Hierarchical Structuring of PPP Risks Using Interpretative Structural Modeling

Abstract

Project risk management emphasizes the need to rank and prioritize risks in a project to focus the risk management efforts. This risk prioritization is of special significance in public-private partnership ͑PPP͒ projects, since project success depends upon the efficient allocation of risks to the party who can best manage it. Previous studies on risk identification and assessment of PPP project risks have only produced an unstructured list of such risks and prioritizing them on the basis of probability and impact. This paper suggests the use of interpretative structural modeling ͑ISM͒ to prepare a hierarchical structure as well as the interrelationships of these risks that would enable decision makers to take appropriate steps. MICMAC ͑matrice d'impacts croises-multiplication appliqué a un classemen͒ analysis is also done to determine the dependency and driving power of the risks. ISM, along with MICMAC analysis, provides a useful hierarchy of risks whose individual relationships are unambiguous but whose group relationships are too complex to organize intuitively and can help practitioners better understand risk dependencies and prioritize risk-mitigation efforts. This study identified 17 risks encountered during the development phase of PPP projects in Indian road sector and found that fourteen risks were weak drivers and weak dependents. Delay in financial closure, cost overrun risk, and time overrun risk have been found to have the highest dependence on other risks. The analysis can be extended by practitioners for risk analysis in other infrastructures such as railways, seaports, airports etc.

A Comparative Study on the Risk Perceptions of the Public and Private Sectors in Public-Private Partnership (PPP) Transportation Projects in Vietnam

“…Among them, traffic revenue and delay in land acquisition were the most critical risks. Other 17 risk factors were recognized during the development phase of Indian PPP projects [9]. Risks related to cost overrun, delay, and financial closures have been reported to be the most critical.…”

Application of Delphi Method in Construction Engineering and Management Research: A Quantitative Perspective

“…Project planning and design ranked first with 29 papers involved. Majority of these papers employed Delphi as a forecasting instrument to identify and evaluate certain risks for managing a specific type of projects, such as financial risks (Thomas et al 2006;Lyer and Sagheer 2010;Xu et al, 2010a;2010b;Ke et al 2010;2011), technical risks (Seo and Choi 2008), execution risks (Aritua et al 2011;Del Caño and de la Cruz 2002;De la Cruz et al 2006), as well as contractual and cost risks (Tummala and Burchett 1999;Adams 2006;. Aside from these studies on risk management, the Delphi method could be also used to investigate factors regarding engineering design and pre-project planning.…”

Influence of Environmental Risk on the Financial Structure of Oil and Gas Projects

“…Some authors explicitly recognize environmental risk as a major source of hazard in PPP projects (Zhang, 2005b;Bing et al, 2005). Iyer and Sagheer (2010) describe environmental risks as those due to environmental impact liability, public protests and litigation by environmental activists that may occur during the construction and operation phases of the project. With specific regard to oil and gas projects, environmental risk is also referred to as oil and gas flaring, water pollution, threats to biodiversity with resulting compensation and restoration of livelihoods (Davis, 2003;Horta, 2007).…”

“…Step Based on models available in the literature to classify risks in PPP contracts (Schaufelberger and Wipadapisut 2003;Xenidis and Angelides, 2005;Zhang 2005b;Iyer and Sagheer, 2010), typical risks inherent with oil and gas BOT projects, including environmental risk, are identified using a Risk Breakdown Structure (RBS) (PMI, 2009), like the one presented in Fig. 2.…”