A framework for the modeling and management of project risks and risk interactions

Abstract

Nowadays, projects are facing a growing complexity and are thus exposed to numerous and interdependent risks. However, existing methods have limitations for modeling the real complexity of project risks. In this chapter, a four-phase framework for project risk management is proposed. It not only deals with project risks in terms of their probability and impact, but also brings in the modeling of risk interactions. Through identifying and assessing risks and risk interactions, a project risk network is constructed to represent the complexity of project risks. A quantitative model is then developed to describe the propagation behavior in the risk network for refining the risk analysis results. A numerical example is given to illustrate how to apply the framework in practice. The proposed approach provides more insights on project risks and risk interactions for their management, and can be used as a powerful complement to the classical methods for subsequent decision support.