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An Issue in Engineering Project Managements- Managing Risks in Projects

Risk is inherent in the construction industry. The industry has maintained a poor reputation in dealing with the unfavourable impacts of risk for years. (Smith, et al., 2006) Webster's dictionary defines risk as "the possibility of loss, injury, disadvantages, or destruction".  In the context of construction industry, it is possible that events, their consequences and dynamic interactions may occur or turn out differently than anticipated, which may be detrimental to the successful completion of a project. According to Glenn Shafer CII (1989), risk is the probability of an unfavourable event occurring. Hertz and Thomas (1983) defined it as uncertainty and the outcome of uncertainty.

Construction industry is one of the most risky and challenging businesses in the world. Risk, major or minor, is associated with each construction activity. Accumulatively, it results in the overall risk for the project (Al-Sobiei, et al., 2005). The uncertainties in construction are caused by the uniqueness of the project as well as the diversity of resources and activities, along with the impact of external factors (CII, 1989). These risks manifest themselves in terms of cost overruns, failure to meet deadlines and compromise on quality specifications. In the worst case scenario, these overruns are so high that they nullify the economic worth of the project (Smith, et al., 2006).  The traditional way of dealing with risks in the construction industry has been either to ignore it or merely add a ten percent contingency amount to the estimated cost. Often, this attitude results in costly delays, litigation and maybe even bankruptcy (Hayes, 1986). Also, as these are based on intuition, they often result in the contractor either losing its competitive edge or the profits at the conclusion of the project (Mills, 2001).

Management of risk, in addition to project completion with budget and on time, enables more systematic and less subjective decision making. The robustness of the project can be compared to specific uncertainties and relative significant of each and every risk can become obvious. In terms of risk identification and consideration of various risk response options, a better, more comprehensive understanding of the project can be established (Mills, 2001). Risk Management aims at engendering pragmatic expectations and increases the control of the project. It catalyses the process of innovative thinking which otherwise would remain dormant.

Construction industry can never be free from risk owing to the uniqueness of its project, scarcity of resources, human input, external environment, etc. However, the presence of risk does not imply that it has to suffer on account of it. It is true that with increasing technology, changing economic conditions, introduction of new techniques and processes, the risks are increasing in the industry. Nevertheless, with a proper, aggressive and effective risk management process, not only can construction project minimise the harmful events but at times can also take advantage of it. 

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