Abstract

Risks and construction have been existent in the world for decades, with most often the risks inherent in construction being those risks that are liable to either cause a project to fail (negative risks) if not properly managed or can increase the success of the project (positive risk).

As such, being able to identify those risks probable to construction projects is vital in order to properly evaluate these risks events. Risk management is growing widely in construction projects, alongside risk management strategies of risk avoidance, transference, reduction and acceptance that enable construction managers take the right actions as per the risks so as to ensure that these projects are carried out on time, within the budget and with the right quality expectations as per the project design.

The Developing Countries are yet to develop their infrastructure. In order develop the stock of their infrastructure, construction projects are pivotal and are the conduits. The challenges of sustainable development of developing countries are the challenges in effectively managing project risk in the construction projects. Construction project outcome is characterized in terms the iron triangle measures of time, cost and quality. A survey research design was implored by the admission of questionnaire.

This was in order to determine the extent to which the risk management strategies affect construction project outcome. The study had a population size of 135 respondents who are employees of SOGEA SATOM Douala, from which a sample size of 100 respondents were selected through a convenient random sampling. Cronbach‘s alpha was used to test for reliability of the constructs and an ordered logistics regression analyses was implored to determine the influence of the risk management strategies on construction project outcome and to evaluate the significance of each construct in the study.

From the findings of the study, risk avoidance, reduction and acceptance have a positive significance when measured against the time variance of project outcome, risk transfer has a negative significance when measured against the same; risk avoidance transfer and reduction have a positive significance when measured against the cost variance of construction project outcome while risk acceptance has a negative significance when measured against the same; and risk avoidance and transfer are insignificant being measured against the quality control variance of construction project outcome whereas risk reduction and acceptance have a positive significance when measured against the same.

The study recommended that other developing countries should carry out this study in order to test their level of application of risk management strategies.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

The process and evolution of risk and risk management has brought about a number of difficulties for those involved in the management of risk, who find these challenges increasingly lacking in areas of basic necessary capabilities to cope with the nature of its change (Smith and Fischbacher 2009).

Hillson (2006) recognizes the presence of risk as accepted, inevitable and unavoidable in every field of human endeavor, with a matching drive to address risk as far as possible. Risk management is best understood through its history; the period from World War II to the mid-1960s was a formative one, characterized by flourishing enterprises, creativity on the part of business people, investors and lawyers.

New risks appeared, old ones aggravated and impelled risk manager‘s responses to these risks, allowing the risk management function to evolve and gain its title and core definition (Douglas, 1993). However, through evolution and development, the meaning of risk has evolved over time, meaning different things to different people from IT to construction to pharmaceuticals and even farming projects, depending on their personal opinion of the word (Frosdick, 1997).

Studying risks started around the seventeenth century, associated to French mathematicians Blaise Pascal and Pierre de Fermat, who tried adding mathematics to gambling (Frosdick, 1997). Their actions led to the development of the probability theory that sits at the heart of the concept of risk (Bernstein, 1996). Risk was associated solely to gambling for many years, and by the nineteenth century the term risk was adopted the by insurance industry in England (Moore, 1983).

Major technological developments, increase size of organizations and internationalization of these organizations in the 1950s and 1960s coined the grounds of importance for risk and risk management to the wider business community (Grose, 1992)

Even though there is an increased volume of information around various sources of threats and the trans-disciplinary nature of the problems that arise due to the discovery of several new types of risks (Dean, 1998), risk management is still an area of concern. Beck (2004), argues on some factors  that  hinder  effective  risk  management  practices  such  as:  the  lack  of  a  precise  and unambiguous legislative mandate for risk management; the lack of sufficient research-based evidence with regards to the value added by risk management activities; and the lack of a clear cut categorization of risk management as an applied discipline within the fields of business and management making it‘s studies complex.

In the last decade, risk management research has developed more in the construction industry (Forbes et al, 2008); construction projects are exposed to risks at the time of their conception, along its various stages, with forms of risks the risk manager will like to counter with what measures; and the cost these measures will incur in order to avoid future errors (Schieg, 2006).

Projects are more exposed to risks because they contain so many contracting parties such as designers, owners, contractors, stakeholders and many others. This gives room for project risks to be analyzed from two sides: On the one hand the stakeholder, project owner and decision maker in construction projects (Bride and Volm, 2009) and on the other hand the contractors (Baloi and Price, 2003). Both sides have different experiences and behavioral patterns. Project risks have a variety of possibilities for transferring, avoiding, mitigation or reducing probable risks as one of the best solutions for dealing with risk events (Kartam and Kartam, 2001).

Mcgrew and Billota (2000) argue in favor of risks management activities, having a positive impact on the timely delivery of projects. Furthermore, Ropponene and Lyytinen (1997) also agree that risk management activities provide better estimation for the resources required to carry out various tasks, reducing the number of failures. Continuous use of risk management measures by project managers in various projects over time contributes significantly to the effectiveness and efficiency of risk management in their separate projects (Ropponene and Lyytinen (1997).

The construction industry is prone to change and is a very volatile environment filled with multiple forms of risks that could occur at any given period during the project‘s lifecycle (Mishra and Mishra, 2016). There are a multitude of risks in the construction sector, and the willingness of contracting parties to take on risks is an important consideration in the allocation of project risks (Ward et al, 1991).

Projects are unique undertakings involving a degree of uncertainty, which are extremely risky (Conroy and Soltan, 1998; Mak et al., 1998; Chapman, 1998). This makes things really difficult for a project team and the supervisors to know exactly what policies or strategies are best implemented for what type of risk, given that the risk effect vary from one construction project to another and the impact of a risk occurring also varies from one another over time periods (Hassler, 1996). Risks in projects are measurable in terms of the likelihood and consequence of the risk event (Widemann, 1992)

The construction industry is highly exposed to various forms of risks which have no clear cut means by which they occur. For decades, from the early 1900s, the problem of managing risks in construction projects has been a real challenging task for many, given that there are no clearly defined rules or procedures as to how to go about dealing with construction risks (Mills, 2001).

Construction projects are amongst the most dangerous and risky fields of work (Kangari, 1995), surrounded by uncertainties that need managerial follow-up, due to its exposure to both internal and external factors affecting the construction process (Office of Project Management Process Improvement, 2003). Most public and private contracts are mostly executed through projects, and as such improving project outcome can contribute enormously to the national economy.

Risk management strategies enable an organization to better respond to its risks eventualities after the risk managers have analyzed the risk management processes of risk identification, risk analysis, risk evaluation , assign the appropriate measures for dealing with each risk according to their degree of occurrence and as such measure their impact with regards to the project.

Identifying the risks that are prone to construction projects gives the risk management team as well as the project manager an added advantage when dealing with risks that are likely to occur. This separates various risks either into the known unknowns or into the category of unknown unknowns (Cakmak and Tezel, 2019). Risks are not always negative, and as such in order to properly identify and manage risks that are inherent in construction projects, we must know some of these risks.

They can either be operational, financial, technical, project management, organizational, environmental or contractual risks that are caused either by internal or external sources (Kendall, 2017). Some of these risks that can occur in construction projects broken down include: safety hazards leading to accidents and injuries, managing change orders, incomplete designs and poorly defined scope, unknown site conditions, poorly written contracts, unexpected rise in cost of materials, labor shortages, damage or theft of equipment, natural disasters, issues with subcontractors and suppliers, availability of building materials, poor quality project management amongst several others (Kendall, 2017; Jayasudha and Vidivelli, 2016).

Interest in the management of risk has increased as competition between firms increases and as the size and complexity of projects grow. This has led to the development of varying practice standards, tools and techniques (Frame, 2003) which if not properly identified will be difficult to control, transfer or manage the risks (Bajaj et al., 1997) for analyzing the extent to which certain risks occur.

Both the risk identification and risk analysis phases of the risk management process are generally considered the most important as these can have the biggest impact on the precision of the risk assessment and risk management strategies, and as such necessitating the need for proper studies in this domain, so as to allow proper risk management strategies to be implemented (Chapman, 1998; Cooper and Chapman 1987).

Risks and risk management are essential for project success, with risks response being an important phase and should not be undermined, making use of the collective information in the analysis stage of risk management and taking decisions to improve the possibility of completing the project within time, budget and performance.

A management system and measures for improving project efficiency should be developed so as to ensure the success of risk responses and to reduce the risks effects of cost, time delays and performance problems (Wei, 2010). According to Hällgren and Wilson (2011), in order to manage risks in projects, we need a set of pre-defined tools and techniques, but there is not much research available for risk response in respect to project success.

The success of risk response measures varies from project to project, and obviously, construction projects require different measures than are implemented in school projects dues to differences in their uses and as such the need for a different risk response strategy (Motaleb and Kishk, 2012).

It is no secret that risk management has become a vital part of any project (Olsson, 2007; Del Caño and De la Cruz, 2002), representing the most challenging task to any project, with regards to identifying the risks and their magnitudes (Anderson, 2009).

This does not take away any of its effect or importance of identifying these risks as managers still rely on its results as an assurance to their projects (Baloi and Price, 2003; Perera and Holsomback, 2005; Alali and Pinto, 2009).

Risk management is a means of identifying the risk and reducing its damage by offering suitable solutions (Lee and Shin, 2009). It was only recently that risk management proved its importance to the construction market (Forbes et al., 2008), taking into consideration the threat that construction work is constantly being put under, alongside the threat that the

multiparty nature of contracts imposes onto a project in the case of subcontracting (El-Sayegh, 2008; Schieg, 2006).

Project success varies from one stakeholder to another, and it‘s the criteria through which we can measure how valid our work is. Rodger (1999) describes the success criteria of cost, time and quality as the Iron Triangle, describing time and cost at best as guesses calculated at a time when little is known about the project and quality as a phenomenon, an emergent property of people‘s attitudes and believes, which often changes over the development life-cycle of the project.

With that in mind, Hatush and Skitmore (1997), carried out an analysis of the success criteria of time (projects scheduled to be used at a time convenient by future clients), cost (seeking the value for money) and quality (the right features that fit their purpose). Risks have a high effect on construction projects, which if not handled properly will lead to poor performance (Tar and Carr, 2000), with each construction project bringing about its own forms of risks.

According to Nasir zadeh (2008), several risks included in construction projects have complicated structures from multiple and interdependent components, giving the projects an extensive and complex structure. Those features that have influence over the probability of occurrence through the feedback loop of a cause and effect. Risks are considered the main factor during the management of any project; as such risk management can be regarded as an integral part of project risk management needing further research (Syedhosini et al, 2009).

Voetsch et al., (2004) reported that effective risk management strategies improve outcome of projects, by enhancing productivity. Although project risk management helps to successfully bring a project to completion, the project managers, project teams and sponsors need to know the relative contribution of each of the techniques of risk management, on the outcome of construction projects. The close relationship between project risk management and project management functions and the efficiency of risk management strategies is expected to significantly improve project performance and thus project outcome (Bannerman, 2008).

More and more construction companies are beginning to be aware of the importance of risk management, yet, the various models and techniques aimed at managing these risks are not being properly used (McNell et al., 2015). This is against the fact that the construction industry is trying to be more time and cost efficient, thereby expanding their levels of control over several projects.

Every country faces its own form of challenges in the construction industry, with each implementing separate ways of dealing with its own types of risks. Hlaing et al., (2008) discussed on how the raging economy of Singapore alongside its continuously changing corporate environment increased risk exposure for actors in the construction industry.

Project managers began having an urge to develop a cohesive approach, demanding strategic planning over the entire scope of construction projects from its initiation to occupancy into construction project management plans.

As a result, clients began to apportion responsibilities of risk management to contractors, making formal risk management a necessity amongst construction firms. Effective risk management systems and strategies used to mitigate the effect of probable risks became of acute concern to construction project management (Hlaing et al., 2008).

In developing country context, especially in Africa, risk management in the construction sector is an unstructured issue coupled with the increase levels of risks involved as compared to the developed countries (Mbachu and Nkado, 2007). Formal risk management strategies have not been widely studied or adopted either with very little to go on with regards to their discoveries in the sector. Boadua, Fianko and Chileshe (2015) carried out a study in Ghana wherein they observed a limited level in the adoption of formal risk management strategies among construction oriented firms, with extremely low level of technical documentation, and the low level of awareness regarding the necessary tools and techniques to effectively manage construction risk. According to their result, Ghana‘s construction sector faces several problems relating to cost and time overruns (Fugar and Agyakwah-Baah, 2010). Ahadzie, Proverbs and Olomolaiye (2008) perceived the most critical project performance success criteria to be project cost and quality.

Construction in Cameroon is relatively a very active domain, with housing, roads, bridges and all sorts of construction projects going on. The construction industry in Cameroon grew exponentially from 2.1% in 2001 to 7.4% in 2011 according to a report published by a consulting cabinet Acaexpertise and is expected to attain close to about 8.4% in 2020; with Cameroon‘s construction industry expected to have annual growths averaging 7.4% until 2028 (SIKA Group, 2019).

This implies that the country‘s construction market is the market with the highest dynamics in West Africa as reported by the business in Cameroon newspaper (SIKA group,2019). The country‘s building industry is developing dynamically under the stimulus of investments in infrastructure and housing construction. Most of the construction projects in Cameroon are done by international organisations (Abanda et al…, 2014) leaving the local population lacking in the knowledge and practices of effective risk management and risk management strategies which can enable her economy grow even more substantially.

This just goes to show how much contribution is done to a nation‘s economy from construction. The construction industry is a heterogeneous one, extremely complex to handle. On that note we find the government enacting legislations such as The June (2000) Regulation of public contracts aimed at making construction projects more transparent.

Fisken, (2013) later observed that key reforms proposed in Cameroon‘s Vision 2035 are in need of effective risk management for construction projects including the creation of necessary recognised frameworks aimed at improving policy implementation and enforcing the industry‘s code and standards amongst others. The industry also warrants practical and complete risk management strategies geared towards attaining performance objectives.

There is a need to increase the theory and practice of risk management and risk management strategies of construction projects in Cameroon given the number of projects we observe to have been either abandoned, delayed, not properly structured or executed and the wonder that comes to mind when we think about what policies or strategies were wrongly used or what risk wasn‘t identified, analyzed, responded to, monitored or controlled.

Thite (2000) recognizes three distinct traits of project outcome which are: the implementation process (internal criteria such as budget, time), the perceived value of the project and client satisfaction with the desired project. Construction projects are characterized by the traditional success criteria of cost, time and quality targets, which are deemed too simple and crude for measuring construction project manager‘s performance in context with today‘s construction project environment (Dainty et al, 2003).

This is because there are several variables outside the project environment that influence the degree at which tasks are accomplished and outcome perceived which is different from the past (Pocock et al., 1996). There is a need to redefine the traditional success criteria of construction projects such that they include knowledge, skills and behavioral contributions to better performance alongside suitable future improvements and innovations (Alarcon et al.., 1998) which influence project outcome.

With that in mind, we realize that there is an in depth necessity to evaluate the effects or risk management strategies and project outcome of construction projects, in order to know what strategy is essential to construction project delivery, and the extent to which these strategies affect project outcome.

The strategies will be tested against three aspects of project management competencies relating to cost, time and quality indicators of project success. The management skills are efficiency (cost), effectiveness (time) and stakeholder‘s satisfaction (quality) (Kylindri et al, 2012).

1.2 Problem Statement

Naturally, a construction project is deemed successful once it meets the requirements of time, cost and performance goals (Shenhar et al., 2011). Sadly, many organisations still run projects that do not end on the required time, within the specified budget or scope (Tso, 2005). This might be as a result of project risks, defined by the Project Management Institute (PMI, 2008) as an uncertain event or condition that if it occurs will have either a positive or negative effect on project objectives. Given the various forms of risks and uncertainties within construction projects, there is a need for those risks to be identified and managed properly as they can rapidly become serious problems to the project (Keil et al., 1998).

Risks and construction projects are very much interrelated, with the construction industry being very much prone to risk and uncertainty than any other sector of the economy (Tah and Carr, 2000; Othman, 2008). This is as a result of several peculiarities that come with construction projects such as complexity, tight scheduling, the size of projects and the dynamic nature of projects (Flanagan and Norman, 1993).

Its impact is further intensified with the involvement of stakeholders and other parties at various stages of product delivery (Kangari, 1995). Risks in construction can influence a project to an extent that the project fails to achieve its main objectives (Tadayon et al, 2012). As a result, construction project performance lies in effectively managing the risks involved. Baloi and Price (2003) underpinned the role of risk management

for construction projects as having a direct relationship with risk management strategies and project outcome, since risks are measured by their probable effect on the project‘s objectives.

SOGEA SATOM Cameroon continues to experience significant cost overruns, delays in schedule, and low quality output which results to poor time, cost and quality performance of their projects (Pettang et al, 2020). This makes it vital to understand risk management strategies put in place by SOGEA SATOM, with the desire and need to enhance their performance.

Previous studies carried out in Cameroon identify various issues with regards to her construction projects and their complexity such as constant rising and unstable project costs, lack of skilled labor, and the cost of housing (Diamond realty, 2020).

SOGEA SATOM has had problems with respecting the time of execution of some of its projects like the case of the Bamenda- Bbadjou highway project of 2017, which is still pending completion, the delay with the completion of the second bridge over the river Wouri in 2018 which was programmed for 48months but ended up taking a longer period of 53 months (Africa News Hub, 2018). This bids the question of what risks were not properly identified, or what plans were not done right, or what strategies were not respected that caused delays of such a major project necessitating the need to understand the operations and applications of the risk management strategies put in place by SOGEA SATOM.

Risk management strategies are focused on regulating the level of risks and modifying their related effects (Uher and Toakley 1999). Although a good number of papers have been written on risk management, most of the surveys have been conducted in developed countries and little information exists on the perception of risks in the developing countries (Hameed and Woo, 2007).

However, some studies (Dwivedula and Bredillet 2010; Xie et al., 2011) have stated that risk management should not be confined to mitigating and controlling risks but should target avoiding the identified risk throughout the project‘s lifecycle given that these risks are often neglected after the project has begun. Complying with Bannerman (2008), risk management is considered for all activities geared towards spotting risky situations, along with developing the risk management strategies to reduce, avoid, transfer or accept the probability of occurrence and impacts of those risks on construction projects.

This investigation attempts to establish how the risk management strategies of risk avoidance, risk transfer, risk reduction and risk acceptance affects project outcome of construction projects, and the challenges that come along with construction projects so as to be able to better evaluate and understand the issues relating risk and construction.

1.3 Research Questions

The research tries to identify what effects risk management strategies have on project outcome with emphasis in construction projects in terms of time, cost, quality and stakeholder ‘s satisfaction in the Cameroonian economy. On that note, this research will be answering the questions of:

1. What are the challenges in managing project risk for construction projects in Douala?
2. How does risk  avoidance  and  risk  transference  affect  the  outcome  of  construction projects?
3. To what extent does risk acceptance and risk reduction affect the outcome of construction projects?