Identification of risk paths in international construction projects

Thesis Type: Postgraduate

Institution Of The Thesis: Middle East Technical University, Faculty of Engineering, Department of Civil Engineering, Turkey

Approval Date: 2010

Thesis Language: English


Principal Supervisor (For Co-Supervisor Theses): Irem Dikmen Toker

Co-Supervisor: Mustafa Talat Birgönül


Within the context of construction projects, risk is generally defined as an uncertain happening which is the function of its occurrence probability and the severity of its possible impacts on pre-defined objectives. According to this definition, international construction projects are high-risk endeavors, since they are known with their complex natures, large sizes, multidisciplinary frameworks, and unfamiliar and uncertain environments. International construction projects have more complex risk emergence patterns as they are affected from multiple global and foreign country conditions as well as project-related factors. Huge and complicated interrelationships and dynamic interactions among these influencing factors necessitate more systematic, comprehensive, and multi-attribute risk management process for overseas projects. In order to satisfy the requirements of such a risk management system, a realistic, inclusive, and accurate picture of the real case, reflecting all the aforementioned aspects of the international projects, is necessary. The major aim of this study is to demonstrate that there are causal relationships between various risk factors which necessitate identification of risk paths rather than individual risk factors during risk identification and assessment phases. Identification of a network of interactive risk paths, each of which initiated from diverse v vulnerabilities of the project system, is considered to be a better reflection of the real conditions of construction projects rather than using generic risk checklists. In this study, using the data of 166 projects carried out by Turkish contractors in international markets, and utilizing Structural Equation Modeling (SEM) technique, 36 interrelated risk paths were identified and the total effects of each vulnerability factor and risk path on cost overrun were assessed. SEM findings prove the main hypotheses of the study. The results demonstrate that every risk path is generated from specific vulnerabilities of inherent in project environment. Risk identification using SEM helps decision-makers in answering “what-if” questions in early stages of a project, in tracing the effects of interdependent risks throughout the life of the project, and in evaluating the influence of alternative mitigation strategies, not only on specific risks, but also on the whole network of interrelated risk factors.