Joint Risk Management Research Articles

Managing risks in IPD-ish projects: experience from Hong Kong

PurposeIntegrated project delivery (IPD) project that does not use multiparty agreement is identified as IPD-ish. The use of IPD-ish arrangement by incorporating integration practices in conventional contract can be viewed as the part of the adoption process of IPD. Moreover, inappropriate integration practices invite new forms of risks and the absence of multiparty agreement adds to the challenges of risk management in IPD-ish projects. This study discusses such challenges and proposes the use of joint risk management to address the potential pitfalls in IPD-ish arrangement.Design/methodology/approachA mixed research method was applied. First, the criticality of IPD-ish general and integration-specific risks was examined through a survey. Second, a real IPD-ish project was used to exemplify the use of joint risk management (JRM) to manage IPD-ish risks.FindingsTwo types of risks, namely integration risks (IRs) and general risks (GRs), are identified in IPD-ish projects. Two major findings for the IRs: (1) the most critical IRs are related to unbalanced incentivization and inefficient multidisciplinary teams; and (2) only team formation related pre-contract JRM strategies affect IRs. As for the GRs, the most critical ones are associated with design issues and can be effectively mitigated by post-contract JRM.Originality/valueUsing IPD-ish arrangement is an inevitable part of implementation of full IPD. This happens as many change-averse owners would like to test the integration principles using a conventional contract that they are familiar with. In fact, success in IPD-ish would pave the path for further adoption of IPD. This study offers insight into categorization of risks in IPD-ish projects. Appropriate use of post-contract and organization related pre-contract JRM would improve the chance of teasing out the values of IPD through IPD-ish arrangements. Care should be taken to introduce some contracting integration initiatives, such as risk/reward sharing incentive.

A risk-based stochastic model for supporting resources allocation of agricultural water-energy-food system under uncertainty

The interactive water-energy relationship is a major restriction on food production in agricultural irrigation systems. Applying water-saving irrigation systems can further intensify the interrelationship between water and electricity and trigger a water-energy joint risk. Currently, there are no approaches capable of effectively assessing the various uncertainties and water-energy joint risks in irrigation districts. In this study, a novel mathematical programming method termed copula-based interval two-stage stochastic mixed-integer programming (CITSMIP) is proposed. CITSMIP quantifies water-energy joint risks in food production and provides an optimal resource allocation plan and water-saving irrigation application schemes under different joint risk levels. CITSMIP was applied to solve an irrigation resource management problem in northwest China. The results show that under a certain water-energy joint risk, planting sunflowers would be the first choice for water-saving irrigation applications. As water-saving applications have become increasingly common over time, the water-saving volume is expected to increase to [74.65, 84.46] × 107 m3 by 2035. Moreover, under a certain joint risk, compared with the water risk, fluctuations in energy risk would have a greater impact on the total benefit of the system and the total consumption of resources. Compared with single water risk or energy risk management, the joint risk management results would have a lower degree of uncertainty and higher lower-bound benefits. Establishing CITSMIP can provide valuable insights into informing stakeholders to allocate resources and maximize benefits under water-energy joint risk.

A review on prospective risks and mitigation for oil and gas projects: implication for Indian CGD companies

PurposeThis study aims to focus on identifying the business risks that cause a delay in the oil and gas projects and suggest the way forward toward the better development of the city gas distribution (CGD) sector in India by suggesting the appropriate mitigation strategies.Design/methodology/approachThe study is a systematic review of literature on risks causing a delay in oil and gas projects. Comprehensive literature was carried out following a seven-step model to develop an exhaustive list of risk classifications and factors, risk identification methods and strategies to mitigate the risks. Weighted average ranking method is used to identify the top ten risks affecting oil and gas projects.FindingsThis research identifies the top ten risks frequently impacting the oil and gas projects, which are project cost, improper project management, change in economic parameters, currency exchange rate, government regulations and laws, contractor and subcontractors issues, lack of skilled labor, delay in approvals, health and safety issues and force majeure. These risks are primarily responsible for cost overrun and project delay. Additionally, this study recommends the implementation of joint risk management to avoid CGD project delay.Originality/valueThe CGD industry is in the growing stage with many projects under construction. However, there is a lack of research to manage risks in the CGD project. This study contributes to the limited literature available on risk management in oil and gas projects. Additionally, it highlights the need for further research to explore the different risks factors affecting the CGD business and its operations and subsequently develop appropriate mitigation strategies.

Risk management and bank performance: evidence from the MENA region

PurposeThe credit crunch of 2008 and recent COVID-19 influences underscored the importance of liquidity and credit risk management in businesses and financial institutions. The purpose of this study is to investigate the impact of liquidity risk and credit risk management on accounting and market performances of banks operating in the Middle East and North Africa (MENA) region.Design/methodology/approachThis study uses a panel data regression analysis on a sample of 51 listed commercial banks operating in 10 MENA countries during the period 2010–2018.FindingsThe results show that credit risk management does not affect the accounting performance of banks, while it has a non-linear, convex relationship with market performance. Surprisingly, liquidity risk management is not a significant driver for either performance measure in studied banks. However, when a bank combines credit risk management with liquidity risk management efforts, liquidity risk management actions return significant results on both performances, illustrated by an inverted U-shaped relationship. In addition, this study examines the joint impact of both risks on bank performance. This study reveals that accounting and market performances are differently affected by joint risk management efforts. Their impact depends on the combination of risk management ratios upon which banks choose to focus their efforts.Practical implicationsThe findings help bankers and regulators further consider non-linearities and offer them new tools for managing the impact of credit and liquidity risk interactions towards achieving more financial stability.Originality/valueThese results contribute to traditional banking in offering bankers and regulators new tools for managing the impact of credit and liquidity risk interactions on bank performance.

The effects of efficiency on banks’ market risk: Empirical evidence from China

This article investigates the effect of efficiencies on market risk using a sample of Chinese commercial banks from 2000 to 2015 using different measures of market risk; the Value at Risk (VaR) and Expected Shortfall (ES). The cost and profit efficiencies are estimated by the Stochastic Frontier Analysis (SFA) on the 12 biggest banks listed on the Shanghai Stock Exchange. In testing the effect between efficiency and market risk, this study applied four different models to uncover the relationship between VaR and ES as measures of market risk on cost and profit efficiencies. Utilising a panel data analysis, the results show that different banks efficiencies affect market risk measures differently. While bank cost efficiency reduces market risk, increase in profit efficiency increase market risk. The analysis in this study helps explain the unconvincing evidence of an inefficiencies-risk connection in the bank sector. Bank regulators and managers may need to focus on the cost and profit efficiencies-related initiatives to better manage the market risk. These findings provide bank managers with more understanding of bank risk and serve as an underpinning for bank supervision efforts aimed at strengthening the joint risk management of efficiency market risks.

Collaborative Interorganizational Relationships in a Project-Based Industry

The project-based construction industry finds itself in a paradoxical situation: while it weighs heavily in the world economy, it does have a history of low productivity. One important issue that plagues the industry is related to the challenges that stem from collaborative efforts (or lack thereof) between actors. The objective of this paper is to explore how actors of the construction industry organize their inter-firm relationships while examining the characteristics of such interactions and the elements affecting them (drivers, barriers, facilitators, outcomes). These interactions and elements were uncovered using a systematic literature review. A qualitative content analysis was carried out to categorize these elements and to generate dimensions describing the forms. The 139 articles retrieved depicted 12 relational forms established between construction companies (in descending order of citation): partnering, alliancing, project delivery methods, supply chain integration, joint ventures, integrated project delivery, joint risk management, collaborative design, contingent collaboration, quasi-fixed network, resource sharing, and collaborative planning. A multitude of drivers, barriers, facilitators, and outcomes were found. An analysis of the results led to the conceptualization of a multidimensional profile, which allows for a practical and flexible identification of the relationship form potential partners in the construction sector intend to establish. To provide guidelines for the implementation of this profile, a three-step framework was developed.

Influence of best value procurement on design-build projects: a grounded theory study

ABSTRACT This study examines the entire life-cycle of best-value projects to identify factors that can help key stakeholders build collaborative teams. Fifteen design-build projects (three medical, five offices, four educational, and three lodging buildings) that were procured using best-value were selected. For each project, knowledgeable stakeholders (i.e., owner’s representatives and contractors) were interviewed. The interview data were coded and analyzed to develop a grounded theory where forming a collaborative team is the core element. This study found that the following factors impact the degree of success achieved through the implementation of best-value: early involvement of key stakeholders, collaborative problem-solving, co-location, sharing information using technology, providing early project planning that includes clear definitions of each party’s responsibilities, building trust between parties, maintaining continuous dialogue through regular meetings, and having joint risk management. As far as academia is concerned, this research is one of the first studies that uses grounded theory qualitative method to better understand the role of project procurement on team behavior. The findings of this study can help practitioners and researchers leverage best-value procurement approach to build high-performance teams during design-build projects.

Joint risk management and collaborative ethos

Purpose Based on experience from the UK construction industry, this paper aims to capture the dimensions of the collaborative ethos required for successful implementation of Joint Risk Management, i.e. the cooperative and dynamic risk management approach that continues into the post-contract stage and is jointly undertaken by different project stakeholders.Design/methodology/approach A mixed methods research approach involving semi-structured interviews and a questionnaire survey was adopted to provide the basis for the statistical analysis encompassing descriptive statistics, non-parametric tests and exploratory factor analysis.Findings The analysis highlights the critical role of team integration achieved through the diffusion of collaborative values at strategic and practical level. Relevant applications include early stakeholder engagement, common goals and interests, team building activities and contractual flexibility.Originality/value This research is beneficial for the industry and academia as it enhances the understanding of an under-utilised management tool and highlights the requirements for its successful implementation.

Analysis of Risk in Construction Projects

The construction industry is subject to more risk and uncertainty than any other industry. Most of the participants experience risks in cost and time over runs and many times fail to meet quality standards and operational requirements. Therefore the need to increase the understanding of risk management. In this project, the qualitative analysis of all types of risks except financial and economical risks in the construction projects is done by ‘Risk factor and priority model’. The industry has shifted from risk transfer to risk reduction, current risk management systems are inadequate to manage project risks, and lack of joint risk management mechanisms is the key barrier to adequate risk management. SPSS (Statistical Package for Social Sciences) software is used for statistical analysis of the data collected from respondents. The general methodology of this study relies largely on the survey questionnaire which was collected from the local building contractors of different sizes by mail or by personnel meeting. A thorough literature review is initially conducted to identify the risk factors that affect the performance of construction industry as a whole. The survey questionnaire is designed to problem the cross-sectional behavioral pattern of construction risks in construction industry.

Risk Management in Construction Project

This article is intended to describe the concise history of the first Portuguese cements companies (Mining and Industrial Company of Cabo Mondego, General Company of Lime and Cements of Rasca, Cement Company of Tejo, Company of Maceira-Liz, Company of White Cements, Northern Cement Company, South Cement Company) that contributed to the emergence of Cimpor SGPS (current Portuguese cement company).Risks have a significant impact on a construction project’s performance in terms of cost, time and quality. As the size and complexity of the projects have increased, an ability to manage risks throughout the construction process has become a central element preventing unwanted consequences. How risks are shared between the project actors is to a large extent governed by the procurement option and the content of the related contract documents. Therefore, selecting an appropriate project procurement option is a key issue for project actors. The overall aim of this research is to increase the understanding of risk management in the different procurement options: design-bid-build contracts, designbuild contracts and collaborative form of partnering. Deeper understanding is expected to contribute to a more effective risk management and, therefore, a better project output and better value for both clients and contractors. The study involves nine construction projects recently performed in Sweden and comprises a questionnaire survey and a series of interviews with clients, contractors and consultants involved in these construction projects. The findings of this work show a lack of an iterative approach to risk management, which is a weakness in current procurement practices. This aspect must be addressed if the risk management process is to serve projects and, thus, their clients. The absence of systematic risk management is especially noted in the programme phase, where it arguably has the greatest potential impact. The production phase is where most interest and activity are to be found. As a matter of practice, the communication of risks between the actors simply does not work to the extent that it must if projects are to be delivered with certainty, irrespective of the form of procurement. A clear connection between the procurement option and risk management in construction projects has been found. Traditional design-bid-build contracts do not create opportunities for open discussion of project risks and joint risk management. A number of drivers of and obstacles to effective risk management have been explored in the study. Every actor’s involvement in dialogue, effective communication and information exchange, open attitudes and trustful relationship are the factors that support open discussion of project risks and, therefore, contribute to successful risk management. Based on the findings, a number of recommendations facilitating more effective risk management have been developed for the industry practitioners.

Determinants and Interactions of Sustainability and Risk Management of Commercial Cattle Farmers in Namibia

We study the determinants and interactions of sustainability and risk management with a cross-sectional dataset on commercial cattle farming in semi-arid rangelands in Namibia. Cattle farmers in Namibia act within a coupled ecological-economic system that is subject to extensive degradation and high environmental risk. Based on survey data, we develop variables for sustainability and risk management within this context, identify their determinants and analyse relevant interactions. Our results show that the ecosystem condition is positively influenced when financial risk management strategies are applied. On-farm risk management, like additional feed for cattle or resting part of the rangeland, and collective risk management through interest groups or governmental support, instead, do not impact on the sustainability of the farm. Risk management itself is predominantly influenced by various risks linked to the farming business and the farmers’ educational background. Furthermore, the gathered experience through operation time on farm decreases the application of on-farm risk management and favours the use of financial and collective risk management. Additionally, collective risk management is influenced by risk preferences, indicating that farmers who are more risk friendly apply forms of joint risk management strategies to a lesser extent. Risk friendliness is also negatively related to the economic sustainability, specified as the ability to sustain the livelihood of the farmer. However, the results show no indication whatsoever that time preferences impact on either sustainability or risk management.

Efforts to Achieve a Joint Risk Management Support System

Efforts to Achieve a Joint Risk Management Support System

Establishing Cooperative Relationships and Joint Risk Management in Construction Projects: Agency Theory Perspective

AbstractThrough construction contracts, clients and contractors are involved in principal-agent relationships. These relationships are argued to be adversarial and characterised by two main features of contracting parties, as follows: (1) different goals, and (2) different attitudes to risk. Agency-related problems contribute to the project participants concentrating on risks associated with their own parts of projects instead of joint risk management (JRM). Fewer studies have discussed JRM, although risk-sharing is a key issue in principal-agent relationships and agency-related problems must be effectively addressed to establish strong collaboration. Thus, the aim of this paper is to investigate how project participants address problems associated with principal-agent relationships and thereby enhance cooperative relationships (and JRM). The empirical findings are based on two longitudinal case studies and show that strong collaboration is a multidimensional activity that is crucial for JRM. Effective JR...

Trends in Critical Infrastructure Protection in Germany

Abstract Critical Infrastructures failures cause harmful consequences to the population, because they disrupt the supply of necessary goods and services. The failures pose an indirect threat, as they will regularly be triggered by natural hazards, technical failure/human error or intentional acts. In the risk analyses on the national level in Germany, Critical Infrastructure failures are qualitatively described to estimate their impacts on society. Critical Infrastructure Protection is seen as a joint task of many different stakeholders. Rules and regulations with different degrees of compulsion build the framework for their cooperation, and a strategy is in place that promotes the trustful exchange of information among all the relevant stakeholders. The most important stakeholder groups are public authorities, infrastructure operators, and the population. An example is given on how a joint risk management of public authorities and infrastructure operators may be performed, and the cooperation of public authorities and the population is discussed. As Civil Protection covers the entire risk and crisis management cycle with its phases prevention, preparedness, response and recovery, the article ends with examples of the support, which the German Federal Office of Civil Protection and Disaster Assistance and the Federal Ministry of the Interior offer for other stakeholders in order to achieve well-protected infrastructures and, in consequence, well-protected citizens.

Analytic Network Process Approach to Risk Allocation of EPC Projects Case Study: Gas Refinery EPC Projects in Iran

Risk allocation is the most significant factor in risk management. Earlier research has shown that risk allocation is essential to achieve success in construction projects. Risk allocation may fail to be achieved due to lack of a mechanism for joint risk management. Successful optimal risk allocation requires one to identify and evaluate the risk allocation criteria, which interact and overlap with each other and can lead to significant variation in the decision outcome in risk allocation. This study aims to allocate the risks in EPC projects using the analytic network process (ANP) method. The ANP approach is preferable in identifying the problems of interdependence and feedback among various criteria factors. The method utilizes data that are collected through a literature review, interviews, and a questionnaire distributed to EPC project experts. The results have shown that 12 risks are allocated to the developer, 9 risks are shared between developer and contractor, and 12 risks are allocated to the contractor. In conclusion, ANP is found to be suitable in analyzing the feedback and interdependencies among risk allocation criteria.

The relationship between liquidity risk and credit risk in banks

This paper investigates the relationship between the two major sources of bank default risk: liquidity risk and credit risk. We use a sample of virtually all US commercial banks during the period 1998–2010 to analyze the relationship between these two risk sources on the bank institutional-level and how this relationship influences banks’ probabilities of default (PD). Our results show that both risk categories do not have an economically meaningful reciprocal contemporaneous or time-lagged relationship. However, they do influence banks’ probability of default. This effect is twofold: whereas both risks separately increase the PD, the influence of their interaction depends on the overall level of bank risk and can either aggravate or mitigate default risk. These results provide new insights into the understanding of bank risk and serve as an underpinning for recent regulatory efforts aimed at strengthening banks (joint) risk management of liquidity and credit risks.

Balancing control and flexibility in joint risk management: Lessons learned from two construction projects

Joint risk management (JRM) is an approach that highlights the importance of collaboration between the project actors in managing risk that cannot be identified at the outset of the project. Despite the recognition of the concept in the literature, the use of JRM in practice seems to be rare. Based on contingency theory, we investigate how mechanistic (control-oriented) and organic (flexibility-oriented) management systems influence the implementation of JRM in two construction projects. In the first project, the actors managed to achieve a balance between control and flexibility, which paved the way for successful JRM. The extensive use of control in the second project hampered flexibility and constrained the use of JRM. We conclude that JRM requires both control for managing risk that has been identified and flexibility for dealing with unforeseen events. When a mechanistic approach is dominant, risk management remains a formal process carried out individually rather than collaboratively.

Comparative analysis of biofuels policy development in Sub-Saharan Africa: The place of private and public sectors

Considering that biofuels are considered as a catalyst for stimulating rural economic development, a number of countries in Sub-Saharan Africa (SAA) have developed policies to guide the development of the sector. This paper reviews the extent to which the existing biofuels policies and strategies of SSA countries have embraced public-private partnerships (PPPs) and whether the policies enhance or hinder such partnerships. In general, most SSA countries have no regulatory frameworks that have led to some private firms taking advantage of this inactivity to acquire large amounts of land for the growing of energy crops for biofuels at the expense of food crops, mostly involving smallholder farmers. The paper proposes developing effective PPP arrangements in order to leverage the synergies from the efficiencies of both public and private sectors. Such PPPs are crucial for mobilizing financial resources to drive scientific research and innovations for developing advanced processing technologies for second generation biofuels using lignocellulosic biomass as alternatives to traditional feedstock in order to foster the commercialization of biofuels in SSA. In conclusion, as we now live in a global village, countries must undertake detailed and systematic, country-specific assessments to ascertain the viability and feasibility of biofuels, and define the “rules of the game” in order to protect rural dwellers from loosing land to investors for growing energy crops and ensure equitable distribution of benefits of biofuels investments without posing a threat to environment or intruding on the rights of citizens or communities. Where biofuels are viable, PPPs should be part of the biofuels policy and investment strategy in order to build trust, collective responsibility and joint risk management to achieve shared outcomes for farmers, the investor and the environment.

Coordinated Border Management: From Theory to Practice

In a globalised world where interconnectedness and integration are key dynamics influencing economic growth and social development, policymakers increasingly realise the need for accelerated transborder regulatory reform to remove unnecessary barriers and burdens on trade. The World Customs Organization (WCO) in its Customs in the 21st century document has captured these critical concepts for reform within the theme of Coordinated Border Management (CBM). For Customs, CBM is about describing how improved regulatory efficiency and effectiveness can be realised through greater coordination between border agencies during policy development and operational activities, both domestically and internationally. This paper considers the meaning of the CBM concept for the customs community in particular and border agencies in general. It provides an overview of the evolution of the concept, which serves as a theoretical underpinning for further policy development. As the CBM concept is broad and offers numerous interpretations, operational arrangements, such as joint mobile teams, hot pursuit, joint risk management, and targeting centres are not addressed, nor does the paper analyse information exchange systems, in particular the Single Window that forms an intrinsic part of CBM. Instead, the paper focuses on institutional and some practical border arrangements developed in several countries as part of a CBM implementation strategy, and concludes by suggesting areas for further research.

The Relationship between Liquidity Risk and Credit Risk in Banks

This paper investigates the relationship between the two major sources of bank default risk: liquidity risk and credit risk. We use a sample of virtually all U.S. commercial banks during the period 1998 to 2010 to analyze the relationship between these two risk sources on the bank institutional-level and how this relationship influences banks’ probabilities of default (PD). Our results show that both risk categories do not have an economically meaningful reciprocal contemporaneous or time-lagged relationship. However, they do influence banks’ probability of default. This effect is twofold: whereas both risks separately increase the PD, the influence of their interaction depends on the overall level of bank risk and can either aggravate or mitigate default risk. These results provide new insights into the understanding of bank risk, as developed by the body of literature on bank stability risk in general and credit and liquidity risk in particular. They also serve as an underpinning for recent regulatory efforts aimed at strengthening banks (joint) risk management of liquidity and credit risks, such as the Basel III and Dodd-Frank frameworks.