Identifying Political Risk Management Strategies in International Construction Projects

Tengyuan Chang,Bon-Gang Hwang,Xiaopeng Deng,Xianbo Zhao

doi:10.1155/2018/1016384

Abstract

International construction projects are plagued with political risk, and international construction enterprises (ICEs) must manage this risk to survive. However, little attention has been devoted to political risk management strategies in international construction projects. To fill this research gap, a total of 27 possible strategies were identified through a comprehensive literature review and validated by a pilot survey with 10 international experts. Appraisals of these 27 strategies by relevant professionals were collected using questionnaires, 155 of which were returned. Exploratory factor analysis was conducted to explore the interrelationships among these 27 strategies. The results show that all of the 27 strategies are important for political risk management in international construction projects. Moreover, these 27 strategies were clustered into six components, namely, (1) making correct decisions, (2) conducting favorable negotiations, (3) completing full preparations, (4) shaping a good environment, (5) reducing unnecessary mistakes, and (6) obtaining a reasonable response. The 6 components can be regarded as 6 typical management techniques that contribute to political risk management in the preproject phase, project implementation phase, and postevent phases. The findings may help practitioners gain an in-depth understanding of political risk management strategies in international construction projects and provide a useful reference for ICEs to manage political risks when venturing outside their home countries.

Highlights

With the rapid development of economic globalization, the global construction market has thrived in the past decade [1]
Results of the Validity Test. e Pearson correlation analysis (2 tailed) was applied to check the validity of the results of the exploratory factor analysis. e strategies clustered into a component should be significantly correlated [44]. e results revealed that for each component all the strategies were correlated with the others, and the strategies can explain political risk management in that dimension
Political risk is a major problem encountered by international construction enterprises (ICEs) in international construction projects

Summary

Introduction

With the rapid development of economic globalization, the global construction market has thrived in the past decade [1]. Ese risks had a very large negative impact on the global market and resulted in great losses for ICEs. Given the increasingly complex business environment, political risks should not be ignored by ICEs when they approach global markets [2, 6, 7]. Political risk in international construction projects refers to uncertainty related to political events (e.g., political violence, regime changes, coups, revolutions, breaches of contract, terrorist attacks, and wars) and to arbitrary or discriminatory actions (e.g., expropriation, unfair compensation, foreign exchange restrictions, unlawful interference, capital restrictions, corruption, and labor restrictions) by host governments or political groups that may have negative impacts on ICEs [6]. Compared with the nonsystematic risks (e.g., technical risk, quality risk, procurement risk, and financial risk) of construction projects, political risk is Advances in Civil Engineering more complex, unpredictable, and devastating and is usually outside the scope of normal project activities [2]

Objectives

Methods

Results

Discussion

Conclusion