Page 134 - Global Project Management Handbook

RISK IDENTIFICATION AND ASSESSMENT 6-3

investors, designers, and constructors do not fully recognize and realize the value of a
systematic risk management process. Differing objectives and the adversarial relation-
ships these differences generate between the parties are also common. Consequently,
the overall inability of project participants to understand the risks associated with
international project constitutes an industry blind spot that particularly plagues con-
tractors and owners. This chapter provides an overview of the IPRA tool development
and research findings, a brief explanation of how the tool is used, and recommenda-
tions for its use on international projects.

RESEARCH OBJECTIVES

The primary objectives of this research investigation were (1) to develop a user-friendly,
systematic management tool and process to identify and assess the risks specific to inter-
national construction, with the ultimate goal of improving project performance, (2) to
quantify and prioritize the relative importance of the identified risks in order to gauge
which risks have the highest impact, and (3) to provide guidance when risk impacts are
unknown or when uncertainty is high.

DEVELOPMENT OF THE IPRA TOOL

The research investigation began with an extensive literature review on the topics of
risk identification, assessment, and management, as well as on issues related to inter-
national construction. To gain additional insight into these issues, information also
was gleaned from a review of industry practices for international project risk assess-
ments and from CII’s globalization forums.
To further evaluate the approaches that organizations use to manage the risks
incurred on international projects, 26 structured interviews were conducted with mid-
dle- to upper-level management personnel. Eight were contractors, eight were owner
organizations, and the remaining 10 were distributed among legal, professional ser-
vice, financial, and insurance experts. Construction industry experience of intervie-

wees ranged from 20 to over 50 years, and all participants had at least 10 years of
working experience with international projects of various types and sizes (Walewski
and Gibson, 2003a).
The literature review and structured interviews showed that a number of techniques
and practices exist to identify and assess risks that occur on international projects, but
there was no standard technique or practice specifically tailored to such projects (CII,
1989: Walewski et al., 2002). Decisions on country-specific risks often are made by
top management and separated from other business, technical, and operational risks of
the project. Few project participants have a complete understanding of the portfolio of
risks that happen on such projects, and a life-cycle view of the risks is uncommon.
Given these limits of perspective, compartmentalization of the risks occurs, and inter-
national projects often are organized and managed in ways that create information and
communication disconnects.
A detailed list of the risk elements that affect the project’s life cycle (i.e., planning,
design, construction, and operations) of international facilities was developed from
five primary sources: the expertise of the research team, literature-review results, the
structured interviews, input from members of CII’s Globalization Committee, and fur-
ther review by industry representatives. Initial topic categories were gathered from
previous research and from the structured interviews and then screened using the