Exploring the Interplay between Risk Management and Construction Risks: Implications for Project Performance through Structural Equation Modeling

Abstract

Construction project risk is an uncertain event that can have a positive or negative impact on project objectives, with unmanaged risks being a major concern for many projects. Previous studies have addressed this issue, but there is a lack of research on the relationship between risk management and project performance, particularly in terms of the intermediary effect of construction risks. This study aims to fill this gap by examining how risk management, project performance, and construction risks are interconnected. A hypothesis was formulated to investigate this relationship, and a theoretical model was developed based on existing literature. Data was collected through a research questionnaire from participants involved in large public building construction projects with more than ten floors in Addis Ababa. Structural equation modeling of risk management processes, risks, and project performance was conducted using SPSS software. The findings revealed that economic, political, logistics, and management risks significantly impact project performance, with internal risk factors collectively exerting a greater influence than external ones. In terms of the risk management process, risk monitoring and evaluation, as well as identification, play a key role in project performance. The study confirms the hypotheses and establishes a significant relationship between risk management and project performance. Proper management of construction risks, including identifying risks, analyzing, developing response plans, and monitoring them continuously, significantly impacts project outcomes. The study on the relationships between risk management, construction risk, and project performance in construction projects in Addis Ababa holds significant practical applications for various stakeholders. By identifying the key risk factors affecting project performance and highlighting the importance of effective risk management processes, this research provides valuable insights for stakeholders in the construction sector. Practitioners and companies involved in large construction projects can utilize the model developed in this study to prioritize and mitigate risks that have a significant impact on project outcomes. This knowledge can help improve cost efficiency, project timelines, quality standards, and overall safety measures. Moreover, the study’s findings can guide construction personnel in understanding and preparing for potential risks associated with their projects, enabling them to develop effective mitigation plans. By bridging this knowledge gap, the study enhances the understanding and application of risk management strategies in construction projects, ultimately leading to improved project success rates.