Integrated Approach to Construction Risk Management: Cost Implications

Abstract

Managing risk in construction projects has proven to be a challenge for many project managers and stakeholders involved in projects. The lack of a systematic approach and standardized processes are key factors influencing improper risk management techniques. This research introduces a new model to evaluate and assess risk in terms of cost impact, utilizing a fuzzy Monte Carlo simulation approach for the first time. The method consists of ranking the top risks using a fuzzy logic system utilized in an objective manner by setting criteria for experts to rank the risk based on cost impact and probability to reduce human biases, then evaluating their cost impact through a Monte Carlo simulation both pre- and postmitigation. This work proposes a new strategy to elicit risk for construction projects based on risk cost impact, project type, project location, project contract type, and project delivery method. Based on the findings, implementation of a risk mitigation response plan can decrease the project cost remarkably. This model proved to be beneficial in forecasting risk impact when executed on a commercial construction project in California. This model can be applied as a general tool for risk mitigation processes for the construction industry.