Critical approach in project risk management Essay

Critical approach in project risk management - Essay Example As Wrona (2010, p. 1) states, â€Å"companies that do perform a risk management process on a fairly typical multi-month project (no longer than 12 months) will identify and manage possibly five to ten easily recognized project risks†. This statement shows that doing comprehensive risk analysis regularly at each stage of the project can reduce the occurrence of risks and make companies able to respond properly to any type of project risk. Risk analysis is necessary to conduct to ensure completion of construction projects within time and available budget. As Flanagan and Norman (1993, p. 45) state, â€Å"attention to risk is essential to ensure good performance†. It is the responsibility of the risk management departments to perform risk management activities regularly in order to save time and budget. The risk management staff needs to be able to identify all types of project risks that a company may face in order to take effective measures to eliminate the occurrence of risks. 'In this paper, we will examine the way risk management approach changes with changes in each stage of construction projects. Along with this, the paper will also cover the way risk analysis can be used to drive project management decisions. There will also be a discussion on different types of construction project risks, as well as the ways to reduce the occurrence of such risks. Moreover, the phases of risk management process will also be discussed in the paper. 2. Risk Management in Construction Companies As Akintoye and MacLeod (1997, p. 31) state, â€Å"risk management is essential to construction activities in minimizing losses and enhancing profitability†. This statement shows that risk analysis and management not only helps companies minimize the probability of potential risks but also ensures consistent performance and improved level of profits due to customer satisfaction. If we talk about risks related to construction industry, we can say that this industry is prone to a number of critical risks, which need to be handled carefully in order to keep the companies away from the damaging effects of risks. In this regard, proper risk analysis at each stage of the project is essential. Risk management is essential for construction projects (Schieg 2006, p. 77; Zu, Liu, & Lu 2012). As Sharp (2009) states, proper identification and assessment of potential risks is critical for a company to succeed in today’s competitive market. It is due to this reason that the managers of construction firms put their efforts on identifying and evaluating the possibility of risks that their companies may face at some point during project management related to operational, financial and, contractual activities. As Lyons and Skitmore (2004, p. 51) state, â€Å"risk identification and risk assessment are the most often used risk management elements ahead of risk response and risk documentation†. A properly planned strategy is required for construct ion firms to analyze the risks associated with project management, as well as to achieving the balance between their operational necessities and identified risks. As Edwards (1995, p. 4) states, â€Å"risk analysis is the identification and assessment of the likelihood of hazards†. Some companies try to eradicate the threat of potential risk