Risk Management Matrix for Building Contractors: Proper Use of Insurance

Abstract

The construction industry is inherently hazardous, requiring effective risk management strategies to mitigate potential negative impacts. This study develops a comprehensive risk management matrix for contractors in Sri Lanka, focusing on the use of insurance in building construction projects. It explores the severity of risks, contractors’ perception on coverage of risk transfer to insurers, and the actual coverage provided, addressing gaps in understanding insurance policies in the Sri Lankan construction sector. The study conducted three Delphi rounds of 25 semistructured interviews with experts selected via purposive sampling, analyzed using manual content analysis. Findings reveal significant discrepancies between contractors’ perceptions and actual insurance coverage, particularly for critical risk factors, exposing contractors to unexpected financial risks or inefficient resource use. By examining 46 risk factors across 10 categories, the study identifies key areas where contractors frequently misunderstood insurance coverage. The risk management matrix created offers a valuable tool for local contractors, guiding them in optimizing insurance policies for effective risk management. These findings are also relevant for other developing countries with similar construction industry conditions, providing insights to enhance risk management practices in these settings.