Risk management for developers in the construction industry

Student thesis: Master Thesis and HD Thesis

  • Morten Møllnitz
  • Anders Dalum Wagner Nielsen
This candidate thesis deals with risk management for developers in the construction industry. There is a recurring point in the literature read for this project, that developers in the construction industry underestimate the risks that may occur on a construction project. This underestimation has resulted in a lack of systematic management of risks, which if corrected could improve earnings by 6 % of construction total. In the project there are descriptions of the different types of businesses in the construction industry that can be identified as a developer. Risk is a broad concept, and therefore when used in this project risk should be viewed as a neutral phenomenon, that can be triggered to be either a negative or a positive. The risks that may appear on a construction project are, or can be widely different. Therefore a number of categories have been set up, in order to assess the risks in a structured manner. To explore the options for managing risks, various methods used in construction and industry have been examined and described. In regards to this it has also been examined what developers do to manage risk on construction projects. This has been done by interviewing Sjælsø, one of the major developers in the Danish construction industry, who says the way they carry out risk management is through the experience of their employees. Based on the exploratory and descriptive part of the project, it is found that the research question for the project should be "How is it possible to establish a method to compare risks with the aim to combine the parameters in a manageable way to give the developers the opportunity to respond?”. Based on the research question the project examines how methods can be established to assess risks. The project aims to develop a decision support system which can be used by developers to help foresee risks and thereby manage them correctly. Through the decision support system developers are able to identify and assess the risks which are related to individual projects. The decision support system is built on existing methods used to analyze risks. In the identification phase it has been chosen to use the method Risk Breakdown Structure to systematically examine the building project for any possible risks. Analytic Hierarchy Process method is used in the estimating phase to find the probability of different risks, as well as in the in the evaluation phase where the method is used to visualize the results obtained from the previous two phases. The decision support system is build so that developers can use the system without an understanding of the underlying analysis. The system is designed so that developers do not need IT experience and the results are visualized, so it is manageable for developers to see the results in the system and respond. The decision support system is a framework of existing analysis methods, within which the three phases: Identification, Estimation and Evaluation are tied together. This is done because the results of one analysis cannot be used to make decisions, but must be combined with other results to be useable.
Publication date2009
Number of pages113
Publishing institutionAalborg Universitet
ID: 17646042