Appraisal Of The Effectiveness Of Risk Management Tools In The Nigerian Construction Industry

Project and Seminar Material for Building Technology BT

Appraisal Of The Effectiveness Of Risk Management Tools In The Nigerian Construction Industry

Abstract

This study was carried out on an appraisal of the effectiveness of risk management tools in the Nigerian construction industry in Lagos State as a case study. The survey design was adopted and the simple random sampling techniques were employed in this study. In determining the sample size, the researcher conveniently selected 148 respondents and 141 were validated. Self-constructed and validated questionnaire was used for data collection. The collected and validated questionnaires were analyzed using frequency tables, while the hypotheses were tested using chi-square statistical tool. The result of the findings reveals that the attitude of workers/contractors towards risk management is positive. The study also revealed that the problems affecting the implementation of risk management in the construction site includes: shortage of knowledge and training, lack of supervision, biological agents, awareness about the safe implementation of assigned work, ergonomic hazards, lack of knowledge and pattern of illness, and apathy and total carelessness. Further findings showed that the strategies for promoting effective risk management in the construction industry includes: supervision, health and risk warning signs, risk management, effective communication, risk incentives, and proper equipment. Therefore, it is recommended that efforts should be intensified by contracting construction firms in devising improved strategy to determine and forestall hazard inherent in a given project before embarking on it. To mention but a few.

Table of Content

  • Title Page
  • Certification
  • Dedication
  • Acknowledgement
  • Table of Content
  • List of Tables
  • Abstract

Chapter One:

Introduction

  • 1.1 Background of the Study
  • 1.2 Statement of the Problem
  • 1.3 Objective of the Study
  • 1.4 Research Questions
  • 1.5 Research Hypothesis
  • 1.6 Significance of the Study
  • 1.7 Scope of the Study
  • 1.8 Limitation of the Study
  • 1.9 Definition of Terms
  • 1.10 Organisations of the Study

Chapter Two:

Review of Literature

  • 2.1 Conceptual Framework
  • 2.2 Theoretical Framework
  • 2.3 Empirical Review

Chapter Three:

Research Methodology

  • 3.1 Research Design
  • 3.2 Population of the Study
  • 3.3 Sample Size Determination
  • 3.4 Sample Size Selection Technique and Procedure
  • 3.5 Research Instrument and Administration
  • 3.6 Method of Data Collection
  • 3.7 Method of Data Analysis
  • 3.8 Validity of the Study
  • 3.9 Reliability of the Study
  • 3.10 Ethical Consideration

Chapter Four:

Data Presentation and Analysis

  • 4.1 Data Presentation
  • 4.2 Analysis of Data
  • 4.3 Answering Research Questions
  • 4.4 Test of Hypotheses
  • 4.5 Discussion of Findings

Chapter Five:

Summary, Conclusion and Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendation
  • References
  • APPENDIX
  • QUESTIONNAIRE

Chapter One

Introduction

1.1 Background to the Study

The Construction Industry and its clients are widely associated with a high degree of risk due to the nature of construction business activities, processes, environment and organizations (Ibironke et al, 2011). Construction projects are complex and time-consuming undertakings because e of the large number of firms and relative ease of entry (Mousa, 2005). Many projects have naturally inherent or in-built risk elements, no matter the depth of planning and the rigidity with which the contract programmes are adhered to, there will always be factors that tend to prevent the project objectives from being realized (Ibironke et al, 2011).

A risk is defined as the potential for complications and problems with respect to the completion of a project and the achievement of a project goal (Mark et al., 2004) and as an uncertain future event or condition with the occurrence rate of greater than 0% but less than 100% that has an effect on at least one project objectives of scope, schedule, cost or quality (Rezakhani, 2012). Construction projects are becoming increasingly complex and dynamic in their nature, and the introduction of new procurement methods, many organisations are having to rethink their approaches to the way in which risks are treated within their projects and companies (Tah and Carr, 1999 and Oyewobi et al, 2012). It is well accepted that risk can be effectively managed to mitigate its‟ adverse impacts on project objectives, even if it is inevitable in all project undertakings (Rezakhani, 2012).

In Nigerian Construction industry, excessive time –overruns is an existing phenomenon and a major problem in the delivery of construction projects which give rise to the time-overruns and cost-overruns experienced in completed projects executed by the Federal Ministry of Works and Housing (FMWH), the ministry responsible for the implementation of Federal Government of Nigeria (FGN) projects (Idoro and Okun, 2009). The construction industry has a growing rate of delays in project delivery (Aibinu and Jagboro, 2002). This position was supported by the works of Aniekwu and Okpala (2006), that Nigerian Construction Industry is beset with many problems, such as uncompleted projects, poor quality work and low level of productivity especially the projects handled by indigenous contractors. Dada and Jagboro (2007) posited that one of the major reasons for ineffective project delivery in the Nigerian construction industry was the improper assessment of risk factors and hence, the industry continues to suffer poor performance with many projects failing to meet time and cost targets.

In a more recent study by Ugwoeri (2012), it was discovered that Construction Industry in Nigeria is suffering from misunderstanding of risk management including risk identification, analysis and assessment. The general low usage of formal risk management techniques by Contractors globally often results into project failures, incessant claims for variations, loss of significant shareholder value and sometimes results in bankruptcy of Contractors (Allan et al, 2007). Managing risk in construction projects has been recognized as a very important process in order to achieve the project objectives of time, cost, quality, safety and environmental sustainability (Perry and Hayes, 1985).

Many projects in Nigeria are being abandoned and they required the attention of risk management to help reduce the time and cost overruns (Augustine et al., 2013). Nigerian construction industry does not use formal risk analysis and management techniques which are capable of minimizing the time and cost overruns and enhancing the profitability due to lack of knowledge (Ojo, 2010 and Augustine et al, 2013). Lack of risk management knowledge was identified as the most sever factor that militate against the practices of risk management in Nigeria (Belel and Mahmood, 2012).

Whilst some project delay risks can be reduced through various preventive actions at early stages, the delay of progress still occurs in many projects during the construction process (Hatami and Behsan, 2012). A recent industry study has indicated that over 80% of projects exceed their scheduled time even with the employment of software techniques for project development (Hatami and Behsan, 2012; and Weiler, 1994). When delay happens, either contractors and or consultants can adopt various mitigative actions to minimize the effects of the delay. Thompson (1992) concluded that risk management is most valuable at an early stage in a project (proposal stage), where there is still some flexibility available in design and planning to consider how the serious risk might be avoided.

Hence, the importance of this in-depth study, where the most significant risk factors and their assessment in the Nigeria construction Industry will be investigated in conjunction with their severity and allocation from both the contractors and the consultants‟perspective.

1.2 Statement of the Problem

A number of previous studies have examined the causes of risks among construction companies including the issue of risk management of construction projects in their local context. However, there exists no comprehensive study explaining the causes of risks among construction companies, moreover, most of the studies covering this subject matter have tended to identify the symptoms rather than causes (Enshassi and Mosa, 2008). Currently the knowledge of the construction stakeholders over risk management practices in Nigeria has not been adequately articulated in literature as identified by Belel and Mahmood (2012).

However, a similar study was conducted by Enshassi and Mosa (2008) covering the perception of the owners‟ and contractors in Gaza strip of Palestine. Hence, a proper and comprehensive study of the perceptions of the practitioners‟ risk assessment, allocations and management is crucial towards the effective delivery of the building projects in Nigeria, particularly the North Central zone of country. This study intends to build on that existing knowledge but this time investigating the perception of the contractors and consultants over the practices of risk management in Nigeria. Ammar et al (2009) supported this argument that construction risks differ from country to another where the economic, political, social and cultural conditions are different, and that Risk management is greatly influenced by the uniqueness of the construction industry in a specific country (Birrell, 1980).

1.3 Objectives of the Study

The aim of this research is the appraisal of the effectiveness of risk management tools in the Nigerian construction industry. The objectives of this study are to:

  1. Ascertain the extent at which workers/contractors comply with risk management skills in the construction industry.
  2. Determine the attitude of workers/contractors towards risk management.
  3. Identify the problems affecting the implementation of risk management in the construction industry.
  4. Identify the strategies for promoting effective risk management in the construction industry.

1.4 Research Questions

The following questions were formulated to guide the study based on the research objectives;

  1. To what extent does workers/contractors comply with risk management skills in the construction industry?
  2. What is the attitude of workers/contractors towards risk management?
  3. What are the problems affecting the implementation of risk management in the construction industry?
  4. What are the strategies for promoting effective risk management in the construction industry?

1.5 Research Hypothesis

  • H0: There is no effective risk management practices in the construction industry.
  • Ha: There is effective risk management practices in the construction industry.

1.6 Significance of the study

The concept of risk management is relatively new to Nigerian public as projects carried out in the past decades did not meet the essential criteria of risk management (Nasir et al, 2003 cited in Augustine et al, 2013). Construction Industry in Nigeria is suffering from misunderstanding of risk management including risk identification, analysis and assessment (Ugwoeri, 2012). Oyewobi et al (2012) posited that identifying risks in Nigeria are not rigorously examined and, even when they have been assessed and remedial measures agreed upon, they are not generally communicated effectively throughout the supply chain. Thus, project participants do not have a shared understanding of the risks that threaten a project and, consequently, they are unable to implement effective early warning measures and mitigating strategies to adequately deal with problems resulting from decisions that were taken elsewhere in the chain. It is clear that the success of a project is dependent on the extent to which the risks that affect it can be allocated accordingly (Oyewobi et al., 2012).

Hence the importance of this in-depth study, where the most significant risk factors in the Nigerian building projects will be identified in terms of their severity, allocation and the effective ways of assessing each of these risk factors identified in accordance with the contractors‟ and the consultants‟ views. Thus, it was hoped that this research work besides serving as a reference materials for further research work, service-providers in the Nigerian Construction Industry could be assisted in identifying the significant and critical risk factors affecting building projects and best applicable ways to assess them. It will also assist in making risk management planning to achieve the desired project delivery asides improving decision makings from the findings of this research. Belel and Mahmood (2012) had also advocated the need to have this study with similar trend to be carried out in other parts of the country to ascertain the level of knowledge of risk management of the construction workers in the Nigerian Industry.

1.7 Scope of the Study

This study covers risk management processes at the project level which involved only the design and construction stages of the building projects. It further focuses on the perception of the key stakeholders which involves the Constructing contractors and consultants providing the services to the projects on behalf of the clients. The composition of the service providers (Consultants) for this study includes the Professional Architects, Quantity Surveyors, Engineers (Builders, Structural/Civil, Mechanical and Electrical) and the Project Managers engaged in building projects obtained from the public and private organizations and agencies.

This research work was delimited with the fact that, although there is no known generic risk analysis technique that is capable of addressing all kinds of risk factors in construction projects but, a particular risk factor should have a particular risk analysis technique to address the risk issue. Thus, this research was only expected to elicit a general assessment of the significance of risk and the designed questionnaire also was to investigate contractors and consulting practitioners’ observations and judgments in determining the relative significance and assessment of the identified risk factors.

1.8 Limitations of the Study

The study intends to explore the effective use of a questionaire survey. The limitations to the study include the followings:

  1. That this research was concerned with building projects under Light Capital Projects (LCP) only and will not take into account other categories of products in the construction industry like heavy engineering construction (tunnels, bridges, dams, etc.), Industrial projects (factories and workshops), and infrastructure projects (sewage and water supply). This type of building projects, the Light Capital Projects (LCP), include simple public and privately financed buildings for residential, administration and or commercial houses, erected on small and or large plots of land (in case property developer) as described by Oforeh (2006) in his definition of light capital projects (LCP).
  2. Only contractors who are registered in the Corporate Affairs Commission of Nigeria will be addressed by the study to ensure the quality and adequacy of the research work.

1.9 Definition of Terms.

Safety:

This is a state of being safe and protected against.

Management:

It is the discipline of planning co-coordinating, organizing, controlling, leading, forecasting, securing and managing resources to being about the successful completion of specific project goals and objectives.

Construction:

According to Wikipedia’s encyclopedia construction is designed as a process of assembling of infrastructure and consist of building up of several activities into final project.

Project:

It is a temporary endeavor having a defined beginning and end which is an undertaken to meet unique goals and objectives.

Construction Management:

Management of the site structural engineer: this is a professional in the field of civil engineering who speechlessness on structural and its detailing.

Site:

This is the location or place where the building structure and all its construction takes place programme.

1.10 Organization of Study

The study comprises of 5 chapters. In chapter one, the concepts are introduced and the problem of the study is established with the research objectives and questions. Chapter two presents the literature review while chapter three presents the research methodology. The fourth chapter presents the results and discussion, and the last chapter presents the conclusion and recommendation.

Chapter Five

Summary, Conclusions and Recommendations:

5.1 Introduction

This chapter summarizes the findings on appraisal of the effectiveness of risk management tools in the nigerian construction industry in Lagos State as a case study. The chapter consists of summary of the study, conclusions, and recommendations.

5.2 Summary of the Study

In this study, our focus was on appraisal of the effectiveness of risk management tools in the nigerian construction industry in Lagos State as a case study. The study is was specifically carried out to ascertain the extent at which workers/contractors comply with risk management skills in the construction industry, determine the attitude of workers/contractors towards risk management, identify the problems affecting the implementation of risk management in the construction site, and Identify the strategies promoting effective risk management in the construction industry.

The study adopted the survey research design and randomly enrolled participants in the study. A total of 141 responses were validated from the enrolled participants where all respondent were Professional Architects, Quantity Surveyors, Engineers (Builders, Structural/Civil, Mechanical and Electrical) and the Project Managers engaged in building projects obtained from the public and private organizations and agencies in Lagos State.

5.3 Conclusions

Based on the findings of this study, the researcher concluded that;

  1. The extent workers/contractors comply with risk management skills in the construction industry is high.
  2. The attitude of workers/contractors towards risk management is positive.
  3. The problems affecting the implementation of risk management in the construction site includes: shortage of knowledge and training, lack of supervision, biological agents, awareness about the safe implementation of assigned work, ergonomic hazards, lack of knowledge and pattern of illness, and apathy and total carelessness.
  4. The strategies for promoting effective risk management in the construction industry includes: supervision, health and risk warning signs, risk management, effective communication, risk incentives, and proper equipment.

5.4 Recommendations

Based on the findings of the study, the following recommendations are proffered.

  1. Efforts should be intensified by contracting construction firms in devising improved strategy to determine and forestall hazard inherent in a given project before embarking on it.
  2. Priority should be given to the review of existing legislation on risk management in companies by the state legislature to meet the current realities of risk practices in more concise and specific details.
  3. Information and communication of risk policy should be disseminated properly for easy understanding by the working crew.
  4. There should be site visit and soil sample testing as to ascertain the nature of the soil and topography before construction proceed.
  5. Risk signs should be placed at the building construction site to ensure that people apply precaution while at site to avoid accidents and injury.
  6. The services professionals with in the building construction site should be encourages to ensure adequate supervision and quality control of materials during production processes.

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