Risks of International Projects: Reward or Folly?

Abstract

Assessing and managing risk is a complex and critical task for international construction projects that support new business ventures. Indeed, it could be argued that the word "risk" and the term "international projects" could be used interchangeably. Driven by such factors as new markets, domestic competition, and trade liberalization, U.S. owners and contractors have in recent years aggressively pursued international business opportunities and projects. International work requires owners to assess a diverse set of political, geographic, economic, environmental, regulatory, and cultural risk factors when contemplating an international capital project. In addition, contractors must consider a similar set of risk factors in determining whether to undertake such projects, and how to price and schedule the work if they do. A limited amount of research has been undertaken to address these issues, and current efforts to assess and evaluate the risks associated with international construction are fragmented and fail to provide adequate assistance to project managers. Can risks be systematically addressed and mitigated on these types of projects or is it folly to attempt this process? This paper will report the results of a research project focused on international projects sponsored by the Center for Construction Industry Studies (CCIS), the Construction Industry Institute (CII) and the Project Management Institute (PMI). This research included input from over 100 industry experts representing 58 organizations. Data from 65 international projects, with a total cost of approximately $27 billion (U.S.) were analyzed. Key risk issues and a management approach to help mitigate risks will be presented. Included in that discussion will be the International Project Risk Assessment (IPRA) tool developed in collaboration with industry. This management tool provides a systematic method to identify, assess, and determine the relative importance of international-specific risks across the project’s life cycle. The reward of risk management on international ventures will be explored. How industries other than construction can gain from this research will be outlined.