Risk management framework for construction projects in developing countries

Abstract

It is important to manage the multifaceted risks associated with international construction projects, in particular in developing countries, not only to secure work but also to make profit. This research seeks to identify and evaluate these risks and their effective mitigation measures and to develop a risk management framework which the international investors/developers/contractors can adopt when contracting construction work in developing countries. A survey was conducted and twenty-eight critical risks were identified, categorized into three (country, market and project) hierarchical levels and their criticality evaluated and ranked. For each of the identified risks, practical mitigation measures have also been proposed and evaluated. Almost all mitigation measures have been perceived by the survey respondents as effective. A risk model, named Alien Eyes' Risk Model, which shows the hierarchical levels of the risks and the influence relationship among the risks, is also proposed. Based on the findings, a qualitative risk mitigation framework was finally proposed which will benefit the risk management of construction project in developing countries.Risk management, risk identification, risk mitigation, risk model, international construction project, developing countries,

Host-Country Related Risk Factors in International Construction: Meta-Analysis

“…Approval and permit change in Law, justice reinforcement, local partner's creditworthiness, political instability, cost overrun, corruption, inflation and interest rates, government policies, government influence on disputes and termination of JV are found to be the most important risk factors for construction projects in developing countries. Findings of the study by (Wang et al 2004) and (Hastak and Shaked, 2000) are similar since, the risks at country level are found to be more critical than that at market and project levels due to the results of each study.…”

Design and Pilot Run of Fuzzy Synthetic Model (Fsm) for Risk Evaluation in Civil Engineering

“…Usually, the construction practitioners have intuitive methods of recognizing a risk source. This is in accordance with the statement of Wang et al (2004) that experts prefer to intuitively identify risks using experience and knowledge gained from previous contracts. There are, anyhow, some formal risk identification tools such as Checklist, Influence Diagrams, Cause and Effect Diagram, Failure Mode and Effect Analysis, and Fault Trees Analysis (Zavadskas et al 2010;Tah, Carr 2000).…”

Project risk management using multiple criteria decision-making technique and decision tree analysis: a case study of Indian oil refinery

“…Although they are effective in identifying resources, tools and techniques, and outputs, each project needs a customised approach for application. Wang et al (2004) study risk management practices of developing countries to identify, categorise, evaluate and rank risks, Thuyet et al (2007) demonstrate risk management practices in oil and gas construction projects in Vietnam, Zayed et al (2008) show risks that are inherent in Chinese highway projects, and Dey (2010) illustrates risks in Indian construction projects in oil industry. Although these give the ideas of risk factors, risk management practices, and issues and challenges of applications for construction projects in specific industry and country, they do not provide a framework for application.…”

“…However, they did not integrate risk assessment with response development. Wang et al (2004) apply qualitative risk management model for managing project risk in developing countries, which has very weak integration across risk management processes. There are numerous studies on managing risks as a part of managing overall project (Dey 2006, Shen et al 2006, Dey and Ramcharan 2008.…”