THE PRACTICE OF ENTERPRISE RISK MANAGEMENT IN CHINESE CONSTRUCTION FIRMS BASED IN SINGAPORE

Abstract

Financial scandals and recent financial crisis has raised the awareness of having a holistic enterprise-wide risk management system in organizations. While the old paradigm was a silo approach to risk management with each risk considered independently, this new approach integrates the risks across the organization and manage risks holistically while designing risk response strategies accordingly. Enterprise risk management (ERM) has been widely adopted in the western countries, and in industries such as banking and finance, insurance, energy, etc, and has proven the usefulness of embracing ERM in the organizations. Whereas in the construction industry, the view is not as clear. This study endeavors to explore the use of ERM in the construction industry, particularly in the Chinese construction firms based in Singapore, and to investigate the values and benefits that ERM may bring to the construction industry. The first two chapters of this dissertation provide a general background of ERM and COSO Enterprise Risk Management Integrated Framework is presented to explain and illustrate the application of ERM. The third chapter covers the significant differences between Project Risk Management (PRM) and Enterprise Risk Management, as well as the feasibility and application of ERM in construction industry. It revealed a positive outlook in the feasibility of embracing ERM in the construction industry. In addition, Chapter 3 highlighted the various challenges and issues faced by Chinese construction industry in Mainland China. Chapter 4 provided a background of the Chinese construction firms based in Singapore, and the extent of the application of ERM in Singapore. Chapter 6 analyzes a survey conducted with 32 Chinese construction firms based in Singapore, which are registered with the Building and Construction Authority (BCA) of Singapore. The findings suggest that the awareness rate of ERM is considerably high among the firms, however the adoption rate is otherwise (66.67%). The main reason was due to time issue for implementing ERM. Overall, the findings indicated that although most of the companies have recognized the significance of risk management and have attempt to embrace ERM in the organization, however the level of adoption is still at an early stage of ERM development. Despite so, benefits were enjoyed by the companies upon the implementation of ERM. The research concludes with the validation of research hypothesis of this dissertation and some explanation on the limitations of the study. Key words: Enterprise risk management (ERM); Enterprise-wide risk management; Project risk management (PRM); Chinese construction firms based in Singapore