Construction Risks

This document discusses the risks involved in construction projects, focusing on two-storied buildings. It covers the selection of engineering activity, project boundaries and objectives, risk management context, identification of risk events, and assessment of risks using FMCEA. It also includes a value-added discussion on environmental aspects. The document provides insights into the potential risks and offers applicable risk treatment options.

Running head: CONSTRUCTION RISKS
CONSTRUCTION RISKS
Name of the Student:
Name of the University:
Author Note:

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Table of Contents
1. Introduction:............................................................................................................................................................................................3
Part 2. Selection of engineering activity with defined scope, engineering specifications, timeline, budget and internal/external
constraints:...................................................................................................................................................................................................4
Part 4. Definition of project boundaries and objectives:.............................................................................................................................5
Part 5. Appropriate risk management context, including stakeholders, rules, roles and responsibilities, likelihood and consequence
criteria, etc...................................................................................................................................................................................................6
Part 6. Identification of risk events with potential major negative impact on selected objectives:.............................................................7
Political and legal risks:...........................................................................................................................................................................7
Socio-economic risks:..............................................................................................................................................................................8
Technological risks:...............................................................................................................................................................................10
Part 7. Assessment of inherent and contingent risks using FMCEA and proposing of applicable risk treatment options:......................10
Part 8. Clearly statement of risk tolerability criteria employed:................................................................................................................11
Part 9. Value added discussion:.................................................................................................................................................................11
Part 10. Conclusion:...................................................................................................................................................................................11

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Part 11. References:...................................................................................................................................................................................13
Part 12. Appendix:.....................................................................................................................................................................................15

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1. Introduction:
Engineering works lead to creation of assets which are of great importance to the users. The assets like bridges, buildings and
roads have great importance to the consumers. They play important role in facilitation infrastructural development of countries. The
engineering structures face several risks due to external factors like natural calamities. These risks often result in collapse of these
structures rendering them non-performing assets. Collapses of engineering structure like buildings cause injuries and even death of
people around and in the buildings. The catastrophic damages which the collapse of buildings cause have made attracted the attention
of the government authorizes and companies involved in the construction companies alike. The aim of the report is to delve into the
risk factors which are involved in the construction of engineering works. The paper would consider two storied buildings as the base
of the research. The paper would first introduce the engineer work, its scope and boundaries especially pertaining to risk management.
The paper would then go onto visit the risk management context by identifying the risks which the buildings can face during and post
construction. Then the task go on to point out the risk treatment options based on the model of Failure mode, effects and critical
analysis or FMEA. This next section would delve into risk tolerability followed by additional discussion to make the discussion
strong. The task would draw its substance from secondary sources like articles, journals and relevant websites. The research would
include of Gantt charts and excels to to render lucidity to the research.

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Part 2. Selection of engineering activity with defined scope, engineering specifications, timeline, budget and internal/external
constraints:
The engineering selected for the research would construction of a two storied building. The activity would be selected on a
given house that would have essentially simplistic and general design. The project will consist of a building with simple
specifications. The risk management plan of the building would be created in accordance of the engineering standards that are
provided by the Australian government. In accordance with the law special care would be taken to ensure that the safety and security
as well as the strength of the building are effectively maintained. The building once build would be effective in providing a safe
dwelling place to the residents. It is important here to note that all the aspects that are required to be considered for the development of
the building are to be considered much importantly. Firstly, the standards of measurements would be important to improve the
environmental positioning of the building. Hence, separate spaces are to be kept for parking and for environmental purposes.
Secondly, the standards of the materials that would be used would be kept high in order to provide safety and stability to the building.
The house is to be a dwelling space; hence, it becomes much important that the safety standards are effectively considered. Thirdly,
the constructions of the dwelling rooms are to be made in ways that conform to the set standards of safety and security. Additional
importance is to be given towards maintenance of stability even in times of significant climatic or environmental disorders. Reinforced
concrete would be utilized for providing essential strength and stability to the structure.
The construction specification are to be made clear henceforward. There would be 22 columns in the building. There would be
2 long beams, 4 cross beams, 4 other beams and 2 special other beams. The cement requirements will be different for different

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construction areas. The columns would require 160 kgs of concrete. The roof beams would require 120 kgs of concrete in total. The
roof slab would require 90 kgs of concrete. These would be the specifications for the first floor. The specifications for the second
floor would be 2 long beams, 4 cross walls, 4 other walls. The requirement for concrete would be 130 Kgs in total for the second floor
columns. 120 Kgs for the second floor roof beams. 90 Kgs for the roof slab. The construction of the second floor would commence
after the completion of the first floor. This way the floors can be completed systematically.
Timeline and budget (attached)
Part 4. Definition of project boundaries and objectives:
The project boundaries would consider the risks which construction of building projects may face during and after the project.
The objectives of the project are as follows:
1. Recognition of risks.
2. Reporting to senior management.
3. Taking appropriate risk mitigation strategies and execution of strategies.
4. Monitoring of the risk management plan or RMP.

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Part 5. Appropriate risk management context, including stakeholders, rules, roles and responsibilities, likelihood and
consequence criteria, etc.
The risk management context would involve identifying the risks which the construction companies involved in construction
of buildings are likely to face during and after the completion of the projects. This context would take into consideration the
macroeconomic factors like political factors, socio-economic factors and technological factors.
The risk management rule should consist of the following steps:
1. The stakeholders like lower level employees upon locating sources of potential risks should communicate the same to the middle
level managers.
2. The middle level managers should communicate the same to the senior management.
3. The senior management would analyse the risks and point out mitigation policies.
4. The managers should lead their reporting subordinates towards execution of strategies pointed out by the management.
5. The managers of the company should maintain continuous communication with external stakeholders to gain information on risks.
6. Following of steps 1 to 4.
7. Continuous monitoring and reporting.

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The stakeholders involved in the project along their respective roles and responsibilities are shown below:
Stakeholders Roles Responsibilities
Management Making of risks management
strategies.
Ensure proper execution
Employees Execution of risk
management strategies
formed by the apex
management
Reporting of new risks
The likelihood and consequences have been shown the attached excel sheet called ‘Risks’.
Part 6. Identification of risk events with potential major negative impact on selected objectives:
Construction of building attracts a variety of risks which would potential negative influences on the achievement of the
objectives. The main risks which the construction works of buildings would face are the outcomes of changes in the external business
environment. The following are the main risks events which construction works may encounter:

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Part 6.1. Political and legal risks:
Construction of building works face political risks due to several factors, all of which have serious negative impacts on the
business outcomes of company(s) involved in the construction works. Talesh (2015) mentions that the first risk which construction
projects would face is change of laws which would require them to change their methods of operations. Compliance with laws would
result in increase in the expenditures of the company involved. The delay in government sanctions may also lead to extension of the
projects, thus increasing the costs.
The second political event which would have strong effect on the construction companies is weakening of the international
relationships. Zheng,et al. (2016) mention that international relationships between countries have direct impact on engineering and
construction companies. This is because the modern plants and technology used to manage large construction projects have to be
imported. This means that construction companies have to acquire these plants and technology from overseas firms. This means that it
is vital for construction companies have to have access to foreign construction supply chain markets which is not possible without
bilateral relationships between nations. Hellsmark et al (2016) mentions that weakening international relationships have negative
impacts on the construction companies. This is because with weakening bilateral relationships companies lose access to cross border
construction supply chain which negatively impacts their advancements and innovation, thus slowly leading to stagnation. This results
in erosion of revenue in the construction companies and ultimately of the construction industry as a whole. Thus, it is evident that
political factors are sources of risks to the construction companies.

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Part 6.2. Socio-economic risks:
The construction companies face two main economic risks which have devastating impacts on their revenue generation. The
first risk which construction companies face is weakening of their currencies of their respective home countries against foreign
currencies. De Soyres et al.(2018) point out that weakening of home currencies against foreign currencies is a huge risks. Hellsmark et
al (2016) can be reiterated that construction companies are dependent on foreign supply chains to provide them with advanced
machinery. Thus, in this case it can be pointed out that weakening of the home currency would push the costs of procuring plants and
technology form foreign markets up. This would lead to high project execution costs. Ashworth and Perera (2018) in this respect point
out that companies before taking up engineering construction projects enter into contracts with the principle or the client. The contract
usually mentions that revenue which the construction company would get on successful execution of the project. Thus, in this respect
it can be pointed out that increasing expenses of importing superior quality raw materials from the foreign market actually erodes the
revenue amount, already mentioned in the contract. This means that the construction companies face revenue risks. Kobayashi (2016)
strengthens the argument of the previous author by mentioning that weakening of economic conditions symptomized by lowering
GDP pose the second economic risks before the engineering construction companies. This is because high GDP means high business
productivity and employment in a country. Strong market conditions means that the companies are able to earn higher profits. The
banks as a result sanction loans more liberally which encourage customers to borrow housing loan to have houses constructed. Thus, it
can be pointed out that on the other hand weakening economic conditions compel banks to suppress loan sanctions. This means that
customers borrow less housing loan which results in lowering demand for houses. This results in lowering of business generation

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among the construction companies, thus eroding their revenue. This means that weakening economic conditions create revenue risks
for the construction companies.
Part 6.3. Technological risks:
The two technological risks which have strong negative influences on the construction companies fast changing engineering
and construction technology and data theft. Guo, Yu and Skitmore (2017) point out that advanced technology render the existing
technology redundant. Moreover, in order to ensure management of big projects, the construction companies have to acquire new
machinery. This means that dynamic technology requires the construction companies continuously invest in technological
advancement which erodes the revenue of the company. The second threat which technological factors usher is the threat of cyber
theft. This is because construction companies share a large amount of strategic data pertaining to the construction projects with clients
and other stakeholders on the digital space. This data also include financial information. Moreover, the construction companies usually
use the digital platform to make and receive payments (Ezeokoli et al. 2016). Thus, it can be pointed out cyber thefts results in theft of
significant data. Thus, it can be pointed out that technological factors present severe risks for the construction companies.
Part 7. Assessment of inherent and contingent risks using FMCEA and proposing of applicable risk treatment options:
The construction companies prior to undertaking projects like construction of two storied buildings should take into account
the failure mode, effects and critical analysis or FMCEA. The companies should analyse the probability of failure in the different

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activities of the project and take strategies to mitigate them using applicable risk treatment methods. The same has been attached on
the excel sheet reading ‘Risk’ (Attached)
Part 8. Clearly statement of risk tolerability criteria employed:
The management of the engineering and construction companies should ensure the risk tolerability based on certain criteria
employed. The first criterion would be type of industry. For example, in construction industry temporary machine breakdown is
acceptable risks but natural calamities are beyond the accepted limits. Similarly, the management should use the amount of financial
losses suffered due to risks to consider the second criterion for tolerability.
Part 9. Value added discussion:
It can be pointed out that construction companies should take into account the environmental aspects of their operations.
Gartiser et al.(2017) point out that construction works have detrimental impacts on the environment. For example, explosions caused
during construction work commencements lead to air pollution. Further, the wastes, especially the liquid wastes pollute the soil and
water. This high rate of environmental pollution harms the health of the people. Thus, it can be pointed out that construction
companies should take steps to reduce the environmental damage which construction works cause. They should try to recycle raw
materials to the extent possible to reduce environmental pollution.

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Part 10. Conclusion:
It can be concluded that construction of buildings are open to several risks. These risk pertain to different factors like political
and economic, which are beyond the control of the construction companies. However, it can be pointed out that the risks which
construction companies face owing to changes in legislative changes have strong negative impacts of the companies. This clearly
means that the management of the companies should take steps to reduce and mitigate the risks.

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Part 11. References:
Ashworth, A. and Perera, S., 2018. Contractual procedures in the construction industry. Routledge.
De Soyres, F., Frohm, E., Gunnella, V. and Pavlova, E., 2018. Bought, Sold, and Bought Again: The Impact of Complex Value
Chains on Export Elasticities. The World Bank.
Ezeokoli, F.O., Ugochukwu, S.C. and Okolie, K.C., 2016. Actualization of a cashless construction industry in Nigeria: Perceptions of
stakeholders in Anambra State. International Journal of Multidisciplinary Research and Development, 3(1), pp.246-253.
Ezeokoli, F.O., Ugochukwu, S.C., Agu, N.N. and Akabogu, S.C., 2016. An assessment of the use, benefits and challenges of the
‘Cash–Lite’policy, for construction projects in Anambra State, Nigeria. European Scientific Journal, ESJ, 12(16), p.313.
Gartiser, S., Heisterkamp, I., Schoknecht, U., Bandow, N., Burkhardt, N.M., Ratte, M. and Ilvonen, O., 2017. Recommendation for a
test battery for the ecotoxicological evaluation of the environmental safety of construction products. Chemosphere, 171, pp.580-587.
Guo, H., Yu, Y. and Skitmore, M., 2017. Visualization technology-based construction safety management: A review. Automation in
Construction, 73, pp.135-144.
Hellsmark, H., Mossberg, J., Söderholm, P. and Frishammar, J., 2016. Innovation system strengths and weaknesses in progressing
sustainable technology: the case of Swedish biorefinery development. Journal of Cleaner Production, 131, pp.702-715.

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Kobayashi, M., 2016. The housing market and housing policies in Japan.
Talesh, S., 2015. Legal intermediaries: how insurance companies construct the meaning of compliance with antidiscrimination
laws. Law & Policy, 37(3), pp.209-239.
Zheng, N., Wei, Y., Zhang, Y. and Yang, J., 2016. In search of strategic assets through cross-border merger and acquisitions:
Evidence from Chinese multinational enterprises in developed economies. International Business Review, 25(1), pp.177-186.

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Part 12. Appendix:
Ri
sk
N
o
Risk
Category
Risk
Incident
Risk
Descript
ion
Current
Controls
Compliance
Controls/A
wareness
Likeli
hood
Conseq
uence
Rati
ng
Accept/
Reject
If
Reje
ct -
furth
er
cont
rols
Likeli
hood
Conseq
uence
Rati
ng
Owner(stak
eholder
concerned)
1 Political
Changes
in
governm
ent
legislatio
ns
Govern
ment
policies
require
the
Constru
ction
compan
eis to
change
its
modes
of
operatio
ns. The
compan
y even
suffers
losses
failing
to
comply
with the
new
policies.
The
compan
y cannot
take any
action to
prevent
changes
in the
laws.
The
apex
manage
ment of
the
compan
y have
to
incorpor
ate the
new
laws in
its mode
of
operatio
ns.
A 4 E Accept NA C 4 E CEO/
Owners
2 Political
Weakeni
ng
internati
onal
Cancella
tion of
contract
s to
The
compan
y cannot
take any
D 4 H Accept NA C 4 E CEO/
Owners

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relations
hips of
the
hoem
coumtry
invest in
the
mortgag
e
schemes
by rich
foreign
clients
action to
prevent
changes
in the
laws.
The
apex
manage
ment of
the
compan
y have
to
incorpor
ate the
new
laws in
its mode
of
operatio
ns.
3 Economic
Weekeni
ng of
USD in
the
internati
onal
currency
market
Constru
ction
compan
eis
generate
s lower
ROI on
its
foreign
investm
ents
Efficient
fund
manager
s
A 5 E Accept NA B 3 H Managers
4 Economic Economi
c
weakeni
ng of the
home
and host
markets
Constru
ction
compan
eis
generate
s lower
reveneu
due to
Efficient
fund
manager
s
c 4 E Accept NA C 3 H CEO/
Owners

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lack of
investor
s
5 Social
Falling
per
capita
income
in the
US
Constru
ction
compan
eis
generate
s lower
business
, thus
sufferin
g
revenue
risks
Efficient
fund
manager
s
N/A c 4 E Accept NA C 3 H Managers
6 Social
Shifting
of
investme
nt
pattern
of
investors
The
investor
s may
shift to
more
secured
mode of
investm
ents like
bonds
and
saving
account
Efficient
fund
manager
s
B 3 H Accept NA C 3 H Managers
7 Technologic
al
Advance
d
technolo
gy
renders
current
technolo
gy
redunda
nt
The
capital
which
Constru
ction
compan
eis
invests
in
technolg
y goes
to waste
Efficient
fund
manager
s
A 4 E Accept NA C 3 H Managers

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8 Technologic
al
Data
thefts
Loss of
sensetiv
e data
pertainin
g to
investor
s
includin
g
financial
data
Technol
ogical
departm
ent
A 5 E Accept NA A 5 E Managers
9 Environmen
tal
Rising
natural
calamitie
s
Loss of
property
and
manpow
er
All the
departm
ent
A 5 E Accept NA C 5 E CEO/
Owners
10 Environmen
tal
Rising
envrion
mental
pollution
Installati
on of
technolo
gy using
less
electricit
y
All the
departm
ent
B 3 H Accept NA C 2 M CEO/
Owners
11 Legal Changes
in laws
Change
of
organisa
tional
policies
All the
departm
ent
B 3 H Accept NA C 4 E CEO/
Owners
12 Legal Crime legal
charges
All the
departm
ent
C 3 H Accept NA C 4 E CEO/
Owners
13 Operational
Higher
turnover
of
employe
es
Disrupti
on of
producti
vity
All the
departm
ent
C 3 H Accept NA C 4 E CEO/
Owners
14 Operational
Resistan
ce to
changes
Disrupti
on of
producti
vity
All the
departm
ent
C 4 E Accept NA C 4 E CEO/
Owners

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15
Threat of
new
entering
company
Investor
poachin
g and
falling
revenue
Reducti
on of
revenue
All the
departm
ent
C 4 E Accept NA C 5 E CEO/
Owners
16
Risk of
employee
theft(Operati
onal)
Loss of
assets
includin
g
informat
ion
Reducti
on of
revenue
All the
departm
ent
C E Accept NA C 6 E CEO/
Owners
17 Fire(Operati
onal)
Loss of
assets
includin
g
informat
ion
Massive
loss of
revenue
and
business
data
All the
departm
ent
C E Accept NA C 7 E CEO/
Owners
18
WHS
risks(Operat
ional)
Loss of
producti
vity due
to
injuries/
death of
employe
es
Legal
actions
from
governm
ents
All the
departm
ent
C E Accept NA C 8 E CEO/
Owners
19
Risk due to
political
corruption(P
olitical)
Loss of
resource
s and
revenue,
inhibitio
n in
getting
approval
s and
sabction
s from
the
governm
ent
Business
opportu
nity loss
All the
departm
ent
C E Accept NA C 9 E CEO/
Owners

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20
Risk due to
IPR
infringment(
legal risks)
Loss of
resource
s and
revenue,
inhibitio
n in
getting
approval
s and
sabction
s from
the
governm
ent
Business
opportu
nity loss
All the
departm
ent
C E Accept NA C 10 E CEO/
Owners