What Enables a High-Risk Project to Yield High Return from a Construction Contractor’s Perspective?

Jin Woo Won, Wooyong Jung, Seung Heon Han, Sungmin Yun and Bonsang Koo
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Jin Woo Won: Department of Civil and Environmental Engineering, Yonsei University, Seoul 03722, Korea
Wooyong Jung: Department of Nuclear Power Plant Engineering, KEPCO International Nuclear Graduate School, Ulsan 45014, Korea
Seung Heon Han: Department of Civil and Environmental Engineering, Yonsei University, Seoul 03722, Korea
Sungmin Yun: Department of Civil and Environmental Engineering, Yeungnam University, Gyeongsan 38541, Korea
Bonsang Koo: Department of Civil Engineering, Seoul National University of Science and Technology, Seoul 0181, Korea

Sustainability, 2019, vol. 11, issue 21, 1-17

Abstract: “High risk high return” is a general rule in the overall industry; however, high-risk projects in the construction industry frequently fail to yield a high return. In order to achieve a sustainable business in the international construction market, contractors require an average to high return yield under high-risk conditions. This study aims to reveal what risk factors and risk management performance enables high-risk projects to yield high returns. The study investigated 124 international construction projects by Korean contractors and classified them into four groups: high-risk high-return (HH), high-risk low-return (HL), low-risk high-return (LH), and low-risk low-return (LL). The study found that risk assessment accuracy was the most important trigger in discriminating between high return projects (HH, LH) and low return projects (HL, LL), whereas risk mitigation performance showed little difference between high return and low return projects. In addition, the contingency amount did not significantly affect project return in HL, LH, and LL projects, but HH projects showed a positive relation between contingency and predicted risk amount. This article contributes to recognizing the differences between high return and low return projects and provides insights for practitioners into the relation between risk management performance and high returns in different risk conditions.

Keywords: risk and return; international construction project; risk assessment; risk mitigation; contingency (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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