From Risk Matrices to Risk Networks in Construction Projects

Abstract

Risk management is considered as a vital process contributing to the successful outcome of a complex construction project in terms of achieving the associated project objectives. The widely used industrial practice in managing construction project risks is to assign probability and impact values to each risk and to map risks on a risk matrix. The main criticism of this practice relates to ignoring complex interdependencies between risks and using point estimates for probability and impact values. Furthermore, risks mapped on a matrix are deemed to influence a specific objective and there is a challenge involved in aggregating the impact of risks across multiple (conflicting) project objectives. Utilizing a data-driven Bayesian Belief Network methodology, in this paper we introduce a new process where the risks mapped on a risk matrix corresponding to each project objective are aggregated and modeled as a risk network, and a holistic impact of each risk is captured across the network by means of new risk metrics. The proposed methodology is demonstrated through a real application. The results specific to the two ranking schemes (assuming independence/interdependence of risks) are found to be negatively correlated, which substantiates the importance of utilizing an interdependency-based risk management process.