Risk management trends in the construction industry: moving towards joint risk management

Abstract

This paper reports the outcomes of the first of three planned questionnaire surveys in the first phase of a broader Hong Kong based study on ‘Joint Risk Management’ (JRM). The survey compared perceptions on both present and preferred risk allocation, including JRM, in construction contracts. Data was mainly collected in Hong Kong and mainland China (with most respondents having working experience from Hong Kong) from various professionals and practitioners representing broad groups of academics, consultants, contractors and owners (clients). Survey results reinforce previous observations (in Canada) of the divergences in perceptions on both present and preferred risk allocation, both within and between different contracting parties. The present study reveals quite wide (marked) divergencies with many individual cases of diametrically opposing views on allocating particular risks within specific groups. Despite such divergencies, respondents professed a general enthusiasm towards JRM, irrespective of their contractual or professional affiliation. Moreover, they generally preferred to assign reduced risks from either one or both contracting parties to JRM, rather than shifting more risks to the other party. This is indicative of a perceived trend towards more collaborative and teamwork based working environments.

Joint risk management and collaborative ethos

“…This stance can be explained from the fact that typically contractors are allocated an excessive number of risks which make them feel unfairly treated (Perez et al, 2017;Zhang et al, 2016). Similar findings have been reported by Rahman and Kumaraswamy (2002a) who observe that owners were seen to be more ready than contractors to approach JRM. This feeling is further justified taking into account Li et al's (2005) observation that there are risks not clearly related to the project characteristics, for which it is likely that no party has the required experience to manage them.…”

“…In this respect, Osipova and Eriksson (2013) highlight the fact that traditional RM entails separate risk identification and assessment from each project party which may lead to a narrow and biased perspective of risk. Rahman and Kumaraswamy's (2002a) survey findings also confirm that standard conditions of contracts often fall short in conveying an unambiguous and unique message to all contracting parties for efficient risk management.…”

“…JRM entails making provision for some gaps in the contract provisions and provide adequate procedures to address them, as and when those risks materialise during the process of construction (Rahman and Kumaraswamy, 2002b). Rahman and Kumaraswamy (2002a) conducted a survey for the integration of JRM in relational contracting and concluded that for unforeseen and unquantifiable risks, JRM is preferable over providing contingencies in contracts and allocating the risks on their occurrence to the party best able to handle them. Moreover, for the management of risks that are foreseeable and quantifiable but need joint effort, their survey's results also demonstrated that JRM is a far better option than others.…”

“…Challender et al (2018) also note that it appears to be relatively few studies that consider the risk management practices as the events of the construction project unfold and the contracting partners interact. Indeed, there are very few studies regarding JRM, conducted mainly by Osipova andEriksson (2009, 2013) in Sweden and Rahman and Kumaraswamy (2001, 2002a, 2002b, 2004, 2005a in China/Hong Kong. This research aims to add to the existing RM literature and practice by investigating specifically the essential collaborative aspects of JRM based on the experience of UK construction professionals.…”

Comparison of Trends in Risk Management Theory and Practices Within the Construction Industry

“…It implies contracting risk allocation such that all stakeholders can take part and help with managing risks even after the formal assignment of responsibilities. Research conducted in Hong Kong [14] indicated that investors and managers were more likely to accept this strategy when compared with contractors and engineers. Results of research that was conducted in the UK five years prior to the study in Pakistan indicated that managers mostly relied on their own knowledge and experience to achieve the best results.…”