Application of risk management to the Chinese construction industry

This work is concerned with the application of the principles and techniques or risk management in the Chinese construction industry. While the benefits of risk management have been increasingly recognized in the Western construction industry, this study suggests that Chinese construction managers have little knowledge or understanding of this important area of management. In recognition of the existence of this failing and the need to overcome it, this study introduces principles, procedures, approaches, models and concepts in risk management. The study concentrates on the consideration of those risks associated with the various elements of construction activities and environment. In the quantitative studies, the main elements considered are the duration and cost of the activities of a project. The main emphasis is placed upon the contribution which can be made to the avoidance of cost overrun. A risk management model has been developed using the Monte Carlo simulation. Although some network-based cost models already exist, this item-based model offers an approach which can predict construction cost rapidly, and enable the consequences of alternative construction methods or management strategies to be evaluated quickly and realistically before tendering and other decisions such as the procurement of materials and equipment are made. While the item-base cost model can be structured to include very detailed cost items, the model in this study assumes a simple structure, and describes construction cost in three general levels - budget cost, primary estimate and planning cost. The computer programs for the model have been developed as a part of the study.