Project Risk Management Essay Example | Topics and Well Written Essays - 2000 words

Project Risk Management - Essay Example A co-operation considered less informal in terms of risk management results in a number of gains. This requires a long term relationship or co-operation among actors of project network. For example, a risk management engagement considered less informal, results in a reduced transaction costs since, it limits the need for rather, expensive contractual engagement. In addition, a risk management process that engages co-operation minimizes dyadic relationships and introduces a network-level engagement. A co-operative means of managing risks results in efficiency and at the same time, pinpoints ineffective and expensive practices resulting into risks. In the construction field today, risk management for projects is gaining recognition as a result of the critical procedures involved. Shortfalls witnessed in construction projects results from the complex nature of various implemented projects. The idea of subcontracting is taking precedence as a result of construction companies concentratin g on their main businesses. This creates a situation where, involvement in projects becomes complex due to many project participants. Uncertainty related to implementing successful projects is caused by various sources. Effective risk management for projects is tenable by developing an understanding of the relationship manifesting between risks and project networks. The stakeholders responsible for implementing a project need to recognize risks attributable to each participant in the project. This provides a reliable mechanism for risk allocation; on the other hand, risks within construction projects often arise because of the involvement of various sources. Construction projects often involve a continuous process in relation to decision making. This results from the existence of many sources that create uncertainty and risks. In most cases, such decisions are beyond the control of the bonafide project participants. Further, most construction projects fail in terms of meeting cost t argets and stipulated timeline (Abdou 7). As a result, it is crucial for contractors to recognize risk sources earlier. For example, in regions such as the Far-East, delays often results from, interference by the owner, lack of experience on part of the contractor, poor planning and financial constraints. Such risks are often network-related, in order to execute a successful project, there is need for guarantee in terms of project participant’s experience and skills. Other factors to consider involve the network undertaking the project (Abdou 8). As a good practice, risk management within projects requires improvements for contracts, providing incentives for quality and recognizing capabilities. According to Baloi and Price, there are two categories of risks related to construction projects (262); this is illustrated in the tables below. Table 1: Typical Risks Technical Social Construction Economic Legal Financial Natural Commercial Logistics Political Table 2: Risks by Impac t Dynamic vs Static Corporate vs Individual Internal vs External Positive vs Negative Acceptable vs Unacceptable Insurable vs Non insurable As suggested in both tables, the major source of risks for construction projects, are networks, this occurs either directly or indirectly. On another note, risks attributed to constructio