Currently risk management is an organized and regulated practice in developed countries. In contrast, in developing countries there are still problems on understanding and implementing risk management. Lack of risk management in construction projects is one of the major setbacks for construction projects performance in Ethiopia. Preliminary interview shows that there is cost and time overrun in Bahir Dar building construction projects. This research deals to investigate risk management practices, challenges and ways to improve risk management on public building construction projects in Bahir Dar. The objective of the study is to investigate the current practice of risk management in building construction projects, identify the challenges facing risk management and improve the risk management practices in building construction projects. The main methodology used starts with a comprehensive literature review, followed by structured questionnaire, case study and interview with construction professional in Bahir Dar ongoing projects. After the questionnaires were completed, the answers were analyzed using statistical processing software, SPSS and Microsoft Excel. Findings conclude that risk management practices are low and lack knowledge on the subject. In addition respondents are not used PMI risk management process, to identify, analyze response and monitor risks. Furthermore, the risk management techniques used by respondents, past experience and documentation review were the most used risk identification techniques. The use of direct judgment and personal skills, comparison analysis and probability analysis are the most used risk analysis techniques, Contingencies, reduce the likelihood of occurrence and insurance were the most used risk response techniques. The result also indicate that risk management practice is thoroughly straight forward, due to no guidelines on standard procedures for managing risk, lack of organization support, lack of familiarity and understanding and lack of joint risk management were the significant challenges. This suggests that there is need to systematically improve RM through integrating risk management in organizational culture, maximum use of experience, making an early start of risk identification and assessment, right attitude toward risk, and training of employees; organizations can integrate risk management tools and techniques receiving benefits realized by these practices.