Modeling Profitability-Influencing Risk Factors for Construction Projects: A System Dynamics Approach

Abstract

This study addressed the complexity involved in integrating the causative risk factors influencing construction profitability. Most of the existing studies cover the individual effects of profitability influencing factors. Very few focus on the systematic impact without incorporating the complexity and associated dynamics, presenting a gap targeted by the current study. The current study aimed to assess causative interrelations and interdependencies between profitability influencing risk factors (PIRF), through systems thinking (ST) and system dynamics (SD) modeling. The SD approach was used to evaluate the integrated impacts on profitability-influencing risk categories (PIRC) in construction projects. The causative influencing factors affecting construction profitability were identified through a comprehensive literature review. These were ranked using content analysis, and categorized into significant issues. Through 250 structured surveys and 15 expert opinion meetings, the path for quantitative and qualitative evaluations was prepared. Following these investigations, a causal loop diagram (CLD) was established using the ST technique, and the integrated effect was quantified using SD modeling. The study finds the rising cost of material, supply chain process, payment issues, planning and scheduling problems, financial difficulties, and effective control of manpower and equipment resources as the most critical PIRFs. The integrated effects of PIRFs on PIRC were quantified using SD modeling. This study helps field professionals with profitability-influencing factors, diagnosing issues, and integrating impacts regarding decision-making and policy formulation. For researchers, it presents a list of factors that can be investigated in detail, and the holistic interrelationships established.

Risk Management Practices and Performance of Road Construction Projects in Kilifi County, Kenya

“…However, the effective implementation of risk management practices has been overlooked in developing nations (Shayan, Pyung Kim, & Tam, 2022). Although risk management and project performance has been widely discussed in the literature from various perspectives (ALSaadi & Norhayatizakuan, 2021), the existing empirical literature has provided mixed findings or inconclusive results (Jahan et al, 2022). The majority of these studies have focused on developed countries with a paucity of studies within the developing countries (Yeung, Chan, Chan, & Lok, 2022).…”

“…The existing empirical literature has provided mixed findings or inconclusive results. Empirical evidence is needed to explain the influence of risk management practices on performance of construction projects (Jahan et al, 2022).…”

Risk Management Practices and Performance of Mining Projects in Kwale County, Kenya

“…Generally, profitability is one of the most important goals, and an essential element of satisfaction for the project stakeholders (Jahan et al, 2022). However, the projects fail to achieve good profitability, due to issues related to time, cost, and scope (Muthukrishnan & Ganapathi, 2021).…”

“…The existing literature suggests that there is a consensus between academia and industry that project risk management is critical to project success (Aramali, Sanboskani, Gibson Jr, El Asmar, & Cho, 2022;Ahmad et al, 2022). However, the link between project risk management and project performance is rarely addressed in the existing literature (Jahan et al, 2022).…”

Analysis of Ukraine’s construction companies profitability as a tool for achieving the SDG

“…Khan etc. identified rising material costs, supply chain issues, payment issues, planning and scheduling issues, financial difficulties, and ineffective control of human and equipment resources as the most critical factors affecting construction profitability [8]. For the proper calculation of profit, it is very important to keep records of income and expenses correctly, especially innovative ones, which is emphasized in work: [9].…”