Dissertation - Submission version

MSc Project and Enterprise Management
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The Influence of the Formal Process of Risk
Management on Project Performance
MSc PROJECT AND ENTERPRISE MANAGEMENT
TIAGO MELO DE BARROS SOUTO
Word count: 10,241

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DECLARATION
“I, Tiago Melo de Barros Souto, ratify that the work presented in this thesis is my own. Where
information has been derived from other sources, I confirm that this has been indicated in the thesis.”

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ACKNOWLEDGEMENTS
First and foremost I offer my sincerest gratitude to my advisor, Dr. Aris Pantelias, who has given an
enormous contribution to this master thesis with his supportive attitude, knowledge and patience whilst
permitting me to work in my own way. It was an amazing learning process have had the opportunity to
grow intellectually through his comments and plausible remarks.
I would like also to thank my family and girlfriend’s support throughout this challenging year. It would
be impossible to accomplish all objectives without their advices and understanding in moments of
disappointment and frustration.
I am also absolutely grateful for all support provided by all Bartlett staff, but mainly from those of the
School of Construction and Project Management, specifically Dr. Stephen Pryke and George, who were
always diligent in helping and providing enough tools for a tranquil journey.

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ABSTRACT
Tiago Melo, Project and Enterprise Management, University College London
Abstract of Master’s Thesis, Submitted 04 September 2013
The Influence of the Formal Process of Risk Management on Project Performance
The central objective of this study is to comprehend the effect of the formal process of risk management
on project performance. Further, it attempts to examine the degree of familiarity and diffusion of the risk
management process in the UK construction industry. The methodological approach involves a blended
qualitative and quantitative research, whereby 2 interviews and 14 questionnaires with a wide range of
experienced professionals provided a detailed set of data for future analysis. The results proves that
construction professionals tend to use the term ‘risk’ to refer to downside events that could affect the
achievement of project mission. As a result, organizations are less skeptical to apply risk management as
a routine process instead of intermittently. From the practical point of view, there still remain doubts
behind the efficiency of RM, as professionals partially agreed that even if a risk management process is
undertaken, it may not lead to success. However, once risk management has an impact on the intended
outcome of the project, it often aids to predict and reduce construction costs. In terms of the risk
management phases, risk analysis proved to be the most critical stage requiring those involved in the
project to feed the risk register to empower a more concise risk response. Therefore, having a structure
process of risk management enable project managers to have a better understanding of events impacting
positively or negatively on a project, avoiding, thus, surprises and, consequently, future losses.

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TABLE OF CONTENTS
1. Introduction....................................................................................................................... 01
1.1. Motivation of the Research......................................................................................... 02
1.2. Objectives..............................................................................................................................02
1.3. Research Scope............................................................................................................
03
1.4. Expected Contributions...............................................................................................03
2. Literature Review..............................................................................................................03
2.1. Risk and Uncertainty: Distinctive Definitions............................................................ 03
2.2. Dealing with Risk within the Construction Industry...................................................05
2.3. The Formal Process of Risk Management................................................................ 06
2.3.1. Risk Identification/Classification.................................................................... 07
2.3.2. Risk Analysis................................................................................................... 08
2.3.3. Risk Response.......................................................................................................08
2.4. Risk Management: Benefits and Barriers................................................................... 09
2.5. Project Success, Performance and Risk Management............................................... 09
2.5.1. Project Performance – Key Performance Indicators...................................... 10
3. Research Methodology..................................................................................................... 11
3.1. Research Strategy .............................................................................................................. 12
3.1.1. Blending Quantitative and Qualitative Analysis .............................................12
3.2. Research Data..............................................................................................................12
3.3. Data Collection............................................................................................................13
3.3.1. Questionnaires................................................................................................. 13
3.3.1.1. structure of questionnaires................................................................ 13
3.3.2. Interviews ........................................................................................................ 14
3.4. Sampling ..............................................................................................................................15
3.5. Research Limitations...................................................................................................15

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4. Research Analys.................................................................................................................16
4.1. Profile of Respondents................................................................................................ 16
4.2. Perceptions on Risk and Uncertainty.......................................................................... 18
4.3. Is Risk Totally Manageable? ......................................................................................19
4.4. Level of Knowledge: Risk Management.....................................................................19
4.5. Benefits and Drawbacks in its Implementation...........................................................20
4.6. The Current Practice of Risk Management ..................................................................... 20
4.7. The Impact of a Formal Process of Risk Management on Project Performance........ 21
4.8. Is Project Performance Improved by Chance? ...........................................................22
4.9. Risk Management and Key Performance Indicators....................................................... 23
5. Conclusion, Suggestions and Limitations........................................................................25
5.1. Limitations of the Research.........................................................................................26
5.2. Suggestions for Future Research.................................................................................26
6. References.......................................................................................................................... 27
7. Appendixes........................................................................................................................ 31
7.1. Appendix A - Interview.................................................................................................30
7.2. Appendix B - Questionnaire..........................................................................................33
7.3. Appendix C - Interview Transcription......................................................................... 37

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LIST OF FIGURES AND TABLES
List of Figures
Figure 1 Understanding risk through time
Figure 2 Probability/Impact Matrix
Figure 3 Performance/Success Factors – Understanding their Relationship
Figure 4 Respondents’ current role
Figure 5 Years of experience in the construction industry
Figure 6 Unit of Risk Management
Figure 7 Approaches used to produce risk analysis
List of Tables
Table 1 Key Performance Indicators – Risk Management Influence

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1. INTRODUCTION
The dynamicity encountered across the construction industry, including its widespread uncertainty,
challenges and risks has been subject of extensive discussions. Complexities vary according to project
type, scope, location and other countless variables intrinsically embedded in the management of projects.
Too often, such complexities turn out to be risks that different parties to a construction project face.
Evidences from world-wide projects show weaknesses in the adequate management of these risks (Lyons
& Skitmore, 2003).
Further, the construction industry expertise demonstrates confusion regarding the conceptualization of
two elements widely present in construction projects: risk and uncertainty. Despite scepticism upon such
conceptual differentiation (Perry & Hayes, 1985), authors unloaded a great deal of attention attempting to
draw a clearer line on both concepts. Uncertainty has been defined as the lack of information necessary
for the decision-making process (Winch, 2009). Whereas, defining ‘risk’ proved to be further complicated
as varying opinions regarding its impact emerge. It is often associated to economic loss (Moavenzadeh &
Rossow, 1976). However, defining risk is not an easy task and there is no definite and/or uniform concept
(Al-Bahar & Crandall, 1990).
An industry characterized by its particular complexities and highly changeable environment requires a
structured process to tackle underlying challenges commonly faced by construction companies. Risk
Management techniques have emerged rapidly in both ad-hoc and systematic forms. In any format, an
element can always be noticed: probability. Amongst the techniques most used are ‘the elicitation of
subjective probabilities’ (Winch, 2009), based on judgment of experienced professionals and
mathematical softwares such as Monte Carlo analysis.
However, intended results have not always been as expected through these less structured processes. The
formal process of Risk Management emerged as a means to fill this gap from 1990 onwards (Caño and
Cruz, 2002). The process comprises five main phases: [1] Risk Identification; [2] Risk Classification; [3]
Risk Analysis; [4] Risk Response and [5] Risk Control, in a circulatory essence ensuring the learning
process through time.
This systematic and structured management approach of risks became further explicit as a chronic
construction project could not be overcome in a continuous basis: poor performance in terms of cost, time
and quality requirements. The Egan Report (1998), Rethinking Construction, discussed such performance
conundrum, exposing the construction performance fissures and stimulating further studies on project
success and performance. As performance measurement has been strictly reduced to cost, time and
quality over time, the UK best practice programme developed the Key Performance Indicators (KPIs). It
provides key parameters for an efficient benchmark of organizations performance against the national
level (Takim & Akintoye, 2002). In section 2.8.1 the key parameters are listed.

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1.1 Motivation of the Research
As discussed above, the dynamics of the construction industry poses heavy risks on the successful
management of projects by organizations performing within this sector. Although construction poor
performance is widely debated, there still lacks empirical research on the influence of a formal process of
risk management on project performance.
This research was motivated by few underlying reasons:
1. Provide new insights into the actual role of the formal risk management on project performance,
revitalizing old assumptions and raising novel issues within this research area;
2. A deep interest held by the author in studying risk management; and
3. Lack of empirical research on the influence of risk management on project performance.
Further discussing the last point, what could be noticed throughout the literature review was a lack of
recent researches establishing any link between RM and the successful accomplishment of intended
outcomes. That is, does it influence on the final project outcome or performance in enhanced merely by
chance?
1.2 Objectives
This broad focus on project performance and the management of projects in a risky construction
environment concerns current practice and concerns potential for future development. This section aims
to depict all key objectives pursued by this research. The main aim of this research is to comprehend the
impact of the formal process of risk management on project performance. Thus, key objectives have been
underlined, as follows:
 Find out the level of familiarity on Risk Management held by companies working primarily on
the construction sector in the UK;
 Exploit the range of experiences and practices being adopted by current risk management
practices;
 Consider whether there really exist any relationship between applying a formal process of risk
management and project performance, interpreting, thus, statements provided by professionals;
 Assess the benefits and potential barriers to success of the RM process;

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1.3 Research Scope
This research attempted to cover a wide range of topics necessary to cement a strong pillar to support the
accomplishment of all intended objectives. The research scope of the study has extended from the study
of RM techniques to the impact of the application of risk management on project performance.
The study focused primarily on formal and structured risk management techniques applied by UK
construction organizations, ranging from contractors to consultancies. As practices vary according to
market demand, the study limited itself to the UK construction industry. Due to restrictions on RM
practice in the UK, widely acknowledged and discussed on various researches, the author decided not
further narrowing the scope down as it would limit the data available. It is also important to underline that
widening the scope to other professional areas, not only risk managers and project managers avoided
biases on opinions from those more dependant of the risk management process.
1.4 Expected contributions
Once all objectives have been achieved, this research will be able to:
1. Equip contemporary professionals and scholars with a broader perspective of what is currently
being adopted in terms of risk management in the UK;
2. Underline the importance of a systemic process of risk management to ensure better project
outcomes;
3. Contribute to the expansion of knowledge within this subject area across practitioners in the UK
construction industry.
Following, the literature review section initially outlines underlying definitions of risk and uncertainty by
a wide range of authors. Then, the implications of these risks are discussed, having the UK construction
industry as the main scenario. In sequence, the process of risk management is debated, including its main
phases and techniques presented to readers. As discussion evolves, parameters utilized to benchmark
construction project performance are presented. Section 3, then, provides a detailed description of the
methodology carried out. Next, the author examine the data gathered and argue the need, benefits, barriers
and repercussions of the formal process of risk management on project performance in the perspective of
construction professionals. Last but not least, in Section 5 the author concludes with a set of remarks and
recommendations for further research.
2. LITERATURE REVIEW
2.1 Risk and Uncertainty: Distinctive Definitions
According to Mills (2001, p. 245), the construction industry may be regarded as “one of the most
dynamic, risky, and challenging businesses”. An assumption highly appreciated mainly due to the

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construction industry exposure and association to risk (Akintoye & Mcleod, 1997), particularly caused by
its complex nature which involves mostly bespoke appraisals, time-consuming processes and costly
production (Flanagan & Norman, 1993).
As such discussion sediments itself, there is a widespread concern upon mistaken usages of the words
‘risk’ and ‘uncertainty’. In order to establish a better understanding on the management of risk and its
functionalities, it is highly recommended an exhaustive exploration of both definitions as well as their
inter-related characteristics. In opposition, Perry and Hayes (1985) regard differentiating both concepts as
unnecessary and occasionally obstructive.
Apparently, what may be assumed is that risk and uncertainty have damaging impact on construction
projects (Mills, 2001). Winch (2009, p.347) has defined uncertainty as ‘the absence of information
required for the decision that needs to be taken at a point in time’. A definition that is intrinsically much
more concise than those relating to risk itself. There has been an enormous effort to accurately define
risk; however ‘disagreement knots’ surely are embedded into and somehow jeopardize its conceptual
development.
Defining risk is elusive and its measurement highly problematic (Al-Bahar & Crandall, 1990). However,
there actually have a multitude of definitions of risk. In construction, it is broadly mentioned as an
exposure to economic loss or gain (Perry & Hayes, 1985; Al-Bahar & Crandall, 1990) or uniquely
associated to loss (Moavenzadeh & Rossow, 1976; Al-Bahar & Crandall, 1990). In parallel, there are
definitions intimately grounded on probabilistic terms that ‘an adverse event occurs during a stated
period of time’ (Royal Society, 2001). Further, Hertz and Thomas (1983, cited in Wang et al., 2004, p.
238) defined it as a ‘lack of predictability about structure outcome or consequences in a decision or
planning situation’. Having said that, a common assumption usually backed by a large portion of
researchers is that there is no uniform or concrete usage of the term ‘risk’ in the literature (Al-Bahar &
Crandall, 1990).
On the other hand, authors have discussed overlaps on both definitions. Raftery (1994) pointed out that
risk and uncertainty might be perceived in situations where outcomes of particular activities deviate from
estimations and forecasts once established in the project outset. Winch (2009) has broken down risk over
a time-based framework which enables a wider grasp of its conceptual intricacies. Risk source and risk
event are then presented. Risk source being an underlying situation that can stimulate a risk event
occurring. Thus, risk event is the event itself that has been generated by a previous state of affairs
(Illustrated in Figure 1).

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Figure 1 Understanding risk through time (Winch, 2009, p. 347)
According to Ahmed et al (1999), when risk is mentioned within the project management rationale,
divergent perceptions arise regarding where it impacts most, as shown below:
 Failure to keep within cost estimates;
 Failure to achieve the required completion date;
 Failure to achieve the required quality and operational requirements;
Also relevant is its categorization, which has been receiving a great deal of attention from various
authors. According to Zhi (1995), risk may be internal (uncertainties in the project itself) or external
(environmental issues). Following a diverse mind-set route, Wang et al (2004) assumes that categorizing
risks depends largely upon the project nature: local or international. Internal risks affect all projects
irrespective of their nature. Whereas external risks impact mostly on international projects such as lack of
information regarding social conditions, legal framework, economic/political scenario, etc. Others
classify risk in broader and more specific terms, such as political risks, financial risks, market risks,
intellectual risks, social risks, safety risks (Songer et al., 1997).
By providing an initial understanding of key elements of the Risk Management rationale, it is now
possible to further explore means of dealing with risk and, consequently, how Risk Management
influences project performance.
2.2 Dealing with Risk within the Construction Industry
Change is inherently embedded into construction activities. And, not surprisingly, the construction
industry performs poorly regarding its efficiency on coping with adverse effects of change, which in turn
causes drastic negative results on project performance (Smith et al., 2006). As previously stated, the
construction industry holds a particular characteristic when compared to other sectors. Each project
possesses its own general requirements, which varies according to the construction type, execution type
and environment (Oztas & Okmen, 2004). Thus, undeniably, the construction industry is one of the most
challenging, risky and dynamic fields (Kangari, 1995).
Before initiating an extensive insight into the management of risks, it is necessary to understand the
construction industry features as regards the management science techniques used to deal with it.
Flanagan and Norman (1993) stated that there are two widely known techniques: deterministic and

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probabilistic. Deterministic techniques presume that decisions are totally known, which is hardly seen
within the construction context. Paradoxically, probabilistic techniques focus attention on situations that
cannot be assured 100%, a scenario familiar to construction.
Regardless of which technique is the most appropriate for dealing with risk associated to construction, a
vital element intrinsically embedded into risk management is probability (Flanagan & Norman, 1999).
Winch (2009) has turned attention to the scarcity of a reliable set of data in the construction industry as a
fundamental reason for many projects use the ‘elicitation of subjective probabilities’ as a means of
addressing risk. It relies on judgemental techniques and decisions taken largely based upon experience of
the decision-maker. Nevertheless, dealing with high-impact/low-probability risks might prove such
technique as problematic (Winch, 2009).
Despite its enormous appreciation, the analysis and management of risk as well as the techniques
employed are little known (Akintoye & Mcleod, 1997). In construction, there is a proliferation of risk
analysis techniques and management packages specifically designed to deal with risk. However, applying
it has been proved unsuccessful from the project managers’ perspective (Tah & Carr, 2001). According to
Al-Iabtabai and Dieckman (1991) risk management techniques have not yet achieved a degree of
acceptable development in the construction industry. The reason is the approach used by practitioners,
habitually grounded on intuition, judgment and experience gained from previous works.
Tah and Carr (2000) have explained that such failure in developing analytical techniques lies primarily on
their approach, as most of them are grounded on probabilities and probability distributions. Perry and
Hayes (1985), in parallel, have stated that risk analysis techniques have been imposed in theoretical terms
for many years, but their practical application has been constrained. It happens actually due to the nature
of adversities construction projects are exposed to: complex, solutions unforeseeable and unpredictable,
and not previous track record (Flanagan & Norman, 1993).
Therefore, as construction projects are becoming increasingly complex, there is an urgent need to rethink
means of managing risk (Zhi, 1995).
2.3 The Formal Process of Risk Management
Risk Management has been deeply acknowledged as a vital subject within the area of project management
as it is becoming increasingly common observe projects failing mainly due to unmanaged and
unmitigated risks (Lyons & Skitmore, 2003). Thus, as Chapman (2001, p. 147) has pointed out
“unidentified and therefore unmanaged risks are clearly unchecked threats to a project’s objectives,
which may lead to significant overruns”. It occurs basically through a yet immature industry as regards its
seriousness on facing damaging events via formal processes, which frequently exposes the project itself to
undesirable factors (Chapman, 1997).

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As result, aiming to overcome a widespread problem of lack of formality in risk management typically
observed in the construction industry, formal processes of risk management have been receiving a great
deal of attention and interest recently (Carr & Tah, 2001). According to Caño and Cruz (2002) such
movement has intensified from 1990 onwards, when authors started proposing a series of risk
management processes.
Regarding its conceptual development, for long periods risk management has improperly been correlated
to insurance management (Al-Bahar & Crandall, 1990). Despite its conceptual essence lies on the
insurance industry (Perry & Hayes, 1985). According to Bing et al (1999, p. 277) risk management is “a
management discipline whose goal is to protect the asset, reputation and profits of organizations by
reducing the possible losses or damages before they occur (…)”. Wang et al (2004, p. 238) defined it as
“a formal and orderly process of systematically identifying, analysing, and responding to risks
throughout the life-cycle of a project to obtain the optimum degree of risk elimination, mitigation and/or
control”. It intends to lift the probability and impact of positive events occurring, and similarly reduce
damaging events throughout the project (Hwang et al., 2013), improving thus project performance
(Flanagan & Norman, 1993).
Various authors (Caño & Cruz, 2002; Winch, 2009; Flanagan & Norman, 1993; Morris & Pinto, 2004;
Smith et al., 2006) have broken down the process of risk management into a wide-ranging set of phases,
mostly comprising five main stages: [1] risk identification; [2] risk analysis; [3] risk response; [4] risk
control. According to Dallas (2006) the formal process of risk management is straightforward; however it
requires a concise leadership, widespread support from the project team and an intrinsic rigidity on its
implementation. Morris and Pinto (2004) stressed out that this process is iterative in nature and an
informal process may skip stages, as there is a temptation to manage risks reactively. Thus, aiming to
better express the formal process of risk management, each phase will be explained in the following sub-
sections:
2.3.1 Risk Identification/Classification
The initial appraisal of risks embedded into the project is an essential first step before any further action
(Perry & Hayes, 1985). Morris and Pinto (2004) have pointed out that one of the key characteristics of
this first stage is that identifying risks should be undertaken throughout the project life cycle, not merely
at the project outset. It usually relies on professionals’ experience or brainstorming sessions thereby risks
impacting on project mission are effectively exposed (Winch, 2009). It also may be undertaken through
research (investigating previous projects), interviews/questionnaires, check lists and risk register (Morris
& Pinto, 2004).

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2.3.2 Risk Analysis
It concerns a process grounded on understanding risks’ profile previously listed over the identification
process (Chapman & Ward, 2003). Risk analysis is broadly subdivided into two distinct parts: qualitative
risk analysis and quantitative risk analysis. Qualitative analysis is based on a more descriptive approach
which points out probabilities and consequences of risks. There are few techniques used throughout that
stage, such as the impact/probability matrix (the easiest and most used), illustrated in figure 2 (Cooper et
al, 2005).
Figure 2 Probability/Impact Matrix (Morris & Pinto, 2004, p. 41)
A quantitative analysis relies heavily on statistical theory, largely backed by powerful software packages.
Such approach encounters resistances due to lack of credibility of its underlying data and models which it
is built upon. The most widely used techniques are Monte Carlo simulation and decision trees (Morris &
Pinto, 2004).
2.3.3 Risk Response
Obviously, through that stage risks may receive proper responses according to their nature. There are four
broad techniques vastly used within the construction industry: risk elimination, risk reduction, risk
transfer and risk retention (Raftery, 1994).
1. Risk elimination: usually expressed through pre-contract negotiations; for instance, a contractor
not placing a bid or owner not proceeding with project funding (Flanagan & Norman, 1993);
2. Risk reduction: reducing risks in construction is closely linked to developing a company’s
physical, procedural, and education and training devices (Flanagan & Norman, 1993);
3. Risk transfer: it is a procedure advised to be taken when the other party is in a better position to
manage the risk, due to its higher expertise or availability of information. It may be done through
various means but mainly by sub-contracting or insurance (Winch, 2009);

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4. Risk retention: foreseen and unforeseen risks will be tackled by the company who controls them.
It occurs in two forms, passive or active. The former when risk is neglected or ignored and the
later when risk is deliberately managed through conscious decisions (Baker et al., 1999).
Baker et al (1999) has undertaken a valuable research into the risk response techniques most used within
construction industry. Overall, risk reduction was considered the most popular, followed by risk transfer,
risk retention and risk elimination.
2.4 Risk Management: Benefits and Barriers
Implementing a formal process of risk management brings tremendous benefits for construction
companies. According to Mock et al (1997) it would, for instance, enhance cost estimating quality and
decision-making, and besides that aid companies to complete projects within time and budget, lower
transaction costs and make risk allocation more accurate (Wiguna & Scott, 2006). Dallas (2006) goes
further stating that once a business has no formal risk management in place, shareholders feel aggrieved
as their company might not being managed properly.
On the other hand, through a survey conducted by Tummala et al (1997) an array of barriers for
implementing risk management process have been pointed out, thereby an overall understanding of its
current state may emerge. As result, it showed that: time involvement, complications in understanding
and interpreting outcomes of the process of risk management, problems in obtaining input estimates and
appraisal of their probabilities are some of the foremost barriers jeopardizing the development of risk
management. Hwang et al (2013) has similarly found out the main barriers frustrating RM
implementation are: “lack of time”, “lack of budget” and “low profit margin”. It actually overlaps with
findings undertaken by Akintoye and McLeod (1997) that also found “lack of time” as the most critical
reason for RM implementation constraints.
2.5 Project Success, Performance and Risk Management
In construction, projects featured by poor performance such as cost and time overruns are not rare and
have been subject of increasing interest by many project management researching areas (Lo et al., 2006).
Achieving perfect completion of project objectives in practice is complex. To do so, researchers have
been unloading great effort on the identification of likely solutions for performance problems.
Performance ought to be managed regularly throughout the project, which leads the team to review
progress and point out opportunities for further improvements (Thomas & Thomas, 2005).
As previously claimed, there is an abundance of concise empirical research on benefits of risk
management. However, investigation is still lacking on the impact of RM on project performance (Hwang
et al., 2013).

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The conceptualization of project success has remained ambiguous amongst construction professionals.
However it has been constructed to employ criteria and standards by which will enable project managers
achieve desired project outcomes. Project success means different things depending on individual’s
perspectives, thus it is dependant to project type, size and sophistication, stakeholders, experience of
owners, etc (Chan & Chan, 2004).
In the literature, a wide range of researchers have touched on cost, time and quality as underlying project
success criteria (Slevin & Pinto, 1987; Hatush & Skitmore, 1997). These three basic elements were called
the “Iron Triangle” by Atkinson (1999). Nevertheless, if analysed in isolation, these three dimensions
cannot provide a balanced view of project success (Kagioglou et al, 2001). As project management
developed, further elements have been introduced into the project success spectrum. Exemplifying,
Songer and Molenaar (1997) described a project as being successful if it is delivered on time and within
budget, matches user’s expectations, meets specifications, attains quality workmanship and reduces
construction aggravation. Moreover, Kummaraswamy and Thorpe (1996) added others criteria such as
transfer of technology, friendliness of environment and health and safety. Atkinson et al (1997) related
successful construction project performance to stakeholders meeting specifications, both collectively and
individually. Chua et al (1999) has explained it on the basis of a hierarchical framework, which budget,
schedule and quality are vital objectives adding value to the objective of construction project success.
Conversely, other four project elements, namely project characteristics, contractual arrangements, project
participants and iterative process measure the efficiency of each of the past criteria.
Despite having certain similarities, it is important to stress out differences between project success and
project performance. According to Cooke-Davis (2002) the distinction lies mainly on how each
dimension is measured. Project success cannot be measured until the project completion, whereas project
performance may be measured throughout the project life cycle.
2.5.1 Project Performance - Key Performance Indicator (KPI’s)
In order to respond to Egan report (1998), Rethinking Construction, which dissected various construction
inefficiencies - particularly its infrastructure problems which inhibited performance - the UK best practice
programme (cbpp) released the ‘key performance indicators’ (KPI’s) for construction. KPI’s are 10
parameters offered as benchmarks indicators for the whole industry, whereby an organization is able to
compare its performance against the national level (Takim & Akintoye, 2002). As Kagioglou et al (2001)
stressed, KPI’s give a range of project specific performance information being achieved across all
construction activities. All indicators are listed as follows:
1. Client satisfaction – product/service;
2. Defects;
3. Predictability – cost/time;

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4. Profitability;
5. Productivity;
6. Safety;
7. Construction Cost;
8. Construction Time;
Raz et al (2002) undertook a research grounded around the relationship between project risk management
(PRM) application and its perceived influence on project performance. Despite regarding a restricted set
of KPI’s, the research showed a poor correlation between PRM and project performance with regards to
meeting either technical or functional specifications. On the other hand, PRM was positively related to
projects achieving its desired schedule and budget targets.
Figure 3 Performance/Success Factors/Success – Understanding their relationships (Takim & Akintoye, 2002, p.
551)
Cooke-Davies (2002) has related project performance and success factors. It has been assured that
performance somehow predicts success and success factors weigh positively/negatively on project
performance. Such understanding fortifies a previous statement made by Pinto and Slevan’s (1994), who
argued that a project should only be defined as successful once it has achieved a certain level of client
satisfaction in terms of its desired needs. In order to better illustrate such relationship, Figure 3 is
presented as follows.
3. RESEARCH METHODOLOGY
In order to strictly conform to the research objectives, two research tasks have been undertaken mainly
through literature review, interviews and a detailed questionnaire.

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The research began with a thorough literature review to depict important issues that are often subject of
concern within the risk management field. It comprised sections devoted mainly to clarifying the current
perceptions on risk and its management as well as further examining all aspects involved in project
success, performance and its relative relationship with risk management. It touched upon topics such as
Key Performance Indicators aiming at breaking down a set of indicators largely used as parameters of
project performance.
3.1 Research Strategy
3.1.1 Blending Quantitative and Qualitative Analysis
Aiming to better explain the design and nature of the current research, it is important to discuss which
strategy has been visualized to accomplish the desired research outcomes. According to Naoum (2007)
two types of research strategy prevail, namely, ‘Quantitative research’ and ‘Qualitative research’.
This research used a blended strategy of qualitative and quantitative research, widely called
“triangulation”. Such approach seeks to enrich the trustworthiness of an analysis by a fuller, more
rounded account, reducing bias and compensating the weaknesses of one method through the strength of
another (Gorard & Taylor, 2004).
Qualitative research enables a deep exploration of the subject, with the foremost objective being to gain
understanding and collect information and data such that theories arise (Fellows & Liu, 2008). It also
attempts to subjectively evaluate diverse opinions and perceptions of pre-identified professionals within
the selected area of research. Qualitative researches also enable participants to raise relevant issues and
topics that might have not been anticipated and, thus, be of critical importance to the study (Kuada, 2012).
Further, quantitative approaches focus attention on measurements and amounts of certain characteristics
presented throughout findings. By applying a quantitative approach, Thomas (2003, p. 2) pointed out that
“researchers seek explanations and predictions that will generalize to other persons and places”. It
requires a careful sampling process to indeed produce generalizable results. These methods generate
numerical data and are assessed by using descriptive or inferential statistics (Taylor, 2005).
3.2 Research Data
According to Kumar (2011) there are two key approaches of information gathering about a situation,
person, problem and phenomenon. Depending on the nature of the research carried out, the information
may be directly collected; however too often data may already be available and it needs only be extracted.
These sources of information may be: [1] primary data and [2] secondary data.
This study utilized both sources. A wide range of books, scientific journals and articles were the main
source of information as they provide a comprehensive and in-depth base to understand issues raised
throughout the literature review.

20
Panneerselvam (2006) pointed out that the collection of primary data must be done with utmost care due
to its importance in current and future studies. There are four main strands by which primary data may be
collected: observation, interview, experimentation, questionnaire and case study method.
3.3 Data Collection
As previously mentioned, this research utilized interviews (see Appendix A) and questionnaires (see
Appendix B) as means of gathering primary data.
3.3.1 Questionnaires
According to Singh (2008) questionnaires have a wide range of pros and cons. Among its main
advantages is questionnaires’ capacity to cover a wide range of issues with minimum expenses and effort.
Oppenheim (2005) also praised the use of questionnaires as it reduces interviewer bias and reaches
respondents located at widely dispersed areas. On the other hand, the author listed important
disadvantages. It generally results in low response rates, and does not provide opportunity to correct
misunderstandings or to offer efficient explanations to clarify obscure issues. Naoum (2007) underlined a
possible lack of accuracy over answers when it is sought a response in a certain specific topic. Further,
the fact that there is not absolute control over respondents, a doubt may be raised if the needed person
actually responded it and not someone else.
The author pre-identified 14 professionals of both large and small-medium-sized construction companies
to collect as much varied insights as possible from diverse working realities. A formalized request was
sent out to all targeted respondents (project managers, risk managers, construction consultants and
directors) between early July and late August 2013. The respondents had a period of nearly 40 days to
return the proposed questionnaires. Following a period of 20 days, a reminder was emailed out to those
who have not responded at all or had done it partially. The questionnaire’s respondents were chosen based
on their relevance to conceptual issues rather than their representativeness.
3.3.1.1 Structure of Questionnaires
The finalized survey questionnaire consisted of three main sections. The first section contained
background questions, targeted to understand the respondents’ past and current experiences. It also sought
to draw a clearer picture in terms of the respondents’ profile. The second section played an important role
in the contextual understanding necessary to comprehend future assumptions, likewise to evaluate the
respondents’ knowledge degree regarding the practice of Risk Management process and underlying
concepts behind it. Third sector touched upon topics specifically designed to analyse the general
viewpoint of respondents on the influence of the formal process of risk management on project
performance.

21
The questionnaire has been structured to contain simple and direct questions which demanded a specific
degree of respondents` expertise. It aimed at developing both ‘open-ended’ questions as well as ‘closed-
ended’ to cover a wide range of topics proposed with certain level of flexibility. In closed-ended
questions a five-point Likert scale has been chosen to provide respondents a more satisfactory opportunity
to point their neutrality if it is needed. Also, multiple choice questions paved the way to capture responses
more accurately over strategic themes.
3.3.2 Interviews
The structured interviews have been designed to collect factual information regarding professional`s
experiences in their respective work field. According to Naoum (2007) when applying structured
interviews, the interviewer has potentially greater control throughout the whole process. Open ended
questions were carefully thought as it yields new insights and concepts, rather than generalized
perspectives as well as facilitate the interviewer since all respondents answer the same set of questions
(McBurney & White, 2010). The follow-up interviews were conducted to balance and compliment
information gathered through questionnaires, thus fortifying the intended research objectives.
According to Knight and Ruddock (2008) structured interviews have an extensive range of advantages. It
allows the researcher to obtain, code and interpret data more easily, quickly and efficiently. Moreover,
analysis might prove more accurate as data is more reliable because is being gathered in a consistent way.
And last but not least, it tolerates higher generalization of conclusions.
The same authors mentioned some disadvantages embedded into the process of applying structured
interviews. It generates uncertainty over whether the right questions are being asked. Further, there is a
high likelihood of researcher bias due to selective instead of spontaneous questions.
The interviews were carried out face to face with two professionals directly involved in the risk
management practice (see below). Firstly, in order to avoid any hesitation in responding particular
questions, it was underlined confidentiality and guaranteed the transcription of the recorded interview to
analysis and, subsequent, approval. Two professionals, a project manager and a consultant risk manager
were approached to concede an interview lasting nearly 30 minutes each. These interviews were
strategically thought as a means of fortifying the questionnaires as well as preventing a biased viewpoint
from professionals of each category. Therefore, views could be directly contrasted resulting in a more
concise research.
The interview comprised 10 questions, 8 being open-ended and 2 multiple choice, each one followed by
explanation. Firstly, definitions have been asked in order to sediment beliefs and opinions over
underlying issues that would support future perspectives. Beyond that, questions have been raised over
the respondent’s work reality on the practice of risk management and which strategies have been

22
undertaken. Finally, issues relating risk management and project performance could be answered in
accordance to the through literature review. The respondents’ profile is showed below:
1. M.R. – Project Manager at Transport for London, 35 years-old, 9 years of relevant experience.
2. M.A. – Senior Engineer/Risk consultant for ABS consulting, 5 years of relevant experience.
3.4 Sampling
The data population in the data-gathering process consisted of:
1. Questionnaires: 14 pre-identified professionals working directly or indirectly with risk
management. It includes: risk managers, project managers, consultants and directors.
2. Interviews: professionals involved in infrastructure project management and risk management
consultancy.
The sampling framework for both questionnaire and interviews included primarily professionals directly
involved in project management with varied working experiences of risk management. For interviews a
professional from a large governmental body responsible for the transport system of London have been
conducted. As professionals with relevant experience in different areas of the construction industry, it
provided a deep contrast of insights between a project manager and risk manager.
Out of 14 questionnaire surveys sent out between July and August 2013, 12 completed questionnaires
were returned. However, as explained previously, six respondents completed it in full whereas the
remaining 6 partially; representing, thus, a response rate of 42.8%. Comparing against the construction
industry rate, it falls within the norm.
The main barrier behind such low response lies primarily on the depth of the questionnaire, requiring time
availability from respondents. Also, it is a research grounded on an area lacking specialized professionals
in the UK, thus there is not a high number of respondents able to effectively respond it. Furthermore,
further complicating the final result of the questionnaires is the lack of time available to run the
questionnaire to receive a high response rate, as it was distributed over a period of 20 days.
3.5 Research Limitations
The research methodology presented few limitations:
1. Sample size: The number of units of the analysis was restricted, consequently, hardening to find
relationships from the data collected.

23
2. Lack of available data: the lack of specified risk managers was a significant obstacle in finding a
meaningful analysis as contrasts of viewpoints amongst risk managers and project managers
would add value to the final analysis.
3. Access to data: most professionals denied conceding face-to-face interviews due to lack of
knowledge in risk management.
4. RESEARCH ANALYSIS
4.1 Profile of Respondents
As thoroughly enlightened over the prior section, a reasonable number of professionals were interviewed
through two methodologies (questionnaires and semi-structured interviews) that aimed to underpin certain
issues lacking clarity.
This sub-section depicted the respondents’ profile, through seven questions colleting data of the
respondents’ personal as well as professional background. In analysing the data, attempts were made to
distinguish between those who responded the questionnaire in full from those who did it partially. This
distinction is important in order to evaluate the data correctly, allowing readers to draw a concise picture
of the research. Therefore, to clarify, all respondents provided their personal and professional information
in full in this entire section.
As demonstrated by Figure 4, fifty per cent of the professionals (7 respondents) who responded the
questionnaires are project managers. Consultants formed the second largest portion of respondents with
30% of the total. Only one respondent was part of the so-called “high hierarchy” of his company, being a
director. Besides these, two risk managers and a risk manager assistant participated of the questionnaire.
This range of professionals will provide further clarity to the current state of the risk management
practice, avoiding biased views in issues concerning the importance and practice of this management
approach in the construction industry, mainly between project managers and risk managers.
Figure 4 Respondents’ current role

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Such breakdown of the respondents’ role is vital to better reflect comments found in the next sections.
Amongst them, nearly 82% are professionals with between 20 to 35 years-old. As observed, this age
group reflects the level of seniority held by the respondents. In Figure 5, it can be perceived that large
majority (75%) of professionals are still in their initial stages of professional life, with only 0-5 years of
experience within the construction industry. Out of 12, only 3 professionals are employed in the
construction industry for more than 5 years.
This research had a major concern to not establish any boundary in terms of perceptions over the process
of risk management. Thus, the sample selected seeks to give the study credibility by providing a balanced
number and range of professionals working in organizations of varying sizes. Obviously, procedures been
practiced at large organizations will differentiate themselves from those practiced in small organizations.
From a universe of 12 professionals 41% have been working primarily on small-medium-sized
organizations, whereas nearly 59% (7 professionals) are working in large organizations (Figure 5).
Figure 5 Years of experience in the construction industry
The questionnaire contained a particular question regarding whether the respondent’s organizations had a
specific department or unit of risk management. This question was specially designed in order to capture
a global idea of how UK organizations currently esteem the application of risk management in their
projects. Unlike evidences encountered in older researches elsewhere, risk management seems to be being
given an unprecedented attention across the construction industry.

25
Figure 6 Unit of Risk Management
As Figure 6 shows, 75% of professionals assured that their organization holds risk management units. Not
surprisingly, the organizations missing a structured department of risk management are small-medium-
sized companies.
4.2 Perceptions on Risk and Uncertainty
Throughout a thorough literature review, definitions of risk and uncertainty have been discussed. Such
discussions are important in order to clarify possible perceptions on a matter utterly crucial to the
development of upcoming assertions.
Thus, all four professionals have been asked to define ‘risk’ and, subsequently, differentiate it from
‘uncertainty’. The literature review was clear affirming that there is an ongoing disagreement within the
construction sector regarding a consensus on ‘risk’ definitions. Also, there is an even more intriguing
confusion over the difference between risk and uncertainty.
The respondents of the interview carried out also have showed certain confusion over both definitions.
Despite agreeing that risk might have a beneficial or detrimental influence on a project throughout its life-
cycle, most interviewees related either risk or uncertainty to probability. Yet, a respondent stated that
uncertainty ‘gives rise to risk’. Thus, conceding risk and uncertainty as temporary and consequential
events, that is, a mutual-dependability feature not found throughout the literature review.
As one might expect, there was plenty of “dark views” on the risk conception. Mainly amongst project
managers, ‘risk’ held an obscure and negative connotation. Words and expressions elicited from
interviewees such as “threat”, “negative effect” and “damaging impact” only add to the thought that more
balanced views are needed in the construction scenario.
Therefore, as previously assumed over the literature review a concise and widespread conceptualization
of risk and uncertainty is lacking. Even though respondents have revealed a worthy comprehension of the
idea in terms of which effect risk/uncertainty can exerts on projects, confusion regarding whether a

26
probability may be assigned to risk or uncertainty exposes that the conceptualization is becoming clearer
but not sufficiently concise.
4.3 Is risk totally manageable?
Having attempted to define risk and uncertainty, interviewees were asked to indicate whether risk is a
totally manageable project feature. All interviewees agreed that risks are not under total control of anyone
involved in projects. An interviewee somehow expressed his satisfaction in terms of the regular existence
of risks in projects, claiming that “we all appreciate that there is always an element of risk in everything
we do”. It has also been argued that risks are taken on the basis of expecting positive outcomes as result
of its acceptance.
4.4 Level of Knowledge: Risk Management
There was some interesting information of the level of knowledge the participants held on risk
management. Taking into account the variety of experience and professional background of the
interviewees and questionnaire respondents, the process of risk management is not fully clear. The
generally stated view was that it is a structured management approach designed primarily to control future
barriers impacting on the project.
In this section, a total of 8 professionals were able to provide valuable insights on their level of familiarity
to the intricacies of the risk management concept. However, two of these thoughts were analysed through
interviews. In a universe of 6 professionals, 4 respondents (66,67%) claimed to be a high level of
familiarity with the concept. By contrast, the remaining two professionals have a limited awareness of
what RM actually involves.
Specifically, the view of a particular interviewee should be highlighted as it uncovers various elements
debated throughout the literature review. In the words of the project manager, risk management is “the
proactive looking at what risks could impact the delivery, the likelihood of those, the cost implications of
those, and putting in steps and measures in place to reduce the likelihood of the risks occurring (…)”.
Interpreting all comments on this section, it is clear that the perception on risk management is a positive
one. Nevertheless, what also may be assumed is that the existing knowledge lacks breadth and depth. Any
professional, even those deeply familiar with the overall process could not express explicitly any specific
technique utilized over the process.
A project manager of a large construction company has defined risk management in a limited perspective.
The professional understands that RM is a strategy that aims to minimise and respond to a risk
accordingly. Such lack of holistic understanding towards the formal process of RM has led a construction
consultant to further limit it to ‘brainstorming sessions’. Alarmingly, this view is not far from what a

27
project manager of a small-sized company described, who described it as the “identification of potential
threats, taking steps to weaken risks’ effects”.
Nevertheless, a project manager assistant observed RM a step further. Besides the underlying phases of
the process (identification, evaluation, analysis, response), the professional visualized a missing benefit
not mentioned yet, that is, the “competitive advantage” gained by those companies applying the process.
In parallel, other construction risk manager consultant described it in terms of its scope, that is, a structure
management approach responsible to deal with project/process risk, health and safety risks, enterprise
risks, insurance risks, etc.
An interesting occurrence to note was the extent to which the questionnaire respondents were satisfied
with the current techniques/strategies applied within their respective companies. A five point likert-scale
provided a reasonable overview of the fact. In average, in a scale ranging from 0 to 5, where 0 refers to
‘very unsatisfied’ and 5 “considerably satisfied”, the respondents rated their level of satisfaction with
current RM practices in 4.4.
4.5 Benefits and Drawbacks in its implementation
Similarly to other management approaches elsewhere, applying a formal process of risk management is
not entirely positive. Some of the negative insights put forward by interviewees in relation to the
application of risk management are then discussed.
Most interviewees mentioned time constraints as a major barrier to implement it. It has been said that
there is not enough time at the outset to sit down with all relevant stakeholders to carefully discuss issues
negatively impaction on the project. Perhaps slightly more interestingly, a project manager went further to
claim that such limitations are faced mainly over the identification phase of the process, where there are
not sufficient benchmarks or an exact ‘quantity’ of risks identified. Besides that, cost constraints to
undertake a formal process was also pointed out as a critical drawback.
On the other hand, a set of positive views were identified. When asked to list the benefits, interviewees
confirmed what has been said throughout the literature review. A construction risk manager pointed out
that if it is correctly implemented at the outset, it potentially turns things clearer in terms of predicting
events in advance. A little bit out of the scope of this research, but not necessarily peripheral, an
interviewee stated that once successfully applied it can even give a project manager “power and good
leadership”.
4.6 The Current Practice of Risk Management
Within this section respondents attempted to give an overview of their current risk management
experience. Also, strategies and/or techniques should be described, taking into account a recent project

28
they have run. There were some interesting opinions amongst those with direct experience with risk
management. Although most researches of 20 or so years ago claimed risk management was not regarded
as a crucial approach in the management of projects, discussions showed a possible U-turn change on its
application.
According to the data gathered through interviews, risk management has been widely practiced in today’s
projects. An interviewee went further to consider it an inherent part of managing projects, that is, “it
should not be regarded as something special or extra”. Other project manager highlighted the importance
of practicing it in a regular basis in order to have “designers on board with the contractors, on board with
the client, allowing you to design out any buildability issues”. A key point raised by a professional was
the link established between applying a formal process of risk management and the achievement of
client’s expectation, an assumption that fortifies the beliefs that such process has numerous implications
on a project.
Yet, in a sample of 14 professionals nearly half responded which sort of techniques their respective
companies are undertaking in order to deal with risks. Such low response rate in this question may
confirm assumptions made by Al-Iabtabai and Dieckman (1991), in the literature review section, that risk
management techniques are not mature enough in the construction industry. From Figure 7, it can be seen
that approaches adopted by organizations are mainly quantitative procedures (50% of respondents). This
frequent use of more sophisticated quantitative methods suggests an increasing development of risk
management application among the survey respondents. It occurs possibly due to support gained by the
engineering construction industry.
The questionnaire results on how the respondents’ companies approach to risk management could be
strengthened showed no dominant trend. A distinction was made between employees of large
organizations from those employed by small ones, as reality differs in each. Large organization
employees believe that better results would be achieved once RM was implemented at an early stage of
the project, encouraging a learning process for future projects. Further, respondents also indicated that
carrying out a successful risk management process requires a high level of accompaniment over the entire
project. On the other hand, respondents of smaller size organizations believe the process may be
enhanced though hiring experienced professionals, thus judgement and experience of past projects should
be considered.
4.7 The Impact of a Formal Process of Risk Management on Project Performance
The practice and importance of the formal process of risk management has increased over the past years,
mainly due to an identified bleakness when it comes to the decision-making process, which stimulated
construction industry experts to invest in other ways to deal with unforeseen events.

29
This shift in attitude towards a formalized process of RM was also identified in this research (see Figure
8). A relevant majority of respondents (nearly 67%) stated their companies are currently undertaking
formalized risk management processes, whereas risk analysis on ad-hoc basis accounted for 16% of the
entire sample for this question (6 respondents).
Figure 7 Approaches used to produce risk analysis
Views on the importance of a formal process of risk management in improving project performance
showed a uniform perception in general. All interviewees held positive insights, most of them underlining
its importance to sediment a better organizational environment, bringing all stakeholders and team
members together to discuss risks and take necessary actions to reduce or eliminate the likelihood of them
occurring. Other claimed that “it allows a project manager to work within a controlled environment and
ask the most fundamental questions in terms of managing a project (…)”.
Taking into account results of the five point Likert scale over risk management role in improving
organizations’ performance, an average rating of 4.60 confirm a homogenous belief that if correctly
implemented, the risk management process will enhance project performance.
Nevertheless, some interesting suggestions have emerged throughout the follow-up interviews. Despite
assuming that risk management poses great influence on project performance, a respondent was somehow
sceptical on how risk management should be undertaken. It was suggested that in order to accomplish a
better project performance, risk management should be carried out but it can never replace the benefits
brought by experienced professionals through their common sense. Yet, it has been stated that the project
management process should be exposed to as many experienced professionals as possible as a means to
manage any potential harmful factor.
4.8 Is Project Performance Improved by Chance?
A vast quantity of research has been carried out within the risk management field, mainly covering
themes such as processes, how professionals deal with risk, techniques, etc. However, it is being

30
practically rare come upon useful research on the factual link between implementing the formal process
of risk management and performance improvement.
In this section an attempt was made to depict views on whether the implementation of risk management
improves project performance, but as a mere coincidence. Putting it in clearer terms, respondents should
explain if the performance of their company’s project has improved due to the implementation of risk
management or it was merely by chance.
Surprisingly, most of respondents held a view that their recent company’s project performance has been
improved after implementing risk management, but it may have been coincidence. Actually, it exposes a
certain level of poor assessment in terms of the process efficiency. It has been remarked that there always
will be inherent uncertainty and risks that have not been analysed in meetings.
A total of 7 professionals (50%) assessed the question “the overall performance of my company’s
projects has improved after implementing a formal process of risk management, but it was not necessarily
due to its efficiency. It was merely a coincidence”. Through a five point Likert scale, a larger portion of
respondents (57%) strongly disagree with such statement. This result, added to the arguments expressed
in interviews, demonstrates a contrasted perspective within the construction industry, perhaps due the fact
that the strict measurement of such assumption is a challenging one.
Consequently, it can be draw that risk management certainly fortifies the decision-making process,
preventing projects to carry unnecessary risks that threaten future results. However, it does not
necessarily mean that implementing it will be the unique strategy to achieve better outcomes. Thus, such
assumption adds even more doubts over the process’s capability or crucial necessity during the
management of projects. In the words of a particular interviewee, “we can never say the success of a
project depends on risk management. I have been involved in other projects which have not used any risk
analysis and delivered pretty much what the client required”.
4.9 Risk Management and Key Performance Indicators
Over the literature review, it has been discussed the emergence of various performance parameters vastly
utilized as a benchmarking element within the construction industry, having as its ultimate objective
enable organizations to strengthen operations poorly managed comparing it to mainstream performance
levels.
Therefore, questions have been raised upon which Key Performance Indicator may be pointed out as the
one which suffers most influence when a formal process of risk management is successfully implemented.
As listed in section 2.8.1, the KPI’s often chosen by organizations in the construction industry are the
following: [1] Client satisfaction – product/service; [2] Predictability – cost/time; [3] Productivity; [4]
Construction costs; [5] Defects; [6] Profitability; [7] Safety and [8] Construction time.

31
According to data collected through interviews and questionnaires, a linear industry mind-set may be
observed as most respondents pointed out towards construction costs as the principal factor being most
influenced should the formal process of RM be undertaken.
The findings revealed a heterogeneous viewpoint amongst a sample of 6 questionnaire respondents. From
Table 1, presents this heterogeneity in the form of percentages.
Table 1 Key Performance Indicators – Risk Management influence
Most surprisingly, any interviewee/questionnaire respondent has leaned its opinion towards the role of
risk management as a fundamental approach for basing and structuring decisions as a means to develop
client satisfaction of both product/service. One might say that most professionals are still ‘blind’ or biased
towards the financial aspect of such approach. Actually, it exposes a yet fragile belief that applying RM
brings only financially related outcomes, such as savings on construction cost.
Beyond the evaluation of which KPIs the formal process of risk management might influence most, this
research attempted to further analyse the main phases’ role in this relationship. According to respondents’
standpoint risk analysis represents the most critical phase when project performance is sought. One
explanation for this is that although the identification phase is a continuing process throughout the project
life-cycle, the analysis of risks are dependant of a wide range of varieties that most companies too often
rely on computer softwares. In addition to that, analysing risk impact and probability requires an extended
experience from professionals involved. This, to some extent, certainly weighs on construction
professionals’ concerns that if a project goes wrong, he may be blamed.
To provide some more insight into the relationship between Risk Management and project performance,
the follow-up interviews equipped the research with valuable information regarding the importance of
applying the process in a continuous basis over the project life-cycle. According to a project manager of a
large UK infrastructure organization, the earliest stages, right after the funding has been secured, are vital.
Another crucial stage pointed out was the detail design, a stage characterized by its heavy risk exposure
and increasing uncertainty. The interviewee warned that over detail design “you get to see that risk

32
management is not applied so much and you would have hoped at that point that either you place any
medications that reduce the consequences of any site risks materializing”.
5. CONCLUSION AND SUGGESTIONS FOR FUTURE RESEARCH
The construction industry is complex in its own essence. Evidences from project to project have shown a
multitude of adversarial situations impacting on the overall performance of projects regardless of the
organization’s size. Nevertheless, due to a still slow dissemination of knowledge related to the practice of
risk management, organizations remain unprepared to tackle unexpected situations. It has been argued
that there still remains misperception on assessing risk and uncertainty. Construction professionals tend to
use the term ‘risk’ to refer to downside events that could affect the achievement of project mission. The
argument was basically grounded on the possibility to assign probabilities to risks whereas uncertainty
was seen as lack of information. This focus on threats alone can lead to emergent opportunities to be
missed, and a reflective management of risk and uncertainty could usefully include a special attention to
opportunity.
There are limits to the extent to which risk can be managed, though. The follow-up interviews revealed a
widespread line of thought where professionals believe that some risks are simply not possible to tackle.
One can argue that having inherent risks in projects can drive an organization to success.
The practice of Risk Management has been changing over the past years. As the literature review
revealed, past organizations considered this process as time consuming as well as not efficient enough to
devote large volumes of resources in its support. Nowadays, this viewpoint is rapidly changing as
professionals are less reluctant and more willing to apply the process as a project routine rather than
intermittently. As a consequence, the level of knowledge of the risk management process reflects that
shift in attitude. Professionals claimed to have a strong knowledge of the entire process. Paradoxically,
open-ended questions in the questionnaire showed exactly the contrary. Despite knowing what the
process entails, the respondents lacked breadth and depth when asked to define the process, as a
professional limited it to ‘brainstorming sessions’.
Project Performance has long been acknowledged as an issue which needs to be addressed and the
success of a project have often been determined by the Iron Triangle: time, cost and quality. The
emergence of KPIs added further parameters to benchmark construction project performances. The
findings in the research unveiled that risk management plays an important role in improving project
performance. An intriguing question was raised intending to open the eyes of the respondents to evaluate
whether applying risk management resulted in better performance but merely due to coincidence instead
of the process efficiency. Professionals agreed to some extent that managing risk formally does not
automatically lead to successful outcomes. Interestingly, a respondent exemplified it stating that he has

33
examples of past projects achieving the clients’ expectations without any formal process of risk
management.
Not surprisingly, the research findings indicated that amongst the ten KPIs listed, professionals believe
that if the formal process of risk management is applied it will enable a better prediction of costs and time
as well as have a serious effect on reducing construction costs. These effects are only to be achieved once
project teams carry out the process in a continuous basis, from inception to completion. A common
practice within the construction industry is identifying and classifying risks in the project inception and
neglecting emerging risks as they appear throughout the project life-cycle. The role of experienced
professionals judging and inferring probabilities from a sample of observations of previous occurrences,
through brainstorming sessions or interviews also have an impact on the achievement of the project
mission. In addition, the findings found that analyzing the risks in terms of impact and probability
implications lead to taking actions more effectively, hence improving performance.
5.1 Limitations of the Research
Although all objectives described in section 1.2 have been successfully met, the findings of this research
presented some flaws:
 Inability to gather an expressive data sample: If more reliable data was available, the results
would reflect an even more in-depth analysis.
 Time and resource constraints: there was not sufficient time to undertake a holistic analysis as
well as lack of resources generated further limitations in the data gathering process as interviews
in a face to face basis with professionals based outside London had to be turned down.
 Questionnaire structure: the questionnaire comprised an extensive set of questions, including
open-ended questions that required in-depth knowledge and a great deal of effort, leading
respondents to respond only first part, and skip the following sections of the questionnaire. It
limited in nearly 50% the response rate of all questions.
5.2 Suggestions for Future Research
This research represents one of the rare attempts to find relationships between risk management and its
efficiency in terms of impact and influence on project performance, taking the research one step further to
pave the way for future studies. Future studies could go further in terms of understanding which specific
performance indicator risk management influences most, for instance, the implications of risk
management on cost reduction.
Further, instead of analysis only an exact industry, the research could expand the scope of analysis to
other sectors, enabling researchers to compare practices and implications between different industries.

34
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7. APPENDIXES
7.1 Appendix A - Interview
Interview
Personal Information
Name:
Years of experience:
Organization (optional):
Role:
Questions
1. Could you define ‘risk’? How would you determine the difference between ‘risk’ and
‘uncertainty’?
2. What is Risk Management?
3. Is risk a totally manageable project feature? Please explain.
4. According to recent researches, construction companies have been facing difficulty in
achieving time, cost and quality objectives mainly due to unforeseen events not being
sufficiently managed/planned. To what extent do you agree that a formal process of risk
management plays an important role in improving your company’s overall project
performance?
5. Taking into account a result of a recent project you have run, has Risk Management been
used in any extent? If so, which techniques or strategies have been mostly used? Please
discuss.
6. Key Performance Indicators (KPIs) have been offered as benchmark indicators for the
whole construction industry. They are mostly used by organizations to compare their
performance against the national level. From the following list, which KPI would you point
out as the one Risk Management influences most? Please expand.
Client satisfaction – product/service Defects
The aim of this interview is to investigate the interviewer’s overall perception on the formal process of
Risk Management and its influence on project performance.

39
Predictability – cost/time Profitability
Productivity Safety
Construction Cost Construction Time
7. To what extent would you agree with the following statement: “The overall performance of
my company’s projects has improved after implementing a formal process of risk management,
but it was not necessarily due to its efficiency, was merely by coincidence.”?
8. If you could determine, which are the benefits and drawbacks of implementing a formal
process of Risk Management (Risk Identification, Risk Classification, Risk Analysis and
Risk Response)?
9. What are the barriers you would point out as the most critical for obstructing the
development of the formal process of risk management in your company? Please expand.
Lack of time Lack of sufficient training on RM
Lack of budget Lack of top management support
Low profit margin
10. Throughout the project life-cycle of a recent project you have been involved in, is risk
management applied over all phases of the project? Does it have any influence on how the
desired outcome might be achieved?

40
7.2 Appendix B - Questionnaire
SECTION 1 BACKGROUND INFORMATION
For section 1 and 2 please tick the relevant boxes:
1. My role responsibility in the project is:
CEO Project Manager Consultant
Contracts Manager Risk Manager Other team member
Other please specify …………………………………………………
2. Could you please tick the box which refers to….
(a) Your age (b) How many years have you spent (c) How many years
in construction project management? you spent with your
current company?
20-30 0-5
36-40 6-10 0-5
51-55 11-15 6-10
Over 55 16-20 11-15
21-25 16-20
26-30 21-25
Over 31 26-30
Over 31
3. In the past 10 years you have worked primarily in:
A large organization (250 or more employees)
A medium-sized organization (between 50 and 249 employees)
A small organization
4. Does your organization have a specific unit of risk management?
Yes No If no, please answer question 5.

41
5. How risk is handled in your organization? Please specify.
………………………………………………………………………………………………………………
………………………………………………………………………………………………………………
………………………………………………………………………………………………………………
……………………………………
SECTION 2 RISK MANAGEMENT
6. How would you define ‘risk’?
……………………………………………………………………………………………………………….
…………
(The ranking for questions 7 and 8 is: Considerably yes 5 4 3 2 1 Not at all)
7. How familiar are you with the concept of Risk Management? 5 4 3 2 1
8. Are you satisfied with the process by which your company deals with risk? 5 4 3 2 1
9. Could you define Risk Management?
………………………………………………………………………………………………………………
………………………………………………………………………………………………………………
……………………….
9. Do you find your company deals with risk using qualitative, quantitative techniques or
both? Qualitative Quantitative Both
10. Does your company produce a risk analysis using formal/systematic approach or is it an ad-
hoc process, or a process combining both processes?
Formal approach 5 4 3 2 1 Ad-hoc basis
10. Is it possible strengthening the way your company handle risks? Please expand.
………………………………………………………………………………………………………………
…………
The aim of this section is to deeply discuss how risk has been dealt with and perceived throughout the project life-cycle

42
12. Please, point out the level of use of the policies and/or strategies which are followed by your
company in risk management to achieve a desired goal in the following table:
Level of use of the strategies
No. Strategies very high high medium low very low
1 Risk Identification
2 Risk Classification and its analysis
3 Dealing with risks / controlling risks
4 Observing the risks and documenting solutions
13. In terms of risk response, from the following list select only two that are the most used
strategies of your company.
Risk retention Risk transfer
Risk reduction Risk avoidance
SECTION 3 RISK MANAGEMENT AND PROJECT PERFORMANCE
14. According to a set of researches carried out recently construction companies have been
facing strong difficulties on achieving time, cost and quality objectives mainly due to
unforeseen events not being decently treated. In which extent do you agree that a formal
process of risk management play an important role in improving your company’s
performance?
Totally agree 5 4 3 2 1 Strongly disagree
15. Taking into account your past experiences running projects, do you feel that the formal
process of risk management has improved your company’s results in which level?
Very high 5 4 3 2 1 Very low
The aim of this section is to further discuss the relationship between the practice of risk management and its impact on
project performance

43
16. In which extent would you agree with the following statement: “The overall performance of
my company’s projects has improved after implementing a formal process of risk management,
but it was not necessarily due to its efficiency. It was merely a coincidence.” ?
Totally agree 5 4 3 2 1 Strongly disagree
17. Which of the following performance criterion would you point out as the one which suffered
the highest impact due to an implementation of a risk management process in your
company?
Client satisfaction – product/service Defects
Predictability – cost/time Profitability
Productivity Safety
Construction Cost Construction Time
18. If you could determine, which of the following phases of the risk management process
would you choose as the most critical to enhance your company’s overall project
performance? (Please, tick only one box)
Risk Identification Risk Classification
Risk Analysis Risk Response
Risk Control
19. Which of the following barriers would you point out as the most critical for obstructing the
development of the formal process of risk management in your company? (Please, tick only
one box)
Lack of time Lack of sufficient training on RM
Lack of budget Lack of company’s support
Low profit margin

44
7.3 Appendix C – Interview Transcription
Interview Transcription
Interviewee: Mark Rice
Organization: Transport for London
Date: 07.08.2013
Length: 25 minutes
Q1. Could you define ‘risk’? How would you determine the difference between ‘risk’ and ‘uncertainty’?
“Uncertainty you can sign a probability to whereas risk you cannot. And ‘risk’ is an event that is going to
happen that can affect the project throughout the project life-cycle and it can have a beneficial or
detrimental on the project outcome.”
Q2. What is Risk Management?
“For me Risk Management is the proactive looking at what risks could impact the delivery, the likelihood
of those, the cost implications of those, and putting in steps and measures in place to reduce the likelihood
of the risk occurring or to reduce the costs of the risk”
Q3. Is risk a totally manageable project feature? Please explain.
“No. There always going to be some inherent in the projects. Not all of the risks in a project will be
managed because there are a wide variety of risks, and some of those risks will get down and you cannot
reduce down to a level that is not worth pursuing anymore.”
Q4. According to recent researches, construction companies have been facing difficulty in achieving time,
cost and quality objectives mainly due to unforeseen events not being sufficiently managed/planned.
To what extent do you agree that a formal process of risk management plays an important role in
improving your company’s overall project performance?
“I think it is a critical area, as you say there is always risks that are going to impact the program duration,
the risk event or the program cost or the quality of the project. We have active risk management sections
every month on a project and those sections are really important to get the whole team together to review
and discuss risks and take actions away to reduce the impact of those or the likelihood of them occurring.”
Q5. Taking into account a result of a recent project you have run, has Risk Management been used in
any extent? If so, which techniques or strategies have been mostly used? Please discuss.
“It has been used in all projects I have worked on. The most current example is to have the designers on
board with the contractors, on board with the client and it allows you to design out any buildability issues
and any risks for construction and become to the main works by having consolidated people, good
communication and sharing knowledge and information reduce risk of any unforeseen events.”
Q6. Key Performance Indicators (KPIs) have been offered as benchmark indicators for the whole
construction industry. They are mostly used by organizations to compare their performance against
the national level. From the following list, which KPI would you point out as the one Risk
Management influences most? Please expand.

45
“I would say construction costs. It is the most easily definable event to risks actually materializing. So KPIs
can easily be applied (…) against construction costs”
Q7. To what extent would you agree with the following statement: “The overall performance of my
company’s projects has improved after implementing a formal process of risk management, but it was
not necessarily due to its efficiency, was merely by coincidence.”?
“I would agree to some extent with that statement. There always going to be inherent uncertainty and risks
that you have not discussed in meetings. But have a formal process to have formal review and actually
review the construction risks every month and give an opportunity to people to input and feedback and
share ideas on how to reduce the costs and the likelihood of the risk occurring”.
Q8. If you could determine, which are the benefits and drawbacks of implementing a formal process of
Risk Management (Risk Identification, Risk Classification, Risk Analysis and Risk Response)?
“The drawback s are in the identification stage because you need to have some sort of benchmark or level
where you can draw the line on how many risks are actually required. Usually would be a brainstorming
session, an open session when everyone can contribute with ideas and that always contribute lots of good
ideas and usually it forces people to dive as many ideas as they can.”
“Drawbacks are the time implications of implementing a formal risk management process. But the benefits
are that to have it formally in place it is regularly reviewed and accepted by everyone within the project the
risk is a key consideration that ultimately affect the project success”.
Q9. What are the barriers you would point out as the most critical for obstructing the development of the
formal process of risk management in your company? Please expand.
“The most critical is lack of time. That is because everyone has different priorities that can often inflict
priorities that usually either the risk manager or the commercial manager who lead the risk management
sessions. So it is difficult to get good input from everyone else in the project team to those sessions because
of the lack of time they have to devote to other things going on that affect the project outcome”.
Q10. Throughout the project life-cycle of a recent project you have been involved in, is risk management
applied over all phases of the project? Does it have any influence on how the desired outcome might
be achieved?
“Yes. The main phase during the project life-cycle is after the funding has been secured, the initial stages of the
design, and it is also key consideration when you get into detail design because it is going to impact the level of
success you have when you get to see that risk management is not applied so much and you would have hoped at
that point that either you place any medications that reduce the consequences of any site risks materializing. But
again, risk should be reviewed at the end of the project and lessons learned. Risk is important in initial phases, it
helps you in you to guide the project to successful outcome.”

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