Risk response incorporating risk preferences in international construction projects

Purpose: The objective of this research is to develop a decision method that can generate appropriate risk response strategies for international construction project managers (PMs) and allow these strategies to reflect their different risk preferences. Design/methodology/approach: The optimal model approach is adopted. A credibility-based fuzzy chance constrained programming (CFCCP) model is developed, which simultaneously minimizes the expected losses of risk events and total costs of risk response. To solve this multi-objective model, a fuzzy interactive solution method is used. Moreover, the model performance is demonstrated by a real international industrial plant project. In addition, a sensitivity analysis of the model is conducted. Findings: The result of the sensitivity analysis indicates that PMs with a greater risk aversion can lead to a higher mitigation ratio of expected losses of risk events and a higher total cost of risk response. Practical implications: This research provides contractors with an effective decision-making model to develop a project risk response plan, and it will assist contractors to minimize risk losses and enhance the project performance in the international construction market. Originality/value: Previous studies overlook the risk preference, which is an important behavioral factor influencing decisions in risk response strategy selection. This research proposed a novel risk response strategy selection decision method that considers different attitudes toward risk among decision makers.