Political Risks in International Construction

Abstract

Political risk identification, measurement, and management are key to successful international construction contracting. Multinational contractors are particularly sensitive to quick, unexpected change in the political environment that affects principal cash‐flow elements of their projects. Traditional political risk analysis used by manufacturing or heavy industrial firms for capital investment decisions does not adequately address contracting risks. An alternate approach is presented to fill this important gap. Essential to this treatment is the identification of the primary political source risks and their impacts on project cash‐flow elements. Recognition and planning, rather than gambling, is emphasized as a contractor's best approach to successful international construction.