EVALUATION OF RISK MANAGEMENT PRACTICE IN CONSTRUCTION COMPANIES IN LAGOS STATE, NIGERIA

Abstract

Organizations in the construction industry are liable to uncertain events inherent throughout the life cycle of any projects. This could be negative or positive – probability, injury, liability, loss, threat of damage or other occurrence caused by external or internal vulnerabilities. Project participants, lack common understanding of project risks and their consequences, hence preclude an implementation of effective and early preemptive actions and/or strategies to mitigate adequately, the risk challenges. This has led many construction firms to become insolvent, especially in Nigeria. This study aims to advance, knowledge around risk management practices in the Nigerian construction industry, by determining the level of risk awareness, management, maturity and challenges, with a view to suggesting ways of improving its practices. Lagos state is selected being the hub of construction activities in the country and also where most construction companies’ head offices are situated. 1504 public building contractors registered with the Ministry of Works in Lagos State represent the target population for the study. A size of 306 was sampled. A structured questionnaire was administered to the top management members in the randomly selected registered construction firms in Lagos state, while data were analyzed using statistical (SPSS) of mean score percentages, relative importance index (ranking) and analysis of variance (ANOVA). The findings revealed a low level of risk awareness and maturity with a mean Score of 2.356). The financial pressure on the organization/paucity of fund to carry out risk management ranked the highest (with a mean score of 3.465), among the challenges facing the implementation of risk management in construction firms. Lack of Support or acceptance of the risk management process proposed by the RM team was ranked low (with a mean score of 3.335). The study concluded that there is a low level of risk awareness and practices in the construction industry and that financial pressure/paucity of fund is the greatest challenge facing risk management practices while risk maturity level of firms is at a novice stage. Thus it is recommended that more time and finance need to be committed to improve on staff level of risk awareness and that a risk management units should be established in construction firms, to implement enterprise risk management alongside formal project risk management in a more formalized way than as it is, at present. It is hope that similar studies would be extended to other states and on consulting firms with a comparative analysis of risk maturity level between contracting and consulting firms in Lagos State and in Nigeria as a whole.