Development of the International Project Risk Assessment (IPRA) Tool
International construction projects are managed most effectively by addressing the risks that occur to all participants across the project’s entire life cycle. Many of these risks are jurisdiction-specific, and to be properly managed, they must first be identified and assessed. However, few management tools exist that consider the portfolio of life cycle risks encountered by owners and contractors working in an increasing global marketplace. In order to address this need, the Construction Industry Institute (CII) with funding from the Center for Construction Industry Studies and the Design-Procurement-Construction Specific Interest Group of the Project Management Institute, formed the International Project Risk Assessment Project Team (PT 181) to produce a user-friendly, systematic management tool to identify and assess the risks specific to international construction with the ultimate goal of improving project performance.
This research report discusses the development of the International Project Risk Assessment (IPRA) management tool including the methodology to create it, an analysis of its effectiveness in determining the relative importance of the identified risks, and the steps necessary to document, track, and mitigate international project-specific risks. The use of this tool and its guidance is especially critical during the business planning and pre-project planning project phases because failure to identify risks early in the project life cycle can result in serious ramifications.
The IPRA tool consists of 82 risk elements that are assessed by likelihood of occurrence and relative impact to determine which elements have the greatest potential impact on the project. Baseline Relative Impact values were developed for each of the 82 elements ranging from negligible impact to extreme impact and are based on input from 44 industry experts reporting results of approximately $23 billion in project value. The Baseline values give the project team guidance when not enough information exists to determine or assess the relative impact of a risk for their project.
The IPRA tool was tested on 22 projects representing greater than $4.2 billion in project value to verify its completeness and to assess the relationship of test and workshop relative impact values. Seven of the test projects were currently in the planning phase and have been assessed using the IPRA tool and detailed risk status reports were developed for four of these projects. In each case, the relative importance of project risks was determined and the IPRA process gave project participants a viable platform to discuss specific issues to move forward with risk management and mitigation.
Project performance data on the test projects were collected to identify the relationship between risk and project performance. A standardized project profile format was developed to help identify which IPRA elements impacted project performance.
Although the consistency test process used a relatively small, non-random sample of 15 projects, as well as seven ongoing projects, the tool appears to be a sound and comprehensive method to identify and assess the relative impact of international risk issues. This research also points out that there is no single blueprint for assessing the risks associated with international projects and use of the IPRA tool must be tailored to adjust for country, user, and business sector concerns. The tool can assist with the identification of issues not typically considered at contract formation but it does not supersede team functions.
The suggested risk register format provided in the report begins the documentation trail needed to establish a base of historical knowledge for risk mitigation and project performance. Records should be developed to account for such issues as date of occurrence, likelihood, relative impact, mitigation measures, and the ultimate impact of individual risk elements on project performance. This historical database serves to evaluate the project as well as to build a record for future projects.
The IPRA is the first management tool of its kind that allows for the identification and assessment of the life cycle risk issues specific to international construction for both owners and contractors. Furthermore, the tool is unique because the Baseline Relative Impact values are based upon empirical evidence created from industry expert inputs reporting on actual projects, and the IPRA identifies the risk factors of highest importance to the project team.
