Protocol to Enhance Profitability by Managing Risks in Construction Projects

Abstract

To enhance the profitability of a construction company, risks that affect the profit of the company must be controlled as part of their long-term business planning. Project risk management is a systematic process used for managing risks. However, it is challenging to properly analyze the probability and impact of risks because of the inherent uncertainties associated with construction projects. Therefore, a practical risk management protocol is proposed for construction companies to handle the risks through the analysis of completed construction projects. The protocol consists of two phases: Phase-1, risk identification and analysis at the project level, and Phase-2, development of risk-handling strategies to control risks at the company level. The major contribution of the proposed protocol is that any construction company can practically utilize the protocol to establish risk management strategies by evaluating the effectiveness of the relationships among cost centers, profit centers, and externals at the company level. As a result, construction companies will be able to: promote efficient organizational management; make profitable business partnerships with external entities; and provide straightforward risk management guidelines for future projects.