CHAPTER ONE INTRODUCTION
Background of the Study
The construction industry in the United Kingdom (UK), owing to the nature of its business that involves open air operations, has always been seen as vulnerable to weather extremes that impact adversely on financial performance. Wedawatta, Ingirige, Jones and Proverbs (2011) confirmed this in their findings that identified this sector as being one of the most exposed to the vagaries and extremes of climate change. Such adversefinancial impacts are significant in light of the fact that construction sector firms constituted over 99 percent of Small and Medium Enterprises (SMEs) in the UK (Wedawatta et al., 2011), and dominated SME businesses.
The high risk exposure to adverse weather in the construction sector was attributed to poor risk management strategies. These included negative individual attitudes and informal organizational culture, low levels of technical expertise, poor disaster risk management procedures, poor planning activities, low levels of capital formation to manage recovery efforts and poor linkages with national agencies and technical support institutions such as the universities. These were attributed as the reason for the poor cost, time and quality performance in the sector, within the UK (Wedawatta et al., 2011).
Depending on the country context, additional challenges were faced by construction firms. For instance, Hlaing, Singh, Tiong and Ehrlich (2008) argued that the turbulent economy in Singapore, coupled with continuous change in the corporate environment, exposed players in
the construction industry to increased risk. This motivated a need among construction project managers to develop an integrated approach to construction project management, necessitating a strategic planning approach that covered the entire scope of construction projects, from inception to occupancy. This was as a consequence of significant changes within the sector, especially in the procurement function. This resulted in clients increasingly apportioning responsibility for risk management to contractors, making formal risk management a necessity among construction firms. Therefore, formulating effective risk management systems and strategies, in order to mitigate the impact of various risks, has become a critical issue that must be addressed by construction firm management (Hlaing et al.,2008).
In the developing country context, especially in Africa, risk management in the construction sector is an amorphous affair faced with higher levels of risk as compared to the developed countries. The level of adoption of formal risk management strategies is not widely studied either. In Ghana for instance, Boadua, Fianko and Chileshe (2015) observed a limited level of adoption of formal risk management strategies among construction oriented firms, with low levels of procedural documentation. One reason that was forwarded for this state of affairswas the low levels of awareness regarding appropriate tools and techniques to effectively manage construction risk. Consequently, the construction sector in Ghana faces many problems related to frequent cost and time overruns(Fugar & Agyakwah-Baah, 2010). Within the mass construction market in Ghana, Ahadzie, Proverbs and Olomolaiye (2008), observe that the most crucial project performance success criteria were overall project cost and quality.
Risk management among construction firms in Kenya has gained increased prominence owing to what Ngundo (2014) observes as an increase in infrastructure development in the country. The rise of many construction projects, most notable in real estate at the mass market level, has been faced with a lot of uncertainty, resulting in outcomes that fail to meet minimum standards benchmarked against best practice in the sector. Ngundo (2014) attributed the low levels of project success to failure to develop proper procedures, lack of sufficient training and capacity building programs, incompetence among project staff, low levels of formal quality management support and low levels of management commitment. As a result, project risk management planning was characterised by poor risk identification, assessment, prioritization, mitigation and control. The overall outcomes were weak and inappropriate risk management measures that increased the vulnerability of the construction firms to risk.
In order to enhance the management of construction risks, the Republic of Kenya (RoK) enacted legislation such as the Engineers Act (2011) and the National Construction Authority Act (2011) for purpose of ensuring that legal compliance in the industry went a long way towards reducing the various risks associated with construction projects (RoK, 2011). Karimi (2004) further observed that key reforms proposed in the Kenya Vision 2030 that would have resulted in effective risk management of construction projects included the creation of the necessary institutional framework to improve policy implementation and enforcement of industry codes and standards among others. There was also recognition of the need to institute functional and comprehensive risk management strategies in the industry, in order to achieve performance objectives.
