ASSESS THE PRACTICES OF PROJECT RISK MANAGEMENT: THE CASE OF SOME SELECTED REAL ESTATE COMPANIES IN ADDIS ABABA

Abstract

Real estate projects experience more risks and need to manage them as effectively and efficiently as possible. As many of these projects completed with a budget overrun, a schedule delay and a change in the original scope, managing the risks that cause these problems seems the way to tackle them and attain objectives. This study is conducted with an objective of examining risk management practices among selected real estate companies in Addis Ababa to find out if risk management is being practiced as it should be theoretically. A descriptive survey design was used while a questionnaire was used to gather quantitative data. The study sample in terms of the respondents covered randomly selected real estate companies in Addis Ababa and a sample of 45 was administered with the questionnaire and 84% response rate was achieved. The data collected was analyzed with the aid of descriptive statistical techniques such as frequencies, percentages and mean score. The findings show that despite the risky nature of real estate projects, risk management is not being implemented and practiced to the level needed and a huge gap is seen between what should be theoretically applied and what is being practiced in the projects. The findings of the study indicated that the risk management process fall short of a fully integrated enterprise wide risk management framework. It is found that reliance on the traditional method of intuitive judgment is still very much in evidence. There is evidence that developers tend to take a more reactive rather than a proactive approach to managing risks. The study conclude that that risk management tended to be unstructured, irregularly employed, not applied across all departments and levels, not applied in strategic formulation, not supported by comprehensive methods and tools and as a consequence, not designed, inter alia, to identify events potentially affecting the real estate development organization. It is recommended that real estate projects should improve their risk management practice by identifying risks earlier in the project and planning for them in advance, by integrating risk plan with other organizational and project plans and by developing employees' awareness on risk and its management