1. A Literature Review on
“Evaluation of risk factors impacting construction projects in Sri Lanka”
M.F.M RIFAN
MC 61525
CPM 7569
July, 2013
Department of Accounting
Faculty of Management Studies and Commerce
University of Sri Jayewardenepura
Gangodawila, Nugegoda,
Sri Lanka.

2. Introduction
The research problem for this literature review is ‘Evaluating the risk factors affecting Sri
Lanka’s construction projects’. Eventhough this topic indicates the perception of an
engineering or construction dicipline, we would rather focuss on the practical risk
management and Internal Audit perspective of the construction industry.
We all experience the recent transformation phase Sri Lanka is going through in various
sectors like Political, Economical, Cultural Etc., after the end of civil war. In its process of
progression building constructions ranging from mega scale construction like Highway roads
in southern parts of Srilanka to small scale ones like comunity centers in war torn areas of
eastern provinces has occupied a major interest. If those projects are not delicately planned
and executed with a long term vision the stakeholders will surely endup in utter waste of
resoureces and mean time not achieving the intended objectives.
Therefore Risk Management aspect will have an important role on these construction projects
in order to minimize potentiol adverse effects ( resource wastage, completion delays) and to
effectivley achieve the expected level of performance throught the projects. The below
review of the different studies conductud relating to the topic would help us derive usefull
insights if apllyed to the context to Sri Lanka.
Literature Review
Since the people who really meddle with the ground work of the construction are the
contractors let us look at their perspective on Risk Management. For this I have selected a
study done by Hlaing et al (2008) on the topic Perceptions of Singapore construction
contractors on construction risk identification. He says that the recent changes in the
corporate environment has result in more and more clients (specially companies) becoming
aware of the weight of risk they are willing to accept. That has endup in allocating or
transfering much of the risk to the contractors.Therefore the need for identifying and treating
those risks from inception to the occupancy has increased. Hlaing et al (2008) also argues

3. Risk identification is a key stage in project risk management as risks cannot be managed
unless they are identified (Chapman and Ward, 1997; Simister, 1994). Many have argued that
the construction industry is poor at carrying out risk identification (Flanagan and Norman,
1993; Baker et al., 1999). The result of this poor risk identification could well be ‘‘nasty
surprises’’ as risks are being taken on without explicit knowledge. Therefore, risk
identification should be performed as part of a project’s initial definition process, along with
project planning, budgeting and scheduling
Ater the identification of the risk comes the need for a comprehansive evaluation of each
risk. This area is explained by the research titled An evaluation of risk factors impacting
construction projects in Ghana by Chileshe and Fianko (2012).Study focusses on identifying
and assessing the likelihood of occurrence and degree of impact of the risk factors on
construction projects within the Ghanaian construction industry. The results of the randomly
selected survey shows that majority of the respondants had selected “construction methods”,
“inflation”, “weather condition”,” ground conditions and contaminant conditions” and “poor
communication amongst project team“ as the 5 most significant risk factors among a total of
25.The survey was geographically oriented only in one region called Greater Accra Region,
which limits generalization of the findings. But basically this study can be usefull to our
study on Sri Lanka because Ghana is a devoloping country plus it also currently goes through
a similar transformational stage on construction.
The next study finds out the adoption of qualitative risk analysis techniques (QRAT) on
construction projects in Nigeria, done by Adedokun et al (2013). The paper assessed the level
of knowledge, awareness, utilization success and the factors affecting the utilization of
qualitative risk analysis techniques. The result of the study revealed a low level adoption of
QRAT, thus preventing the Nigerian construction industry from taking full advantage of
QRAT in the analysis of risks inherent in construction projects. Also checklists, flowchart
and assumption analysis were the commonly used QRAT in the study area. Furthermore,
inadequate training and record keeping on risk management contributed largely to the factors
affecting the utilization of QRAT on projects (Adedokun et al, 2013).

4. The sample for the survey was limited to the selected large construction firms of the Nigerian
Federal Tender Board,which involves in high budget construction projects. Therefore the
adoption of the analytical techniques would be further low if we come down to small and
medium sized constrution firms. However the findings from this study give us valuable
information for my study to give adequete attension on the awareness and the utilization of
these techniques by the Sri Lankan construction companies.
After looking at the risks involved generally on the construction industry and then on the
techniques which can be used for the risk evaluation purpose, we will now go into the risk
factors affecting at each stage of a construction project. First we will review a study done on
the Risk factors impacting the Cash flow forecasting titled An evaluation of risk factors
impacting construction cash flow forecast, done by Odeyinka et al (2008). The research
identified 11 significant risk factors out of 26 research risk variables. These significant risk
variables were grouped under three generic factors of ‘‘changes in the design or
specification’’, ‘‘project complexity’’ and ‘‘natural inhibition’’.
Eventhough the sudy cannot be directly applicable to Srilanka since its done in UK which is
a much more efficient and devoloped market, the project by project approach used in the
analysing the respondants makes it possible to derive a view on Sri Lanka. This could
hopefully be done though building the arguments based on the projects which match with the
circumstances of the Srilankan construction companies.
Cost over runs is the most common problem both the contractor and the clients (buyers) are
facing, specially in large construction projects. A study was done by Dada and Jagboro
(2007) exactly relating to the same. It points out that the primary reason for not acheiving the
cost targets is the improper assesment of risk factors unique to each project. The main risk
factors identified are finance and political influence. A model was developed by relating the
variation between the initial contract estimate and the actual project cost to the risk variables.
The paper recommends that contingency additions should be based on the procurement
method used.

5. Costs of the projects crossing the budgets is primarily due to draging the completion deadline
for various reasons. Lets review a study done relating to the time factor. Zubaidi and Otaibi
(2008) in their study titled An Empirical Approach for Identifying Critical Time-Overrun
Risk Factors, looks into identifying the critical risk factors causing delay in Kuwait’s
building and infrastructure projects. Their Survey and case study results show that the
frequency of time-overrun in Kuwait’s construction projects is very high. The five most
critical time-overrun factors identified in Kuwait’s infrastructure and building projects are:
delay in government approvals/permits, delay in preparation and approval in variation orders,
client induced additional work beyond the original scope, changed engineering conditions
from the contract document and decreased labor productivity due to extreme climatic
conditions. Also another study points out that the most severe factors for delays are human
related factors that can be controlled and reduced by improving the skills of the construction
parties like managerial skills, labors skills, resources management skills, site management
skills, etc. (Mahamid, 2011).
The study being generalized into the country of Kuwait as whole is not appropriate in my
view since the survey sample only contained 28 building construction cases. The delay factor
suggested as decreased labor productivity due to extreme climatic conditions is unique to
Middle Eastern countries where sand storms and sudden hikes in temperature are quite
frequent. Therefore this factor would not be a likely Risk factor when looking from the
Srilankan perspective.
A study done by Enshassi et al (2012), discusses about the major problems and the causes
which exist between the contractors and subcontractors in the construction industry. The
result of the survey indicated that, assigning part of the works to new subcontractor without
informing the original subcontractor, contractor’s financial problems, delay in contract
progress payments, non-adherence to the conditions of the contract, non-adherence of the
subcontractor to the time schedule, and lack of construction quality work were the most
important causes of interface problems, while involvement in several projects with the
contractor at the same time, weather conditions, and geological problems on site were
considered as trivial causes of potential interface problems.

6. Financing the construction supply chain undoubtedly remains an important consideration,
particularly, in developing countries (Goss, 1980; Glen and Pinto, 1994; Aniekwu, 1995;
Achour et al., 1999; Eyiah and Cook, 2003; Grosskopf, 2005; Larrain and Matias, 2005).
This is because today’s globalized construction industry is characterized by elongated and
more complex supply chains, which can involve a multi-directional flow of raw materials
(Anugwom, 2007). The Risks faced by contractors as a result of the vendors and trade credit
provision provided to small to medium sized construction firms is discussed by Badu et al
(2012) in the context of Ghana. . A critical observation stemming from the analysis was that
trade policy was absent within the trade credit market in Ghana
Let us move on to the Risk Factors which impact the Construction industry in the post
production stage. Generally the factors contributing to maintenance cost includes the life-
long environmental factors that the building is exposed to during its useful life. This area is
discusses by Silva et al (2012) in the research tilted. Risk factors affecting building
maintenance under tropical conditions . A total of ten risk factors of maintainability were
identified in relation to high-rise buildings. The results show that there is a considerable
reduction in maintenance cost when these risks are identified and minimized at the design
stage itself.
Conclusion
The discussion on the risk factors affecting the construction industry provided us with many
insights to the practical causes of the problems. This would not only benifit the businesses
involved in the construction field, but also to the government policy setters in order to walk
on the path of efficiency and effectiveness. Since the objective of the study was limited to
evaluating the risk, a further review focussing on the Risk Mitigation Strategies would be
equally important.

7. Refferences
 Anugwom, E.E. (2007), Globalization and labor utilization in Nigeria: evidence from
the
 construction industry, Africa Development, Council for the Development of Social
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Nigeria, Construction Management and Economics, Vol. 13 No. 6, pp. 445-55.
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 Adedokun, O.A., Ogunsemi, D.R., Aje, I.O., Awodele, O.A. and Dairo, D.O.,
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 Chapman, R.J. and Ward, S. (1997), Project Risk Management Processes, Techniques
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Risk Management and Construction, Blackwell, Oxford.

8.  Chileshe, N. and Fianko, A.B.Y. (2012), An evaluation of risk factors impacting
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9.  Henry A. Odeyinka, H.A., John Lowe, J.L. and Kaka, A. (2008), An evaluation of
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