Risk response incorporating risk preferences in international construction projects

Abstract

Purpose

The 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/approach

The 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.

Findings

The 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 implications

This 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/value

Previous 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.

Citation

Yan, P., Liu, J., Zhao, X. and Skitmore, M. (2022), "Risk response incorporating risk preferences in international construction projects", Engineering, Construction and Architectural Management, Vol. 29 No. 9, pp. 3499-3519. https://doi.org/10.1108/ECAM-03-2019-0132