A Study of Risk Management Practices in the Nigerian Construction Industry.

Abstract

The multiplier effect of the construction industry to both developed and developing countries cannot be overemphasised. The 2012 construction sector review purports that the UK construction industry has an annual turnover of more than £100 billion and accounts for 10 per cent of the country’s GDP. In contrast Nigeria, which is urbanising at one of the fastest rates in the world, contributes only 3.2 per cent in terms of Gross Domestic Product. In other words, the contributions of the construction industry warrants persistent review of its gaps; risk and uncertainty are particularly rife in most Nigerian construction projects, and the cost implications are severe enough to influence its low GDP contribution and beyond. The aim of this research effort is to understand the competitive advantage (value chain) of enshrining risk management practices up and down the construction supply chain. A literature review was first conducted to identify and categorise different risk management practices on and off a construction site. In turn, the population for the study was determined using stratified random method of sampling. The units of analysis in this case study are contractual interfaces and organisational structure, of which there can be hundreds in a typical case. After an initial scoping study – the administering of 150 questionnaires – of risk management practices amongst general contractors. Fourteen in-depth interviews were conducted across a typical value chain. Drawing on principles of grounded theory, interview transcripts were analysed through a combination of content analysis and graphical representation of contractual and organisational structures. Clients and contractors were found to be risk averse even though they claimed to have formal written procedures for risk management. Their awareness of the importance of risk management in construction business is more of lip services. A graphical representation of the Nigerian contractual structure, supply chain and value chain was achieved. Consequently, a conceptual model is developed for enshrining risk management practices in developing countries. The micro and macro implication of the prescribed model is subject to its testing and validation.