International Project Risk Analysis
Abstract
The industries are expanding their business into new foreign markets as a result of the globalization of international markets. International projects involve a wider range of issues than domestic projects. It is very essential for the companies to understand the risks involved with the international projects and their effects for sustained competitiveness and growth in a global market. International Project Risk management is the systematic process of identifying, analyzing and responding to project risks associated with international projects. This paper aims to explore the different categories of risks involved in international projects and illustrate the various risks involved in each category.
Keywords- globalization, international
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Financial capability of the owner/ contractor is the backbone of any project. Because of the fluctuations in foreign exchange rates, the proper cost estimation of any activity in international project becomes crucial. Factors like changes in government policies, unstable legal procedures can also create the financial & economic risks for the company. (Ahsan & Gunawan, 2010; Hartono et al., 2013, Hwang, Zhao and Gay, 2013; Lam et al., 2007)
2) Contractual & Legal Risks- Every country has its own legal procedures and regulations for the overseas companies executing projects in that country. The unfamiliarity with the legal procedures and the regulations can impose severe risks to the company. The contracting document also needs to be carefully prepared. Several clauses in the contract document if ignored can cause serious risks in the execution of the projects. (Charoenngam and Yeh, 1999;Hartono et al., 2013, Hwang, Zhao and Gay, 2013; Jamil, Mufti and Khan, 2008; Lam et al., 2007; Li Shuying,
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The following four risk mitigation strategies are commonly used. (PMBOK, 2004)
4.1 Avoid- This strategy suggests not undertaking the activity that is likely to trigger the risk. The risks related to fraudulent practices must be handled with this strategy.
4.2 Reduce- This strategy suggests to control the probability of occurrence of a particular risk or to control its impact. It is the most commonly used strategy in international projects. Most of the risk categories like economic, political, operational, cultural, technical, managerial, design, internally generated risks etc. should be responded with this strategy.
4.3 Transfer- This strategy suggests to transfer or share the risk responsibility to some other party by means of contract, partnership/joint venture or insurance. The risks like legal or contractual risks and subcontractor related risks should be responded with this strategy. Some of the financial risks can also be handled by using joint ventures or insurance.
4.4 Accept- This strategy suggests accepting the likelihood of risk occurrence and planning for proper utilization of resources. The risks like force majeure risks have no option other than to accept
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