which are answered on a dichotomous scale and multiple choice questions. There are 15 questions in the questionnaire. There are many questions which include options on to which the respondents are required to show their response

3.8 Summary

In this chapter the researcher has provided the methodology which is consistent with the problem statement. The contents of the research methodology include the research process having the research strategy, the philosophy and approach to do a research. In addition to this the research methods have been thoroughly justified.

 

 

 

Chapter four Analysis

As mentioned in the methodology chapter of this research, questionnaires have been used in order to collect data to form findings. This chapter includes the detailed results of all the responses to the questionnaires. This chapter also includes detailed discussion and analysis of the results. Questionnaires results have been presented in the form of percentages. Then detailed analysis is presented on each of the questions in this research report.

4.1. Findings

The first portion of the questionnaire includes demographic questions. Questions related to age, gender, education, and the level at which they work in a construction project. The second portion of the questionnaire includes questions related to the risks in a construction project.

4.1.1. Gender

The aim of this question is to find out the percentage of respondents dividing them on the basis of their gender. This question reveals that how much respondents are male and how many of them are female. Following table and pie chart show the statistics related to the gender of the respondents of the questionnaire:

 

Table No 4.1: Gender

Dichotomous Answers

Frequency

Percentage

Male

77

77%

Female

23

23%

 

So the results of the gender statistics questions reveal that 77% of the respondents to the questionnaires are men and the other 23% are women. This also reveals a fact that most of the people working on a construction project are men.

4.1.2. Age Statistics

The aim of this question is to find out the age groups of the respondents of the questionnaires. Age group can give you indications to many things including the work experience of the employees responding to the questionnaires. Following are the statistics received on this topic after reviewing the questionnaires:

 

Table No. 4.2: Age Group Statistics

Series Answers

Frequency

Percentage

18-25

17

17%

25-35

43

43%

35-50

36

36%

50 and Above

4

4%

 

This question reveals that most of the employees belong to the 25-35 age groups. The number of respondents in the group has been 43. The second group with the most frequency of employees has been 35-50 age. 50 and above count is just 4. The newbie’s count is 17 that is age group of people from 18-25 years of age. This question reveals the fact that generally construction projects have a mix of young and fresh employees and experienced campaigners.

4.1.3. Type of Job

The purpose of this question is to create a distinction among all employees on the basis on the type of their jobs. Risks are identifies on two levels; managerial level and functional level. In the construction business, these two jobs can easily be identified. Here are the percentages of the responses that have been received through questionnaire in response to this question:

 

Table No. 4.3: Type of Job:

Dichotomous Answers

Frequency

Percentage

White Collar Employee

61

61%

Blue Collar Employee

39

39%

 

The results of this question reveal a good mix of managerial and functional employees. This means that the results of this study will present a good mixture of risks at both the managerial level and functional level.

Above three questions are related to the demographics. Now the next portion of this study includes questions related to the main subject of this study. Next questions concentrate on the finding meaningful results related to the risks in a construction project. All the questions reveal one specific type of risk related to the construction projects. There are different categories of risks related to construction projects. Following are all the categories of risks being identified in this study:

  • Cost Related Risks
  • Time Related Risks
  • Quality Related Risks
  • Environment Related Risks
  • Safety Related Risks

3 to 4 questions have been assigned to each category of risks to determine different dimensions of all these categories of risks. Each question is an effort made in order to determine a dimension of the specific risk category. The brief analysis of each of these risk categories is explained after each question and further analysis is saved for the end detailed discussion and analysis part of this chapter.

4.1.4. Tight Project Schedule

Tight project schedule is not only a measure of risks related to time but it also is a measure of risks related to the cost as well, because in tight schedules more cost is usually incurred in order to get things done quickly in a construction project. Tight schedule is also a measure of time risks. The question asked to the employees of construction projects is that whether in their opinion tight project schedule is a risk or not. Here are the results in response to that question:

 

 

 

Table No. 4.4: Tight Project Schedule

Dichotomous Answers

Frequency

Percentage

Yes

92

92%

No

8

8%

 

92% of the respondents are of the view that tight project schedule effects both the project and results in cost and time risks. This huge number represents the fact that Tight Project Schedule demands from the customers often result in hurting their own construction projects not only in terms of time but cost as well. These demands add to cost and time risks and hence result in great risks for the overall construction project.

4.1.5. Inflation

The question asked in the questionnaire related to this dimension was a likert scale question with answers ranging from Strongly Agree to Strongly Disagree. The question asked from the employees was whether they think that the inflation of the construction materials affects the construction project or not. Most of the respondents i.e. 73% agreed with this theory. The percentage of people who remained neutral thought that inflation is an understood phenomena and it can’t be categorized as a risk. Most of the employees agreed with this theory so we can conclude that the inflation of construction materials is a risk.

Here is the representation of statistical data of this question in graphical and tabular form:

 

Table No. 4.5: Inflation:

 

Likert Scale

Frequency

Percentage

Strongly Agree

13

13%

Agree

60

60%

Neutral

18

18%

Disagree

8

8%

Strongly Disagree

1

1%

 

4.1.6. Cost Estimate

This question aimed to find out the effect that cost estimates have on the cost related risks. The question asked was “Are Cost Estimates a good dimension to measure the overall cost of a project?” Unsurprisingly all respondents thought that cost estimates are a good measure of determining the total cost of a construction project. Here is graphical representation of the statistics received in response to this question.

 

Table No. 4.6: Cost Estimates

Dichotomous Answers

Frequency

Percentage

Yes

100

100%

No

0

0%

 

The results of this question reveal that the cost estimates at the start of a construction project should be made very carefully, because these estimates are vital in determining many cost related dimensions of the project. Wrong cost estimates can lead to many cost related risks and hence result in over budget projects.

4.1.7. Disputes

 

Table No. 4.7: Disputes

Dichotomous Answers

Frequency

Percentage

Yes

71

71%

No

29

29%

Disputes among the clients and management of the construction projects often results in many kinds of risks, such as time risks, cost risks, and quality risks etc. 71% of the employees think that those disputes can affect the on goings of a project and can result in risks. As shown in the above Graph and Table, 29% of the employees have responded to the No option. Those in support of No have been the blue collar employees, because they usually don’t directly interact with the customers. These employees are at the functional level. But even 10% of the Blue Collar employees went with Yes, because the total percentage of the Blue Collar employees taken as sample in this study has been 39%.

4.1.8. High Performance and Quality Expectations

The purpose of this question was to find out the effect of quality expectations on a construction project. There have been two contrasting views related to this question. More than half people share the view that high expectations don’t weigh down a construction project or the performance of a team working on that project. These people are also of the view that high quality expectations can’t be categorized as a risk in the Quality related risks. A little less than the half of the employees are of the view that high quality expectations can pressurize a team working on a construction project, and in turn can result in less performance. These people are also of the view that high quality expectations can be categorized as a risk in the quality related risks.

The question asked from the people was “do you think high quality expectations can be categorized as a quality related risk?” Here are the results related to this question:

 

Table No. 4.8: High Quality Experience:

Dichotomous Answers

Frequency

Percentage

Yes

47

47%

No

53

53%

 

As we can see the view on this question is almost equally divided among Yes and No, with high percentage of people tilting towards NO. So, high quality expectations can’t be categorized as a risk, rather it can be used as a motivation.

4.1.9. General Safety

The aim of this question was to investigate the importance of general safety measures. Also their categorization of the general safety as a safety related risks. Question asked was “general safety concerns can be categorized as a safety related risks”. Here is a graphical and tabular form of statistical data presented in response to this question:

 

Table No. 4.9: General Safety:

Dichotomous Answers

Frequency

Percentage

Yes

100

100%

No

0

0%

 

All people share the view that general safety concerns should be taken care of. All people believe that accident occurrence is 100% a safety related risk. Necessary steps should be taken in order to minimize all safety related risks.

 

 

4.1.10. Documentation

The purpose of this question is to find out the importance of necessary documentation in the completion of a construction project. Here are the statistical results:

 

 

Table No. 4.10: Documentation:

Dichotomous Answers

Frequency

Percentage

Yes

15

15%

No

85

85%

 

85% of the people are of the view that documentation has no significant affect on the construction project. Everything has to do with functional end of the project. Documentation of things such as billings and memorandums etc are all formalities and these things can’t be considered as a major risk to the construction project.

4.1.11. Proposal and Approval

The aim of this question is to find out the significance of proposal and its approval. Here are the statistical results related to this question:

 

Table No. 4.11: Proposal and Approval:

Dichotomous Answers

Frequency

Percentage

Yes

81

81%

No

19

19%

 

Question asked was “are proposal and its approval a vital step in a construction project, and can they be categorized as a risk?” Most of the people think that yes these things do matter and can be categorized as a risk. 81% people think that if proposal and its approval are not done properly, then it leads to a communication gap between the management of the construction project and the client. The end product is not according to client’s needs and wants. This disturbs the main purpose of the construction project to its core. Those who are not in support of this view think that if all the necessary specifications are conveyed to the functional team, then all the documentation related to proposal and its approval is not necessary. But if all the things are not conveyed well it again creates a communication gap, so, still it can be categorized as a major risk.

4.1.12. Unavailability of Managerial Level Employees:

 

Table No. 4.12: Unavailability of Managerial Level Employees:

Dichotomous Answers

Frequency

Percentage

Yes

72

72%

No

28

28%

 

Majority of the people share the view that unavailability of the managerial level employees is a major risk. Managerial level employees are responsible for the major decision making and hence their importance can’t be emphasized more. They are an integral part of the construction project and hence can be categorized as a risk.

 

4.1.13. Unavailability of Functional Level Employees:

 

 

Table No. 4.13: Unavailability of Functional Level Employees:

Dichotomous Answers

Frequency

Percentage

Yes

92

92%

No

8

8%

 

Unavailability of functional level employees if compared with unavailability of the managerial level employees is a relatively bigger headache for construction companies. It is considered a huge risk and a huge down point for a construction company if a company doesn’t have reliable, experienced, and affordable functional level employees. It is a problem for companies in different locations including Guangdong, China. But it can be generally applied to all construction markets.

In addition to the above demographics, and then few close ended questions, few open ended questions have been added in the study to look at more wide canvas views on some topics.

4.1.14. Most Important Type of Risk

As mentioned in methodology section, that the research incorporates quantitative as well as qualitative method of study for this particular research. In order to use this strategy the questionnaire incorporated two of the open ended questions. These open ended questions are similar to the questions asked in interview as it does not restrict the respondent on the basis of available options. The respondent is free to answer in any way he/she wants. One of the questions asked in the questionnaire was “Which type of risk is most vital type in the construction projects?” This led to some interesting answers, one of the respondent replied that “in my opinion its cost because it is not just a risk it’s a huge risk”. This justifies that cost is one of the critical factor which is regarded as an important risk. Leading further it was also noted that one respondent replied that “It’s the time as in construction business it is the game which is associated with time, a time lapse and you are gone. Another of the respondent was of view that “Time is one of the costs in this business, we cannot separate up cost and time as we play with time”. Another of the respondent was of view that “Time is precious for us, it’s a risk which can convert to revenues at the very same time it can be too dangerous”. This shows that how significant in nature is time for construction project. It is one of the most important risks which must not be ignored in any case.

This was just not it; there were many other risks too as identified by different respondents. Only those have been mentioned in this study which according to the opinion seemed important and critical. Responding to the same question one of the respondent replied as “To me it is the quality at first which is a huge risk and along with that the time constraint is the second big risk”. Another of the respondent replied that “risk? We play with it in terms of time, quality and cost”. This shows that it is evident to note that no a single risk can be categorized as important and critical. In views of some one type is critical and for some the other.

4.1.15. Investments

Which risk or a specific type of risk can hurt the investor confidence in a construction project?

The purpose of this question is to find out the main reason from the above questions in order to understand the factors that matter the most to investors in Guangdong, China. This question was also left open ended in order to get a wide array of answers. One of the respondent replied that “It’s the labour if labour is available it directly impacts the cost and quality which shakes or makes the investors’ confidence”. Another of the respondent was of view that “To me it is quality of labour, no matter how costly the labour is”. This signifies that labour’s availability, cost and quality plays a critical role in confidence of investors in a construction project.

Some other respondent replied to this question as “Investors are always looking at the cost of a project and the benefits associated, so if the cost is too high the confidence is low”. Another of the respondent replied that “The quality of construction project in my opinion plays a great role for the investor to invest; the confidence is based on how good the project is going to be in the future”. According to another “I believe it’s the time, time taken to end up a project, if you are on time investors surely are in but if you are not they are out”. This shows that along with the cost factor, quality and time also play significant role which either lead to greater confidence by the investors or it shakes their confidence in construction projects.

 

 

4.2. Discussion and Analysis

In the above section of this study, detailed analysis of the questionnaire is provided. All the questions along with their tabular and graphical presentation and brief explanation are covered in the above portion of this chapter. This portion gives a really detailed descriptive analysis of all the risks attached to the construction industry in Guangdong, China, and the whole world as well.

Discussion starts with the categories of risks. There are five categories of risks that have been identified earlier in this study; Quality, Environment, Cost, Time and Safety related risks (Uher, 2003). There are many dimensions of these risks that have been directly identified in the questionnaire analysis. Some of those risks and some other indirect dimensions are covered in this portion of the study. There are risks attached to every dimension of the construction projects. We have already identified the basic risks, but it hasn’t been classified that which party or which player in this project exhibits those risks. There are many indirect and direct parties involved in the construction business. Here, we will identify each of those parties and will assign them the risks that are either created due to them or they are a party in creating that risk.

4.2.1. Client

First and the most important player in a construction project is the client. Firstly, we will explain and discuss the risks related to the clients of construction businesses. Among the above mentioned key risk factors, one factor that was more emphasized upon was the tight schedule. This risk factor is such a factor that is usually initiated by the client of the construction project. Client always sets boundaries in this aspect so that the construction is completed before time (Berkeley et al. 1991). Devising a suitable schedule becomes absolutely vital in such projects where there is a short time limit and the schedule is very tight. Sometimes customers blindly hand time limits to their construction companies and don’t take into account all the hurdles and barriers that are faced during the construction process. Clients shouldn’t do that, they should rather develop a schedule themselves with a keen eye for detail, include all the necessary steps and activities and should also take into account all the hurdles and barriers, and specific delays should be included in the schedule before handing their construction company a deadline.

One more thing that has to be in customers hand is the final plan. Customer should provide the final plan to the company before even the work has started. Once the plan is finalised, it shouldn’t be subject to any change. Variations in the plan on the part of the client are another risk that is created by client and results in cost and time related risks. All the planning, construction and designing should be done before time so that no such variations occur once the project is in running condition. High expectations are a myth for the constructor, because what the client is expecting is not of any meaning to client himself. Clients sometime raise the bar so high that such specifications in a construction are not even close to the industry practices. High quality expectations turns into risks when the expectations of the client start hurting the construction project in terms of cost, time and sometime the safety is also compromised in this sense (Flanagan and Norman, 2003).

 

4.2.2. Designers

Now we come towards the risks that are created on behalf of the designers. We have discussed the variation problems in the designing and planning on the part of the designer. If designer does variations in the design, then it leads to a defective design for the client. This creates communication Gaps between the client and the designer (Schuyler, 2001). It eventually results in dissatisfaction for the client because the design of the construction project is not according to their demands.

Improper program scheduling can eventually lead up-to great cost and time risks. As discussed earlier, time and cost lapses are the biggest risks to a construction project, and both of these can happen in result of inadequate project scheduling. Activities and plans are not in order, timeline is not being met, the project is over budget, all these things have to be heard if the program scheduling is not done right. If these neglecting things are done on the part of designers, it leads to great risks in all portions of the project.

4.2.3. Contractors

Contracting company or the contractors are also one of the most important players in a construction project. Actually the most numbers of risks are attached to the contractor, which kind of makes them the most important player in a construction project. Bad project management on the part of the contractors can lead to some serious repercussions (Baker and Reid, 2005). Variations in the project scheduling and the improper project management can both lead to disastrous results. These things can happen due to improper program scheduling, which leads to dislocated activities and functions. This can majorly happen due to lack of latest and improvised knowledge on the part of the contractor.

Unavailability of labour is another risk that is created on the contractor level. Unavailability of managerial level employees is not a bigger problem in China. Unavailability of the functional level employees or as they are called “Blue Collar Employees” is also not a problem. But it could be a problem for a new contractor in Guangdong, China. The unavailability of labour is not only in the blue collar jobs, sometimes this deficiency runs in the white collar jobs as well in case of pro-efficient project managers (Smith, 2003).

Occurrence of disputes due to miscommunication or negligibility can also create serious risks in a construction project. Miscommunications not only create time and cost lapses, they can also result in environmental issues, safety and quality related risks as well. Variations in the designing and the construction plans and management usually lead to these kinds of discrepancies among the project plan. One another negligence on the part of the contractor that can lead to a risky environmental condition is the noise and air pollution created due to the construction projects. Such negligence can lead to complaints and serious government interventions. Accident occurrence not only creates serious risks for people working on the project but it also poses a great threat towards the neighbouring areas. General safety concerns should be taken care of in order to mitigate the effect of safety related risks

4.2.4. Other Key Players and Risks

Here are some of the other key players in the construction projects and the risks related to their functions:

  • One key player in the construction project is subcontractor. Subcontractors are small contractors that contractors hire for some activities in the construction plan. One major risk related to the subcontractors is the lack of managerial skills in the subcontractors (Chapman, 2001). The big contractors are usually good at these things, but subcontractors usually struggle with these things. We can say that big contractors usually have great white collar management, but they struggle with blue collar employees at affordable prices who are provided to the contractors by subcontractors for certain functions and activities.
  • Another key player which was also mentioned above for one point is Government and related state bodies. The risk related to governments and state bodies depends on geographies. Some countries have huge approval procedures before they can let anyone do anything in their country. So, excessive approvals and related documentation is considered a risk in some parts of the world.
  • Another key risk is inflation in the prices of material being used for the construction project. This thing can’t be associated with a certain player from all the above mentioned key players in a construction project. Although it can be associated to the suppliers, but supplier is not a key player in the projects of construction (Tam et al. 2004). This thing is covered by the contractors. Therefore, this inflation risk is usually categorized as an external issue.
  • Weather and natural disasters can also be categorized as external factors in the risks portion. But if we cover the whole essence of the risk management then we have to include the weather part as well.

In the end it is necessary to mention that inflation, weather and natural disasters are categorized as external factors, because none of the key players in a construction project can control the above mentioned external factors. Any of the decision making by management can’t affect the outputs of the external factors; therefore they are not linked to any of the key players.

 

 

 

 

 

 

 

 

Chapter Five Conclusion & Recommendations

5.1. Conclusion

This study is a detailed analysis of the risks that are included in a construction project. This study tried to identify the key risk elements in a construction project. For the sake of minimizing the scope of the study, the study’s methodology and sample were limited to Guangdong, China. But at the same time, this study focuses on the construction projects all around the world as well. That is why, all the analysis and findings have been generalized to all the construction projects in the world.

This study is a quantitative study. The methodology used in order to collect the data is the questionnaire technique. An elaborate and complete questionnaire has been developed in order to collect the data. Questionnaire included demographics questions. Then basic subject related closed ended questions with likert scale and dichotomous questions. In the end few open ended questions have been added in order to capture a wide array and variety of opinions about risks in a construction project. Literature reveals that previously risks have been classified into three different categories; Resources Factors, Management Factors and Parent Factors (Chen et al. 2004). Contrasting to these previous studies five new types of risks have been identified in this study. These five types of risks are different from these old types in their categorization and their dimensions. Here are the five new mentioned types of risks that have been devised in this study:

  • Cost Related Risks
  • Time Related Risks
  • Quality Related Risks
  • Environment Related Risks
  • Safety Related Risks

In addition to these five types, there is one additional type of risk that is mentioned time to time in the analysis part of this study. That type of risk is the external factor risk. This is a type of risk that can’t be controlled by any key player in the construction project. So, any of the decision making by the key players in the construction project can’t affect the external factor risks.

Few key players have also been identified in this study that affects the decision making in the construction process. These key players are as follows:

  • Client
  • Designer
  • Contractor
  • Sub-Contractor
  • Government and State Bodies

 

Detailed analysis has been done on the data collected from the questionnaires. The data collected has been presented in the form of tables and graphs with the help of percentages. Here are few of the overall key risks that have been identified in this study related to the construction projects:

  • Tight Project Schedule
  • Variations in the Design by Clients or Designers
  • Disproportionate Endorsement Activities from Governments and State Bodies of the Governments
  • Noise and Air Pollution
  • Weather and Natural Disaster Risks (External Factor Risks)
  • Inflation in the Price of Construction Material (External Factor Risk)
  • Dispute among Client and Management of the Construction Project
  • High Quality Expectations
  • Improper Project Management
  • Unavailability of Managerial Level and Operational and Functional Level Labour
  • Safety Related Risks
  • Cost and Time Lapses and their Dimensions
  • Inaccurate Cost Estimates
  • Inaccurate Time Estimates

These are main risks identified in this study. All of these above risks have been explained, discusses and dissected with the help of their dimensions in detail in the main finding and analysis portion of this study. Furthermore all the dimensions of these risks have been explained in detail in the descriptive discussion and analysis portion.

5.2. Recommendations

Here are some of the recommendations that can be useful in mitigating the effects of the risks that have been identified through the conduct of this study.

  • First and the fore most recommendation is the use of project management techniques. Project management techniques should be used in order to estimate the cost and time. These methods are used for more and more accurate estimates.
  • Project management techniques can also be used for arranging activities, planning activities and functions, and scheduling the whole project process.
  • Project management should not only be used by designers and contractors, these techniques should also be used by the client in order to give cost limits and time deadlines.
  • In order to prevent the safety issues and environmental issues, proper steps should be taken in order to minimize the effect of these issues on the construction projects.
  • Functional and operational level employees should also be given decision making power along with managerial level employees. This step could help in removing the communication gap between the client and functional level employees. Clients often interact with managerial level employees that leave a communication gap between client and functional level employees. This gap can be filled by investing some decision making power in the hands of the functional level employees.
  • Labour from Middle East and Asian countries should be given a chance in manufacturing processes in construction businesses. Asia and Middle East is the hub of skilled and cheap labour including the Chinese market. That is the reason many companies now-a-days outsource their manufacturing and constructing activities to China due to cheap and skilled labour.
  • All the documented formalities should be taken care along with the proposal and its approval. It removes all the communication barriers between the main management of the construction project and the client. Also any short comings on the part of the management are identified at the very start of the construction project and are immediately corrected.
  • Proper surveys should be done in the first place in order to inspect the soil and site. Inspecting the site and soil sample should be a pre requisite to all the following activities. All construction contractors should do the site inspection in the first place before accepting any contract.
  • Proper steps should be taken in order to mitigate the effects of Air Pollution and Noise Pollution. First of all, these pollutions should be controlled to the maximum limit. Whatever small amounts remain should be covered in such a way that it doesn’t affect the neighbourhood and overall environment.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Appendix – Questionnaire

This research is conducted on “The risk factor of construction industry in Guangdong, China have hampered development and investments” Please respond to the questions given below

 

Demographic Questions:

  1. Gender                                                                        Male                Female
  2. Age Group     

18-25 Years                 25-35 Years                 35-50 Years                 50 Years and Above

  1. Type of Job

White Collar Job                                                                     Blue Collar Job

Please mark the options you consider most appropriate to your point of view.

  1. Can tight project schedule be categorized as a cost or time related risk?
  • Yes
  • No
  1. Price Inflation of the construction material is a great risk to a construction project.

Strongly Agree                  Agree              Neutral            Disagree          Strongly Disagree

  1. Is getting the cost estimates wrong at the start of a construction project is a great cost related risk to that project?
  • Yes
  • No
  1. Is occurrence of disputes between the client and project management a risk to the overall project?
  • Yes
  • No
  1. Can high quality expectations be classified as a risk?
  • Yes
  • No
  1. Are general safety issues a saftey related risk?
  • Yes
  • No
  1. Is formal documentation a necessary part of the project management. If yes, then can it be categorized as a potential risk?
  • Yes
  • No
  1. Project proposal and its approval are considered vital in the designing of a project. Can improper behaviour in this aspect be considered as a risk in the project?
  • Yes
  • No
  1. Is unavailability of managerial level employees a potential risk to a construction project?
  • Yes
  • No
  1. Unavailability of functional level employees can hurt a project in its cost, time and quality. Is it a probable risk to the project?
  • Yes
  • No

Fill in the open ended questionnaires.

  1. Which type of risk is the most vital type in the construction projects?
  2. Which risk or a specific type of risk can hurt the investor confidence in a construction project?

 

 

 

 


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