Risk Management in the South African Construction Industry

This descriptive study investigates the risks experienced in the South African construction industry, their probability of occurrence and the impact on project objectives. It also researches the risk management strategies employed and the degree to which they influence firms’ performance. The study is based on a questionnaire survey of contractors and project risk managers from a purposely selected sample of 50 construction companies. The questionnaire was designed with four separate sections and tested for reliability. The results indicate that the ten most critical risks faced by the South African construction industry are the following: cash flow problems, effect of time and cost overrun, investment risks, inadequate resources and availability of funds, availability and exchange rate fluctuations, incomplete project closure, no extra-work control, special equipment and materials transshipment delays, inadequate and low-quality procurement of resources, and damage during construction due to negligence. Additionally, ensuring good quality of construction materials through an efficient supply chain, and formal training of construction workers are the strategies which significantly influence the firms’ performance. The study also shows that project management, end-product fitness for purpose and reduction in supplier/contractors’ defaults drastically improve if risk management strategies are properly implemented.