Ecm 756 Risk Management For Construction Project: Akleh Phase 2

ECM 756 RISK MANAGEMENT FOR CONSTRUCTION PROJECT
CHAPTER 1
1.1 Introduction
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 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.
1.1.1 Project Description

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.
Total project costs are RM 98,891,792.70 which is up to 100 million is entirely borne by the
concessionaire, Projek Lintasan Kota Sdn Bhd. The construction is completed within 24 months
(2 years) and completed 7 months ahead of the original plan. The new route also has the
capacity to accommodate a wide area in peak traffic conditions.
Akleh Phase 2
Concessionaire
Project Developer
Lead Consultant
Road Safety Audit
Environmental Management Plan
Program Management Solution
Contractor
:Projek Lintasan Kota Sdn Bhd

:Turnpike Synergy Sdn Bhd
:Ranhill Consulting Sdn Bhd
: Endeavour Consult Sdn Bhd
: Jalinan Timur Sdn Bhd
:Enterprise Business Solution(EBS) Sdn Bhd
: Cantilever Bumi Sdn Bhd
PICTURE 1.0 AKLEH PHASE 2 Overall Layout Plan Image
PICTURE 2.0 Layout Plan of Interchange
1.2 Aim and Objective

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 1
2.1 RISK MANAGEMENT PLAN

AKLEH Phase 2 construction project exposed to the various types of risk throughout the project
life cycle since it is a complex, expensive and new venture transportation infrastructure. The
concept of risk explained by Can (2002) if uncertain event occur, it will result in a way of positive
as an opportunities or negatively as threats to the project objective. Risk defined by Al-Bahar &
Crandall (1991) as the exposure to the chances of event occurrence which affecting the project
objectives as a consequence of uncertainty with potential either loss or gain. Batson (2009)
described the project risk is the probability of the failure to comply the project specification in
term of quality, quantity, time or cost and associated with the consequences of such failure.
In conjunction to ensure the project objective can be achieved, it is required by the contractor to
adopt appropriate risk management system from the early stage of project intention until the
project completion. Generally, risk management is an essential tool for eliminating and
mitigating the consequences of construction projects risks (Veerasak & Photios G, 2012). and
Al-Bahar & Crandall (1991) explained the risk management as a formal systematic orderly
process of identifying, analyzing and responding the risk element by developing alternatives and
mitigation measure in order to obtain the acceptable degree of risk elimination and control.
2.1.1
Risk 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.
2.1.2Comparison of Risk Management Standard

DESCRIPTION
MALAYSIAN
STANDARD,MSIEC/ISO
31010:2011
Background
Provides guidance on
selection and
application of
systematic techniques
for risk assessment.
Standard concerning
risk management
codified by The
International
Organization for
Standardization and
The International
Electrotechnical
Commission (IEC).
Can be used by any
public, private or
community enterprise,
association, group or
individual.
provides guidance on
selection and
application of
systematic techniques
for risk assessment
Risk assessment
Risk Management
AUSTRALIAN/
NEWZEALAND
STANDARD, AS/NZS
4360:2004
Sets out a generic
process for risk
management which is
independent of any
specific industry or
economic sector.
Recognises upside and
downside of risk,
referring to potential
gains and potential
losses and to positive
and negative
outcomes. Addresses
both, in parts of the
standard eg Risk
Treatment.
Sets out process and
brief content for each
step.
The process is very
similar to that in the
AIRMIC Standard
ENTERPRISE RISK
MANAGEMENT
INTERGRATED
FRAMEWORK COSO 2004
Sets out a generic risk
management process
with more emphasis on
business risk , value
creation and internal
control.
Recognises upside and
downside of risk,
expressing this more in
terms of uncertainty and
the associated risks and
opportunities.
Sets out components of
risk management, ie the
risk management process.
Presents a three
dimensional matrix to
relate the organisations
objectives to the risk
management components
and to the business unit
structure of the
organisation.
RISK MANAGEMENT
STANDARD
AIRMIC/ALARM/IRM 2002
The context includes the
COSO does not have an
Standard describes
Sets out a generic

process for risk
management, applicable
to a wide range of
organisations / activities
Recognises there is an
upside to risk as well as
a downside , but
addresses mainly the
downside .
Sets out steps in the risk
management process
with very brief guidance
on each.
Context
carried out in
accordance with this
standard contributes to
other risk management
activities.
Supporting standard for
ISO 31000
organisations internal
and external environment
and the interface
between the two.
Risk Management is
so important that it merits
every organization to set
up its own Enterprise Risk
Management which
integrates with its
corporate governance
process, operational,
strategic and corporate
planning process,
budgeting, internal and
external threats, and
internal controls
Goals and objectives are

addressed as part of
establishing the risk
management context.
Business Objective
and Objective
Setting
exactly comparable
section but discusses in a
number of places: The link to business
objectives
The organisation s
internal environment
Four categories of
objectives strategic,
operations, reporting
and compliance
Risk management
philosophy and
risk appetite.
Emphasises strategic
objectives as supporting
the the organisations
vision and
mission.
external and internal

drivers 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.
Stress the importance of

relating risk
management and risk
assessment to strategic
objectives.
At a high level, all four 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 organisations and activities recognises that management

of risk is part of good management practice, should be continuous and is best
embedded into existing practices / business processes.
recognises that there can be positive outcomes as well as negative outcomes
sets out steps in the risk management process with brief guidance on each.
defines the terminology used
Therefore, our group has decided to choose the MALAYSIAN STANDARD,MSIEC/ISO

31010:2011 as our risk management standard because the standard will provide uniformed and
guided techniques for risk management practitioner to embark on the risk assessment process
as defined in MS ISO 31000.
2.2 RISK MANAGEMENT PROCEDURE
2.2.1 Process
Many approach and procedure were modeled by researchers can be adopted in the process of
project risk management system. The early framework established by Al-Bahar & Crandall
(1991) is called CRMS (Construction Risk Management System) Model which consists of four
processes of risk identification, risk analysis and evaluation, response management and system
administration.
For AKLEH Phase 2 project, we are come out with the framework where the risk management
cycle consists of four major steps compromises of risk identification, risk analysis, risk response
analysis and risk monitoring, controlling and reporting (Refer to Error: Reference source not
found).
Can (2002) structured the process of risk management into four process phase which
comprises initiation phase, balancing phase, maintenance phase and learning phase which
each phase breakdown into several stages. Initiation phase are the establishment of the
requirement, project, process and team for the risk management system. The second phase
starts with risk identification followed by modeling, estimating, evaluation and balancing every
risk factor in the project. Third stage is the maintenance of the risk environment and closed by
lesson learned from the present project experience as the final phase.
The process that will be carried out is illustrate in the Figure 2-1 which consist of process of risk
identification, risk analysis, risk response analysis and finalized by risk monitoring, controlling
and reporting.
Figure 2-1 Proposed Risk Management Process for AKLEH Phase 2 project
2.2.2 Risk Identification

Risk identification is the first stage in the risk management process. Risk identification is the
process of systematically identifying all possible risk events 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
10
as systematic and continuous process of identifying, categorizing, and assessing the initial
significance of risks associated with a construction project (Refer Figure 2-3).
The risk identification activity was the most difficult stage especially on large-scale defense and
space projects (Batson, 2009). According to Batson (2009), risk identification should be carried
out as early since during construction planning and from lesson learned from previous similar
projects.
The starting point for identifying risk is come out with the checklist. All related risk that affects
productivity, performance, quality and economic of the construction project will be listed since
the all those element is included in the project objective. (Batson, 2009) suggested risk
identification made during the early stage of project development to reduce the variability, in the
transition from design to construction and during actual construction phase. Failure to identify
the potential risk may result in disaster include economic gain/loss, personal injury, physical
damage, time and cost savings/overrun or refrain an opportunity to perform appropriate
corrective action (Al-Bahar & Crandall, 1991). .
Mojtahedi, Mousavi, & Makui (2010) classified the identified risks according to the likelihood
occurrence of the risks. Zou et al., (2007) suggested two approaches of classifying risk; by risk
owner or project stakeholder (clients, designers, contractors, subcontractors/suppliers,
government and external parties) or by element of project objective (cost related risks, time
related risks, quality related risks, environment related risks and safety related risks
There are many options can be used to categorized the identified risk. The risk classification
method used by Pinthong (2003), which classified those risk according to the external and
internal risk factor with sub-elements were adopted.
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 listed.
All identified risks during the AKLEH Phase 2 construction project were listed in the following
table 2-1, Table 2-2 and Table 2-3
Table 2-1: Risk Identification

ID
Type of risk
1. Construction Risk
1
Shortage of equipment
Shortage of material
Late deliveries of material
Poor quality of workmanship
Lower work quality in presence of time constrain
Lack of site safety inspection and poor supervision
Accidents (such as collision, fire and so on)
Damage to persons or property
Changes in the work
10
Inadequate planning
11
Insolvency of suppliers
12
Insolvency of subcontractors
13
Bad Weather
2. Legal Risk
14
Change in law and regulation
15
Inconsistencies in government policies
3. Politics and Contracts Provision Risk

16
Excessive contract variation
17
18
19
Poor supervision
20
Bureaucratic system and long procedure for approval
21
Compliance with Government
Table 2-2: Risk Identification (Cont)
11
ID
Type of risk
4. Finance Risk
Delay in payment for claim
22
23
Cash flow difficulties
24
Price inflation of construction materials
25
Financial failure of 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
5. Design risk
Method of construction defined in drawing and specification is
30
inappropriate and inapplicable to construct
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

specification
36
Rush design
37
awarding the design to unqualified design
38
Change of scope
6. Environmental Risk
39
Pollution
40
Ecological damage
41
Adverse weather conditions
42
Difficulty to access the site (very far)
43
Environmental factors (floods, droughts)
44
Compliance with law and regulation
12
13
Table 2-3: Risk Identification (Cont)

ID
Type of risk
7. Logistic Risk
45
Inaccurate project program
46
Poor communications between the home and field offices

(contractor side)
47
Lack of manpower on site
48
49
Undefined scope of working
50
Lack of skilled workers
8. Organizational Risk
51
Inexperienced staf assigned
52
Losing critical staf at crucial point of the project
53
Insufficient time to plan
54
Unanticipated project manager workload
55
Not enough time to plan
56
Priorities change on existing program
2.2.3 Risk Analysis

A 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
14
(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.
2.2.3.1 Risk Analysis Techniques

Commonly, there are two general techniques used in risk analysis stages. First is a qualitative
analysis that focuses on identification and subjective assessment of risks and the second one is
a quantitative analysis that focuses on an objective assessment of the risks. The qualitative
methods are most applicable when risks can be placed somewhere on a descriptive scale from
high to low level. The quantitative methods are used to determine the probability and impacts of
the risks identified and are based on numeric estimations (Winch, 2002).
In addition, there is also one approach called semi-quantitative analysis, which combines
numerical values from quantitative analysis and description of risk factors, the qualitative
method (Cooper et al. 2005). However, this approach will not be further addressed in this paper.
Can & Cruz, (2002) in their study, identified current used of qualitative risk analysis techniques
consist of;
a) Checklist
b) Assumption analysis
c) Data precision ranking
d) Probability and impact description
e) Probability-impact risk rating table
f)
Cause and effect diagrams
g) Flowcharts and influence diagrams

h) Event and fault trees
In certain cases of huge and complicated projects, the quantitative risk models will be
established and performed by organizations with an acceptable point of responsibility. It must
comprise together risks and responses. As it is compulsory to relate the several alternative
15
responses to a risk, responses have to be embraced in a model. Useful information for choosing
among the alternatives will be provided by quantifying the results using dissimilar responses.
Can & Cruz, (2002) was listed out the type of quantitative risk analysis techniques which consist
of;
a) Sensitivity analysis to determine the criticality of several project limitations.
b) Expected value tables to relate expected value for dissimilar risk responses.
c) Triple estimates and probabilistic sums applied to cost estimating.
d) Monte Carlo, Latin hypercube simulation to achieve the cumulative likelihood
distributions of the projects objectives
e) Decision trees to support decision making when there are choices with uncertain
outcomes.
f) Probabilistic influence diagrams combining influence diagrams with probability and
Monte Carlo theory.
g) Process simulation, using a variety of techniques to simulate specific project processes.
2.2.3.2 Data Analysis Method

For this project, qualitative analysis was used to assess all identified risk. There are fifty-nine
(56) different risk factors were categorized into nine (9) 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 Risk Matrix Method. The analysis included ranking
the different causes according to the relative importance indices. The analysis revealed the
most contributing factors and categories causing risks. Likelihood is derived from uncertainty of
risk occurrence. The impact is the effect of the contingency.
Risk = Likelihood x Impact
16
Questionnaires were developed into three (3) major sections (A, B and C).
Section (A&B): 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 (C): 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 PROLINTAS 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.
2.2.3.3 Questionnaire survey

2.2.3.3.1 Questionnaire design
The 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. Meetings with groups members from the different background and experience
were conducted to identify the right questions required and to present them in a clear and an
unambiguous format. Special care also was done for phrasing the questions that is easily
understood by respondents.
2.2.3.3.2 Contents of the questionnaire

The questionnaire was divided into three major sections. The first section contains the
17
probability of the causes leading to risk and the respondent is asked to state the probability of
occurrence of these causes 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 Probability 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 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.
Factors causing risk in construction projects in AKLEH Phase 2 project were identified through
the literature based on previous researches, journal together with input, revision by groups
members where a total of ninety-nine (56) factors at nine (9) major categories were identified.
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.
2.2.3.3.3 Data gathering
Questionnaires were mailed to respondents (Project Managers, Site Managers, Assistant
Managers, Project Engineers, Finance Managers, HSE Officer, Site Engineer, Project Engineer
and Sr. Exc. Project Development) 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
PROLINTAS SDN BHD; this means the rate of response was 60%. The details of respond from
respondents with their classifications were mentioned in Table 2-4 for clarifications.
18
Table 2-4: Profession of Respondent

Professional cadre of
NO
1
2
3
4
5
6
7
8
9
respondents
Project Managers,
Percentage,
No of respondents
1
Site Managers,
Assistant Managers
Project Engineers,
Finance Managers,
HSE Officer,
Site Engineer,
Project Engineer
Sr. Exc. Project
Development
Total
1
1
1
1
1
1
%
11.11
11.11
11.11
11.11
11.11
11.11
11.11
11.11
1
9
11.11
100 %
In both surveys, the baseline characteristics of the respondents were relatively similar. Of the 9
respondents in the survey,
a)
b)
c)
d)
e)
f)
g)
h)
i)
Project Managers,11.11%,
Site Managers 11.11%,
Assistant Managers 11.11%,
Project Engineers 11.11%,
Finance Managers 11.11%,,
HSE Officer 11.11%,
Site Engineer 11.11%,
Project Engineer 11.11% and
Sr. Exc. Project Development 11.11%
This research is based on a survey designed to gather all necessary information in an effective
way. The survey presents fifty-Six (56) factors generated on the basis of related research works
19
on risk factor in construction projects. These factors were classified into nine (9) major
categories based on previous section and as advised by researcher (see Table 2-5):
1)
2)
3)
4)
5)
6)
7)
8)
9)
Construction Factors Category,

Legal Factors Category,
Politics and Contracts Provision Factors Category,
Finance Factors Category,
Design Factors Category,
Design Risk Factors Category
Environmental Factors Category
Logistic Factors Category,
Organizational Factors Category
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 2-6
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 2-5: Categorized factors that cause risk in construction projects.

Related factor
Total number of
Category item
ID
category factors
Construction Factors Category

Legal Factors Category
Politics and Contracts Provision Factors
01: 08
09:13
13
02
Category
Finance Factors Category
Design Factors Category
Design Risk Factors Category
Environmental Factors Category
Logistic Factors Category
Organizational Factors Category
14: 15
16: 21
22: 29
30: 31
32: 38
39: 44
45: 50
06
08
02
07
06
06
06
Total
51: 56
Table 2-6 : Respondents years of experience

Years of experience
16- above Years
11-15 Years
6-10 Years
1-5 Years
Total
No of respondents
1
4
2
2
9
Percentage%
11..11%
44.44 %
22.22 %
22.22 %
100 %
56
20
Figure 1: Sample Questionnaire
21
2.2.3.3.4 Sample determination and selection
22
Figure 2: Risk Analysis
23
24
2.2.4 Risk Response Analysis

Risk 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 according to Hillson
.The risk responses should be appropriate, affordable, actionable, achievable, assessed,
agreed and allocated (Hillson, 1999).
Table 2-6 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 construction,
Table 2-6: Basic Risk Response Strategy
Risk Avoidance
Risk Mitigation
Risk Transfer
Risk Acceptance
Eradicate the risk
Reduce the impact
Contractually transfer
Retained the risk and
altogether by
and probability of the
the risk and loss
develop plans to cover
eliminating the cause
risk event to an
exposure to a third
the financial
of the risk event
acceptance level
party
consequences
2.2.4.1 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
25
project will be able to eliminate the monitoring and control of the risk management process need
to be conducted if there were risks.
2.2.4.2 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.
2.2.4.3 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
b.
contractors.
Contractor All Risks or CAR insurance is one of the methods of transferring the risk of
construction accident to insurance company.
2.2.4.4 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
26
adapting to every each of risk category. The mitigation measures for major risks in the AKLEH
Highway Phase 2 project were shown in table 2-7 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 2-7: Risk Response for each Risk Category
Catego
ry ID
Risk
Category
Ris
k
ID
Risk Factor
Shortage of equipment
Shortage of material
Late deliveries of material
Poor quality of workmanship
Lower work quality in presence of time

constrain
Lack of site safety inspection and poor
supervision
Accidents (such as collision, fire and so on)
8
9
10
Damage to persons or property

Changes in the work
Inadequate planning
11
Insolvency of suppliers
12
Insolvency of subcontractors
13
Bad Weather
14
15
16
17
18
19
Excessive contract variation

Poor supervision
Bureaucratic system and long procedure for
approval
Compliance with Government
5
1
Constructio
n
Legal
Politics and
Contracts
Provision
20
21
Risk
Respons
e
Mitigation
Acceptanc
e
Mitigation
Finance
22
23
24
25
26
27
28
29
Design
Design Risk
Environmen
tal
Logistics
Organizatio
nal
Delay in payment for claim

Cash flow difficulties
Price inflation of construction materials
Financial failure of the contractor
Exchange rate fluctuation
Monopolizing of material due closure and
other unexpected political condition
Lack of financial resources
Change in taxation/new tax rates
30
Method of construction defined in drawing

and specification is inappropriate and
inapplicable to construct
31
32
33
34
Design and drawing change

Defective design (incorrect)
Not coordinated design
Inaccurate quantities
35
Lack of consistency between bill of

quantities, drawing and specification
36
Rush design
37
38
39
40
41
42
43
44
45
awarding the design to unqualified design

Change of scope
Pollution
Ecological damage
Adverse weather conditions
Difficulty to access the site (very far)
Environmental factors (floods, droughts)
Compliance with law and regulation
46
Poor communications between the home

and field offices (contractor side)
47
48
49
50
51
Lack of manpower on site

Undefined scope of working
Lack of skilled workers
Inexperienced staf assigned
52
Losing critical staf at crucial point of the

project
53
54
55
Insufficient time to plan

Unanticipated project manager workload
Not enough time to plan
27
Mitigation
Mitigation
Mitigation
Mitigation
Mitigation
Mitigation
56
28
Priorities change on existing program
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 single major risk. The mitigation measure for major risks in the AKLEH Phase
2 project were shown in Error: Reference source not found, Error: Reference source not found,
Error: Reference source not found, Error: Reference source not found and Error: Reference
source not found.
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 2-8: Major Risk Mitigation Measures

NO
1
Risk
Categories
Construction
Risk Factors
Mitigation Measures
Shortage of
equipment
Develop a good, clear and appropriate plan and

control on schedule
Hire the security officer to make sure about the
safety of the equipment
Conduct the frequent jobsite inspection
Establish safety equipment and material storage
system
Shortage of
material
> Material
price fluctuation
> Material
is necessarily
imported from
other country
Always have a review of construction material at

the current situation
control on schedule.
Maintain good relationship with the suppliers to
avoid any chance for the suppliers to take an
advantage of their material prices
Avoid any late order to the supplier
Have a good relation with the trusted suppliers
to avoid any chance for the suppliers to take an
advantage increase up the price of the materials
Review the background and history of each
supplier before sign any contract.
Ensure standby cash flow in advance
Lack of site
safety
inspection and
poor
supervision
29
Avoid any miscommunication with the supplier

from other country to prevent any major losses
Maintain the approval of site safety inspection
procedure and supervision
Identify/mapping of all areas
Use a checklist to ensure consistent and
comprehensive inspections.
Assign competent HSE inspectors to conduct
daily inspections based on mapping schedules
and checklist.
Ensure proper training of inspectors.
Ensure the proper documentation for each
inspection
Ensure management supervision
Ensure proper safety training for the site
engineer
Maintain a minimum number of safety officers on
site based on the number of workers
Insolvency
of subcontractor
> Inefficiency
and low
productivity of
sub-contractor
> Subcontractor lacks

of labor
> Poor
coordination
among subcontractors
Incorporating a progress-performance-payment
rule in the subcontract where possible e.g. that
stipulates a certain amount can only be
earned/paid when certain requirements have
been met a stage has been achieved in the
project
Properly directing the subcontractor to ensure
they know what is expected of them in relation
to the project
Avoiding the selection of the cheapest
subcontractor if there is doubt on performance
track record
Direct negotiation between Malaysia
government and the other country which can
provide labour supply
Establish networking with others contractor for
labour sharing
Contractors Pre-qualification: the contractors
will be pre-qualified for their experience in
similar projects, technical capabilities of their
personnel, construction equipment, financial
capabilities etc to make sure the good quality of
the contractors are selected for the project.
> Lacks
managerial
skills
Politics and
Contracts
Provision
Bureaucratic
system and
long procedure
for approval
Design
Method of
construction
defined in
drawing and
specification is
inappropriate
30
Properly directing the subcontractor to ensure

they know what is expected of them in relation
to the project
Incorporating a progress-performance-payment
rule in the subcontract where possible e.g. that
stipulates a certain amount can only be
earned/paid when certain requirements have
been met/a stage has been achieved in the
project
Clear definition of each subcontractors scope of
work
Select subcontractor which already have
experience in similar project
Involving where possible, subcontractors doing
major/critical part of the project with the internal
planning process i.e. early involvement of
relevant subcontractors e.g. at pre-tender stage
in order to advise on design before having cost
and time implications (Early engagement)
Avoiding the selection of the cheapest
subcontractor if there is doubt on performance
track record
Contractors Pre-qualification: the contractors
will be pre-qualified for their experience in
similar projects, technical capabilities of their
personnel, construction equipment, financial
capabilities etc to make sure the good quality of
the contractors are selected for the project.
Schedule training programs for them within and
outside the country to keep up the capacity
competency of them
Maintain good relationship and connection with
higher local government agencies
Study carefully the local government policy
Ensure the project is complying with local
authority procedure
Prepare and submit all the necessary
documents in a timely manner to the
government agencies
Always maintain a good reputation without any
blacklisted title.
Making sure the project is properly understood
before embarking on it
Detailed review of the information relating to the
work before embarking on it
Development a project execution plan for the
work before starting on it
and
inapplicable to
construct
Design and
drawing change
Not coordinated
design
4
Design Risk
Environmental
Lack of
consistency
between BQ,
drawing and
specification
Adverse
weather
conditions
31
Involving where possible, subcontractors doing

major/critical part of the project with the internal
planning process i.e. early involvement of
relevant subcontractors e.g. at pre-tender stage
in order to advise on design before having cost
and time implications (Early engagement)
Calling in specialists to advise and contribute to
the planning and management of complex
works/projects
Ensuring adequate coordination of design and
activities preceding and following the complex
work
Ensuring as much design as possible is done for
the complex work or project before commencing
Ensuring adequate coordination of design and
activities preceding and following the complex
work
Calling in specialists to advise and contribute to
the planning and management of complex
works/projects
Conducting workshops and brainstorming
session to generate ideas and for problems
solving before and during the complex
work/project
Ensuring the cause of a design change is
always determined
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.
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.
Preparing the construction schedule.

Schedule activities that can be impacted by rain,
such as earthworks, to occur outside of the rainy
season.
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.
Understand the expected weather conditions
and allow additional time in the schedule to
Difficulty to
access the site
(very far)
Environmental
factors (floods,
droughts, etc.)
Logistics
Inaccurate
project program
Inexperienced
staff assigned
Organizational
Losing critical
staff at crucial
point of the
project
32
compensate for delays caused by inclement

weather.
Undertake pre-project planning to ensure
existing utilities
Always aware with the condition of surrounding
area and make proper plan or schedule to check
on the satisfaction of public
Arrange and undertake comprehensive site
investigation before construction phase
Insurance carried by owner
Contractual clauses for delay and payments for
incurred damages
Undertake pre-project planning to ensure the
scope of the project
Arrange and undertake comprehensive site
investigation before construction stage
Employ local staff with multi-skill ability
control on cost
Good communication between senior and junior
engineers is the key to a safe working
environment.
Reinforcing a safe and knowledge seeking
culture within senior engineering management.
Attempt negotiation where ask them to stay on
an extra week or two to get you through this
critical period to find a replacement
Re-examine your project plan either reorganized your team or brought on someone
with the necessary business or technical skills
where you can keep and maintain the project on
schedule
Table 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.
33
2.2.5 Risk Monitoring, Controlling and Reporting

The final phase of risk management involved administration process. According to Al-Bahar &
Crandall (1991), risk management policy, reviewing and monitoring procedure has to be
established in this phase. Besides, risk monitoring and risk control has to be strategized as part
of maintenance stage in the risk management system (Can & Cruz, 2002).
2.2.5.1 Risk Management Policy

In AKLEH Phase 2 project, the contractor starting realize that the important to establish formal
risk management function in their organization by set up their own risk management team. At
first place, corporate risk management policy which comprises of a formal plan, procedure or
document which is outline the rules of the risk management operation were established.
The policy provides guidelines for consistent actions in managing risk. Al-Bahar & Crandall
(1991) said, the main advantage of the policy is that the risk manager does not have to restudy
and recurring problems before making decision once the guidelines are adopted.
2.2.5.2 Risk Monitoring and Control
Once the risk response plan were taken place, risk monitoring and risk controlling 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.
34
2.2.5.3 Evaluation of Risk Management Process and Review

Evaluation 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 (AlBahar & Crandall, 1991).
2.2.5.4 Records and Reports

Keeping appropriate records is essential for the risk management function because these
records form the basis of report (Al-Bahar & Crandall, 1991). The records include risk frequency,
risk severity and consequences and other related information. All the records from site activities
should be maintained by contractor that might be unique to the risk envisioned in the project.
35
CHAPTER 3
3.1 Result and Discussion
Based on Figure 3 below, design changes were assessed to be critical in construction

related risks. The strategy should be to reduce both the likelihood and the impact of this
risk. Likelihood can be reduced by starting the construction only after design has been fully
completed. However, whenever this is not practical it is worthwhile for the contractor to
lessen the impact associated by proposing value engineering solutions to the problems and
also discussing constructability issues with the designer before the design is finalized.
When the scope is undefined and the design changes are inevitable, the contractor should
not take the cost risks associated with it.
Rather contractor should opt for cost plus basis of contract for such kind of projects.
Labor productivity is also seen as a risk variable whose impact on the project is quite
substantial. This kind of risk associated with low labor productivity should be transferred to
the subcontractor. Risk pertaining to different site conditions should be transferred to the
owner. Similarly unrealistic schedule risk should be transferred to the third parties, owner as
well as the subcontractors. Weather delays are uncontrollable and therefore cannot be
avoided. The best strategy would be to lessen the impact due to the inclement weather. This
risk should be retained by the contractor by allocating sufficient contingency in the schedule
for such delays. Defective work is the responsibility of the contractor and should be retained
by the contractor. To bring the risk to an acceptable level, the contractor should emphasize
on its quality control and quality assurance. Equipment failure and labor dispute were
thought to be of lesser risk rating and should be retained by the contractor
Figure 3: Construction Factors Category
36
37
CHAPTER 3
3.1 RECOMMENDATION
AKLEH 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.
38
3.2 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 activities.
39
References
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, Ltd
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
Perry, J., 1986. Risk management an approach for project managers. Butterworth & Co.
Vol. 4, pp. 211-216
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.
Can, A., & Cruz, M. P. (2002). Integrated Methodology for Project Risk Management,
(December), 473485.
Pinthong, Y. (2003). Evaluation of Multi-Party Risk Factors For Mass Rapid Transit (M.R.T)
Chaloem Ratchamongkhon Line Construction Project. Kasetsart University.
Abdul-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.
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.2007.03.001
40

Ecm 756 Risk Management For Construction Project: Akleh Phase 2

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1.1.1 Project Description

:Projek Lintasan Kota Sdn Bhd