Risk response incorporating risk preferences in international construction projects

Abstract

PurposeThe objective of this research is to develop a decision method that can generate appropriate risk response strategies for international construction project managers (PMs) and allow these strategies to reflect their different risk preferences.Design/methodology/approachThe optimal model approach is adopted. A credibility-based fuzzy chance constrained programming (CFCCP) model is developed, which simultaneously minimizes the expected losses of risk events and total costs of risk response. To solve this multi-objective model, a fuzzy interactive solution method is used. Moreover, the model performance is demonstrated by a real international industrial plant project. In addition, a sensitivity analysis of the model is conducted.FindingsThe result of the sensitivity analysis indicates that PMs with a greater risk aversion can lead to a higher mitigation ratio of expected losses of risk events and a higher total cost of risk response.Practical implicationsThis research provides contractors with an effective decision-making model to develop a project risk response plan, and it will assist contractors to minimize risk losses and enhance the project performance in the international construction market.Originality/valuePrevious studies overlook the risk preference, which is an important behavioral factor influencing decisions in risk response strategy selection. This research proposed a novel risk response strategy selection decision method that considers different attitudes toward risk among decision makers.

Impact of Individual Decision-Making Factors on Project Failure

“…The four critical components of Klien's model (Klien, 1989) include situational recognition, situational understanding, mental stimulation, and serial evaluation. The multi-criteria evaluation approach (Samadi, Nazari-Shirkouhi and Keramati, 2014) is based on the premise that ideal risk response strategies can be formulated using the multi-criteria evaluation tools on evaluation criteria and concerning the expert judgments prioritizing risk responses (Yan et al, 2021).…”