The construction of projects involves many related and non-related operation risk factors that contribute to the failure of the project (Chia, 2006, p. 21). To have an effective risk management plan, it is paramount, as a first step, to have the key risk factors that may affect the project identified and classified. Project management operations bearing the most effects on the plan of risk management are identified and categorized and then an analysis of the key risk factors in each of these categories are described (Chia, 2006, p. 23). Finally, a hierarchy of risk classification covering all the projects significant risk factors is developed. A number of case studies, for example, for this paper, The Libyan Housing Sector, show how classification helps cover the key risk factors that are very useful during the management of a project risks. The following is a review of a classification proposal that would be used to categories the risk factors in the construction sector
Chapman (2001, 09), defines risk classification as a method that ensures a broad and comprehensive process of identifying risks to a fundamental and basic level of details and one that contribute to a quality, effective and efficient risk identification. It is an important step during the risk assessment process, since it helps categories the diverse risk factors that affect projects into a more structured form (Mark, 2004, p. 77). There are several literature approaches to construction risk classification that have been proposed. Several literature works proposes an extensive list of factors gathered from different sources, then classified in terms of the risks posed towards the customers, contractors and consultants (Carr, 2001, p. 26). An international review of the frameworks involving risk classification in construction projects, for example, the Libyan Housing Sectors, can help identify and study the risk factors affecting the construction projects and how to classify them for easier management
Libyan Housing Sector
Libya did not have any housing problems before the discovery of oil in 1960s, despite having a very small number of houses in the urban areas (Ngab, 2007, p. 17). This was mainly because majority of the people were nomadic pastoralists. There was no need for permanent residence as people kept moving from one place to another, in search of pasture for their camels and other livestock. However, after oil discovery, the economy started to flourish and the urban centers developed especially along the coastal cities.
As a result, people began to migrate and settle in these cities due to the increase in job opportunities (PCPMF, 2004, p. np). There were also a considerable amount of immigrants from neighboring countries like Egypt, Algeria, Tunisia and Niger. People moved into Libya to work on oil mines and other businesses that started to crop up because of the oil. As such, there was an upsurge in the demand for housing (Ngab, 2007, p. 19). Therefore, housing became a priority for the government, which brought rise to the Libyan housing sector that was responsible for building houses for the increasing population. The construction process was however marred with a lot of risk which hinders project completions.
The housing construction projects have faced a variety of challenges and risks throughout the world (Chien, 2014, p. 11). Most of these risks have everything to do with time and cost overruns. Such is not only unique to Libya, however, their case is more to a larger degree as they lack enough experience in executing construction projects (Taroun, 2014, p. 47). The problem became a major hit back in 1970s and is still ongoing. Proper housing is important world over, and is essential to the growth of an economy. The major client of the Libyan building projects, like in any country around the world, is the government (Tah, 2001, p. 44). Therefore, the government has every interest in streamlining this industry and ensuring an effective risk management strategy. This involves developing clear risk classification procedures.
Risk Classification Categories
There are several proposed construction risk classification techniques adopted over time. In his review, Chapman (2001, p. 13), classified construction risk by categorizing them into three main groups, those risk involving; construction design, construction finance and construction time. Carr (2001, p, 28), further classified the building risks into four sections namely those risk associated with the environment where the projects is being developed, the dynamics of the construction industry, that is, the clients and consultants, and the type of projects itself. Mark (2004, p. 79), categorized the risks into six sub categories placing them into those that affect finances, those that are associated with the law, those that affect management, those emanating from the current housing market, those that deals with policy and regulation and finally risks influenced by politics of the day.
From the above techniques it is evident that risk classification can be categorized into two major groups. External Risk classification and Internal risk classification (Klemettii, 2006). The internal risks factors are those that are under the direct control of the project management while the external risk factors are not necessarily under their control.
The internal risk include; projects operations, projects Management, projects engineering and projects finance (Zou, 2007).On the other hand, the external risk involves; the weather, government policy, culture, consumers and the housing market in general
In light of the ongoing project construction crisis in the housing sector, in Libya and indeed internationally, it is clear that neither quality nor quantity risk analysis and classification techniques are being utilized. Thus, Contractors have failed to deliver quality results on time and within the available budget. To understand the construction risk and how to manage them, projects managers ought to be able to first classify them for analysis. In order to reflect the impact they have on the projects duration, quality and cost. This study is intended to shed light on the possible techniques of classification as a first step to enhancing risk management for contractors working in the house construction industry in Libya and other parts of the world. By so doing, there shall be enhancement of better business management skills and competence. It will also foster competition which is very healthy for any business to grow.
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