Risk Allocation Research Articles

Assessment of critical risk and success factors in construction supply chain: a case of Pakistan

Assessment of critical risk and success factors is essential for successful execution of construction projects. This paper aims to identify the critical risk and success factors that affect the performance of the supply chain in the construction projects of Pakistan. For this purpose, a methodology was developed to identify risk and success factors. A questionnaire was designed to obtain the opinions of contracting companies, consulting firms, and project managers. Data were collected from 259 respondents and were analyzed statistically. The results of this study identified the top five critical risk factors that were prioritized based on the severity index. The most critical risk factors identified were, funding with a highest percentage of 93.89%, followed by shortage of material/equipment, cash flow, and bad weather. Among success factors, the communication has the highest severity index of 93.23%, followed by trust with a supplier, risk allocation, problem-solving, and joint working. These factors were discussed with implications that affect and impact the performance of the construction industry. The findings of this research can be used to guide the improvements in the construction industry in Pakistan, and other terror hit countries.

Zooming in on mechanistic predator-prey ecology: Integrating camera traps with experimental methods to reveal the drivers of ecological interactions.

Camera trap technology has galvanized the study of predator-prey ecology in wild animal communities by expanding the scale and diversity of predator-prey interactions that can be analysed. While observational data from systematic camera arrays have informed inferences on the spatiotemporal outcomes of predator-prey interactions, the capacity for observational studies to identify mechanistic drivers of species interactions is limited. Experimental study designs that utilize camera traps uniquely allow for testing hypothesized mechanisms that drive predator and prey behaviour, incorporating environmental realism not possible in the laboratory while benefiting from the distinct capacity of camera traps to generate large datasets from multiple species with minimal observer interference. However, such pairings of camera traps with experimental methods remain underutilized. We review recent advances in the experimental application of camera traps to investigate fundamental mechanisms underlying predator-prey ecology and present a conceptual guide for designing experimental camera trap studies. Only 9% of camera trap studies on predator-prey ecology in our review use experimental methods, but the application of experimental approaches is increasing. To illustrate the utility of camera trap-based experiments using a case study, we propose a study design that integrates observational and experimental techniques to test a perennial question in predator-prey ecology: how prey balance foraging and safety, as formalized by the risk allocation hypothesis. We discuss applications of camera trap-based experiments to evaluate the diversity of anthropogenic influences on wildlife communities globally. Finally, we review challenges to conducting experimental camera trap studies. Experimental camera trap studies have already begun to play an important role in understanding the predator-prey ecology of free-living animals, and such methods will become increasingly critical to quantifying drivers of community interactions in a rapidly changing world. We recommend increased application of experimental methods in the study of predator and prey responses to humans, synanthropic and invasive species, and other anthropogenic disturbances.

Annual and Monthly Dam Inflow Prediction Using Bayesian Networks

Dam inflow prediction is important in terms of optimal water allocation and reduction of potential risks of floods and droughts. It is necessary to select a suitable model to reduce uncertainties in long-term and short-term predictions. In this study a probabilistic model of Bayesian Networks (BNs) was used to evaluate its efficiency in predicting inflow into reservoirs considering the uncertainties. For this purpose, continuous BNs as well as integration of K-means clustering and discrete BNs were applied for predicting magnitude and range of inflows, respectively in terms of annual and monthly prediction scenarios. In this regard, the Zayandehrud Dam reservoir in Iran was selected to test this model. To achieve the best network structure in these scenarios, different patterns were defined based on the combination of predictors. According to the magnitude predictions, the MAPE and R2 indicators in annual model were respectively 21% and 0.62 and in monthly model were respectively 49% and 0.71. According to the results of the inflow range prediction, the prediction accuracy of the annual and monthly patterns was 75% and 83%, respectively. Modelling results showed that BN performs better in predicting the inflow range than its numerical prediction. The proposed model can improve the decision making of reservoirs operation.

A New Approach to Risk Attribution and Its Application in Credit Risk Analysis

How can risk of a company be allocated to its divisions and attributed to risk factors? The Euler principle allows for an economically justified allocation of risk to different divisions. We introduce a method that generalizes the Euler principle to attribute risk to its driving factors when these factors affect losses in a nonlinear way. The method splits loss contributions over time and is straightforward to implement. We show in an example how this risk decomposition can be applied in the context of credit risk.

Driving PPP Projects through AI Standards: A Review

Infrastructure projects in general have faced project management challenges since long. PPP projects that involve greater complexities of risk allocation and management, therefore, have not translated into executable projects in many instances. While research confirms potential benefits from employment of artificial intelligence and other technology in speedy decision making at different stages of PPP projects, industry standards on data sharing, transparency and cyber security will first have to gain momentum with increased cooperation between national and international authorities. This finding has been reached based on the information available in the public domain on the progress being made towards development of the ecosystem for adoption of AI in different countries/regions. While many countries have formed national strategies for AI, there has not yet been adequate thrust towards instituting processes that will lead to nationally and internationally acceptable AI standards in many countries.

Novel Probabilistic Cost Estimation Model Integrating Risk Allocation and Claim in Hydropower Project

AbstractThe uncertain construction of hydropower projects and fierce market competition put forward more stringent requirements for contractors with regard to accuracy and competitiveness of cost e...

Risk Allocation in Unsolicited and Solicited Road Public-Private Partnerships: Sustainability and Management Implications

Risk allocation plays a crucial role in the successful development of public-private partnership (PPP) projects. However, despite being an important topic for scholars and practitioners, the existing literature does not provide sufficient evidence on how managing risks in solicited (SP) and unsolicited (USP) road PPP projects, and subsequently, on what the sustainability implications are for such managerial processes. This study aims to extend risk allocation studies by analyzing contracts in Chilean highway PPPs over the last decade based on a systematic content analysis framework and case study data. The framework was developed through line-by-line coding of contract provisions associated with risk-related issues, and data were collected from semi-structured interviews with Chilean PPP practitioners. Results show that, although the majority of risks are either shared or transferred to the private party in most contracts, there are important variations in the way allocation procedures are implemented for SPs and USPs. Contracts analyzed revealed that risk arrangement mechanisms have usually focused on the economic dimension of sustainability without fully incorporating social and environmental considerations, increasing protests in the long-term. Conclusions indicate that risk allocation procedures and sustainability considerations are highly dependent on project-specific features and contextual factors. Overall, the analysis uncovers that the level of autonomy given to the private sector in both SPs and USPs has contributed to properly manage technical and economic risks, but has failed to successfully allocate social and environmental concerns.

Optimal dynamic asset allocation for DC plan accumulation/decumulation: Ambition-CVAR

We consider the late accumulation stage, followed by the full decumulation stage, of an investor in a defined contribution (DC) pension plan. The investor’s portfolio consists of a stock index and a bond index. As a measure of risk, we use conditional value at risk (CVAR) at the end of the decumulation stage. This is a measure of the risk of depleting the DC plan, which is primarily driven by sequence of return risk and asset allocation during the decumulation stage. As a measure of reward, we use Ambition, which we define to be the probability that the terminal wealth exceeds a specified level. We develop a method for computing the optimal dynamic asset allocation strategy which generates points on the efficient Ambition-CVAR frontier. By examining the Ambition-CVAR efficient frontier, we can determine points that are Median-CVAR optimal. We carry out numerical tests comparing the Median-CVAR optimal strategy to a benchmark constant proportion strategy. For a fixed median value (from the benchmark strategy) we find that the optimal Median-CVAR control significantly improves the CVAR. In addition, the median allocation to stocks at retirement is considerably smaller than the benchmark allocation to stocks.

Developing a Fuzzy Value-for-Money Analysis Model for Annuity-Based Public-Private Partnership Infrastructure Projects under Consideration of Risk Mitigation Capability

AbstractOptimal allocation of risk between the public and private sector is instrumental to the enhancement of value-for-money (VFM) for public-private partnership (PPP) infrastructure projects. Th...

Public–private partnerships: implications from policy changes for practice in managing risks

PurposeThis paper investigates the policy changes made towards infrastructure public–private partnerships (PPPs). The purpose of this study is to empirically identify the policy risks associated with the development of PPPs and to assess their impacts on the projects.Design/methodology/approachA case study of the policy changes that have been implemented for PPPs in China over the past seven years has been undertaken and is presented in this study. The causal loop diagrams are applied to assess and illustrate the potential impacts of the risks as a result of such changes on PPPs.FindingsA sequence of the policy risks, which relate to PPP risk allocation, contract management and implementation, payment and abatement mechanisms and financing, has been identified. It is also found that the identified risks will generate significant but negative impacts on PPPs, leading to an ineffective project delivery, low revenue, poor service quality and even contract breach.Practical implicationsThis research provides the private-sector entities that will embark on PPPs with an insight into managing and controlling policy risks over the project's lifecycle.Originality/valuePPPs have been critical for infrastructure development worldwide. Nevertheless, they have been a controversy, as many of them were subjected to poor outputs. Consequently, a variety of political mechanisms has been implemented to enhance the governance for PPPs. Policy can bring not only benefits but also risks and, however, policy risks of PPPs with a particular assessment for their potential impacts have received limited attention. Therefore, the study presented in this paper will contribute to the identification and assessment of policy risks within the context of PPPs.

Access and allocation: the role of large shareholders and investors in leaving fossil fuels underground

An under-researched story is how large shareholders (e.g. Pension Funds) and investors (e.g. Export Credit Agencies) whose investments in fossil fuels may amount to trillions of dollars are implementing the Paris Agreement on Climate Change and in particular leaving fossil fuels underground (LFFU). Hence, this paper addresses the question: What arguments are used by shareholders and investors in making their financial flows consistent with LFFU, and what do these arguments imply for: access to fulfilling needs; allocation of related resources, responsibilities and risks; and, the right to (sustainable) development? This paper identifies the different arguments used and clusters them into five investor/shareholder scenarios. It assesses these scenarios using the inclusive (access and allocation) development framework. We find that there is prima facie evidence that fossil fuels and associated infrastructure are doomed to become obsolete and hence stranded, which poses a series of risks for (potential) investors and various stakeholders. Three of the five identified scenarios indicate that Pension Funds and Export Credit Agencies may transfer their risks associated with fossil fuel resources, assets and/or related knowledge to developing countries justified by the latter’s Right to Development. Such transfers have negative access and allocation impacts—creating, inter alia, a fossil fuel infrastructure and path dependency in the South and amounting to a de facto transfer of a carbon budget along with carbon dependency and related debt to the Global South.

A closer look at risk factors for public-private partnerships in Singapore: six case studies

ABSTRACT Despite its global popularity over the past few decades, the public-private partnership (PPP) has not always led to successful outcomes, due largely to a number of risk factors associated with the projects. To explain how and why PPPs sometimes fail, this study considers the success-failure continuum of Singapore’s recent PPP experience from 2000 to 2019. After taking a critical, close look at the six failed cases, we identify the following latent risk factors: unstable financial capacity during the execution period of a project, force majeure unforeseen problems that arise, a lack of technical and/or financial foresight, poor corporate management (e.g. delays in construction and poor-quality service delivery), and an unfavourable investment environment stemming from the lack of a clear and supportive governance framework. In addition, we find that most risk factors tend to appear during the contract management (pre-operation) and project management (operation) phases. Such risks seem to drive the operational failure and subsequent contract termination of multiple unsuccessful PPPs, simultaneously (and sometimes sequentially) rather than in isolated fashion. All in all, this study offers for policymakers that better risk allocation and proper, mutual coordination between the public and private partners represent essential factors for PPP success.

What goes around, comes around? Access and allocation problems in Global North\u2013South waste trade

Infamous cases of toxic waste trade and research on its health and environmental implications have made the global waste trade a prominent environmental and social justice issue. Recently, such trade has shifted towards extracting resources from waste as recyclable components and used goods which could create income-generating opportunities and reduce the environmental burdens of waste trade from Global North to Global South countries. Nevertheless, studies highlight persistent problems in the access to these resources and allocation of responsibilities, risks and burdens from processing and disposal of traded waste in Global South countries. This article aims to contribute to the lessons learnt on access and allocation with respect to waste trade by focusing on issues of equity, fairness and distributive justice. Two cases are analysed: trade in discarded electronic and electric equipment (EEE) between the EU and Africa and trade in plastic materials between the UK and China. This study shows that exports of used EEE and recyclable plastic materials exacerbate the environmental burdens of Global South countries while also exporting new environmental risks and social burdens. At the same time, new demands for justice have emerged from Global South countries through waste ship back initiatives, and new international measures have also been adopted. While the access and allocation lens enabled the identification of persistent problems in Global North–South waste trade, directing future Earth System Governance research to the demands emerging from the Global South countries could offer insights into how to better address these problems and deal with growing global inequalities.

Rule of Prescription Under Article III, Rule 6 of Hague/Hague-Visby Rules: When Does the Clock of Limitation Start Ticking?

The pursuit of an internationally recognized regime which governs the allocation of risk of liability has been the predominant purpose of maritime law. At the same time, it is also necessary to set a time limit within which a legal action may be brought against the carrier. There are two regimes which govern the carriage of goods by sea and are adopted by many countries, the Hague Rules, and the Hague-Visby Rules and the time limit for claims set out in the rules against the carrier is one year from the day on which the goods are delivered or should have been delivered by the carrier. The rationale behind this is that the carrier cannot be expected to keep records for long periods and must be notified while the events are still fairly recent and recorded, as to what claims are to be presented. At present, Pakistan has adopted the Hague Rules in its Carriage of Goods by Sea Act, 1925 and despite the clarity embodied in the period of limitation as laid down under Article III, Rule 6, Pakistani Courts have given various interpretations to the term “delivery”, resulting in different outcome of the cases. In relation thereof, this article examines and discusses several judgments for decades on the subject of rule of prescription, along with the analysis of Article III, Rule 2 on the interpretation of “discharge”, and puts forward some suggestions and recommendations on the law laid down by the Convention. The rules for transport documents are based on Hague or Hague-Visby Rules, and therefore, it is necessary at the outset of the article to provide an overview of the transport system in the country. The need for efficient working of the transport system in the country is absolutely vital in view of its role in a country’s economic growth.

Access and allocation in climate change adaptation

As climate change impacts become increasingly apparent, adaptation becomes increasingly urgent. Accordingly, adaptation to climate change has shifted towards the centre of attention in both policy and research. In this article, we review the last 10 years of adaptation research (2008–2018), with a focus on work within the Earth System Governance network. We use the lens of access and allocation to structure our review and examine how adaptation affects, and is affected by, access to basic needs, basic rights, and decision-making on the one hand, as well as allocation of responsibilities, resources, and risks on the other. We find that questions of justice, equity, and fairness are fundamental to all dimensions of adaptation. The access perspective, for example, suggests that we need to assess vulnerability, understood broadly, while the allocation perspective focuses on questions of responsibility for being vulnerable, e.g. when people live, or move to, hazard-prone areas exposed to climate risk. This also relates to questions of who is responsible for selecting, implementing, and funding adaptation measures. Overall, we find that the framework of “access and allocation” and its subcategories offer a detailed approach to adaptation and adaptation research, but that it is not intuitive. The notion of “climate justice” seems to resonate more with both academic and policy debates.

Development of risk misallocation causal networks using interpretive judgement in the construction industry

The allocation of risk in the construction industry determines to some extent the success of the project as inappropriate allocation has the resultant effects of claims, disputes, tensions, cost overruns, schedule overruns and quality shortfalls. The existent literature has predominantly focused on risk misallocation as the allocation of risk to the inappropriate party. Notwithstanding, risk misallocation includes use of inappropriate mechanisms, incomprehensive allocation and use of inappropriate resources. This paper developed causal networks resulting in risk misallocation. The causal networks are developed from 15 purposive semi-structured interviews from a heterogeneous sample and supplemented sequentially by 198 questionnaire survey responses in the building sector selected randomly from construction clients, contractors and consultants. The causal networks depict how the processes of risk identification, risk analysis, risk control measures and risk allocation could lead to risk misallocations. The findings suggest that the risk control/response stage has potential for various forms of risk misallocation in comparison to any other stage. Networks presented are a basis for improvement in professional practice for construction professionals as they manage risk on various projects.

Managerial ability and bank failure

ABSTRACT Bank failure is a major concern for the authoritative bodies and market participants because of the possible contagion across the financial sector and the subsequent collapse of the economic system. This paper investigates the impact of managerial ability on bank failure. We find that more ably managed banks experienced lower failure probability. Further analyses provide support to this finding and reveal that more ably managed banks are associated with more adequate capital, better asset quality, greater efficiency in the allocation of resources, higher liquidity and lower risk.

Impacts of risk allocation on conflict negotiation costs in construction projects: Does managerial control matter?

The negotiation costs for project participants to resolve conflicts significantly undermine the project performance, but how to reduce these costs remains largely unexplored. This study proposes that risk allocation in the contract between the client and contractor will impact the conflict negotiation costs and managerial controls of the client will moderate this relationship. Hypotheses were tested with a sample of 226 projects collected from Chinese construction firms. The results show that conflict negotiation costs will increase with more risks allocated to the contractor. Moreover, behavior control of the client strengthens this positive relationship but outcome control weakens it. These findings offer a nuanced understanding of how conflict negotiation costs occur and contribute to the project governance literature by exploring how ex-post governance (managerial control) aligns with ex-ante governance (risk allocation). Practitioners can benefit from this study by understanding how to formulate risk allocation strategies and exercise different managerial controls.

Aggregate Risk Model and Risk Measure-Based Risk Allocation

AbstractIn actuarial modeling, aggregate risk is known as more attractive rather than individual risk. It has, however, usual difficulty in finding (the exact form of) joint probability distribution. This paper considers aggregate risk model and employ translated gamma approximation to handle such distribution function formulation. In addition, we deal with the problem of risk allocation in such model. We compute in particular risk allocation based on risk measure forecasts of Value-at-Risk (VaR) and its extensions: improved VaR and Tail VaR. Risk allocation shows the contribution of each individual risk to the aggregate. It has a constraint that the risk measure of aggregate risk is equal to the aggregate of risk measure of individual risk.Keywords: allocation methods; tail-value-at-risk; translated gamma approximation. AbstrakRisiko agregat merupakan kajian yang lebih menarik dalam pemodelan aktuaria, dibandingkan dengan risiko individu. Namun fungsi distribusi risiko agregat sulit ditentukan bentuk eksaknya. Artikel ini membahas mengenai model risiko agregat dan menggunakan metode aproksimasi Translasi Gamma untuk menentukan fungsi distribusi risiko agregat. Berdasarkan fungsi distribusi tersebut, dapat diprediksi alokasi risiko agregat. Metode alokasi risiko agregat diterapkan pada ukuran risiko Value-at-Risk (VaR) dan pengembangannya: improved VaR dan Tail-VaR. Alokasi risiko menyatakan nilai kontribusi setiap risiko individu terhadap ukuran risiko agregat. Jumlahan atau agregat dari setiap alokasi risiko individu sama dengan ukuran risiko agregat.Kata kunci: aproksimasi Translasi Gamma; alokasi risiko; Tail-Value-at-Risk.

Shades of Green Reporting: A Critical Discourse Analysis of Eco-News Reports in the Philippines

This paper uncovers the ideological representations found in the linguistic patterns of eco-news reports of national and local dailies in the Philippines. By bringing the 25 mainstream news reports on environmental concerns to analysis using Fairclough’s (1992) Critical Discourse Analysis Framework and Halliday’s (1985) Systemic Functional Linguistics, findings reveal that the news reports serve to promote different core ideas about destruction, allocation of blame, victimization, bias, risk and hazard, government’s role, and objectification. Themes drawn out are found to represent nature as the enemy and the culprit of destruction, the government as the eco-warriors, the ordinary citizens as weak and defen c eless versus the authorities as empowered and influential, and plants and animals as human commodities. By way of turning verbs into nouns, active to passive structure, and subject to its metonymic representation, human involvement is concealed as social actors are removed in the text construction. Despite maintaining the objective nature of news reporting, the discourse is produced based on the ideological standpoints of the writers, which may feed readers’ understanding o f the realities of nature and ecology as a whole.