Evaluating the impact of construction risks on project success in the Arabian Gulf region (AGR) construction industry from the perspective of multinational firms

Multinational firms working on construction projects often encounter significant risks beyond those encountered by local firms. Although risk mitigation measures are used when venturing into international markets, there has been little research into evaluating the impact of risks on project and firm performance in the Arabian Gulf Region (AGR). Risks are identified through an extensive data collection process from multinational companies with significant work experience in the AGR. The impact of these risks on four performance metrics is descriptively evaluated using Relative Importance Index (RII), Significance Score (SS), Risk Mapping Matrix (RMM) and Principal Component Analysis (PCA) for validation. The results indicate that firms are potentially exposed to a total of 27 external risks divided into political, economic, legal, natural, and social categories, and 47 internal risks divided into design, construction, financial, management, and maintenance categories. Of the 27 external risks, war threat, political instability, price inflation, resource availability and quality, authorities and regulation requirements, and inclement climate have the most significant impacts on the four performance metrics considered. Of the 47 internal risks, defective late design documents, constructive changes, and insufficient scope definition in the management risk category have the most significant impacts on the four performance metrics. Multivariate data analyses revealed that six out of the 27 external risks, including nationalism and local protectionism, permits and licenses, inclement climate, resource availability and quality, import and export restrictions and war threat had substantial influence over projects’ overruns. Of the 47 internal risks, defective/late design documents, long lead material/equipment, insufficient scope definition, equipment and labor productivity, inadequate schedule, and constructive changes, inaccurate supplemental design information, error in bids/quotation, and differing and unforeseen site conditions and coordination between subcontractors were found to have an influence over projects’ failure with regard to schedule or cost. Based on that, multinational firms seeking to work in AGR or similar countries that are rich in natural resources but experience significant political instability can use these findings as a guide to establish effective risk mitigation plans that reduce adverse effects on project and company performance.