Risk Analysis for International Projects (Best Practice)

RT-181 Topic Summary
RT 181

Overview

CII commissioned RT-181 in response to the increasing trend among U.S. firms (owners and contractors) pursuing projects outside of North America which carried with them risks unique to projects in foreign jurisdictions. These risk factors are specific to international projects and represented an additional layer of threat/opportunity to the stakeholders’ interests.

 RT-181 established the following objectives:

  • Develop a process to identify and assess risks specific to international projects using standard terminology.
  • Develop a list of risk elements specific to international projects.
  • Create a structured process to help identify, measure, and track risks from an early stage of project development through operation of the facility. 

To enhance the identification and assessment of international project risks, RT-181 developed a structured risk identification and assessment process known as the International Project Risk Assessment (IPRA). The IPRA has been tailored to address the specific issues typically encountered by those working in an international setting. The tool focuses on the international aspects and does not address issues considered basic to the project. As outlined in this summary, research has shown that the tools and techniques developed by the project team can assist in improving the overall success of international capital projects.

Key Findings and Implementation Tools

1 : Benefits of Using the IPRA tool

The IPRA can provide numerous benefits to the project team. These include uses as:

  • A checklist that a project team can use for determining potential project risks
  • Standardized risk terminology for international ventures
  • A process for identifying and assessing risk that will also facilitate prediction of disruptions, potential for disputes and other potential issues
  • A means to monitor progress in addressing risk control at various stages during the project’s life cycle
  • A tool that aids in communication and promotes alignment by highlighting poorly defined areas of risk for investors, owners, and design or construction contractor
 Refer to RS181-1 for a complete list of benefits. (RS181-1, p. 4)
Reference: (RS181-1)

2 : Categorization of Risk Elements

A detailed list of the risk elements that impact the project’s life cycle (planning, design, construction, and operations) of international facilities was developed. The breakdown of the 82 risk elements grouped into 14 categories are not equal in impact to the threat/opportunity – as hypothesized by the team. Project characteristics affect the level of impact based on locale, project type, resource availability, government, and other specifics. Hence, the team created a standard guidance to assign the level of impact of a certain risk if no baseline previously existed based on a project’s characteristics. 

Refer to RS181-1 for a list of the categorized risk elements. (RS181-1, p. 5)

Reference: (RS181-1)

3 : Life Cycle Project Process

RT-181 team’s research (case studies, interviews, surveys), showed that assessing risk was a project management activity to be done throughout the project life cycle. This is key to effectively managing the risks. The relative importance of any specific risk depends on the respective stakeholders, and could be different for different stakeholders. Therefore it is essential to get a broad range of perspectives when assessing risk in order to arrive at a consensus on relative importance of risks.
 
(RS181-1, p. 14)
Reference: (RS181-1)

4 : Relative Importance of a Risk

The likelihood of occurrence combined with the relative impact at the time of the assessment determines the relative importance of the risk.
Reference: (RS181-1)

5 : Critical Go/No-Go Risk Elements

The top five critical go/no-go risk elements are:

  1. Sources and form of funding
  2. Business case
  3. Economic model/feasibility
  4. Political stability
  5. Contract type and procedures

 (RS181-1, p. 23)

Reference: (RS181-1)

6 : Risk Management to Improve Project Performance

For international construction projects, the following risk response is proposed as a critical phase of the overarching risk management process. These are suggested actions that can help the project team effectively implement the IPRA:

  1. Organize and formalize a risk management process and keep it as simple as possible.
  2. Begin early to be most effective.
  3. Keep a broad perspective to get the diversified input required.
  4. Undertake adequate pre-project planning, analysis, and engineering.
  5. Partner with owner and contractor management.
  6. Recognize that certain projects are more prone to risk and that experience in a jurisdiction is important.
  7. Risk documentation is critical.

(RS181-1 p. 27)

Reference: (RS181-1)

7 : Implementation Tool #1

IR181-2, Integrated Project Risk Assessment(IPRA) 

The International Project Risk Assessment (IPRA) tool focuses on the risks typically encountered during the life cycle of international capital projects.

Reference: (IR181-2)

Key Performance Indicators

Reduced/improved risk

Research Publications

Adding Value through a Practical and Proactive Project Risk Management Process - SP181-3

Publication Date: 09/2014 Type: Implementation Resource Pages: 49 Status: Supporting Product

Integrated Project Risk Assessment (IPRA), Version 2.0 - IR181-2

Publication Date: 12/2013 Type: Implementation Resource Pages: 117 Status: Tool

Risk Assessment on International Projects: A Management Approach - RS181-1

Publication Date: 02/2004 Type: Research Summary Pages: 38 Status: Supporting Product

Development of the International Project Risk Assessment (IPRA) Tool - RR181-11

Publication Date: 12/2003 Type: Research Report Pages: 362 Status: Reference


Supporting Resources

Presentations (CII Annual Conference & Workshops)

Session - Risk Assessment for International Project

Publication Date: 06/2003 Presenter: Number of Slides: 26 Event Code: AC03

Session - Risk Management Update

Publication Date: Presenter: Number of Slides: 85 Event Code: PIW914


Education Materials

International Project Risk Assessment and the IPRA - Instructor's Guide - EM181-21

Publication Date: 02/2006 Type: Education Module Pages: Status: Supporting Product

International Project Risk Assessment and the IPRA - Participant Handbook - EM181-21A

Publication Date: 02/2006 Type: Education Module Pages: Status: Supporting Product

International Project Risk Assessment and the IPRA - Classroom Kit - EM181-21K

Publication Date: 02/2006 Type: Education Module Pages: Status: Supporting Product


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