ECM 756 RISK MANAGEMENT FOR CONSTRUCTION PROJECT49

CHAPTER 1:

INTRODUCTION

1.0 Definition Risk Management Plan

Risk can be defined as the combination of the probability of an event and its consequences (ISO/IEC Guide 73). Risk also known as the potential event that can be happened in every construction stage. Risk management started to be introducing after World War II. Some studies show that risk management implementation in early 1955-1964 (Crockford,1982;Harrington and Neihaus, 2003; Wiliam and Hems, 1995).

Risk management is the process of identifying risk, assessing risk and taking steps to reduce risk to an acceptable level (National Institute of Standards and Technology, July 2002).Risk management is about determines the processes, technique, tools, and team roles and responsibilities for a specific project (System Engineer Guide Publication).

Risk management plan is a document that a project manager prepares to foresee risk estimate impact, and define responses to issues. It also contains a risk assessment matrix. The risk management plan contains an analysis of likely risks with both high and low impact, as well as mitigation strategies to help the project avoid being derailed should common problems arise. Risk management plans should be periodically reviewed by the project team to avoid having the analysis become stale and not reflective of actual potential project risks.

Most critically, risk management plans include a risk strategy. Broadly, there are four potential strategies, with numerous variations. Projects may choose to:

Avoid risk Change plans to circumvent the problem;

Control/Mitigate risk; Reduces impact or likelihood (or both) through intermediate steps;

Accept risk Take the chance of negative impact (or auto-insurance), eventually budget the cost (e.g. via a contingency budget line);

Transfer risk Outsource risk (or a portion of the risk - Share risk) to third party or parties that can manage the outcome. This is done financially through insurance contracts or hedging transactions, or operationally through outsourcing an activity.

2.0 Benefit of Risk Management Plan

Benefits of undertaking a risk management program particularly as it relates to public safety. These benefits may include:

Improved strategic and business planning More effective use of resources Increased ability to deliver on time Reduced costs by limiting legal action or preventing breakages Improved reliability leading to an enhanced reputation An ability to quickly grasp new opportunities Fewer breakdowns, fewer shocks and fewer unwelcome surprises Enhanced communication between Business Units and Departments The ability to reassure key stakeholders throughout the organization The promotion of continuous improvement, leading to higher quality of output A more focused internal audit programme Robust contingency planning3.0 Risk Management Process

All risk management processes follow the same basic steps, although sometimes different jargon is used to describe these steps. Together these 5 risk management process steps combine to deliver a simple and effective risk management process.

Step 1: Identify the Risk. You and your team uncover, recognize and describe risks that might affect your project or its outcomes. There are a number of techniques you can use to find project risks. During this step you start to prepare your Project Risk Register.

Step 2: Analyze the risk. Once risks are identified you determine the likelihood and consequence of each risk. You develop an understanding of the nature of the risk and its potential to affect project goals and objectives. This information is also input to your Project Risk Register.

Step 3: Evaluate or Rank the Risk. You evaluate or rank the risk by determining the risk magnitude, which is the combination of likelihood and consequence. You make decisions about whether the risk is acceptable or whether it is serious enough to warrant treatment. These risk rankings are also added to your Project Risk Register.

Step 4: Treat the Risk. This is also referred to as Risk Response Planning. During this step you assess your highest ranked risks and set out a plan to treat or modify these risks to achieve acceptable risk levels. How can you minimize the probability of the negative risks as well as enhancing the opportunities? You create risk mitigation strategies, preventive plans and contingency plans in this step. And you add the risk treatment measures for the highest ranking or most serious risks to yourProject Risk Register.

Step 5: Monitor and Review the risk. This is the step where you take your Project Risk Register and use it to monitor, track and review risks

4.0Risk Management Standard

International Standards are strategic tools and guidelines to help companies tackle some of the most demanding challenges of modern business. They ensure that business operations are as efficient as possible, increase productivity and help companies access new markets.ISO standards help businesses to: Cut costs, through improved systems and processes

Increase customer satisfaction, through improved safety, quality and processes

Access new markets, through ensuring the compatibility of products and services

Reduce their impact on the environment.Table 1.1 Comparison of Risk Management Standard

DESCRIPTION AUSTRALIAN/ NEWZEALAND STANDARD, AS/NZS 4360:2004ENTERPRISE RISK MANAGEMENT INTERGRATED FRAMEWORK COSO 2004RISK MANAGEMENT STANDARD AIRMIC/ALARM/IRM 2002

Scope provides a generic guide for managing risk

may be applied to a very wide range of activities, decisions or operations of any public, private or community enterprise, group or individual professional body in United Kingdom

framework of content and methodology that detail the requirements for sustainable and effective enterprise risk management applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives drawn from risk management organizations in UK

simple guide that outlines a practical and systematic approach to the management of risk for business managers (rather than just risk professionals).

Risk Management Context The context includes the organisations internal and external environment and the interface between the two. has eight Components and four objectives categories Authority and pledge to the ERM

RISK Management policy

Mixer of ERM in the institution

Risk Assessment

Risk Response

communication and reporting

Information and Communication

Monitoring Standard describes external and internaldrivers of risk, categorising them as financial, strategic, hazard and operational.

Standard sets out the basic risk management process diagram

Standard sets out benefits of risk management.

Objective provide guidance to enable public, private or community enterprises, groups and individuals to achieve:i. a more confident and rigorous basis for decision-making and planning; ii. better identification of opportunities and threats; and iii. gaining value from uncertainty and variability. improving this capability and coordination, while integrating the output to provide a unified picture of risk for stakeholders and improving the organization's ability to manage the risks effectively COSO does not have an exactly comparable section but discusses in a number of places: -

The link to business objectives

The organizations internal environment

Four categories of objectives strategic, operations, financial reporting and compliance

Risk management philosophy and Stress the importance of relating risk management and risk assessment to strategic objectives.

At a high level, all three of standard are similar in that each of them: -

sets out a generic process for risk management and accepts that there needs to be flexibility in implementation

is applicable to a wide range of organizations and activities recognizes that management of risk is part of good management practice, should be continuous and is best embedded into existing practices / business processes.

sets out steps in the risk management process with brief guidance on

each. Based on Table 1.1 which are explained about the three standard, our team has decided to follow and use AUSTRALIAN/ NEWZEALAND STANDARD, AS/NZS 4360:2004 approach for our case study is AKLEH Highway Phase 2 (Ampang-Kuala Lumpur Elevated Highway (Akleh) Phase 2 East Bound from Ulu Kelang Interchange (Km 6.0). Akleh Phase 2. Reason is because this standard may apply to the wide range of activities decisions or operations of any public, private or community enterprise, group or individual. This standard also gives benefit to managing the risk such as:

1) increase the likelihood of achieving objectives

2) be aware of the need to identify and treat risk throughout the organization3) improve the identification of opportunities and threats

4) comply with relevant legal and regulatory requirements and international norms

5) improve financial reporting

6) improve governance

7) improve stakeholder confidence and trust

8) establish a reliable basis for decision-making and planning

9) improve controls

10) effectively allocate and use resources for risk treatment

11) improve operational effectiveness and efficiency

12) enhance health and safety performance, as well as environmental protection

13) improve loss prevention and incident management

14) minimise losses

15) improve organisational learning

16) improve organisational resilience.

CHAPTER 2:

LITERATURE REVIEW

In every construction stage there is always a risk. Risk management is part of successful construction driver. Risk management plan is the strategy of implementing the best tools to make sure project will be completed. Generally the basic strategy used by construction players todays are; Avoid, control/mitigate the risk, accept the risk and transfer the risk and this strategy known as (ACAT). The positive impacts of implementing the risk management plan are improvement in planning, meet the project completion date, and develop reputation among industry player. This positive result will develop the reputation and good impression to the contractor.

Five steps in produce a good management plan are first identifying the risk. Second analyzed the risks, third, evaluate or rank the risks, forth, treat the risk and lastly monitor and review the risk. This process is widely used in the making of good risk management plan due to the process were stated in risk management standard which also support by the international standard. This will help to improve the operation efficiency, increase the productivity and help the company to access new market. Each develop country have their own standard to suite with environment and others factor. Australian/Newzealand Standard, AS/NZS 4360:2004, Enterprise Risk Management Intergrated Framework COSO 2004, and Risk Management Standard Airmic/Alarm/IRM 2002 are standard used as references to produce this report.

Akleh Phase 2 is an additional route connecting to the existing deck (AKLEH Highway) that will involve the expansion of the existing two-lane dual carriageway into a three-lane dual carriageway from KM 4.6, Persimpangan Jalan Jelatek until KM 6.0, Jalan Ulu Kelang Interchange towards Ampang Area by providing a new three-lane route along the 1.4 km. This project belongs to Jabatan Kerja Raya (JKR) and concessionaire by Project Lintasan Kota Sdn Bhd. The objective of this project is to evaluate how risk management plan is used in the AKLEH Phase 2 construction project and how the practitioners are managing risks in everyday situations during the construction project.CHAPTER 3:

PROJECT BACKGROUND

3.1 Introduction of Project

AKLEH is the countrys 1st intra-urban highway, and was envisioned as a solution to the traffic congestion along Jalan Ampang caused by the rapid development in the Ampang and Hulu Kelang vicinity. AKLEH spans 7.9km, and starts eastward from Jalan Sultan Ismail to the riverbanks of Sungai Klang and Sungai Ampang and ends at Taman Ampang Utama in Ampang. AKLEH provides 3 lanes carriageway in each direction from Jalan Sultan Ismail interchange to Dato Keramat interchange. From Dato Keramat interchange to Ampang interchange, there is a 2 lanes carriageway in each direction. Figure 3.1 shows the current route map of the AKLEH Highway. Figure 3.1: AKLEH Route MapFigure 3.2 shows the overall layout plan image for AKLEH Phase 2 construction project. It divided into 3 sections which is from Jelatek Interchange KM4.6 until Ampang Interchange KM6.0.

With the availability of AKLEH Phase 2 highway, it expected to reduce up to 35% of traffic problems during the peak hours. The three-lane one-way route is wider and it can contribute to a more comfortable drive and safer for motorists that heading towards Jalan Ulu Kelang, Middle Ring Road II (MRR2) and Ampang.

Figure 3.2: AKLEH PHASE 2 Overall Layout Plan Image

3.2 Project Description

Our case study is AKLEH Highway Phase 2 (Ampang-Kuala Lumpur Elevated Highway (Akleh) Phase 2 East Bound from Ulu Kelang Interchange (Km 6.0). Based on Figure 3.3,the layout plan of interchange shows that Akleh Phase 2 is an additional route connecting to the existing deck (AKLEH Highway) that will involve the expansion of the existing two-lane dual carriageway into a three-lane dual carriageway from KM 4.6, Persimpangan Jalan Jelatek until KM 6.0, Jalan Ulu Kelang Interchange towards Ampang Area by providing a new three-lane route along the 1.4 km.Figure 3.3:Layout Plan of Interchange

3.2.1 Summary of ProjectTable 3.1: Project SummaryTitle of The ProjectAKLEH Highway Phase 2 (Ampang-Kuala Lumpur Elevated Highway (Akleh) Phase 2 East Bound from Ulu Kelang Interchange (Km 6.0)

Project ValueRM 98,891,792.70million

Project Start16 May 2014

Completion Date

16 May 2016 (completed within 24 months (2 years) where 7 months ahead of the original plan November 2015

OwnerJabatan Kerja Raya

Concessionaire

Projek Lintasan Kota Sdn Bhd

Project Developer Turnpike Synergy Sdn Bhd

Lead ConsultantRanhill Consulting Sdn Bhd

Main Contractor Cantilever Bumi Sdn Bhd

Road Safety AuditEndeavour Consult Sdn Bhd

Environmental Management PlanJalinan Timur Sdn Bhd

Program Management SolutionEnterprise Business Solution(EBS) Sdn Bhd

Table 3.1 shows the summary of the AKLEH Phase 2 project. The project costing is RM 98,891,792.70million which is nearly 100 million of the project by Jabatan Kerja Raya (JKR). This project is completed 7 months ahead of the original completion date of the project where it starts on 16th of May 2014 and completed within 24 months November 2015.3.3Objective of the Project

The aim of this project is to evaluate how risk management plan is used in the AKLEH Phase 2 construction project and how the practitioners are managing risks in everyday situations during the construction project. The theory of the risk management process will be compared to the actual practice in order to investigate similarities and differences. The main idea is to see if the AKLEH Phase 2 construction project is working with risk management as it is described in the literature regarding the methods and techniques presented.

In order to achieve the aim, the following objectives will be fulfilled:

a) Identify risk and risk management perceived in a AKLEH Phase 2 construction project

b) Identify risk management process used in practice

c) Proposed risk management plan for the AKLEH Phase 2 project

CHAPTER 4

RESEARCH METHODOLOGY4.1 INTRODUCTIONThe methodology of this paper is listed as follows:

The research methodology can be summarized in fifty-nine (56) different risk factors were categorized into eight (8) major categories and visualized by ranking through the detailed literature review questionnaire distributed to experts in the construction of (AKLEH) Phase 2 Project. The questionnaire was developed to assess the feedback on the relative importance of risk causes. Then, the questionnaire was filled out by nine (9) highly experienced construction professionals including Project Managers, Site Managers, Assistant Managers, Project Engineers, Finance Managers, HSE Officer, Site Engineer, Project Engineer and Sr. Exc. Project Development. The collected data were analyzed through Qualitative analysisi technique by using Risk Matrix Method. The analysis included ranking the different risk according to the relative importance indices.

Questionnaires were developed into four (4) major sections (1, 2, 3 and 4).Section (1&2): Aimed to obtain information about caused of risks in construction projects, it was asked to rate those initially identified fifty-Six (56) factors according to their impact (I) and likelihood (P). A survey was conducted through distributed questionnaires in which respondents were asked to rank and score these factors according to their experience and position.Section (3): The fourth section consists of the parties responsible in the particular task. Section 4 Personal information of the respondent was collected (e.g., work experience of construction projects and work position.The company for involved for this surveyed by questionnaires is Projek Lintasan Kota Sdn Bhd.

Totally fifteen (15) person approached for these questionnaires and nine (9) out of fifteen responses were received with response rate equals to 60%.

Assessment of feedback from questionnaire survey was made. Analysis was carried out for nine (9) responses to identify major risk contributing factors. Analysis is discussed in details, on the basis of which recommendations to construct projects were made.

The approach to the study has been summarized, which consists of data/results that methodology as shown in Figure 4.1Figure 4.1: Risk management Plan

RISK ASSESMENT

RISK IDENTIFICATION

RISK ANALYSIS

RISK EVALUATION

RISK TREATMENT

4.2 Risk Identification

Risk identification is the first stage in the risk management process. Risk identification is the process of systematically identifying all possible risk factor which have a potential impact on the project. It consists of documenting on an ongoing basis throughout the project all external as well as internal risks.

In this stage, potential risks associated with the particular construction project must be identified (Zou, Wang, & Zhang, 2007). Al-Bahar & Crandall (1991) defined the risk identification as systematic and continuous process of identifying, categorizing, and assessing the initial significance of risks associated with a construction project.To establish identification of risk exposure to that particular AKLEH Phase 2 construction project, we are looking for lists of potential risk associated with various project through journals, progress report of the AKLEH Phase 2 project, and information provided by project management personnel. Identified risk factor from data collection from journals related to similar and various construction project (Batson, 2009; El-Sayegh, 2008; Ghosh & Jintanapakanont, 2004; Pinthong, 2003; Zhao, Hwang, & Yu, 2013; Zou et al., 2007) were also be listed.Risk category is an integrative part of risk identification to structure the diverse risks affecting a construction project. We are categories for each category as a step to help us to find and predict the risks factor. In this paper, risks are categories into technical and non-technical risk categories.

The technical risk includes risk during Construction, Design, Environmental and Logistic. The non-technical risk is Legal, Politic and Contracts Provision, Finance, and Organizational. Table 4.1 illustrates the risk categorization with respect to the priority in the risk factor. All the risk which is possible at each category will be identified as types of risk. Table 4.1: Categorized factors that cause risk in construction projects.Risk IDCategoryItem

1Technical RiskConstruction

2Design

3Environmental

4Logistic

5Non-technicalPolitics and Contracts Provision

6Legal

7Finance

8Organizational

4.2.1 Project risk causesThere are fifty-nine (56) factors and are categorized into eight(8) major categories as a risk factor in construction project which are used in this paper, as follows:1)Shortage of equipment 2) Shortage of material 3) Late deliveries of material 4) Poor quality of workmanship 5) Lower work quality in presence of time constrain 6) Lack of site safety inspection and poor supervision 7) Accidents (such as collision,fireand so on) 8) Damage to persons or property 9) Changes in the work 10)Inadequateplanning 11)Insolvencyofsuppliers12)Insolvency ofsubcontractors 13) Bad Weather14)Change in law and regulation 15) Inconsistencies in government policies 16)Excessive contract variation 17) Change in law and regulation 18) Inconsistencies in governmentpolicies19) Poor supervision 20) Bureaucratic system and long procedure for approval 21) Compliance with Government 22) Delay in payment for claim 23) Cash flow difficulties 24) Price inflation of construction materials 25) financial failure with the contractor 26) Exchange rate fluctuation 27) Monopolizing of material due closure and other unexpected political condition 28) Lack of financial resources 29) Change in taxation/new tax rates 30) Method of construction defined in drawing and specification is inappropriate and inapplicable to construction 31) Design and drawing change 32) Defective design (incorrect) 33) Not coordinated design 34) Inaccurate quantities 35) Lack of consistency between bill of quantities, drawing and specification36) Rush design 37) awarding the design to unqualified design 38) Change of scope 39)Pollution 40)Ecological damage 41)Adverse weather conditions 42) Difficulty to access the site (very far) 43) Environmental factors(floods, earthquakes, etc.) 44) Compliance with law and regulation 45) Inaccurate project program 46) Poor communications between the home and field offices (contractor side) 47) Lack of manpower on site 48)Inaccurate project program 49) Undefined scope of working 50) Lack of skilled workers 51) Inexperienced staffassigned 52) Losing critical staff at crucial point of the project 53) Insufficient time to plan 54) Unanticipatedproject managerworkload 55) Not enough time to plan 56) Priorities change on existing program.4.2.2 Questionnaire survey4.2.2.1 Questionnaire designThe questionnaire design took into consideration the objectives of the study with the aim to answer the research aims. Great effort and brainstorming were done for designing the questionnaire. The design of the questionnaire was based on the fact that they had to be simple, clear, and understandable for respondents, and at the same time, they should be able to be interpreted well by us.

The questionnaire has a definite advantage of requiring smaller time to be responded and is more accurate in the final outcome. The questionnaire consists eight (8) major categories and each category have a several factors causing risk in construction projects in AKLEH Phase 2 have a total of ninety-nine (56) factors (refer Table 4.2). The participants were required to rate the factors in the way they affect risk in construction projects using their own experiences on construction of highway sites.Category itemTotal number of category factor

Construction Factors Category13

Legal Factors Category02

Politics and Contracts Provision Factors Category06

Finance Factors Category08

Design Risk Factors Category09

Environmental Factors Category06

Logistic Factors Category06

Organizational Factors Category06

Total56

Table 4.2: Categorized factors that cause risk in construction projects.4.2.2.2 Contents of the questionnaireThe questionnaire was divided into four (4) major sections (refer Figure 4.2).The first section contains the probability of the causes leading to risk and the respondent is asked to state the probability of occurrence of these risk in his projects on a scale with the ranting 1 representing Inconceivable; 2 Remote 3 Conceivable; 4 possible; and 5 Most Likely.The second section questionnaire required the respondent to rank these on a scale with the rating of 1 representing Negligible; 2 Minor 3 Serious; 4 Fatal; and 5Catastrophic according to the degree of Impact risk in construction.The third section addresses general information about the respondents such as (1) Years of experience and (2) Position of the respondent.

The fourth section consist of the parties responsible in the particular task. This section is to identify which the person who are most responsible to the particular risk and the project.

Figure 4.2: Sample Questionnaire

4.3 RISK ANALYSISA risk analysis consists of identifying the most potential threats to an organization along with analyzing the actual related vulnerability of the organization to these kinds of threats. An essential link in between risk identification and rational management as being a foundation intended for decision making associated with risk response strategies making use of probability theory by means of incorporates uncertainty in a quantitative manner is called as risk analysis (Al-Bahar & Crandall, 1991).Risk analysis should be performed as part of the risk management process for each project and it is designed to remove or reduce the risks which threaten the achievement of project objectives. As for all risks identified, it has to be assessed in order to determine the risk priority as well as for risk response techniques. Properly undertaken of risk analysis will increase the likelihood of successful completion of a project towards cost, time and performance objectives.4.3.1 Data Collection

The questionnaire was developed to assess the feedback on the relative importance of risk causes. The Questionnaires were mailed to the main contractor, Projek Lintasan Kota Sdn Bhd. Completed forms were requested to be mailed or faxed back to us, and the response for this request was poor. Another approach of collecting data was used; involved follow-up telephone calls, most of data were collected by this method. Over a period of 1 week later, we collected nine (9) responses from fifteen (15) total forms from Projek Lintasan Kota Sdn Bhd.; this means the rate of response was 60%. From the data, the questionnaire was filled out by nine (9) highly experienced construction professionals including Project Managers, Site Managers, Assistant Managers, Project Engineers, Finance Managers, HSE Officer, Site Engineer, Project Engineer and Sr. Exc. Project Development. The result shown that, the questionnaired was answered by different person with different position. The details of respond from respondents with their classifications were mentioned in Ta

HYPERLINK \l "page6"ble 4.3 for clarifications.Table 4.3: Profession of Respondent

NOProfessional of respondentsNo of respondentsPercentage, %

1Project Managers,111.11

2Site Managers,111.11

3Assistant Managers111.11

4Project Engineers,111.11

5Finance Managers,111.11

6HSE Officer,111.11

7Site Engineer, 111.11

8Project Engineer111.11

9Sr. Exc. Project Development111.11

Total9100 %

From the questionnaire the baseline characteristics of the respondents were relatively similar. Of the 9 respondents in the survey, all the professional of respondents have a similar percentage which is 11.1%.To consider the effect of different levels of the participants experiences, the results were grouped into four (4) main groups: group 1 for respondents experience 1 till 5 years; group 2 for respondents experience above 6 till 10 years; and group 3 for respondents experience above 11 till 5 years and group 4 for respondents experience above 16 years; Table 4.4 depicts these groups. In all surveys, the majority of the respondents have 11 till 15 years experience in construction/project management or working knowledge of construction/project management activities. Based on work experience and employment position, it was inferred that the respondents have adequate knowledge of the activities associated with construction project risk. This makes them as reliable and credible sources of information which is crucial to satisfy the research goal. The procedure, findings, and relevant discussion of the analyses are detailed in the following section.

Table 4.4 :Respondents years of experience

Years of experienceNo of respondentsPercentage%

16- above Years111..11%

11-15 Years444.44 %

6-10 Years222.22 %

1-5 Years222.22 %

Total9100 %

4.3.2 Risk Analysis Techniques4.3.2.1 Qualitative analysisQualitative analysis that focuses on identification and subjective assessment of risks. The qualitative analysis are most applicable when risks can be placed somewhere on a descriptive scale from high to low level (Winch, 2002). There are many techniques for this and they are known as qualitative risk analysis, the red-light/green-light rating, the risk matrix method, and the urgency assessment.

4.3.2.2 Quantitative analysis Quantitative analysis that focuses on an objective assessment of the risks.. The quantitative analysis are used to determine the probability and impacts of the risks identified and are based on numeric estimations (Winch, 2002).The factors causing risk in construction projects in AKLEH Phase 2 will be looked at from different perspectives. It will examine the data provided by respondents and that will be the basis for case selection. The level of risk will be calculated as final outlined results. These factors will be ranked and categorized based on their total risk score by using qualitative risk analysis with Risk Matrix Method.4.3.3 Risk Matrix MethodThis collected data were analyzed through Risk Matrix Method. The analysis included ranking the different factor according to the risk scoring. ARisk Matrixis a matrix that is used duringRisk Assessmentto define the various levels of risk as theproductof the probability categories and impact categories. This is a simple mechanism to increase visibility of risks and assist management decision making.

This matrix setup for our study is 5x5. The vertical side of the matrix is labeled probability and the horizontal side is project impact (refer Table 4.5 & 4.6). The scale on the matrix goes from low to high on each side. How low or high are defined should be based upon the major objectives of the project. The probability and impact matrix illustrates a risk rating assignment for individual risk factors in the identified risks categories. The risk matrix shows the combination of impact and probability that in turn yield a risk priority (shown by the red, yellow, and green colour).

The risks in the upper right corner with risk score in range 15 25 was considered as a high risks that must be addressed in project planning and the response plan is required. The risks in the middle with risk score in range 5-14 is a medium level and the response plan as neede. The lower left corner are Low risks and can be optional or ignored.Table 4.5: Risk MatrixIMPACT

1=Negligible2=Minor3=Serious4=Fatal5=Catastrophic

PROBABILITY5= Most Likely510152025

4= possible48121620

3= Conceivable3691215

2= Remote246810

1=Inconceivable 12345

Table 4.6: Risk RatingLevelRiskAction

High15-25Response Plan Required

Medium5-14Response Plan as needed

Low1-4Response Plan optional

4.3.4 Data analysis and ResultThe identified risk levels according to their potential effect on construction project objectives were ranked. In our observation, based on the risk matrix, the highest risks identified based on each category ID (see table 4.7).The highest numbers of respondent scoring for each factor considered as a high level of risk.

Table 4.7: Highest Risk Factor cause risk in construction projects.

Category itemTotal number of category factorsNos. of scoringPercentages %

(High level)

Construction Factors Category131234%

Legal Factors Category2-0%

Politics and Contracts Provision Factors Category626%

Finance Factors Category8411%

Design Risk Factors Category9412%

Environmental Factors Category6617%

Logistic Factors Category6514%

Organizational Factors Category626%

Total5635100%

Figure 4.3: Data & Result

Figure 3 represents the ranking of the risk factors with the respect to risk categorization. From studying this project and analyzing the data, it was found that the highest risk in the construction categories during the construction stage. While the most frequently mentioned risk factors with 34% from the total of high risk factor. Environmental Factors Category contributed 17%, Logistic Factors Category 14%, Finance Factors Category 11% and Politics and Contracts Provision Factors Category, Design Factors Category Design Risk Factors Category, Organizational Factors Category with 6% respectively.

Case study conclusion from studying and analyzing the AKLEH Phase 2 project, it was found that there is most of respondent agreed that the high level of risk is during the construction stage. Respondents believed that these risk events are responsible for poor quality of work, delays and associated losses. Risks with high impact and high probability, such as Construction Factors Category, Environmental Factors Category, Logistic Factors Category and Finance Factors Category are required further analysis, including quantification, and aggressive risk management4.4 Risk Response AnalysisRisk response is the process of developing options and determining actions to enhance opportunities and reduce threats to the project objectives. This process ensures that the identified risks are properly addressed. However, when the risk events cannot be solved through the other techniques of risk response such as avoidance, mitigation and transference, the only option remaining is the acceptance. This technique indicates that the project team has decided not to change the project plan to deal with a risk or is unable to identify any other suitable response strategy. Active acceptance may include developing a contingency plan to execute, should a risk occur. Identification and assessment of risks alone will not serve the purpose unless meaningful ways to mitigate those risks in a structured way is planned in advance.

These effective responses to the risks should meet a number of criteria.The risk responses should be appropriate, affordable, actionable, and achievable, assessed, agreed and allocated (Hillson, 1999).

Table 4.8 is a basic risk response strategy that we are using in the AKLEH Phase 2 project construction. There are 4 types of risk response which are implemented in these AKLEH Phase 2 project constructions.

Table 4.8: Basic Risk Response Strategy

Risk AvoidanceRisk MitigationRisk TransferRisk Acceptance

Eradicate the risk altogether by eliminating the cause of the risk eventReduce the impact and probability of the risk event to an acceptance levelContractually transfer the risk and loss exposure to a third partyRetained the risk and develop plans to cover the financial consequences

4.4.1 Risk Avoidance

This is the best method of risk response, whereby all necessary actions are taken to avoid the risk. Avoiding risk is the best method of risk mitigation, avoiding risk means a total removal of the risk. However according to Edwards & Bowen (2005) risk avoidance is not the same as eliminating risk since elimination of risk is rarely possible. By avoiding the risk, AKLEH Phase 2 project will be able to eliminate the monitoring and control of the risk management process need to be conducted if there were risks. 4.4.2 Risk Mitigation

Not all the risk sources can be solved by risk avoidance and transfer. In fact most of the risks cannot be addressed by the above two risk responses. Therefore, for majority of the risks, reduction or mitigation techniques need to be applied. Depending on where the risk source lies in the risk matrix, mitigation may be done either by reducing the probability of risks or by reducing their impact or both. If the impact of the risk is high, risk reduction may be done by lessening the extent of the damage. If the risk occurs very often, it is wiser to tackle the risk sources at their root by inhibiting their trigger (Hillson, 1999). Whenever the risk probability and the impacts are high, the response strategy should be to reduce both.

4.4.3 Risk Transfer

Method of transferring risk to another party, while according to Edwards & Bowen (2005), it was described as shifting the burden of a particular risk to another stakeholder. This method is commonly used by main construction firms to release the burden of a particular risk under their responsibility. Examples are:

a. Main contractor sublet some portion of their contract works to their sub contractors, whereby the subletting exercise itself will transfer all the risks related to the sub contractors.

b. Contractor All Risks or CAR insurance is one of the methods of transferring the risk of construction accident to insurance company.4.4.4 Risk Acceptance

When the risk sources fall in the low impact-low probability quadrant of the risk matrix, such risks are deemed acceptable. Acceptance can be passive when the impact is minor for which no prior plans may be required. Acceptance can be active if the impact if it occurs needs to be further reduced and for such risks contingency plan should be put in place by allocating sufficient time and resources (Piney, 2002).

Based on those risks ranking, as the major risk will contribute huge impact to project objective, it require higher concern. Variety of mitigation measure using multiple response type were adapting to every each of risk category. The mitigation measures for major risks in the AKLEH Highway Phase 2 project were shown in Table 4.9 below.

However, the minor risks also need the risk response either to reduce or to eliminate the severity and likelihood of occurrences. Some of mitigation measure for major risk can heal the minor risk.Table 4.9: Risk Response for each Risk Category

IDRisk CategoryRisk IDRisk FactorRisk Response

1Construction1Shortage of equipmentMitigation

2Shortage of material

3Late deliveries of material

4Poor quality of workmanship

5Lower work quality in presence of time constrain

6Lack of site safety inspection and poor supervision

7Accidents (such as collision,fireand so on)

8Damage to persons or property

9Changes in the work

10Inadequateplanning

11Insolvencyofsuppliers

12Insolvency ofsubcontractors

13Bad Weather

2Legal14Change in law and regulationAcceptance

15Inconsistencies in government policies

3Politics and Contracts Provision16Excessive contract variationMitigation

17Change in law and regulation

18Inconsistencies in governmentpolicies

19Poor supervision

20Bureaucratic system and long procedure for approval

21Compliance with Government

4Finance22Delay in payment for claimMitigation

23Cash flow difficulties

24Price inflation of construction materials

25Financial failure of the contractor

26Exchange rate fluctuation

27Monopolizing of material due closure and other unexpected political condition

28Lack of financial resources

29Change in taxation/new tax rates

5

Design

30Method of construction defined in drawing and specification is inappropriate and inapplicable to constructMitigation

31Design and drawing change

32Defective design (incorrect)Mitigation

33Not coordinated design

34Inaccurate quantities

35Lack of consistency between bill of quantities, drawing and specification

36Rush design

37awarding the design to unqualified design

38Change of scope

6Environmental39PollutionMitigation

40Ecological damage

41Adverse weather conditions

42Difficulty to access the site (very far)

43Environmental factors (floods, droughts)

44Compliance with law and regulation

7Logistics45Inaccurate project programMitigation

46Poor communications between the home and field offices (contractor side)

47Lack of manpower on site

48Inaccurate project program

49Undefined scope of working

50Lack of skilled workers

8Organizational51Inexperienced staffassignedMitigation

52Losing critical staff at crucial point of the project

53Insufficient time to plan

54Unanticipatedproject managerworkload

55Not enough time to plan

56Priorities change on existing program

4.5 Risk TreatmentRisk treatment is a step in the risk management process that follows the risk assessment step in the risk assessment all the risks need to be identified, and risks that are not acceptable must be selected.Based on those risks ranking, as the major risk will contribute huge impact to project objective, it require higher concern. Variety of risk treatments using multiple response type were adapting to every single major risk. The risk treatments for major risks in the AKLEH Phase 2 project were shown in Table 4.10Table 4.10: Major Risk Mitigation Measures

Risk categoryRisk codeRisk FactorRisk Treatment

Construction1Shortage of equipmenta) Hire the security officer to make sure about the safety of the equipment

b) Conduct the frequent jobsite inspection

c) Establish safety equipment and material storage system

2Shortage of materialMaterial price fluctuation

a) Always have a review of construction material at the current situation

b) Develop a good, clear and appropriate plan and control on schedule.

c) Maintain good relationship with the suppliers to avoid any chance for the suppliers to take an advantage of their material prices

Material is necessarily imported from other countrya) Avoid any late order to the supplier

b) Review the background and history of each supplier before sign any contract.

c) Ensure standby cash flow in advance

d) Avoid any miscommunication with the supplier from other country to prevent any major losses

3Late deliveries of materiala) Avoid any late order to the supplier

b) Choose the capable suppliers that have a good communication and linkage

c) Review the background and history of each supplier before sign any contract.

d) Make sure the payment to the supplier is following the schedule to avoid any problem in delivering the materials to the construction site.

e) Develop a good, clear and appropriate plan and control on schedule.

4Poor quality of workmanshipa) Proper communication among parties involved

b) Strict supervision by the supervisor

c) Provide training and education to the workers

d) Proper construction management

5Lower work quality in presence of time constrainta) Proper construction management and manpower management

b) Proper work planning by the supervisors

c) Monitoring the workers to make sure everything is follow the right procedures

Construction6Lack of site safety inspection and poor supervisiona) Maintain the approval of site safety inspection procedure and supervision

b) Identify/mapping of all areas

c) Use a checklist to ensure consistent and comprehensive inspections.

d) Assign competent HSE inspectors to conduct daily inspections based on mapping schedules and checklist.

e) Ensure proper training of inspectors.

f) Ensure the proper documentation for each inspection

g) Ensure proper safety training for the site engineer

h) Maintain a minimum number of safety officers on site based on the number of workers

7Accidents a) Provide sufficient guardrails or personal fall protection equipment

b) Employer needs to ensure that they are provide sufficient Personal Fall Protection and this equipment needs to be tested before use

c) Responsible person need to observe their workers when working at high elevation and give a penalty to workers that failed to obey the safety rules

8Damage to persons or propertyPrepare the insurance for life or property for each personnel who are involved with the project.

10Inadequateplanninga) Proper project planning and scheduling

b) Effective strategic planning

c) Collaborative working in construction

11InsolvencyofsuppliersEnsuring the continuation and availability of key resources (including staff, plant, equipment and materials) and that the work should continue if there are minimal delays but there should be a backup plan.

12Insolvency ofsubcontractorsa) Properly directing the subcontractor to ensure they know what is expected of them in relation to the project

b) Avoiding the selection of the cheapest subcontractor if there is doubt on performance track record

c) Clear definition of each subcontractors scope of work

d) Select subcontractor which already have experience in similar project

Construction13Bad WeatherTake protective measures, for example site manager might therefore consider installing protective sheeting around scaffolding, which can also mitigate against wind, or temporary roofing structures.

Politics and Contracts Provision19Poor supervisionProvide training and seminar to the site supervisor to improve their supervision skilled task, requiring the highest levels of social work skills and knowledge of research on what works.

20Bureaucratic system and long procedure for approvala) Maintain good relationship and connection with higher local government agencies

b) Ensure the project is complying with local authority procedure

c) Prepare and submit all the necessary documents in a timely manner to the government agencies

d) Always maintain a good reputation without any blacklisted title.

Finance22Delay in payment for claima) Prepare the entire claim document early before the submission date to the clients.

b) Have a discussion with the client to approve the claim early and release the money as soon as possible to make sure all the site activities can be run as usual without any delay.

23Cash flow difficultiesa) Be sure to start of your year by deploying an accounting system that you can use to put all your invoices as well as capture all expenses.

b) Always generate and deliver your invoices immediately a service has been completed.

24Price inflation of construction materialsa) Always have a review of construction material at the current situation

b) Develop a good, clear and appropriate plan and control on schedule

c) Maintain good relationship with the suppliers to avoid any chance for the suppliers to take an advantage of their material prices

28Lack of financial resourcesa) Ensure standby cash flow in advance

b) Examine the company's financial viability

c) Obtain guarantees or other credit support from reliable and credit worthy local and international entities

d) Contractor should struggle to prevent financial failure by practicing a stern cash flow management and minimizing the dependence on bank loans.

Design30Method of construction defined in drawing and specification is inappropriate and inapplicable to constructa) Detailed review of the information relating to the work before embarking on it

b) Development a project execution plan for the work before starting on it Ensuring adequate coordination of design and activities preceding and following the complex work

c) Calling in specialists to advise and contribute to the planning and management of complex works/projects

31Design and drawing changea) Ensuring as much design as possible is done for the complex work or project before commencing

b) Ensuring adequate coordination of design and activities preceding and following the complex work

c) Calling in specialists to advise and contribute to the planning and management of complex works/projects

d) Conducting workshops and brainstorming session to generate ideas and for problems solving before and during the complex work/project

e) Ensuring the cause of a design change is always determined

33Not coordinated design The link between design coordination and production needs to be clearly understood and elevated in importance to help contractors take advantage of the reductions in field conflicts and production planning information that can be achieved through the coordination process

35Lack of consistency between bill of quantities, drawing and specification The need for innovative contract procurement methods such as management contracting which are more capable of allocating the risks to the parties that could best handle them.

Environmental

39Pollutiona) Take a precaution steps to make sure all the personnel and the nearest residents is not affected by the pollution

b) Have a proper site clearing to make sure no dust can cause air pollution, and have a proper drainage so there will be no water pollution.

40Ecological damagea) Develop strategies to reduce adverse impacts of development.

b) Planning mitigation early in the project can be highly beneficial to the development and the community.

41Adverse weather conditionsa) Preparing the construction schedule.

b) Schedule activities that can be impacted by rain, such as earthworks, to occur outside of the rainy season.

c) Close up buildings ahead of the rain season or cold weather. Schedule activities such as roofing and lifting large loads to happen outside the windy season.

d) Understand the expected weather conditions and allow additional time in the schedule to compensate for delays caused by inclement weather.

42Difficulty to access the site (very far)a) Undertake pre-project planning to ensure existing utilities

b) Always aware with the condition of surrounding area and make proper plan or schedule to check on the satisfaction of public

c) Arrange and undertake comprehensive site investigation before construction phase

43Environmental factors (floods, droughts, etc.)a) Insurance carried by owner

b) Contractual clauses for delay and payments for incurred damages

44Compliance with law and regulationAccess and leverage information in prequalification database to select

Logistics45Inaccurate project programa) Undertake pre-project planning to ensure the scope of the project

b) Arrange and undertake comprehensive site investigation before construction stage

c) Employ local staff with multi-skill ability

d) Develop a good, clear and appropriate plan and control on cost

47Lack of manpower on sitea) Establish networking with others contractor for labour sharing

b) Direct negotiation between Malaysia government and the other country which can provide labour supply

49Undefined scope of workingDescribe the scope of work in general terms to the all workers to make sure they understand what is their role in site construction

50Lack of skilled workersa) Take steps to convince a new generation of workers that their talents could be put to good use in the construction industry.

b) Convincing young people the computer skills that they already possess have real-world applications on job sites

Organisational51Inexperienced staffassigneda) Good communication between senior and junior engineers is a key to a safe working environment.

b) Reinforcing a safe and knowledge seeking culture within senior engineering management

52Losing critical staff at crucial point of the projecta) Attempt negotiation where ask them to stay on an extra week or two to get you through this critical period to find a replacement

b) Re-examine your project plan either re-organized your team or brought on someone with the necessary business or technical skills where you can keep and maintain the project on schedule

Table 4.10 above represents the mitigation measures that have been proposed. The mitigation measures method recommended by the respondents of the questionnaires which are the higher level of the management of the AKLEH Phase 2 construction project. Those mitigation methods was obtained by interviewing and we make a phone call to the respondents of the questionnaires before which are the persons who is in charge and close to the AKLEH Phase 2 project. The data of the mitigation measures have been discussed amongst all project participants after they doing brainstorming and internal meetings among their staff project to find the most appropriate method suited to the situation.4.6 Risk Monitoring and Review

Risk Monitoring and Review should be a planned part of the risk management process and involve regular checking or surveillance. The results should be recorded and reported externally and internally, as appropriate. The results should also be an input to the review and continuous improvement of the firm's risk management framework.

Responsibilities for monitoring and review should be clearly defined. The firm's monitoring and review processes should encompass all aspects of the risk management process for the purposes of:

Ensuring that controls are effective and efficient in both design and operation

Obtaining further information to improve risk assessment

Analyzing and learning lessons from risk events, including near-misses, changes, trends, successes and failures

Detecting changes in the external and internal context, including changes to risk criteria and to the risks, which may require revision of risk treatments and priorities

Identifying emerging risks.

As part of the monitoring process, the thresholds for the risk criteria should be reviewed at the commencement of each risk assessment cycle to identify the processes that may be subject to increased risks and, as such, would derive the greatest value from the risk assessment.In project AKLEH Phase 2,once the risk response plan were taken place, risk monitoring and review has to be implemented to deal with the evolution of risk factors, triggers and effectiveness of responses and other aspects of risk environment. Risk monitoring is establishment of systematic reviews which scheduled in the project schedule. This includes ensuring all requirements of risk management plan are being implemented, assess currently defined risks, evaluate the effectiveness of action taken, validate previous risk assessment (probability and impact) based on on-going construction progress, identifying new risk also establish risk communication between all project stakeholder and personnel. Frequent holding site meeting within all stakeholder, regular work inspection during construction and application of monitoring tools such as bar charts and CPM schedule network analysis would help a lot in planning and monitoring performance of project quality (Abdul-Rahman et al., 2006). The risk register has to be periodical updated. According to Can & Cruz (2002), risk monitoring may lead to modification of risk management strategy by taken place the corrective and preventive measures to avoid similar crises in other areas of the project. 4.6.1 Evaluation of Risk Management Process and ReviewEvaluation is an attempt to improve the process of risk identification, analysis and evaluation and response management. In construction project especially in this AKLEH Phase 2 Project, the business environment and the contractors operating are subject to constant changes. Therefore, an effective, dynamic and consistent risk management program is required in this evaluation process to recognize all those thing of changes. The techniques and strategies adopted must be monitored and adjusted to compensate the changes in risk levels associated with changes in the firms operation, business environment and the insurance company (Al-Bahar & Crandall, 1991)CHAPTER 5:

CONCLUSION

In order to achieve project objectives in term of time, cost, quality and environmental sustainability, systematic risk management is very crucial. Variety risks related to different project stakeholders may occur at different project stages. Proper management of these risks can help significantly influence the achievement of project objectives (Zou et al., 2007). A project stakeholder includes project owner, consultant, contractor, and authority should cooperate together since throughout project lifecycle to organize and strategies the potential risk.

Risk management concept is moderately fresh to the construction industry. The analytical addition presented in this course project is the efficient analytical method to be implemented in the real situation in construction project. It can improve in term of cost, time and also quality.

However, to achieve the oriented goal, all parties such as clients, designers, contractors and government agencies must do their parts and be responsible in whatever circumstances to ensure the safe, efficient and high quality construction activitiesCHAPTER 6

RECOMMENDATIONAKLEH Phase 2 project is renowned as a high risk in construction industry. Where are involve complexity of project, time consuming design and construction processes characterized by unforeseen circumstances. As a result, effective risk management is essential in construction AKLEH Phase 2 project in to minimize losses and enhance profits. Therefore, each of contractors may wish to implement these concepts in varying degrees onto the efficient and effective management of the risk involved.

Second recommendation is contractors involved in this AKLEH Phase 2 project must consider the rate of contingency sum or risk allowance and variable pricing of each element during tendering stage. This is to secure the contractors from all angles unforeseen circumstances occur during construction project.

Third recommendation is to small firms may utilize the classification concepts to provide a better view of total risk and use these results to determine if the project is worth bidding. Larger firms may desire to blend the concepts into their existing insurance programs, maintaining a dynamic risk evaluation program for the life of the project as suggested.

The last recommendation is for risk department should prepare a risk report for each project that their firms participated in tender. The report most consist of all construction risk involved at every construction stages starting from design, construction up to operational stage if needed. The risk report should include identified construction risk, raft estimate or cost of risk and proposed mitigation plan with costing.CHAPTER 7

REFERENCESAbdul-Rahman, H., Berawi, M. A., Berawi, A. R., Mohamed, O., Othman, M., & Yahya, I. A. (2006). Delay Mitigation in the Malaysian Construction Industry. Journal of Construction Engineering and Management, (February), 125133.

Al-Bahar, J. F., & Crandall, K. C. (1991). SYSTEMATIC RISK MANAGEMENT APPROACH FOR CONSTRUCTION PROJECTS. Journal of Construction Engineering and Management ASCE, 116(3), 533546.AS/NZS 4360. (2004). Risk Management. The Joint Standard Australia/New Zealand StandardCan, A., & Cruz, M. P. (2002). Integrated Methodology for Project Risk Management, (December), 473485.

Cooper, D., Grey, S., Raymond, G., and Walker, P., 2005. Project Risk Management

Guidelines: Managing Risk in Large Projects and Complex Procurements. Chichester: John Wiley & Sons, LtdCrockford, G.N., 1982. The bibliography and history of risk management:The Geneva Papers on Risk and Insurance 7, 169-179.

Hillson, D. A. (1999) Business uncertainty: threat or opportunity? ETHOS magazine, 13

(June/July), 14-17

National Institute of Standards and Technology, July 2002, Special Publication (NIST SP) - 800-30 Rev 1Perry, J., 1986. Risk management an approach for project managers. Butterworth &

Co. Vol. 4, pp. 211-216

Pinthong, Y. (2003). Evaluation of Multi-Party Risk Factors For Mass Rapid Transit (M.R.T) Chaloem Ratchamongkhon Line Construction Project. Kasetsart University.

Smith. N.J., Merna, T. and Jobbling P., 2006. Managing Risk in Construction Projects.

2nd edition Oxford: Blackwell Publishing

Winch, G., 2002. Managing construction projects, an information processing approach.

Oxford: Blackwell Publishing

Zou, P. X. W., Wang, J., & Zhang, G. (2007). PROJECT Understanding the key risks in

construction projects in China. International Journal of Project Management, 25, 601614. doi:10.1016/j.ijproman.2007.03.001Risk = Likelihood x Impact

49