lOMoARcPSD|52690394
Risk analysis in
construction project
chosen methods
Corporate Finance lecture notes
, lOMoARcPSD|52690394
1. Introduction
The phenomenon of risk is a subject of investigation for many both practitioners and theorists. However, only a few
of them take these problems and try to formulate the problem within the framework of a procedure. In many
publications, the authors deal with the problem of identification of hazards areas and their classification in different
groups, among others, due to the source of origin, the impact size, etc. [10]. The number of papers proposing a
methodology of quantifying of the risk and elaboration of procedures for the adoption of appropriate actions (so called
“an appropriate strategy on risk response”) is relatively lower. This paper briefly outlines the area of risk management
in the construction industry against the background of the selected publications [1-31]. The aim of the paper is to
present the three methods used for the risk analysis with simultaneous signaling of their characteristics features and
specifying of the usefulness degree in the discussed problems. The character of the presented methods, a kind of the
solved decision-making problem and the type of used data made impossible their mutual comparison. However, the
authors have identified the common features of the methods, reflecting the analytical decision-making process and the
individual features of each of them..
2. Risk management in construction projects
In recent years, it is noticeable the increased interest of the risk problem from the perspective of the construction
industry. The research areas in the risk management are focused on the identification of random factors, determination
of the probability of their occurrence and their impact on the course of a construction project. The problems, which
often occur in terms of the risk analysis in the listed publications, are the following ones:
x Methodology/procedure of risk analysis for a project [1, 13, 24, 25, 26, 30]. x Proposition of risk
classification according to the source of origin, type, consequences [1, 10]. x Review and
classification of selected methods supporting the risk management in projects [2, 21].
x Analytical application of method/tool to a specific problem in the scope of risk analysis [4-7, 13, 15, 16-19, 2226,
28-31]. x Risk management in construction projects – theory and practice [3, 8, 9, 27].
A risk, as a measurable part of the uncertainty, is most often treated in the literature as a possibility of incurring of a
loss. The number and scope of the problems associated with the realization of the project is large. Before we start their
in-depth analysis (in terms of risk analysis) we should find the answers to at least three key questions (Fig. 1 (a)).
(a)
(b)
Fig. 1. (a) decision problem; (b) decision making procedure in risk management, source [own work].
In an effort to simplify the procedure (so called “the risk management”) it should be paid attention to three general
links: identification, quantification (assessment) and reaction. Of course, this procedure is much more complex
depending on the preferences of a decision maker and the ability of verification and analysis of the results and their
subsequent implementation. Within scope of each link it might be considered another method, which results in the
Risk analysis in
construction project
chosen methods
Corporate Finance lecture notes
, lOMoARcPSD|52690394
1. Introduction
The phenomenon of risk is a subject of investigation for many both practitioners and theorists. However, only a few
of them take these problems and try to formulate the problem within the framework of a procedure. In many
publications, the authors deal with the problem of identification of hazards areas and their classification in different
groups, among others, due to the source of origin, the impact size, etc. [10]. The number of papers proposing a
methodology of quantifying of the risk and elaboration of procedures for the adoption of appropriate actions (so called
“an appropriate strategy on risk response”) is relatively lower. This paper briefly outlines the area of risk management
in the construction industry against the background of the selected publications [1-31]. The aim of the paper is to
present the three methods used for the risk analysis with simultaneous signaling of their characteristics features and
specifying of the usefulness degree in the discussed problems. The character of the presented methods, a kind of the
solved decision-making problem and the type of used data made impossible their mutual comparison. However, the
authors have identified the common features of the methods, reflecting the analytical decision-making process and the
individual features of each of them..
2. Risk management in construction projects
In recent years, it is noticeable the increased interest of the risk problem from the perspective of the construction
industry. The research areas in the risk management are focused on the identification of random factors, determination
of the probability of their occurrence and their impact on the course of a construction project. The problems, which
often occur in terms of the risk analysis in the listed publications, are the following ones:
x Methodology/procedure of risk analysis for a project [1, 13, 24, 25, 26, 30]. x Proposition of risk
classification according to the source of origin, type, consequences [1, 10]. x Review and
classification of selected methods supporting the risk management in projects [2, 21].
x Analytical application of method/tool to a specific problem in the scope of risk analysis [4-7, 13, 15, 16-19, 2226,
28-31]. x Risk management in construction projects – theory and practice [3, 8, 9, 27].
A risk, as a measurable part of the uncertainty, is most often treated in the literature as a possibility of incurring of a
loss. The number and scope of the problems associated with the realization of the project is large. Before we start their
in-depth analysis (in terms of risk analysis) we should find the answers to at least three key questions (Fig. 1 (a)).
(a)
(b)
Fig. 1. (a) decision problem; (b) decision making procedure in risk management, source [own work].
In an effort to simplify the procedure (so called “the risk management”) it should be paid attention to three general
links: identification, quantification (assessment) and reaction. Of course, this procedure is much more complex
depending on the preferences of a decision maker and the ability of verification and analysis of the results and their
subsequent implementation. Within scope of each link it might be considered another method, which results in the
