A complexity-based framework of financial risk assessment in large-scale projects

Abstract

This paper considers how complexity analysis can help determine financial risk exposure to large-scale projects. We propose that a treatment of risk as a complex, emergent phenomenon and employing network analysis offers a potentially rich framework for understanding risk exposure generally. The approach deals specifically with risk and its transmission mechanism which, we argue, finds a natural articulation in a network presentation. Our experimental results indicate that the potential for risk transmission is an emergent product of existing risk identification methods and the consequential designed, and also unplanned-for, risk management interventions. In developing our work, we show that areas of risk reception are more important for risk management than risk propagation; thus, leading to the conclusion that risk management in projects should prioritize protecting areas of vulnerability from risk impact as opposed to trying to disrupt the sources of risk to those vulnerable areas.