Journal of Facilities Management

Analysing project risks in Ghana’s real estate industry

Charles Amoatey, Doreen Danquah,
Article information:
To cite this document:
Charles Amoatey, Doreen Danquah, (2018) "Analysing project risks in Ghana’s real estate industry",
Journal of Facilities Management, https://doi.org/10.1108/JFM-10-2017-0054
Downloaded by UNIVERSITY OF NEW ENGLAND (AUS) At 13:56 13 October 2018 (PT)

Permanent link to this document:

https://doi.org/10.1108/JFM-10-2017-0054
Downloaded on: 13 October 2018, At: 13:56 (PT)
References: this document contains references to 33 other documents.
To copy this document: permissions@emeraldinsight.com
The fulltext of this document has been downloaded 5 times since 2018*
Access to this document was granted through an Emerald subscription provided by emerald-
srm:320271 []
For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald
for Authors service information about how to choose which publication to write for and submission
guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information.
About Emerald www.emeraldinsight.com
Emerald is a global publisher linking research and practice to the benefit of society. The company
manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as
well as providing an extensive range of online products and additional customer resources and
services.
Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the
Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for
digital archive preservation.

*Related content and download information correct at time of download.

 The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1472-5967.htm

Real estate
Analysing project risks in Ghana’s industry
real estate industry
Charles Amoatey and Doreen Danquah
Business School, Ghana Institute of Management and Public Administration,
Accra, Ghana
Received 28 October 2017
Revised 4 December 2017
Downloaded by UNIVERSITY OF NEW ENGLAND (AUS) At 13:56 13 October 2018 (PT)

Abstract Accepted 30 December 2017

Purpose – The purpose of this paper is to analyse project risks in Ghana’s real estate construction industry
in terms of likelihood of occurrence, severity of impact and controllability.
Design/methodology/approach – A quantitative research approach was used in this study to address
the research objective. The study population consisted project managers, architects, surveyors and
contractors from 17 members of the Ghana Real Estate Developers Association (GREDA) in Ghana. Random
stratified sampling technique was used to select 97 participants from these firms. A structured questionnaire
was used to collect primary data, whereas descriptive statistics were used to present findings.
Findings – All risks identified have some level of likelihood of occurrence, extent of severity of impact and
controllability. Market risks, technical risks and environmental risks are more likely to occur. Market risks,
technical risks and environmental risks had the highest severity of impact. Financial risks, market risks,
managerial risks and technical risks are the most controllable. Among all risks, environmental risks are the
direst because they have high likelihood of occurrence and severity of impact but very low controllability.
Real estate construction firms (developers) are therefore expected to prioritize remedy of environmental risks.
Research limitations/implications – The study is based on self-reported perception of project parties
on the likelihood, severity of impact and controllability of real estate project risk factors. Firms outside of
GREDA were not included in the survey. Therefore, generalisation of these risk factors for the entire
construction industry should be done with caution.
Practical implications – The research results show that Ghanaian real estate developers are aware of the
existence of the risks which impact on the performance of the industry. To effectively and efficiently manage these
risk factors, project parties must understand the likelihood of occurrence, severity of impact and controllability of
the risk factors, as well as individual firm’s responsibilities and capabilities to manage them. Such knowledge helps
project managers to prioritise risks in managing them in the face of scarce resources. From an academic research
perspective, the paper contributes to a conceptual risk assessment framework for the real estate industry.
Originality/value – The paper’s main contributions relate to the introduction of real estate construction
sector-specific factors to project risk management modelling.
Keywords Construction, Risk factors, Ghana, Real estate, Controllability, Severity of impact
Paper type Research paper

1. Introduction
It is the priority of every organisation to enhance its project performance to maximise its
overall organisational performance. Some researchers (Fadun, 2013; Ibrahim and Kagara,
2014) have argued that the project management performance and project maturity level of a
firm are contingent on the effectiveness of project risk management. Effective management
of project risks is therefore a requirement for enhancing project performance and project
maturity. Management of project risks is said to be an inherent part of the project
management process (PMP) and plays a critical role in pre-empting project failure (Odimabo
and Oduoza, 2013; Ogunsanmi et al., 2011). Journal of Facilities Management
The importance of risk management in PMP has been tested and confirmed by © Emerald Publishing Limited
1472-5967
researchers. Thus, several studies (Carbone and Tippett, 2004; Ijigah et al., 2013) have DOI 10.1108/JFM-10-2017-0054
 JFM empirically confirmed that project risk management positively impacts several project
performance indicators such as project success, project maturity and project effectiveness.
This means that the relevance of risk management to project and business performance is
also empirically confirmed. However, empirical evidences on the effect of project risk
management on project performance indicators have been considered by some researchers
(Ogunsanmi et al., 2011; Ojo and Odediran, 2015) to have a weak root.
What is said to be a weak root in this context is the absence of an empirical framework
that visualises all project management risks and their respective severity of impact and
controllability. Ojo and Odediran (2015) and other researchers were of the view that project
risk management and its impact would be improved and maximised based on a good
Downloaded by UNIVERSITY OF NEW ENGLAND (AUS) At 13:56 13 October 2018 (PT)

understanding of each project risk, especially with respect to its severity in an industrial
context. They also argued that knowledge about the relationship among these risks is
fundamental to a firm’s project management maturity and knowledge.
The Ghana Real Estate Developers Association (GREDA) consist of top-, average- and
low-ranked construction firms in Ghana. Unfortunately, their consistent engagement in
project management has not adequately equipped them with a high project management
maturity, though this should not have been the case (Aminu, 2013). As observed by Kese
(2015), this situation is worsened by the fact that these construction firms hardly increase
their project management maturity levels and have therefore failed to maximise project
performance. Considering the argument of Fadun (2013), the difficulty associated with
enhancing project management maturity in these firms is traced to poor risk management
capability.
Poor risk management capability in construction firms is attributable to the fact that
management of these firms under GREDA lack sufficient knowledge on risks to which their
projects are exposed, specifically with respect to which risk is most severe and which is less
severe. Invariably, these firms are unable to maximally prioritise the management of these
risks in the PMP, which always requires optimisation of costs. It is thus evident that a lack
of adequate knowledge on individual project management risks with respect to their extents
of severity and controllability is the reason for poor project management performance
among many of these firms. Though Kese (2015) tried to provide empirical evidences that
were aimed at investigating these critical risk factors, her study was based on data from one
case study construction firm; thus, the finding were not reflective of the real estate
development industry of Ghana.
A number of researchers have indicated that project failures come as a result of taking a
wrong approach to project implementation and risk management. Yet, a wrong approach to
project risk management is often driven by lack of knowledge of situation-specific measures
to consider in initiating and implementing a project (Wong and Tein, 2007; Amade et al.,
2009). Therefore, the fact that the severity and controllability of individual project
management risks has not been studied by researchers is a major gap in the literature.
Moreover, no identifiable research has analyse these risks to establish knowledge on the
severity and controllability of each risk in the Ghanaian context. Ogunsanmi et al. (2011)
acknowledged that the absence of these evidences makes it difficult to prioritise the
management of these risks and for that matter identify appropriate measures for their
mitigation.
The fact that there is very limited sector-specific risk assessment model for the real estate
construction industry of Ghana is a major constraint. This is because there are specific
factors which could influence project success in this sector. Evidently, academic debate on
the subject of project risk assessment in the Ghanaian real estate construction sector is quite
weak. This study shall contribute to this debate and expand the subject’s literature.
 Considering the foregoing gap in the literature, this paper assesses project management Real estate
risks in terms of the likelihood of occurrence, severity of impact and controllability. industry
It is hoped that this study will contribute to a better understanding of project
management risks in the construction sector and the relative importance attached to their
remedy. Finally, the paper identifies strategies used by real estate firms and constructions
firms in Ghana to mitigate the effects of these risks. This study relied extensively on the risk
identification model used by Odimabo and Oduoza (2013).
The remainder of the paper is organised as follows. Section 2 discusses previous related
studies on risk factors in the real estate construction sector. This is followed by a
presentation of the methodology of the study in Section 3. Section 4 discusses the key
findings from the study. Section 5 identifies measures for minimising the most critical real
Downloaded by UNIVERSITY OF NEW ENGLAND (AUS) At 13:56 13 October 2018 (PT)

estate construction risk factors. Finally, the research conclusions are presented in Section 6.

2. Literature review
Several researchers have investigated the risk management in the construction sector.
Hence, this section reviews some of the major real estate project risk factors.

2.1 Overview of Ghana’s real estate construction industry

Over the past two decades, the construction sector has continued to grow and remain a key
driver of Ghana’s economy. According to the Ghana Statistical Service (2016), construction
was the largest sub-sector of industry in 2015, with a growth rate of 30.6 per cent and a 14.8
per cent share of GDP. It has grown consistently over the past five years, up more than 70
per cent since 2010 and employing around 320,000 people. Although the residential sub-
sector is the largest contributor to construction output in Ghana, its potential is not fully
realised. A comparison between Ghana and other sub-Saharan African countries shows that
the country’s urban population is very poorly housed, with as much as 60 per cent of all
urban households occupying single rooms and only a quarter of households owning their
dwelling units [United Nations Human Settlements Programme (UN-HABITAT), 2011].
Under the umbrella of GREDA, private real estate developers in recent times has also
boosted the supply of houses to meet the housing stock deficit in the country.
Though Ghana’s real estate industry sector has been very supportive of the country’s
socio-economic growth over many years, the industry is faced with many risks such as
project delays and scope creep with associated impact on firms’ profitability. Several studies
have provided evidence indicating the prevalence of several real estate construction risk
factors in Ghana and other parts of the world. A study by Social Security and National
Insurance Trust (2013) revealed that about 4,700 real estate housing projects in Ghana have
been stalled or completely abandoned due to varying reasons, of which funding is the major
obstacle. For example, Ministry of Finance (2015) noted that increase debt coupled with
unsustainable macro-economic stability had crippled the real estate sector in its mission
dispensation.
This study will investigate these sector-specific risk factors in Ghana’s real estate
construction industry and recommend appropriate mitigation measures. It is also expected
that findings will field into current discussions on development of national housing policy
for Ghana.

2.2 Theoretical framework

A project risk is basically a measure of uncertainty associated with the project. It is defined
as uncertainties and constraints, which when not controlled or hedged can lead to project
failure or eventualities minimising project performance (Ekung et al., 2015). It is also an
 JFM unfavourable condition or situation of the PMP that may attract bottlenecks and
consequently threaten successful project closure (Fadun, 2013). These risks could be as a
result of financial issues (e.g. financial risks), unexpected climate changes (i.e. environmental
risks) and human activities (i.e. social risks). Risks are more often regarded as measures of
uncertainty in the PMP because their occurrence is based on subjective probabilities or
likelihood (Mahendra et al., 2013). Thus, the occurrence of a risk is not certain and the
tendency of their occurrence is based on subjective but experience-driven analysis of the
project situations.
Researchers have identified two theories that are mostly applied to risk management in
the construction sector. The first of these theories is the frequency theory or the frequency
Downloaded by UNIVERSITY OF NEW ENGLAND (AUS) At 13:56 13 October 2018 (PT)

approach to risk assessment, which is herein explained based on its adaptation by Ekung
et al. (2015). This approach deals with the frequency of occurrence of a risk and its
relationship with other key variables, which ultimately include other risks. The second
approach is the life cycle theory, which considers several possible developments of the
project with time during its life cycle. Though Ekung et al. (2015) observed that the life cycle
approach is most commonly used in construction projects and the need to apply the
frequency approach is mandatory for many projects.
In the frequency approach, one concern is how a risk relates with other risks. For
instance, if inflation is a form of project risk (i.e. financial project risk), it is likely to be
related to exchange rate fluctuation and many other risks. In this situation, identifying and
managing risks with the life cycle approach yields incomplete results because this approach
cannot reveal the frequency of occurrence of risks and how each risk correlates with others.
In trying to know the severity of risks, the project’s complete lifecycle needs to be covered
(Fadun, 2013). This rationale constitutes one of the reasons why the life cycle approach is
mostly used.
Several other research have used the failure mode and effects analysis (FMEA) to assess
project risks. According to Sant’Anna (2012), FMEA is an inductive technique to
systematically analyse all modes of failures of a system and identify the effects of these
failures that may prevent fulfilment of its function. Each failure is considered individually
as an independent event, unrelated to other system failures, and the evaluation of its
importance according to three criteria, severity, frequency or undetectability, must be
performed also independently, not taking into account any possible relationship between
these criteria. The three values of severity, frequency and undetectability of each potential
failure are multiplied, forming a risk priority number (RPN). The author posited that four
steps may be identified in the implementation of FMEA: planning, analysis of potential
failures, risk assessment and improvement. Planning includes the production of documents
describing the objectives and scope of the analysis. The stage of analysis of potential
failures includes the description of the failure modes and effects and of the possible
improvement actions associated. It ends with the approval of an evaluation form where the
numerical evaluations will be registered. Liu et al. (2015) noted that though FMEA has been
widely used for quality assurance and reliability improvement in different industries, the
shortcomings of the conventional RPN method have been extensively analysed in the
literature. Teng et al. (2006) provided an example of inconsistency in the ranking of severity,
occurrence and detection to show that the inconsistency may delay FMEA implementation
in a supply chain.
In this study, the severity of construction project risks is examined from the viewpoints
of both the frequency and life cycle approaches to risks assessment. From the lifecycle
perspective, risks assessment is identified as a facet of the PMP which covers the entire
lifecycle of all projects. The identification of risks in terms of their severity of impact and
 controllability would therefore not be limited to a specific stage of the PMP; hence, this Real estate
study would produce a holistic framework of construction project risks in terms of their industry
likelihood of occurrence, severity of impact and controllability. To better understand how
this theoretical stance would be relevant to this study, the types of project management
risks are discussed in the following sections.

2.3 Type of risks found in construction projects

Several risks have been found to affect the PMP in the construction sector. As a result,
researchers have produced various frameworks of project risks pertinent to the construction
sector. The frameworks available are similar in terms of their individual items or risks, but
Downloaded by UNIVERSITY OF NEW ENGLAND (AUS) At 13:56 13 October 2018 (PT)

they differ in terms of the context in which they were developed. The most basic framework
of project risks is embodied by three components of risks and was formulated by Ibrahim
and Kagara (2014) in their study and was later adapted in another context by Ekung et al.
(2015). This framework recognises a construction project risk as a constituent of the
following categories:
 financial risks;
 material/equipment risks; and
 people risks.

These categories of risks are discussed as follows:

2.3.1 Financial risks. This is a category of risk elements that relate to the likelihood of a
project’s financial needs and expected impact not being met (Aminu, 2013). In addition, this
category is broadly influenced by random events that are likely to bring about financial
drawbacks in a project. These events are directly risks or are risk drivers because they
accompany project implementation inefficiencies that may cause a deviation from the PM
budget (Ibrahim and Kagara, 2014; Ekung et al., 2015). At worse, financial risks hinder
project closure and may result in a project not yielding the expected financial value.
Examples of this component are inflation, delayed payments and exchange rate fluctuation
(Aminu, 2013). Logically, each of these elements of the financial risk component is a random
event as earlier mentioned. They are random events because their occurrence is not under the
total control of the project team and manager. Inflation and exchange rate fluctuation, for
instance, are economic indicators influenced by the totality of the macro-economic situation.
Depending on the macro-economic situation, this component could include more
elements of risk. Odimabo and Oduoza (2013), for instance, observed that market monopoly
is a financial risk element in many developing countries which could impel a project team to
spend more than its budget indicates. Yet spending beyond the limit of a project budget may
negatively influence timeliness of project closure or may terminate the course of the project
(Ogunsanmi et al., 2011). Even so, the severity of financial project risks is sometimes
expressed in terms of their relationship with other risks such as material risks.
2.3.2 Material/equipment risks. A successful implementation of the PMP requires the use
of a wide scope of materials and equipment. It is in view of this fact that logistics and
procurement management is an intrinsic aspect of the PMP. Odimabo and Oduoza (2013)
posited that material risks prevail because of the tendency of, among others:
 lacking access to the needed logistics and equipment possibly because of financial
constraints;
 failure of suppliers to meet timelines; and
 equipment failure.
 JFM The inherence of material risks in the PMP presents the need for companies to expend
efforts to hedge against them. Managing material risks is however considered a harder task
because they relate to both financial and people risks (Aminu, 2013).
2.3.3 People risks. This component of risks is identified by Tipili and Ilyasu (2014) as the
basis of financial and material risks. Typical examples cited by Odimabo and Oduoza (2013)
are:
 lack of requisite skills and knowledge among project team members;
 inability of technicians to operate and repair equipment; and
 managerial incompetence and inefficiency.
Downloaded by UNIVERSITY OF NEW ENGLAND (AUS) At 13:56 13 October 2018 (PT)

In the context of some other models of risks, such as the one developed by Odimabo and
Oduoza (2013), the third cited example is conceptualised as management risks and design
risks.
Another comprehensive and broader framework of construction project risks was
formulated by Odimabo and Oduoza (2013). Their framework can be regarded as a facet of
the one just discussed because it contains financial, material and people risks. The first
component is physical risks. An example of this component is the occurrence of an accident,
possibly as a result of poor safety precautions taken.
Another component found in Odimabo and Oduoza (2013)’s framework is environmental
risks. This component is made up of environmental factors (e.g. earthquakes, flood and
strong winds), the fact that the project site is far from the company’s office or a central
access point and poor weather conditions that may come with unfavourable rainfalls. The
third major component is logistics risks, which is naturally part of material risks. An example
of this component is unavailable labour, materials and equipment.
As also confirmed by Aminu (2013), legal risks, construction risks, political risks and
management risks are other components of risks faced in the construction sector. Though
several other frameworks and models of construct project risks exist in the literature, the
two frameworks identified above exhaust all risks that could be faced in construction
projects. It is nonetheless unlikely that all risks identified above are faced in individual
firms. Researchers (Fadun, 2013; Ibrahim and Kagara, 2014) on a global scale have
contributed to the empirical literature with respect to project risk identification and
management in various ways. Yet there is a general lack of research work regarding the
severity and controllability of individual project risks. It is noteworthy that this gap is
wider in the real estate development sector, where research work on risks assessment
over the years has been relatively minimal in a developing country context (Ojo and
Odediran, 2015). On the basis of this gap, Mahendra et al. (2013) expressed the opinion
that the PM risk management literature is lacking in many ways and would therefore
need to be enriched.
Chapman (2001) grouped risks into four subsets: environment, industry, client and
project. Of the 58 identified risks associated with sino-foreign construction joint ventures,
Shen (2001) categorised them into six groups in accordance with the nature of the risks, i.e.
financial, legal, management, market, policy and political, as well as technical risks. In a
word, many ways can be used to classify the risks associated with real estate construction
projects, and the rationale for choosing a method must serve the purpose of the research.
It is also observed that project risk researchers have over the years adopted qualitative
research techniques to develop risk management frameworks and methods. Qualitative
research methods thus dominate the literature on risk management. As a result, most of the
risk management frameworks developed remain empirically untested.
 3. Methodology Real estate
The following research methodology was used in analysing the perception of likelihood of industry
occurrence, severity of impact and controllability of project risks in the real estate
development industry in Ghana.

3.1 Research design

A quantitative method was used for this research. This research approach was used
because, as Creswell (2003) puts it, it is the most suitable method for analysing numeric or
quantitative data using inferential statistical tools. It involved the use of structured
questionnaire designed to capture information relevant to research questions and study
Downloaded by UNIVERSITY OF NEW ENGLAND (AUS) At 13:56 13 October 2018 (PT)

objectives.

3.2 Sampling technique and sample size

The survey was conducted among architects, civil engineers, quantity surveyors from a
stratified random sampling of 17 real estate firms headquartered in Accra, Ghana, from a
total population of about 130 registered firms found in the GREDA database. The
representativeness of the sample was maximised by using the random sampling process/
function in an Ms Excel (2010) environment. For each firm, names of all eligible employees
were assigned numbers from 1 until the group is exhausted. The list for each firm was
entered into a different Ms Excel sheet but in a common Ms Excel book. For each of the
firm’s list, the simple random sampling technique was applied in Ms Excel 2010. Randomly
selected names became the sample for each of the firms.
Out of a total of 105 questionnaires sent to the companies under consideration, 97
responded, signifying a response rate of 92 per cent. As a general criterion and to ensure
they have had adequate exposure to project risks, experts were to have worked directly on
projects for at least three years to be prequalified as a survey respondent.

3.3 Questionnaire structure

The survey asked detailed questions which required respondents to rate each project risk
factor in terms of likelihood of occurrence, severity of impact and controllability of projects
on a scale of 1-5, with 5 being strongly agree, 4 is agree, 3 is neutral, 2 is disagree and 1 is
strongly disagree. Listed risk factors were adapted from Odimabo and Oduoza (2013) and
Ekung et al. (2015) and grouped under the following categories:
 Technical risks: These include tight project schedule, variations of construction
programmes unavailability of sufficient professionals and variations by the client.
 Environmental risks: These include bad weather conditions, including flood,
earthquakes, rainfalls, presence of other settlements and distance of sites from the
central location.
 Design risks: These include defective designs, using inaccurate quantities, rush
design,awarding design to incompetent people and lack of consistency.
 Logistics risks: These include lack of material and equipment, lack of labour to use
equipment and materials, undefined scope of working, high competition in bids and
Inaccurate project programme.
 Financial risks: These include inflation, delayed payments, financial failure of
contractors, unmanaged cash flows, exchange rate fluctuation and monopoly on
goods and services.
 JFM  Legal risks: These include rush bidding, undocumented change orders, lower work
quality in presence of time constraints, design changes and actual quantities that
differ from the contract quantities.
 Political risks: These include segmentation of construction process, new
governmental acts or legislations and unstable security environment.
 Management risks: These include ambiguous planning due to project complexity,
resource management, changes in management ways, information unavailability
(include uncertainty) and poor communication between involved parties.
 Market risk: These include fluctuation in demand for housing.
Downloaded by UNIVERSITY OF NEW ENGLAND (AUS) At 13:56 13 October 2018 (PT)

3.4 Reliability and validity of the data

Cronbach’s alpha were used to confirm data reliability in relation to the questionnaire
design. The Cronbach alpha value of 0.955 confirms high reliability of our data set and
consistency between the adopted methodology and the research objectives.

3.5 Data analysis

Data analysis was done using Ms Excel 2010 and SPSS. Excel was used to compute
descriptive statistics, which were used for checking out for outliers and missing items.
Descriptive statistics, precisely frequency and percent, were also used to present results on
the open-ended questions. The mean scores for each project risk factor were calculated and
ranked. The mean scores measure the extent of likelihood of occurrence, severity of impact
and controllability of the risk factors.
According to some researchers (Odimabo and Oduoza, 2013; Tipili and Ilyasu, 2014;
Ekung et al., 2015), the most important aspect of risk analysis is knowing the relative
strengths of all risks along the three themes of:
 likelihood of occurrence;
 severity of impact; and
 controllability.

Such knowledge helps project managers to prioritise risks in managing them in the face of
scarce resources.

4. Results
4.1 Discussions on project risk likelihood of occurrence, severity of impact and controllability
In this section we discuss the perception of project parties on the project risk likelihood of
occurrence, severity of impact and controllability of these risk factors.
Figure 1 is a radar chart showing ranking of the risk categories on the three themes of
likelihood, severity and controllability. Tables AI-AIII (in the Appendix) provide detailed
statistical analysis of these risk categories.
4.1.1 Technical risk. Technical risk is ranked first in all three risk categories of likelihood
of occurrence, severity of impact and controllability. In the context of real estate
development, technical risk encompasses the risk of more development effort, changes in
performance characteristics, schedule alterations and variations in requirements. The
implication of this ranking is that technical risk is the most common, has the highest effect
on project performance and yet it is the easiest to control. According to Tipili and Ilyasu
(2014), technical skills have the highest severity of impact because they emanate during
 Real estate
industry
Downloaded by UNIVERSITY OF NEW ENGLAND (AUS) At 13:56 13 October 2018 (PT)

Figure 1.
Comparison of project
risk likelihood of
occurrence, severity
of impact and
controllability

project implementation, a stage at which the effect of environmental and market risks are
most dire. Again, the high controllability ranking means there are standard and tested
methodologies for mitigating the effects of technical risk when they occur.
To adequately address the issue of technical risks, Mecca and Masera (1999)
acknowledged that though numerous techniques are at present available for practitioners in
construction risk management, interest has rarely been focussed on the question of technical
risk analysis. They posited that technical risk assessment in building construction
emphasises the role of project quality planning in client satisfaction and should be one of the
main tools for evaluating the reliability of quality systems. Another mitigation measure is
stronger client/contractor relationship and information sharing. As noted by (DoD, 2001),
often, the contractor is better equipped to understand the project technical risks than
the client is. Both the government and contractor need to share information, understand the
risks and develop and execute risk management efforts. The client must involve the
contractor early in project development so that effective risk assessment and reduction
measures can be identified early.
4.1.2 Market risks. Market risk was ranked second under all three themes (i.e. likelihood
of occurrence and severity of impact and controllability). Real estate firms’ exposure to
market risks is logically as a result of continuous production and marketing of housing
products in Ghana. Aminu (2013) acknowledged that possible market failures constitute
project risks because their realisation could terminate engagement in other projects or
minimise the quality of deliverables in other projects. Kese (2015) also observed that real
estate firms are increasingly facing market risks such as poor sales or patronage as a result
of increasing market competition. The corresponding high ranking for market risk
 JFM controllability means there is high probability that with the right strategies in place, firms
could avoid or alleviate the severity of impact (of the market risks) they are exposed to. For
example, as proposed by Zou et al. (2006), as the price of construction materials is always
changing in response to inflation and the relation between supply and demand in the
construction material market, clients should choose an appropriate type of contract such as
lump-sum to transfer the risks to other parties, while contractor should always avoid using
fixed price contracts to bear the risk.
4.1.3 Environmental risks. Environmental risks were ranked third in terms of both
likelihood of occurrence and severity of impact. Nevertheless, environmental risks were
ranked the lowest in terms of controllability. Among all risks, environmental risks are the
Downloaded by UNIVERSITY OF NEW ENGLAND (AUS) At 13:56 13 October 2018 (PT)

direst because they have high likelihood of occurrence and severity of impact but very low
controllability. The implication is that real estate firms are expected to prioritize remedy of
environmental risks. Amade et al. (2009) study revealed that Environmental factors are more
critical to the success of project implementation than skills portfolio of the project team.
They posited that failure to capture environmental factors is possibly a serious gap because
environmental factors make the highest effect on project success. Chileshe and Yirenkyi-
Fianko (2012) grouped environmental risks under three categories, namely, “weather
conditions,” “ground condition and contaminants” and “site conditions.” They observed that
while the clients and contractors did not regard these risk factors as crucial, the contractors
ranked “weather conditions” and “ground conditions and contaminant” moderately higher
in terms of likelihood and severity of impact than the clients and consultants. According to
Tchankova (2002), the environment’s influence on the people and people’s influence on the
environment are very important aspects of this source of environmental risk.
As mitigation measure, some firms are choosing to green their supply chain to avoid
inheriting environmental risks from less environmentally conscious suppliers (Klassen and
Whybark, 1999). Finally as acknowledged by Gupta and Piero (2003), many global firms are
considering the environmental attributes of their suppliers to avoid environmental risks and
to minimise their long-term environmental liabilities.
4.1.4 Other general observations. In summary, analysis of the survey data showed that
all real estate firms encounter or face several risks. These risks are financial, legal,
managerial, market, policy, political, technical/project, environmental and social risks. Over
80 per cent of respondents agreed to the fact that these risks are associated with the
industry. The identified risks are consistent with several frameworks of construction project
risks (Rezakhani, 2012; Xenidis and Angelides, 2005). This confirmation implies that risks
faced by real estate firms in Ghana are standard project risks recognised by global models
and frameworks.
The study reveals that all risks identified have some level of likelihood of occurrence.
This suggests that the firms are obliged to hedge against every risk, as even risks with
extremely low likelihood of occurrence can still occur (Yildinz et al., 2012). We observe that
technical risks (M = 4.25, SD = 0.60), market risks (M = 4.16, SD = 0.37) and environmental
risks (M = 4.09, SD = 1.11) are those more likely to occur, while legal risks, managerial risks,
policy risks and political risks have low likelihood of occurrence. As risks that have low
likelihood of occurrence pose little threat to project success (Oyewobi et al., 2012), firms
would need to prioritise those with high likelihood of occurrence. The framework developed
by Rezakhani (2012) identifies technical risks and market risks as risks with higher
likelihood of occurrence.
Risks could also be described in terms of severity of impact. The findings reveal a similar
pattern with likelihood of occurrence. Thus technical risks (M = 4.00, SD = 0.58), market
risks (M = 3.78, SD = 0.92) and environmental risks (M = 3.49, SD = 0.77) are those with the
 highest severity of impact, though technical risks are still outstanding among these risks. Real estate
Similarly, Tetteh (2012) identified technical risks, market risks and environmental risks as industry
those with the direst severity of impact.
Again, every risk identified is controllable to some extent. However, some risks such as
social, political and environmental risks have very low levels of controllability, and this
evidence is again supported by Rezakhani (2012). Moreover, social, political and
environmental risks are recognised by Xenidis and Angelides (2005) as uncontrollable in
some situations and controllable in some other situations. For instance, political risks could
be controlled or become controllable when real estate firms work with government and
development stakeholder by promoting a political-enabling environment where there is rule
of law. Some environmental risks, such as the distortion of projects by rainfall or
Downloaded by UNIVERSITY OF NEW ENGLAND (AUS) At 13:56 13 October 2018 (PT)

unfavourable weather, can also be controlled when the firms work with weather information
providers such as the Meteorological Service to get reliable weather information. On the
whole, we observe that the nature of risks investigated in this study were significantly
consistent with what pertains in the literature.

5. Conclusions
Construction projects are often associated with various risks. Project risk management in
the real estate construction industry is recognised as critical requirement for achieving
project success. However, the specific risks encountered by real estate firms are not well
known. Earlier research works in this regard have focussed on the likelihood of occurrence
rather than a more holistic approach of identifying and analysing the likelihood of
occurrence, severity of impact and controllability of these risk factors. The objective of this
paper is to analyse the risks associated with the real estate industry from the perspective of
their likelihood of occurrence, severity of impact and controllability.
The study identified nine types of risks faced by real estate firms, these are; financial,
legal, managerial, market, policy, political, technical, environmental and social risks. The
risk factors were assessed in terms of likelihood of occurrence, severity of impact and
controllability. All risks identified have some level of likelihood of occurrence, extent of
severity of impact and controllability. Market risks, technical risks and environmental risks
are those more likely to occur. Market risks, technical risks and environmental risks are
those with the highest severity of impact. Financial risks, market risks, managerial risks
and technical risks are the most controllable. Among all risks, environmental risks are the
direst because they have high likelihood of occurrence and severity of impact but very low
controllability. Real estate firms are therefore expected to prioritize remedy of
environmental risks.
As an important contribution, the paper proposed some mitigation measures for the three
most critical risk factors, namely, technical risks, market risks and environmental risk. It is
expected that the findings of the paper will help improve the attitude of real estate managers
in Ghana and others in similar country contexts toward project risk management by
including risk as an integral part of their project management.

6. Limitation of study
The study is based on self-reported perception of project parties on the likelihood of
occurrence, severity of impact and controllability of real project risk factors. Firms outside
of GREDA were not included in the survey. To improve the study’s contribution to
knowledge and academic debate, it is suggested that future studies capture evidences in the
context of the entire real estate construction industry. This would ensure that conclusions
could be generalised over the entire industry, providing a wider scope of firms which can
 JFM make use of the study’s findings. It is also suggested that future studies use exploratory
factor analysis and other more robust statistical tools to classify the risks identified in this
study. Taking this step in future, researches would better describe the nature of construction
risks in terms of likelihood of occurrence, severity of impact and controllability.

References
Aminu, A.B. (2013), “Risk management in Nigerian construction industry”, Master’s thesis, Institute of
Graduate Studies and Research, Eastern Mediterranean University, Gazimagusa, North Cyprus,
pp. 1-77.
Carbone, T.A. and Tippett, D.D. (2004), “Project risk management using the project risk FMEA”,
Downloaded by UNIVERSITY OF NEW ENGLAND (AUS) At 13:56 13 October 2018 (PT)

Engineering Management Journal, Vol. 16 No. 4, pp. 28-35.

Chileshe, N. and Yirenkyi-Fianko, A.N. (2012), “An evaluation of risk factors impacting construction
projects in Ghana”, Journal of Engineering, Design and Technology, Vol. 10 No. 3, pp. 306-329.
Creswell, J.W. (2003), Research Design Qualitative, Quantitative and Mixed Methods Approaches,
Second Education, SAGE Publications, International Educational and Professional Publisher,
pp. 3-15.
Department of Defense (DoD) (2001), DSMC Risk Management Guide for DoD Acquisition, Published
By The Defense Acquisition University Press Fort Belvoir, VT.
Ekung, S., Adeniran, L. and Adu, E. (2015), “Theoretical risk identification within the Nigeria East-
West coastal highway project”, Civil Engineering and Urban Planning: An International Journal,
Vol. 2 No. 1, pp. 1-11.
Fadun, O.S. (2013), “Risk management and risk management failure: lessons for business enterprises”,
International Journal of Academic Research in Business and Social Sciences, Vol. 3 No. 2, pp. 225-239.
Ibrahim, D. and Kagara, A. (2014), “An investigation to risk factors and preventive measures in
building construction projects in Abuja FCT, Nigeria”, International Journal of Scientific and
Research Publications, Vol. 4 No. 7, pp. 1-6.
Ijigah, E.A., Ajayi, J.R., Bilau, A.A. and Agbo, A.E. (2013), “Assessment of risk management practices
in Nigerian construction industry: toward establishing risk management index”, Internal
Journal of Pure Applied Science Technology, Vol. 16 No. 2, pp. 20-31.
Ijigah, E.A., Jimoh, R.A., Aruleba, B.O. and Ade, A.B. (2013), “An assessment of environmental impacts
of building construction projects”, Civil and Environmental Research, Vol. 3 No. 1, pp. 93-104.
Klassen, R.D. and Whybark, D.C. (1999), “The impact of environmental technologies on manufacturing
performance”, Academy of Management Journal, Vol. 42 No. 6, pp. 599-615.
Liu, H., You, J., Ding, X. and Su, Q. (2015), “Improving risk evaluation in FMEA with a hybrid multiple
criteria decision making method”, International Journal of Quality and Reliability Management,
Vol. 32 No. 7, pp. 763-782.
Mahendra, P.A., Pitroda, J.R. and Bhavsar, J.J. (2013), “A study of risk management techniques for
construction projects in developing countries”, International Journal of Innovative Technology
and Exploring Engineering, Vol. 3 No. 5, pp. 139-142.
Mecca, S. and Masera, M. (1999), “Technical risk analysis in construction by means of FMEA
methodology”, Hughes, W. (Ed.), 15th Annual ARCOM Conference, 15-17 September 1999,
Liverpool John Moores University, Association of Researchers in Construction Management,
Vol. 2, pp. 425-434.
Odimabo, O.O. and Oduoza, C.F. (2013), “Risk assessment framework for building construction
projects’ in developing countries”, International Journal of Construction Engineering and
Management, Vol. 2 No. 5, pp. 143-154.
Ogunsanmi, O.E., Salako, A.O. and Ajayi, O.M. (2011), “Risk classification model for design and build
projects”, Journal of Engineering, Project, and Production Management, Vol. 1 No. 1, pp. 46-60.
 Ojo, G.K. and Odediran, S.J. (2015), “Significance of construction cost estimating risks in Nigeria”, Real estate
International Journal of Civil Engineering and Construction Science, Vol. 2 No. 1, pp. 1-8.
industry
Sant’Anna, A.P. (2012), “Probabilistic priority numbers for failure modes and effects analysis”,
International Journal of Quality and Reliability Management, Vol. 29 No. 3, pp. 349-362.
Teng, S.G., Ho, S.M., Shumar, D. and Liu, P.C. (2006), “Implementing FMEA in a collaborative supply
chain environment”, International Journal of Quality and Reliability Management, Vol. 23 No. 2,
pp. 179-196.
Tipili, L.G. and Ilyasu, M.S. (2014), “Evaluating the impact of risk factors on construction projects cost
in Nigeria”, The International Journal of Engineering and Science, Vol. 3 No. 6, pp. 10-15.
Zou, P.X.W., Zhang, G. and Wang, J. (2006), “Identifying risks in construction projects: life cycle and
Downloaded by UNIVERSITY OF NEW ENGLAND (AUS) At 13:56 13 October 2018 (PT)

stakeholder perspectives”, Proceedings of the 12th Pacific Rim Real Estate Society Conference,
Auckland, 22-25 January 2006.

Further reading
Amoatey, C.T., Ameyaw, Y.A., Adaku, E. and Famiyeh, S. (2015), “Analysing delay causes and effects
in Ghanaian state housing construction projects”, International Journal of Managing Projects in
Business, Vol. 8 No. 1, pp. 198-214.
Brown, J.D. (2009), “Principal components analysis and exploratory factor analysis: definitions,
differences, and choices”, JALT Testing and Evaluation SIG Newsletter, Vol. 13 No. 1, pp. 26-30.
Dulaimi, M.F., Ling, F.Y.Y., Ofori, G. and De Silva, N. (2002), “Enhancing integration and innovation in
construction”, Building Research and Information, Vol. 30 No. 4, pp. 237-247.
Fageha, M.K. and Aibinu, A.A. (2016), “Identifying stakeholders’ involvement that enhances project
scope definition completeness in Saudi Arabian public building projects”, Built Environment
Project and Asset Management, Vol. 6 No. 1, pp. 6-29.
Freshman-Caffrey, K. (2014), Foreseeing Fees: Reducing the Hiddden Cost of Professional Services,
available at: http://media.ibisworld.com/wp-content/uploads/2014/11/Hidden-Costs-Professional-
Services1.pdf (accessed 20 May 2015).
Ikediashi, D.I., Ogunlana, S.O. and Alotaibi, A. (2014), “Analysis of project failure factors for
infrastructure projects in Saudi Arabia: a multivariate approach”, Journal of Construction in
Developing Countries, Vol. 19 No. 1, pp. 35-52.
Krejcie, R.V. and Morgan, D.W. (1970), “Determining sample size for research activities”, Educational
and Psychological Measurement, Vol. 30 No. 3, pp. 232-256.
Olatunji, A. and Diugwu, I.A. (2013), “A project management perspective to the management of federal
roads in Nigeria: a case study of Minna-Bida road”, Journal of Finance and Economics, Vol. 1
No. 4, pp. 54-61.
Ringner, M. (2008), “What is principal component analysis?”, Nature Biotechnology, Vol. 26 No. 3,
pp. 303-304.
Suhr, D.D. (1999), Principal Component Analysis vs. Exploratory Factor Analysis, University of Northern
CO, pp. 1-11.
Tummala, R. and Schoenherr, T. (2011), “Assessing and managing risks using the Supply Chain Risk
Management Process (SCRMP)”, Supply Chain Management: An International Journal, Vol. 16
No. 6, pp. 474-483.
Williams, C. (2007), “Research methods”, Journal of Business and Economic Research, Vol. 5 No. 3,
pp. 65-72.
 JFM Appendix

Rank Project risk category Mean SD Std. error mean t df p-value (2-tailed)

5th Financial risks 3.1753 0.98964 0.10048 1.744 96 0.084

7th Legal risks 2.2577 0.72569 0.07368 10.074 96 0.000
6th Managerial risks 2.5773 0.76151 0.07732 5.467 96 0.000
2nd Market risks 4.1649 0.37306 0.03788 30.755 96 0.000
8th Policy risks 2.2474 0.59566 0.06048 12.443 96 0.000
9th Political risks 1.8454 0.69732 0.07080 16.308 96 0.000
Downloaded by UNIVERSITY OF NEW ENGLAND (AUS) At 13:56 13 October 2018 (PT)

1st Technical risks 4.2474 0.59566 0.06048 20.625 96 0.000

Table AI. 3rd Environmental risks 4.0928 1.11880 0.11360 9.620 96 0.000
Description of risks 4th Social risks 3.5876 0.86304 0.08763 6.706 96 0.000
in terms likelihood of
occurrence Source: Survey data (2016)

Rank Risk category Mean SD Std. error mean t df p-value (2-tailed)

4th Financial risks 3.01 1.36 0.14 0.07 96 0.941

8th Legal risks 1.74 0.73 0.07 17.07 96 0.000
5th Managerial risks 2.57 1.05 0.11 4.06 96 0.000
2nd Market risks 3.75 0.92 0.09 8.02 96 0.000
7th Policy risks 2.16 0.69 0.07 11.96 96 0.000
9th Political risks 1.68 0.76 0.08 17.16 96 0.000
1st Technical risks 4.00 0.58 0.06 17.06 96 0.000
Table AII. 3rd Environmental risks 3.49 0.77 0.08 6.37 96 0.000
Description of PM 6th Social risks 2.32 1.19 0.12 5.65 96 0.000
risks in terms of
severity of impact Source: Survey data (2016)
 Real estate
industry
Rank Risk categories Mean SD Std. error mean t df p-value (2-tailed)

4th Financial risks 3.5052 0.64749 0.06574 7.684 96 0.000

6th Legal risks 1.6598 0.62727 0.06369 21.043 96 0.000
3rd Managerial risks 3.5155 0.66322 0.06734 7.655 96 0.000
2nd Market risks 3.7629 0.60850 0.06178 12.348 96 0.000
5th Policy risks 2.8454 0.56532 0.05740 2.694 96 0.008
8th Political risks 1.4948 0.50257 0.05103 29.496 96 0.000
1st Technical risks 3.9175 1.03753 0.10534 8.710 96 0.000
Table AIII.
Downloaded by UNIVERSITY OF NEW ENGLAND (AUS) At 13:56 13 October 2018 (PT)

8th Environmental risks 1.4948 0.50257 0.05103 29.496 96 0.000

7th Social risks 1.5155 0.66322 0.06734 22.045 96 0.000 Description of PM
risks in terms of
Source: Survey data (2016) controllability

Corresponding author
Charles Amoatey can be contacted at: camoatey@gimpa.edu.gh

For instructions on how to order reprints of this article, please visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: permissions@emeraldinsight.com