--- title: "Risk in construction projects and its management" subject: "Project Engineering" chapter: 5 key: "semester_7/project_engineering:risk-define-more-chance-construction" source: https://www.bctengineer.com/q/semester_7/project_engineering/risk-define-more-chance-construction site: BCT Engineering --- # Risk in construction projects and its management Project Engineering · Chapter 5: Project Risk Analysis and Management - Asked in: 2082 Bhadra, 2+2+8 marks - Video: [27 | Understanding Risk Management in Construction Projects](https://www.youtube.com/watch?v=3uwLkhTKZSg) — Planning Engineer FZE. - Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14 - Page: https://www.bctengineer.com/q/semester_7/project_engineering/risk-define-more-chance-construction - Whole chapter: https://www.bctengineer.com/md/semester_7/project_engineering/chapter-5 ## Question Define the risk that may occur in a project. Why is there more chance of occurrence of risk in a construction project? Explain in detail how you effectively manage the different types of risk that may occur in a construction project. ## Short answer Risk is an uncertain event affecting project objectives, measured by probability × impact. More chance arises from uniqueness, long duration, outdoor work, many parties, and large resources. Manage by planning, identifying, analyzing, and responding (avoid, transfer, reduce, accept) while monitoring with a risk register. ## Answer #### Risk **Risk** is an uncertain event or condition which, if it occurs, has a positive or negative effect on the project objectives (scope, time, cost, quality). It is measured by the probability of the event and the size of its impact: Risk = Probability x Impact. #### Why construction projects have more chance of risk 1. Every project is unique, with new site, design and conditions. 2. Long duration, so more time for change in price, law and weather. 3. Outdoor work exposed to rain, flood, earthquake and ground conditions that are not fully known. 4. Many parties (owner, designer, contractor, subcontractors, suppliers) with different interests. 5. Large amount of money, labour and equipment at one time. 6. Dependence on approvals, land and utilities. 7. Frequent design change and variations. 8. Hazardous activities, so higher accident risk. 9. Difficult access and logistics in Nepal. 10. Use of the lowest-bid system and thin profit margins. #### Managing the different types of risk | Type | Management | |---|---| | Technical / design | Complete investigation, design review, peer check, standard codes (reduce) | | Cost | Realistic estimate, price adjustment clause, early purchase of material, contingency (reduce, transfer) | | Schedule | Detailed CPM schedule, buffers, resource planning, liquidated damages (reduce) | | Financial | Funds plan, assured payment, advance guarantee (transfer, reduce) | | Contractual / legal | Clear contract, dispute board, legal review (avoid) | | Natural | Insurance (CAR), seasonal planning, flood-resistant design (transfer, reduce) | | Safety | Safety plan, PPE, training, inspection (reduce) | | Political and social | Stakeholder consultation, community benefit, early land (avoid, reduce) | | Quality | Quality plan, testing, supervision (reduce) | Process followed: plan -> identify -> analyse (qualitative and quantitative) -> respond (avoid, transfer, reduce, accept) -> monitor and control. A risk register with owner, trigger and contingency is kept, and the process is repeated through the project. ## Check yourself The answer's key points as multiple-choice questions, with the correct option and why. 1. Which statement best defines project risk and how it is measured? A. An uncertain event that affects project objectives, measured as probability x impact B. A certain loss that will happen during construction, measured as cost x time C. Only negative events caused by the contractor, measured by the number of delays D. Any change in design, measured by the number of variations Answer: A. Risk is an uncertain event or condition with a positive or negative effect on objectives, measured by Risk = Probability x Impact. (Key point: Definition of risk) 2. Why does a construction project have more chance of risk? A. It is short and uses repeated standard designs B. It is unique, long, outdoors, involves many parties and uses lowest-bid with thin margins C. It is done indoors with fully known conditions D. It involves only one party with no approvals Answer: B. Uniqueness, long duration, outdoor exposure, many parties and lowest-bid systems increase risk. (Key point: Why construction is riskier) 3. Which measures manage cost risk in a construction project? A. Insurance (CAR) and flood-resistant design B. Safety plan and PPE C. Realistic estimate, price adjustment clause, early material purchase, contingency D. Stakeholder consultation and community benefit Answer: C. Cost risk is reduced/transferred by realistic estimates, price adjustment clauses, early purchase and contingency. (Key point: Management of cost risk) 4. What is the best response combination for natural risk such as flood or earthquake? A. Liquidated damages and CPM buffers B. Peer check of design and standard codes C. Dispute board and legal review D. Insurance (CAR), seasonal planning and flood-resistant design Answer: D. Natural risk is transferred by insurance and reduced by seasonal planning and resistant design. (Key point: Natural risk response) 5. What is the correct order of the risk management process? A. Plan, identify, analyse, respond, monitor and control B. Respond, identify, plan, analyse, monitor C. Analyse, respond, plan, identify, close D. Identify, monitor, respond, plan, analyse Answer: A. The process is plan -> identify -> analyse -> respond -> monitor and control, repeated through the project. (Key point: Risk management process) ## Related in Project Engineering - [Risk management cycle; managing risk effectively](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Arisk-management-cycle-manage-effectively) — Project Engineering, chapter 5 - [Define risk, types, manage with risk cycle](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Arisk-define-types-manage-cycle) — Project Engineering, chapter 5 - [Manage risk; qualitative and quantitative system](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Arisk-manage-qualitative-quantitative) — Project Engineering, chapter 5 - [Internal risk of Nepalese construction project](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Arisk-internal-construction-nepalese-company) — Project Engineering, chapter 5 - [Types of projects; effect of project management](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Aproject-types-effect-of-management) — Project Engineering, chapter 1 - [Risk management and its steps](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Arisk-management-define-steps) — Project Engineering, chapter 5, asked 2× ## Related in other subjects - [Manage and perform project work](https://www.bctengineer.com/question.md?key=semester_7%2Fict_project_management%3Amanage-project-work) — ICT Project Management, chapter 7 - [Project life cycles in detail](https://www.bctengineer.com/question.md?key=semester_7%2Fict_project_management%3Aproject-life-cycles) — ICT Project Management, chapter 4 - [Risk management plan](https://www.bctengineer.com/question.md?key=semester_7%2Fict_project_management%3Arisk-management-plan) — ICT Project Management, chapter 12 - [Project risk](https://www.bctengineer.com/question.md?key=semester_7%2Fict_project_management%3Aproject-risk) — ICT Project Management, chapter 12