Assessing risk analysis and management practices of property development companies in Nigeria
Article Sidebar
Main Article Content
Abstract
Risk is inherent in property development, yet its management remains a challenge in many emerging economies. This study is aimed at assessing the risk management practices of real estate development companies in Nigeria, providing a comprehensive understanding of how risks are analysed and managed across the country’s six geopolitical zones. This study employed an explanatory sequential mixed-methods design to investigate the risk management practices of real estate development companies in the six geopolitical zones of Nigeria. While 250 questionnaires were sent to development firms registered with the Real Estate Developers Association of Nigeria, personal interviews were conducted with 13 purposively selected developers. Quantitative data were analysed using descriptive statistics, while qualitative data were analysed using a thematic approach. Out of the 250 questionnaires distributed, 84 were correctly filled out and returned, giving a response rate of 33.6%. Descriptive statistics results showed that out of 31 risk management techniques, brainstorming, checklists, experience/judgement/intuition, risk avoidance, and interviews were the most commonly used techniques adopted by real estate developers in risk management for development projects. Additionally, over half of the development firms have well-formulated strategies for risk management; however, this does not translate into practice. The qualitative findings validated most of the quantitative results. This study inferred that combining qualitative with quantitative methods, especially probabilistic approaches, will create a comprehensive and more balanced risk management approach in real estate development projects. The findings of this study would assist both local and international developers in making informed decisions regarding real estate development investment in Nigeria and other countries that share similar characteristics with Nigeria.
Article Details
Section
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors who publish with this journal agree to the following terms:
a) Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share and adapt the work with an acknowledgement of the work's authorship and initial publication in this journal.
b) Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
c) Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Open Access Citation Advantage Service). Where authors include such a work in an institutional repository or on their website (ie. a copy of a work which has been published in a UTS ePRESS journal, or a pre-print or post-print version of that work), we request that they include a statement that acknowledges the UTS ePRESS publication including the name of the journal, the volume number and a web-link to the journal item.
d) Authors should be aware that the Creative Commons Attribution (CC-BY) License permits readers to share (copy and redistribute the work in any medium or format) and adapt (remix, transform, and build upon the work) for any purpose, even commercially, provided they also give appropriate credit to the work, provide a link to the license, and indicate if changes were made. They may do these things in any reasonable manner, but not in any way that suggests you or your publisher endorses their use.
How to Cite
References
Akintoye, A. S., and MacLeod, M. J., 1997. Risk analysis and management in construction. International Journal of Project Management, 15(1), pp. 31-38. https://doi.org/10.1016/S0263-7863(96)00035-X
APM, 2019. Association for Project Management Book of Knowledge. 7th ed. Buckinghamshire: Association for Project Management.
APM, 2012. Association for Project Management Book of Knowledge. 6th ed. Buckinghamshire: Association for Project Management
Ayodele, T. O, and Olaleye, A., 2021. Flexibility decision pathways in the management of uncertainty in property development: experience from an emerging market. Journal of Financial Management of Property and Construction, 26(3), pp. 408-432. https://doi.org/10.1108/JFMPC-05-2020-0037
Baker, S., Ponniah, D., and Smith, S., 1999. Survey of risk management in major UK companies. Journal of Professional Issues in Engineering Education and Practice, 125(3), pp. 94-102. https://doi.org/10.1061/(ASCE)1052-3928(1999)125:3(94)
Baldi, F., 2013. Valuing a greenfield real estate property development project: a real options approach. Journal of European real estate research, 6(2), pp. 186-217. https://doi.org/10.1108/JERER-06-2012-0018
Banaitiene, N., Banaitis, A., and Norkus A., 2011. Risk management in construction projects: peculiarities of Lithuanian construction companies. International Journal of Strategic Property Management, 15(1), pp. 60-73. https://doi.org/10.3846/1648715X.2011.568675
Baruch, Y., and Holtom, B. C., 2008. Survey response rate levels and trends in organizational research. Human relations, 61(8), pp. 1139-1160. https://doi.org/10.1177/0018726708094863
Bartlett, M. S., 1950. Tests of significance in factor analysis. British Journal of Statistical Psychology, 3(2), pp. 77-85. https://doi.org/10.1111/j.2044-8317.1950.tb00285.x
Berg, H., 2010. Risk management: procedures, methods and experiences. RT & A, 1(June), pp. 79-95. Available at: http://www.gnedenko-forum.org/Journal/2010/022010/RTA_2_2010-09.pdf
Bhoola, V., Hiremath, S. B. & Mallik, D., 2014. An Assessment of risk response strategies practiced in software projects. Australasian Journal of Information Systems, 18(3), pp. 161-191. https://doi.org/10.3127/ajis.v18i3.923
Braun, V., and Clarke, V., 2006. Using thematic analysis in psychology. Qualitative Research in Psychology, 3(2), pp. 77-101. https://doi.org/10.1191/1478088706qp063oa
Byrne, P., 2002. Risk, uncertainty and decision-making in property development. 2nd ed. London: Routledge.
Cameron, R., 2009. A sequential mixed model research design: Design, analytical and display issues. International Journal of Multiple Research Approaches, 3(2), pp. 140-152, https://doi.org/10.5172/mra.3.2.140
CAHF, 2020. Nigeria’s housing construction and housing rental activities: cost benchmarking and impact on the economy. Johannesburg: Centre for Affordable Housing Finance in Africa. Available at: http://housingfinanceafrica.org/app/uploads/Nigeria-HEVC-Final-Report-June-2020-1.pdf
Chapman, C., and Ward, S., 2011. How to manage project opportunity and risk. 3rd ed. West Sussex: John Wiley & Sons
COSO, 2004. Enterprise risk management – integrated framework: executive summary. Committee of Sponsoring Organisations of the Treadway Commission (COSO).
Creswell, J. W., and Creswell, J. D., 2018. Research design – qualitative, quantitative, and mixed methods approaches (5th ed.). California: Sage Publications, Inc.
Crosby, N., Devaney, S., & Wyatt, P. (2020). Performance metrics and required returns for UK real estate development schemes. Journal of Property Research, 37(2), pp. 171-193. https://doi.org/10.1080/09599916.2020.1720269
Dandage, R. V., Mantha, S. S., and Rane, S. B., 2019. Strategy development using TOWS matrix for international project risk management based on prioritization of risk categories. International Journal of Managing Projects in Business, 12(4), pp. 1003-1029. https://doi.org/10.1108/IJMPB-07-2018-0128
Debrah, C., Owusu-Manu, D. G. Amonoo-Parker, L. Baiden, B. K. Oduro-Ofori, E. and Edwards, D. J., 2022. A factor analysis of the key sustainability content underpinning green cities development in Ghana. International Journal of Construction Management, 23(14), pp. 2469-2478. https://doi.org/10.1080/15623599.2022.2068786
Debrah, C., Owusu-Manu, D. G. Kissi, E. Oduro-Ofori, E. and Edwards, D. J., 2020. Barriers to green cities development in developing countries: evidence from Ghana. Smart and Sustainable Built Environment, 11(3), pp. 438-453. https://doi.org/10.1108/SASBE-06-2020-0089
Deloach, J. W., 2000. Enterprise-wide risk management: strategies for linking risk and opportunity. Essex: Financial Times Prentice-Hall.
Fisher, P., and Robson, S., 2006. The perception and management of risk in UK office property development. Journal of Property Research, 23(2), pp. 135-161. https://doi.org/10.1080/09599910600800484
Gehner, E., 2008. Knowingly taking risk investment decision making in real estate development. Delft: Eburon Academic Publishers.
Gehner, E., Halman, J. I. M. and de Jonge, H., 2006. Risk management in Dutch real estate development sector: a survey. The 6th International Postgraduate Research Conference in the Built and Human Environment. Salford, University of Salford.
Ghonegun, V., and Olorunlomeru, A., 2021. Lagos and burden of recurring collapse of structures. The Guardian.7 November. Available at: https://guardian.ng/sunday-magazine/lagos-and-burden-of-recurring-collapse-of-structures/
GleiBner, W., and Wiegelmann, T., 2012. Quantitative methods for risk management in the real estate development industry. Journal of Property Investment & Finance. 30(6), https://doi.org/10.1108/jpif.2012.11230faa.002
Hargitay, S., 1985. Selection of assets for a property portfolio using portfolio theory. Journal of Valuation, 3(3), pp. 272-283. https://doi.org/10.1108/eb007977
Havard, T., 2014. Financial feasibility studies for property development: theory and practice. London: Routledge.
Hiang Liow, K. 2008. Extreme returns and value at risk in international securitized real estate markets. Journal of Property Investment & Finance, 26(5), pp. 418-446. https://doi.org/10.1108/14635780810900279
Isaac, D., O'Leary, J., and Daley, M., 2010. Property development: appraisal and finance. London: Palgrave Macmillan.
Khedekar, S., and Dhawale, A., 2015. Qualitative risk assessment and mitigation measures for real estate projects in Maharashtra. International Journal of Technical Research and Applications, 3(4), pp. 49-57. Available at: https://www.ijtra.com/view/qualitative-risk-assessment-and-mitigation-measures-for-real-estate-projects-in-maharashtra.pdf
Krejcie, R. V., and Morgan, D. W., 1970. Determining sample size for research activities. Educational and Psychological Measurement, 30(3), pp. 607-610. https://doi.org/10.1177/001316447003000308
Kutsch, E., and Hall, M., 2010. Deliberate ignorance in project risk management. International Journal of Project Management, 28(3), pp. 245-255. https://doi.org/10.1016/j.ijproman.2009.05.003
Kvale, S., 1996. Interviews: an introduction to qualitative research interviewing. Thousand Oaks, California: SAGE Publications, Inc.
Kvale S., and Brinkmann, S., 2009. Interviews: learning the craft of qualitative research interviewing. Los Angeles: SAGE Publications, Inc.
Lizieri, C., and Finlay, L., 1995. International property portfolio strategies: problems and opportunities. Journal of Property Valuation and Investment, 13(1), pp. 6-21. https://doi.org/10.1108/14635789510146596
Loizou, P., and French, N., 2012. Risk and uncertainty in development: a critical evaluation of using Monte Carlo simulation method as a decision tool in real estate development projects. Journal of Property Investment & Finance, 30(2), pp. 198-210. http://dx.doi.org/10.1108/146357811211206922
Lyons, T., and Skitmore, M., 2004. Project risk management in the Queensland engineering construction industry: a survey. International Journal of Project Management, 22(1), pp. 51-61. https://doi.org/10.1016/S0263-7863(03)00005-X
Makui, A., Mojtahedi, S. M., and Mousavi, S., 2010. Project risk identification and analysis based on group decision making methodology in a fuzzy environment. International Journal of Management Science and Engineering Management, 5(2), pp. 108-118.
Miles, M. E., Netherton, L. M. and Schmitz, A., 2015. Real estate development: principles and process. 5th ed. Washington D. C.: Urban Land Institute.
Mintah, K., 2018. Real options analysis in residential property development decision-making in Australia: perspective of executives. International Real Estate Review, 21(4), pp. 473-520. Available at: https://www.um.edu.mo/fba/irer/papers/past/vol21n4_pdf/03.pdf
Moorhead, M., Armitage, L., and Skitmore, M., 2021. Risk management processes used in determining project feasibility in the property development process early stages by Australia/New Zealand property developers. Journal of property investment & Finance, 40(6), pp. 628-642. https://doi.org/10.1108/JPIF-08-2021-0071
NBS (2021). Selected Banking sector data: Sectorial breakdown of credit, epayment channels and staff strength (Q4 2020). Abuja: National Bureau of Statistics. Available at: https://nigerianstat.gov.ng/elibrary/read/1241018
Ng, S. T., Smith, N. J., and Skitmore, M., 1995. Case-based reasoning for contractor pre-qualification. In 4th International Conference on the Application of Artificial Intelligence to Civil and Structural Engineering. Development in artificial intelligence for civil and structural engineering.
Nnamani, O. C., 2017. Application of quantitative risk assessment techniques in property investment appraisal in Enugu urban, Nigeria. Journal of Land Management and Appraisal, 5(1), pp. 23-41. Available at: https://academicjournals.org/journal/JLMA/article-full-text-pdf/DB9D3BE58643
Ogbuefi, J. U., 2002. Aspects of feasibility and viability studies. University of Nigeria, Enugu Campus: Institute of Development Studies.
Ogunba, O. A., 2002. Pre development appraisal and risk adjustment techniques in southwestern Nigeria. Ph.D. Obafemi Awolowo University.
Okafor, F. O., 2002. Sample survey theory with applications. Nsukka: Afro-Orbis Publishers.
Otegbulu, A. C., Mohammed, M. I., and Babawale, G. K., 2011. Survey on risk assessment techniques applied in real estate development project in Nigeria. Journal of Contemporary Issues in Real Estate, 1(1), pp. 189-202.
PMBOK, 2017. A Guide to the Project Management Body of Knowledge (PMBOK® Guide). 6th ed. Pennsylvania: Project Management Institute.
PMBOK, 2013. A guide to the project management body of knowledge. 5th ed. Pennsylvania: Project Management Institute, Inc.
Preller, F. T., 2009. A critical assessment of pre-construction property development principles and process in Queensland, Australia. Ph.D. Curtin University. Available at: https://espace.curtin.edu.au/handle/20.500.11937/1009
Ratcliffe, J., Stubbs, M. and Keeping, M., 2021. Urban planning and real estate development. 4th ed.London: Taylor & Francis Group.
Raz, T., and Michael, E., 2001. Use and benefits of tools for project risk management. International Journal of Project Management, 19(1), pp. 9-17. https://doi.org/10.1016/S0263-7863(99)00036-8
Reed, R. and Sims, S., 2015. Property development. 6th ed. London: Routledge
Rostami, A., Sommerville, J. Wong, L. and Lee, C., 2015. Risk management implementation in small and medium enterprises in the UK construction industry. Engineering, Construction and Architectural Management, 22(1), pp. 91-107. https://doi.org/10.1108/ECAM-04-2014-0057
Saidu, A. I., and Yeom, C., 2020. Success criteria evaluation for a sustainable and affordable housing model: a case for improving household welfare in Nigeria Cities. Sustainability, 12(2), p. 656. https://doi.org/10.3390/su12020656
Uher, T. E., and Toakley, A. R., 1999. Risk management in the conceptual phase of a project. International Journal of Project Management, 17(3), pp. 161-169. https://doi.org/10.1016/S0263-7863(98)00024-6
Whipple, R. T. M., 1988. Evaluation of development projects. Journal of Valuation, 6(3), pp. 253-286.
Wiegelmann, T. W., 2012. Risk management in the real estate development industry: investigations into the application of risk management concepts in leading European real estate development organisations. Ph.D. Bond University.
Zhang, L., Wu, X., Skibniewski, M. J., Zhong, J., and Lu, Y., 2014. Bayesian-network-based safety risk analysis in construction projects. Reliability Engineering & System Safety, 131, pp. 29-39. https://doi.org/10.1016/j.ress.2014.06.006
Zou, Y., Kiviniemi, A., and Jones, S. W., 2017. Retrieving similar cases for construction project risk management using Natural Language Processing techniques. Automation in Construction, 80, pp. 66-76. https://doi.org/10.1016/j.autcon.2017.04.003