Last edited 20 Jul 2021

Risk in building design and construction


[edit] Introduction

The development of buildings is carried out in several phases, all involving hazard, uncertainty and risk.

[edit] Hazard

A hazard is a situation that sets some level of threat to life, health, property, the environment, personal integrity, and so on

From a health and safety perspective, a hazard may be seen as a condition with the potential to cause physical impairment or health consequences in people (or any other type of life). In a project environment, a hazard is anything that may affect the success of project activities or the project as a whole. Similarly, companies, ventures, physical assets, the environment and society face hazards.

Most hazards are potential or latent but when they become active or effective, they can generate emergency situations. A hazardous situation that becomes effective can cause an incident, an accident or a disaster.

[edit] Uncertainty and risk

Uncertainty is not the same as risk. The two terms are distinct and have different meanings. ‘Uncertainty’ refers to the occurrence of an event about which little is known, while a risk is the outcome of an event which is predicted on the basis of statistical probability. Uncertainty exists when there is more than one possible outcome and risk exists when a decision is expressed in terms of a range of possible outcomes.

The first step in risk assessment is to identify hazards, after which it may be possible to treat risks, thereby preventing them. However, an exact definition of risk and its measurement is still controversial - despite its ubiquity in almost every human activity.

The word 'risk' is used with many different meanings. The European Commission suggests that a risk is any factor, event or influence that threatens the successful completion of a project in terms of time, cost or quality. However, there are many other definitions, such as:

Although the risk concept has been defined in many ways, it is characterised by two main factors:

Actually, many risk standards suggest it is important to understand these two component elements to fully define a risk. While some definitions of risk focus only on the probability of occurrence of an event that may possibly affect the achievement of a given process, more comprehensive definitions consider both the probability of the occurrence and its consequences.

Risk is the effect of uncertainty on (the achievement of) objectives:

Ref. Basic definitions from ISO /FDIS 31000:2009 (ISO/IEC Guide 73)

According to the Project Management Institute, PMBOK (Project Management Body of Knowledge) – Fourth Edition (2008), a risk may have one or more causes and, if it occurs, it may have one or more impacts which in turn may have positive and negative effects on the project objective. A cause may be a requirement, assumption, constraint, or condition that creates the possibility of negative or positive outcomes. However, some definitions tend to focus only on the downside scenarios.

[edit] Basic risks of construction projects

According to Pinsent Masons, risks such as tax risks, interface risks and local site risks are the most common and inevitable on construction projects. Other risks that may be less likely to occur are force majeure events or changes in law; but should these risks occur, they will have a significant impact on the project. Ratz points out that delays, claims for increased costs, injuries to workers and so on are the most common risks in construction projects. The accumulation of all these risks or the combination of them can be termed 'project risks'.

Construction project risks are interrelated and interdependent. The customary origins for project risks are the following (U.S. Department of Transportation, 2006):

Risk will be peculiar to each particular project and each project participant, however, it is recognised that all construction projects share common risks that can be classified as follows (Guerra & Teixeira):


Financial and economic



Contractual and legal


Political and societal

The US Department of Transportation (2006) adopts the following risk organisation structure:

[edit] Technical risks

  1. Owner involvement in design
  2. Inadequate and incomplete design
  3. Change in seismic criteria
  4. Errors in completion of structural / geotechnical / foundation
  5. Wrong selection of materials
  6. Take off data (traffic demand, water consumption demand, etc.)
  7. Need for design exceptions
  1. Inaccurate contract time estimates
  2. Construction procedures
  3. Construction occupational safety
  4. Work permissions
  5. Utilities
  6. Late surveys, incomplete or wrong
  7. Delayed deliveries and disruptions
  8. Worker and site safety
  9. Innovative projects
  10. Unsuitable equipment and materials
  11. Environmental risks (such as projects close to a river, floodplain, coastal zone, high habitat sensitivity, and so on)
  1. Environmental analysis incomplete or wrong
  2. Offsite and onsite wetlands
  3. Hazardous waste, preliminary site investigation wrong
  4. Lack of specialised staff (biology, anthropology archaeology, etc)
  • Inaccurate assumptions on technical issues in the planning stage
  • Fact sheet requirements (exception to standards)

[edit] External risks

  1. Landowners unwilling to sell
  2. Priorities change on existing program
  3. Funding changes for fiscal year
  4. Stakeholders request late changes
  5. New stakeholders
  6. Additional needs requested by stakeholders
  7. New information required for permits
  8. Inconsistent costs, time, scope, and quality objectives
  9. Permits and licences

Force majeure factors

  1. Political factors change (political interference)
  2. Political climate
  3. Economic instability
  4. Market conditions
  5. Exchange rate fluctuation
  6. Public safety regulation
  1. Local communities pose objections
  1. Environmental regulations change
  2. Water quality issues
  3. New information required for permits
  4. Environmental impact statement required
  5. Historic site, endangered species, or wetlands present
  6. Pressure to compress the environmental schedule

[edit] Organisational risks

[edit] Project management risks

It is important to capture all potential risks in a project and undertake all necessary actions or make provisions for eliminating or preventing them from occurring. Alternatively, the effects of risks may be reduced and allocated to the party best prepared for managing them. This requires a systematic approach to risk management.

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The text in this article is based on a section of ‘Risk Management in Construction’ by José Cardoso Teixeira, Janusz Kulejewski, Micha Krzemiski and Jacek Zawistowski. The original manual was published in 2011. It was developed within the scope of the LdV program, project number: 2009-1-PL1-LEO05-05016 entitled “Common Learning Outcomes for European Managers in Construction”.

It is reproduced here in a slightly modified form with the kind permission of the Chartered Institute of Building.

[edit] Related articles on Designing Buildings Wiki

[edit] External references


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