A Risk Threshold Calculation Methodology for the Construction Projects Applying Value at Risk

Kim, Seon-Gyoo; Kim, Jae-Jun; Kim, Kyungrai

doi:10.1061/40754(183)65

Cited by 5 publications

(3 citation statements)

References 4 publications

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“…Several studies have implemented control thresholds within the project system based on preexisting or new metrics and indicators to capture deviations in performance proactively by generating early warnings. Kim et al [22] introduced risk thresholds, evaluated through the value-at-risk concept, which would trigger if the profit ratio of the affected work package influences the project profit. Pajares and López-Paredes [23] introduced two monitoring metrics, namely, the cost control index and schedule control index, whose values determine whether early decisions should be made.…”

Section: Literature Reviewmentioning

confidence: 99%

Risk Perception-Based Project Contingency Management Framework

Ottaviani,

De Marco,

Rafele

et al. 2024

Systems

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Project risk management (PRM) involves identifying risks, assessing their impact, and developing a contingency plan. A structured contingency management (CM) approach prevents subjective biases in analyzing risks and developing responses. Previous studies have either focused on improving the accuracy of risk estimates or analyzed, from a qualitative perspective, the relationships between perceived risk and project performance. This study aimed to improve PRM by providing a risk-perception-based contingency management framework (CMF). The CMF guides contingency depletion based on two short- and long-term cost overrun indicators and their respective thresholds. Thresholds and the initial contingency reserve amount are determined by applying the Monte Carlo method to a stochastic, discrete-event, finite-horizon, dynamic project simulation model. The study developed the CMF through a structured approach, validating the simulation model on eight specific project configurations. The results prove that the framework can be applied to any project, shaping the risk response strategy. This study contributes to PRM by explaining the relationships between risk perception and risk responses and providing a prescriptive CM tool.

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Section: Literature Reviewmentioning

confidence: 99%

Risk Perception-Based Project Contingency Management Framework

Ottaviani,

De Marco,

Rafele

et al. 2024

Systems

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“…Below that risk threshold, the organization will accept the risk. Above that risk threshold, the organization will not tolerate the risk [32,33]. In the present study, VaR, an effective risk management tool in the field of finance, is utilized to estimate the risk threshold.…”

Section: Introductionmentioning

confidence: 99%

“…Therefore, it is of great value to define thresholds to describe the minimum magnitudes of rainfall and reservoir fluctuation for changing the landslide movement state and to thus implement an effective tool for landslide risk management in the Three Gorges Reservoir area. The risk threshold, defined as the tolerance criteria for risks that will lead to action, is an effective measure of the degree of uncertainty [32,33]. It has been widely applied as a popular risk management measure in the fields of finance [34], hydrology [35,36], and energy storage operation [37] due to the advantage of conceptual simplicity.…”

Section: Introductionmentioning

confidence: 99%

Estimation of Risk Thresholds for a Landslide in the Three Gorges Reservoir Based on a KDE-Copula-VaR Approach

Zhang

Tang

2020

Geofluids

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The Three Gorges Reservoir area, one of the most landslide-prone areas in China, is characterized by widely distributed deep-seated landslides exhibiting creep deformation due to rainfall and reservoir fluctuation. Thresholds, which are a key component for a reliable landslide early warning system, are still lacking for the prediction of movements of deep-seated reservoir landslides with creep deformation because information about reservoir fluctuation indicators is lacking, uncertainty is ignored, and binary output is provided. The risk threshold, defined as the tolerance criteria for risks that will lead to action, is an effective measure of the degree of uncertainty. In the present study, a hybrid approach utilizing kernel density estimation, a copula function, and the value at risk is proposed for the estimation of the risk threshold for the Baishuihe Landslide, a typical deep-seated landslide in the Three Gorges Reservoir area. Historical observations over approximately 15 years including rainfall, reservoir fluctuation, and landslide velocity were used to extract the risk threshold. A three-level risk threshold describing the minimum magnitudes of rainfall and reservoir fluctuation for changing the landslide movement state under three confidence levels was developed. A three-level risk response procedure, including risk responses in yellow alert, orange alert, and red alert, is proposed for risk management. Given its successful application, the present approach can be used to estimate the risk threshold for deep-seated landslides.

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Value-at-Risk Model Analysis of Taiwanese High-Tech Facility Construction

Chen

Peng

2018

J. Manage. Eng.

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A Risk Threshold Calculation Methodology for the Construction Projects Applying Value at Risk

Cited by 5 publications

References 4 publications

Risk Perception-Based Project Contingency Management Framework

Risk Perception-Based Project Contingency Management Framework

Estimation of Risk Thresholds for a Landslide in the Three Gorges Reservoir Based on a KDE-Copula-VaR Approach

Value-at-Risk Model Analysis of Taiwanese High-Tech Facility Construction

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