Selecting Project Risk Preventive and Protective Strategies Based on Bow-Tie Analysis

Abstract

In the practice of project risk management, project managers need to determine preventive actions to reduce risk probability before the risk occurs and/or protective actions to lower the risk impact after the risk occurrence. This paper proposes a method that integrates the bow-tie analysis and optimization model to determine risk response strategies from the preventive and protective perspectives. In the proposed method, bow-tie analysis is used to identify and analyze the causes and consequences of the risk event, the risk preventive strategies with respect to the causes, and the protective strategies with respect to the consequences. Then, the likelihood of the occurrence and the total loss of the risk event are calculated. The fuzzy optimization model is built to select proper risk preventive and protective strategies under the constraints of the risk likelihood, risk loss, and the expected loss. Finally, to demonstrate the proposed method, a case study is provided and some insights for managerial practice are drawn.