Project Risk Factors Facing Construction Management Firms

Abstract

Very little is known about the project risk factors that affect construction management (CM) firms, which often struggle due to a lack of effective risk management practices. This study investigates the risk factors critical to project execution in CM firms and ranks them using the analytic hierarchy process (AHP) and failure mode and effects analysis (FMEA) methods. Interviews with executives at the top 15 Korean CM firms are carried out to identify major risk factors in the CM sector, and a survey is used to develop priority ranking. We find that payment delays and project delays are the two most critical risk factors affecting CM firms because of (1) lack of communication between headquarters and field offices, (2) shift of responsibility from headquarters to a field office, (3) absence of regular monitoring of project progress, and (4) ex-post management practices. The findings presented in this study should assist CM firms in establishing more robust risk management practices, thereby improving firms' profitability, project performance, and customer satisfaction.