Managing construction risk with weather derivatives

Islip, David; Wei, Jason Zhanshun; Kwon, Roy H.

doi:10.1080/0013791x.2020.1733721

Cited by 5 publications

(3 citation statements)

References 48 publications

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“…Weather and climate conditions may have a variety of effects on construction projects, such as decreasing productivity and occasionally interrupting the process, damaging exposed and unprotected components, disrupting communications, and/or obstructing access to construction site areas [17,18]. Furthermore, weather has been perceived to be one of the most critical factors impacting project cash flows [19]. Therefore, disputes between contractors and project owners arise because of the weather-and climate-related claims [20,21].…”

Section: Introductionmentioning

confidence: 99%

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The Impact of Climate Change on Construction Activity Performance

Oruc,

Dikbas,

Gumus

et al. 2024

Buildings

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There are specific construction operations that require weather forecast data to make short-term decisions regarding construction; however, most resource-related decision making and all project management plans must be carried out to anticipate weather conditions beyond the capabilities of the currently available forecasting technologies. In this study, a series of single- and multi-risk analyses were performed with ~9 km grid resolution over Türkiye using combinations of weather and climate variables and their threshold values which have an impact on the execution and performance of construction activities. These analyses will improve the predictability of potential delays, enable the project to be scheduled on a future-proof basis by considering the calculated normal and periodic predictions on the grid scale, and serve as a dispute resolution tool for related claims. A comprehensive case study showcasing the methodology and illustrating its application shows that the project duration is expected to be extended because of the impact of climate on both historical and future periods. While the original project duration was 207 days, when climate effects were considered, the optimum mean and median values increased to 255 and 238 days, respectively, for the historical period. The optimum duration mean and median change to 239 days by the end of the century, according to the SSP5-8.5 scenario, if the construction schedules consider climate change. The change in duration was mainly due to rising temperatures, which increased winter workability and reduced summer workability. However, if the historical practices are carried over to future schedules, the mean and median increase to 258 days and 244 days, respectively, which may cause unavoidable direct, indirect, or overhead costs.

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Section: Introductionmentioning

confidence: 99%

“…Still, several authors highlight the difficulties in outlining provisions for weather-related claims and the associated issues that go through litigation [21,33,34]. Even in litigation, contractors must prove that weather delays have impacted project completion dates, increasing litigation difficulties [19].…”

Section: Introductionmentioning

confidence: 99%

The Impact of Climate Change on Construction Activity Performance

Oruc,

Dikbas,

Gumus

et al. 2024

Buildings

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“…According to the Weather Risk Management Association (WRMA) [5], nearly 60% of all industries are directly or indirectly dependent on weather conditions. The most frequently mentioned industries directly dependent on the weather conditions are energy [6,7], construction [8,9], tourism [10], agriculture [11], transport [12][13][14], retail [15,16], and municipal enterprises [17]. In this case, the risk relates to production or production capacity losses occurring as a result of weather phenomena [18,19].…”

Section: Introductionmentioning

confidence: 99%

Weather Risk Assessment for Collective Water Supply and Sewerage Systems

Rak

Wartalska

Kaźmierczak

2021

Water

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The weather derivatives market as an instrument of effective weather risk management is still not flexible enough for many industries. The water supply and sewerage industry is sensitive primarily to heavy rainfalls and periods of high and low temperatures: days with heavy rainfall may cause a hydraulic overload of the sewerage systems; on hot days, the water demand increases significantly; on frost days, the risk of water pipe failure grows. The work aimed to summarise methods of weather risk management and propose indices that will help to protect the interests of the water supply and sewerage industry in Poland. Three indices were proposed: a daily precipitation index, frost day index, and hot day index. The frequency of reaching these indices in Poland was verified with the use of meteorological data from 1970–2019, for 19 locations. The non-parametric Mann-Kendall test was used to determine the climate change impact on the exceedance frequency of the proposed indicators. The results showed that the indexes were exceeded in the past once every 6 years, on average. The hot day index was exceeded the least often, but it was the only one with a clear (growing) trend observed.

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