American Journal of Civil Engineering

2013; 1(2): 64-67

Published online August 30, 2013 (http://www.sciencepublishinggroup.com/j/ajce)
doi: 10.11648/j.ajce.20130102.13

A study on risk assessment and its management in India

Kinnaresh Patel
M.E 15 Construction Engineering Management, Texas A&M University, College Station

Email address:
kinnaresh_99@yahoo.com

To cite this article:

Kinnaresh Patel. A Study on Risk Assessment and its Management in India. American Journal of Civil Engineering.
Vol. 1, No. 2, 2013, pp. 64-67. doi: 10.11648/j.ajce.20130102.13

Abstract: All of themost challenging construction projects worldwide involve a variety of complex processes working
simultaneously. Managing these processes can be quite a challenge for the management. A big part of meeting these
challenges is mitigating the RISKS involved. Risk management includes identifying risks, assessing risks either
quantitatively or qualitatively, choosing the appropriate method for handling risks, and then monitoring and documenting
risks. This study identifies the procedures for risk identification, management and its perception from the Indian
construction industry players. Time and cost management need to be fully integrated with the identification process. Time
constraints and project managers with sufficient experience are critical when identifying the level of risk for large and/or
complex projects.The aim of this study is to advocate for a method of risk mitigation which includes a well-documented
procedure which serves as a one stop-solution to all the risks that would emanate in the future.

Keywords: Risk Assessment, Risk Management, Risk Identification, Construction Projects, India

1. Introduction
Risks can be defined as an event that negatively affects
the project objectives, which are:
1) Time and Schedule
2) Cost
3) Quality of work
A risk is nothing but a situation. Risks are neglected by
construction contractors and consultants while considering
bids and tenders. Project risk management is widely
recognised as one of the most critical procedures and
capability areas in the field of project management. Risks
are critical to a project as every critical activity is
associated with a risk.
Also, the number of risks arising from a task is directly
proportional to the number of people working on it.
Mismanagement is one of the various sources of risk. Risk
mitigation depends a lot on the co-ordination of work
between different people on the project. So naturally, less
the number of people working on a project, less is the
chance of the risk taking place.
Nowadays, almost all of the big scale projects are sublet
to sub-contractors, and therefore risk assessment and
mitigation has become more and more difficult. As a
developing country, India has not focused on risk
management. This study aims to better understand the risk
identification process and other risk processes.It has

already been recognised that a clear understanding of the

risks born by each participant leads to better risk allocation.
The objective of this study is to find means of identifying
risk management and other processes that can be utilised
and to make new suggestions on the use of these risk
management methods.

2. How is Risk Assessment approached

in the Construction Industry in India
This study was performed with respect to the surveys
and observation of management techniques used in todays
construction industry in India. Every project has big
important events or milestones with respect to cost and
time which are pre-marked by the management at the start
of the project. They are tracked regularly. Project managers
use these milestones as pointers to risk mitigation. They
look out for any negative cost impact or delays in activities
of these milestones. Now in most of the cases, these
milestones are not met. The main reason for that is the
approach of the project manager towards the pertinent risks.
Their approach is of the wait and watch type. They react
only after they find themselves in a fix, as opposed to being
proactive and taking necessary steps to prevent the risk
from taking place. There is a need of a whole system to be
in place, so before any activity takes place, all possible

American Journal of Civil Engineering 2013; 1(2): 64-67

risks are identified and acted upon.

3. Risk Identification and approach to

Risk Management
Risk identification is an iterative process that involves
the project team, stakeholders and other managers affected
by or who affect the project, and finally outside individuals
who can comment on the completeness of the risk
identification based on their similar experiences.
The challenge lies in identifying beforehand all the risks
that you might face so that the project team is well
equipped and ready to mitigate it systematically. While it is
a well-known fact that risk identification is a step by step
process, i.e. new risks might appear only when the project
reaches a certain level, this is exactly where analysis of
historical data comes into play. The project team has to
collect all possible relevant data of previous projects and
take into account all the similar risks that can be linked
even remotely. This can be done with the help of industrial
checklists.
By identifying risks at an early stage of planning a
construction project or a tender and assessing their relative
importance, the project management can be adapted to
reduce the risks and allocate them to the parties best able to
control them or absorb them should they occur. Studies
should be carried out early in the life of a project, well
before decisions are made to proceed with the project.Risk
Management can be divided into two main ways: 1)
Informal approach &2) Formal approach
3.1. Informal Approach
In this approach, risks are mitigated as and when they
come. They are not predetermined.
The key aspect here is that no preparation is done on
collecting any data for risk identification.
One of the most widely used techniques in the informal
approach to risk management is the provision of
contingency funds. There are two main types of
contingency funds: lump sum contingencies and percentage
contingencies.
Here, the project depends a lot on the on-site and the
sub-contractor teams. Another disadvantage is that
discussions and brainstorming at all stages becomes a
necessity.
Table 1.Pros and Cons of the Informal approach towards risk assessment
PROS
(a)

Economical in some cases

(b)

You dont hire special

teams to collect any data or
identify risks

(C)Could be useful in a project

involvingnew or unusual risks.

CONS
(a) You need an
experienced and loyal
execution team
(b)Discussions at all stages
might be verytime consuming
(C) Correct selection of
people for brainstorming must
be done
(d)Lack of objectivity.

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3.2. Formal Approach

Here at the start of the project the project management
sits down and chalks out allthe possible risks that are most
likely to come up during the course of the project.
All the risks likely to come up in the worst case scenario
are predicted, and proper solutions are discussed regarding
that.
In this method it is viable for a company to have a set of
industrial data that has been gathered by experience over
the years in the form of checklists.
PROS

CONS

(a)

Objectivity.

(a)It may be costly.

(b)

It saves a lot of time as the

management is prepared to
mitigate the risks.

(b) It takes up a lot of

resources at the start of the
project.

(c)

Chances of failure are low.

4. Important Tools/Aspects in Risk

Identification and Assessment
4.1. Work Breakdown Structure
Before the commencement of the project all tasks are
listed, broken down into manageablesubtasks& the
schedule is prepared via MS Project or Primavera. It breaks
down activities into smaller and more specific sub-tasks
which gives an exact idea of what needs to be done and the
amount of resources to be spent on that task.It can have as
many levels as possible.A WBS with the schedule is
imperative in the risk identification particularly in an
industrial project involving structural steel.The WBS in the
schedule can be used to generate a BIM or VDC (Virtual
Design Construction)video which would give a clear idea
of the activities to be performed in a chronological order.
4.2. Product Specifications
Product Specifications is a literature given to the
contractors by the owners which gives a detailed
description on how the product is to be executed.There are
additional or new (other than the common ones) risks for
products which have particularly different specification.
4.3. Risk Matrix
A project manager with the help of a specialist should
create a matrix that lists out all those risks which may have
a considerable cost & time impact.
4.4. Resource Plan
In this paper resources refer to men, materials &
machinery. Resources arethe Achilles heel of all the
construction processes.In India there are more risks arising
out of the lack of or mismanagement of resources rather
than the activities themselves.Hence while brainstorming it

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Kinnaresh Patel: A Study on Risk Assessment and its Management in India

Table 3.Result ofthe questionnaire survey

is very important to assign the activities just the right

amount of resources required.

Risk Identification Process

Mean Rank

Rank

5. Methodology
To achieve the objectives of this research, questionnaires
were deemed to be the most effective tool for gathering
information. These questions helped identify any projects
that should definitely not be undertaken by the parties and
those which, although risky, should be examined further
after a more rigorous examination of the potential sources
of risk. This study was carried out based on a literature
review and a questionnaire survey. The data were collected
through questionnaires, which were distributed through
postal and electronic mailing to selected groups of 32
respondents (mainly people who work for construction
companies/ firms who enjoy a leading role in planning and
construction management, e.g., project managers, general
managers, civil engineers, site managers, site engineers,
supervisors) from government, construction and consulting
companies and firms in the defined area of study.

6. Analysis and Discussion

Three Non-Parametric Tests were conducted with the
help of questionnaires & their results were as follows:
6.1. The Most Preferred Method of Risk Identification by
the Indian Construction Players
Table 2.Result ofthequestionnaire survey
Methods Used For Risk
Identification

Mean

Rank

Brain-storming sessions

3.56

Analysis of historical
data for similar projects

1.09

Use of industrial checklists

1.35

The results show that brain-storming sessions were the

most significant method that contributed to identifying the
risks of a project. Brain-storming sessions and analysis of
historical data for similar projects were found to be the
most preferred methods of risk identification in the Iranian
construction industry. However, it was suggested by the
respondents that these practices led to informal risk
identification.
6.2. The Relative Importance of Risk Identification
Processes
These results are shown based on their mean value (the
average indexes).
The mean for some processes indicates that time
management and cost management have affected the
process of identifying the risk.

Is the risk identification process fully

integrated with cost management and time
management processes and the project
office?
Does documentation exist on all processes
and standards for identifying risk events?

4.3812

3.9393

Does the process include proper tools for

teams to identify risks (checklists,
automated forms, etc.)?

3.8323

Does the organization have a documented

repeatable process for identifying project
risks which is fully implemented?

2.1020

Are all processes in place, documented and

being used?

2.0353

Rating Scale: (Agreement)

1 = Strongly disagree; 2 = Disagree; 3 = Less agree; 4 =
Agree; 5 = Strongly agree
The main objective of this section is to assess the level of
knowledge and awareness, including the perception of
construction industry players, of identifying the level of
project risk in general. Questions were ranked based on the
level of importance (the average indexes) to identify the
specifications of project risk.
6.3. Maximum Types of Risks Emanating from One
Source
Table 4.Result ofthe questionnaire survey
Sources Of Risks

Mean Rank

Rank

Financial

7.56

Quality

7.01

Geographical

6.01

Environmental

5.39

Legal

4.28

Social

3.23

Rating Scale: (Agreement)

1 = Strongly disagree; 2 = Disagree; 3 = Less agree; 4 =
Agree; 5 = Strongly agree
During a construction project, risks can result from many
circumstances. Based on the data analysed earlier, a total of
six sources of risk in construction projects were compared,
as shown in table. Financial, construction and demand of
quality and product risks are the greatest risks in
construction projects. There are some sources of risk
associated with engineering projects that have been
identified. These sources of risks, the risk drivers, could be
used as a checklist. However, the key sources of project
risks are essentially the same.

American Journal of Civil Engineering 2013; 1(2): 64-67

7. Conclusion
The research results were obtained through questionnaire
surveys conducted in India. The ways to identify project
risk that have been particularised for construction projects
have been presented from diverse points of view (from
government, consultants and contractors) and construction
companies and firms that may be helping the process of
dealing with the project in the planning and construction
phases. From the results it is safe to say that majority of the
construction projects have no systematic procedures in
place to deal with the risks. Risk management is done in a
very informal manner.
The brain-storming sessions were found to be the most
preferred method of risk identification in the Indian
construction industry. The risks associated with Indian
construction projects included financial risks (project
funding problem), construction risks and demand/ product
risks. These risks commonly prevent the completion of
construction project objectives in India. In contrast with
other countries, Indian construction projects generally have
been practiced with an informal approach for risk
management. In most situations, government employees,
consultants and contractors wait until issues arise during
construction phases, and when they do the discussions are
informal and intermittent.
Hence there is a thriving need to have a welldocumented procedure which should be a one stop solution
to all the risks that are likely to be faced. It might be
difficult to get all the data, information & knowledge

67

together in order to identify the risks beforehand. But that

is where the prospect of research stands in value. There
should be a more wholesome approach towards risk
management instead of the present sporadic approach of
meeting the risks as and when they come.

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