- Project plans
- Project activities
- Legislation and standards
- Industry context
Last edited 09 Jul 2018
Risk in building design and construction
The development of buildings is carried out in several phases, all involving hazard, uncertainty and risk.
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.
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:
- A situation where there exists no knowledge of its outcome.
- The variation in possible outcomes that exist in nature in a given situation.
- A high probability of failure.
- Lack of predictability about structure, outcome, or consequences in decision or planning situations.
- The chance of something happening that will have an impact on objectives.
Although the risk concept has been defined in many ways, it is characterised by two main factors:
- The likelihood of a particular hazard actually taking place.
- The impact or consequences of that.
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:
- An effect is a deviation from the expected, and can be positive and / or negative.
- Objectives can have different aspects (such as financial health and safety, and environmental goals) and can apply at different levels (such as strategic, organisation-wide, project, product and process).
- Uncertainty is the state, even partial, of a lack of information related to knowledge of an event, its consequences or likelihood.
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.
 Basic risks of construction projects
The construction industry has a high rate of accidents and a poor reputation for coping with problems, with many projects failing to meet deadlines, cost and quality targets. In extreme cases the risk of time and cost overruns can compromise the economic viability of the project, making a potentially profitable investment untenable. Compared to many other activities, construction is subject to more risks due to its unique features, such as long duration, complicated processes, unpredictable environment, financial intensity and dynamic organisational structures.
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'.
- Performance, scope, quality, or technology issues;
- Environment, safety, and health concerns;
- Scope, cost, and schedule uncertainty;
- Political concerns.
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):
- Changes in the work
- Subsurface geological and geotechnical conditions
- Site access
- Level of detail design delivered by the owner
- Late drawings and instructions
- Availability of resources
- Accidents (such as collision, fire and so on)
- Damage to persons or property
- Defective design
- Cost of tests and samples
- Actual quantities of work
- Equipment commissioning
Financial and economic
- Productivity of labour
- Productivity of equipment
- Suitability of materials
- Defective work
- Conduct hindering performance of the work
- Labour disputes
Contractual and legal
- Delayed dispute resolution
- Delayed payment on contracts and extras
- Change order negotiation
- Insolvency of contractor or a subcontractor
- Subsurface geology geotechnical conditions
- Subsurface conditions and ground water
- Natural catastrophes
Political and societal
- Soil availability for construction
- Environmental pressures
- Regulations (safety or labour laws)
- Public disorder
- Owner involvement in design
- Inadequate and incomplete design
- Change in seismic criteria
- Errors in completion of structural / geotechnical / foundation
- Wrong selection of materials
- Take off data (traffic demand, water consumption demand, etc.)
- Need for design exceptions
- Inaccurate contract time estimates
- Construction procedures
- Construction occupational safety
- Work permissions
- Late surveys, incomplete or wrong
- Delayed deliveries and disruptions
- Worker and site safety
- Innovative projects
- Unsuitable equipment and materials
- Environmental risks (such as projects close to a river, floodplain, coastal zone, high habitat sensitivity, and so on)
- Environmental factors
- Environmental analysis incomplete or wrong
- Offsite and onsite wetlands
- Hazardous waste, preliminary site investigation wrong
- Lack of specialised staff (biology, anthropology archaeology, etc)
- Inaccurate assumptions on technical issues in the planning stage
- Fact sheet requirements (exception to standards)
- Contractual relations
- Landowners unwilling to sell
- Priorities change on existing program
- Funding changes for fiscal year
- Stakeholders request late changes
- New stakeholders
- Additional needs requested by stakeholders
- New information required for permits
- Inconsistent costs, time, scope, and quality objectives
- Permits and licences
Force majeure factors
- Political factors change (political interference)
- Political climate
- Economic instability
- Market conditions
- Exchange rate fluctuation
- Public safety regulation
- Social factors
- Local communities pose objections
- Environmental factors
- Environmental regulations change
- Water quality issues
- New information required for permits
- Environmental impact statement required
- Historic site, endangered species, or wetlands present
- Pressure to compress the environmental schedule
- Inexperienced staff assigned
- Losing critical staff at crucial points of the project
- Insufficient time to plan
- Unanticipated project manager workload
- Not enough time to plan
- Priorities change on existing program
- Inconsistent cost, time, scope, and quality objectives
- Project purpose definition, needs, objectives, costs, deliverables are poorly defined or understood
- No control over staff priorities
- Too many projects
- Consultant or contractor delays
- Estimating and/or scheduling errors
- Communication breakdown with project team
- Lack of coordination / communication
- Inexperienced workforce / inadequate staff / resource availability
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.
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.
 Related articles on Designing Buildings Wiki
- Contingency plan.
- Design risk management.
- Health and safety.
- Interface risk in construction.
- Method statement.
- Near miss.
- Principles of prevention.
- Project risk.
- Retained risk.
- Risk assessments and method statements.
- Risk assessment.
- Risk feedback.
- Risk management.
- Risk register.
- Safety management.
- Value management.
 External references
- Medeiros, J. A., & Rodrigues, C. L. (n.a.): A existência de riscosnaindustria da construção civil e a suarelação com o saberoperário.
- Project Management Institute (2008): A Guide to the Project Management Body of Knowledge (PMBOK® Guide) — Fourth Edition.
- Padiyar, V., Shankar, T., &Varma, A. (n.a.).Risk Management in PPP. Re- trieved in October 2010 from www.globalclearinghouse.org/.../Padiyar%20et%20al%20%20Risk%20Management%20in%20PPP%20(2004).pdf
- ISO /FDIS 31000:2009(ISO/IEC Guide 73)
- U.S. Department of Transportation (2006): Risk assessment and allocation for highway construction management . Retrieved January, 2011, from http://international.fhwa.dot.gov/riskassess/index.cfm
- Guerra, J. R., &Teixeira, F. J. (n.a.): Risk Management applied to design, tendering/awarding and construction in EDP hydroelectric power plants.
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