Building risk management strategies into the vertical construction sector

Project overview

The construction sector has been a perennial underperformer in the New Zealand economy.  The sector’s low productivity reflects very challenging operating characteristics: order-based production, low-task repetition, and site-specific operations are all products of a market that largely deals in bespoke, complex projects requiring unique approaches.  However, poor risk management can also play a part in low productivity through increased delays and errors, time-wasting, and ineffective problem-solving. Ongoing construction quality issues and high enterprise failure rates are signs that the sector is currently not managing risk as effectively as it could.

Nevertheless, some parts of the construction sector appear to be doing better than others. The recent success of horizontal infrastructure projects (e.g. pipes, roads, and cables) such as the Northern Toll Road Gateway, Waterview Project, and Christchurch Infrastructure Recovery are in contrast to ongoing challenges faced by the vertical construction sector (e.g. buildings).

This BRANZ-funded project looked to uncover core differences in how risk is managed in the horizontal and vertical construction sectors and identify opportunities for cross-sectoral learning. Our focus is on the role risk management plays in improving sector productivity.

Given the complexity of the construction sector, we have chosen to develop RISKFLOW, a system dynamics model, as a tool to help better understand the relationships between risks, risk management, and productivity in the construction sector, and how these relationships might differ between the vertical and horizontal sub-sectors.

Read the final report