Here is the abstract of a paper I presented at the 2008 COBRA Conference in Dublin, Ireland on 21 September 2008:
Risk pricing practices in finance, insurance, and construction
Samuel Laryea (s.laryea@reading.ac.uk)
School of Construction Management and Engineering, University of Reading, UK, RG6 6AW
A review of current risk pricing practices in the financial, insurance and construction sectors is conducted through a comprehensive literature review. The purpose was to inform a study on risk and price in the tendering processes of contractors: specifically, how contractors take account of risk when they are calculating their bids for construction work. The reference to mainstream literature was in view of construction management research as a field of application rather than a fundamental academic discipline. Analytical models are used for risk pricing in the financial sector. Certain mathematical laws and principles of insurance are used to price risk in the insurance sector. Construction contractors and practitioners are described to traditionally price allowances for project risk using mechanisms such as intuition and experience. Project risk analysis models have proliferated in recent years. However, they are rarely used because of problems practitioners face when confronted with them. A discussion of practices across the three sectors shows that the construction industry does not approach risk according to the sophisticated mechanisms of the two other sectors. This is not a poor situation in itself. However, knowledge transfer from finance and insurance can help construction practitioners. But also, formal risk models for contractors should be informed by the commercial exigencies and unique characteristics of the construction sector.
Keywords: construction sector, financial sector, insurance sector, risk, risk pricing.
Reference:
Laryea, S. (2008) Risk pricing practices in finance, insurance, and construction. In: RICS Construction and Building Research Conference, 4-5 September 2008, Dublin Institute of Technology, Dublin, Ireland
View the article:
http://www.rics.org/Newsroom/Researchandreports/Researcharchive/cob08laryea1_r_060109.html
About Me
- Samuel Laryea
- Johannesburg, Guateng, South Africa
- I am a Senior Lecturer in the School of Construction Economics and Management at University of the Witwatersrand, South Africa. In the past, I have been a Lecturer in the School of Construction Management and Engineering at the University of Reading, UK (2010-12); and also a Post-Doctoral Academic Fellow (2009) and Graduate Teaching Assistant (2008). I completed my PhD at University of Reading in Dec 2008 on the relationship between risk and price in tendering. Prior to transferring to Reading in Jan 2008, I was an MPhil/PhD student at KNUST, Ghana (2004-07). I gained my undergraduate degree in Building Technology from Kwame Nkrumah University of Science and Technology (KNUST), Ghana in 1998-2002. During school days, my peers elected me to serve in several leadership positions including SRC President at KNUST. From 1994-96, I attended Suhum Sec. Tech. School after basic education at schools in Ghana and Nigeria. I did my National Service with the Fanteakwa District Assembly in 2002-03. After that, I worked at the Development Office of KNUST until I started my PhD in 2004. I am a co-organiser for the WABER Conference and an author of 30+ research publications.
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