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Country risk assessment in the construction industry

Akçamete, Aslı
Every business involves risk, but due to its nature, construction business involves more risk than many other industries. Therefore, risk assessment is indispensable to the success of construction companies in terms of, preventing dramatic financial losses. When the decision process for expanding the operations in the international construction market is concerned, it becomes more important for companies to analyze the risk of the target country. For this reason, construction firms benefit from many different risk assessment methods. Contractors prevalent practice of risk assessment is identifying related risks and making an evaluation relying on their personal judgments (without substantial explicit support), but none of the applied methods is construction specific. To overcome this, a construction specific country Risk Breakdown Structure (RBS) is prepared. While preparing this construction specific RBS, not only macro level country risks but also market risks for construction are considered in order to reflect the real risks of performing construction business in foreign countries. Consequently, a tentative country RBS specific for construction industry is constructed and its reliability is tested by interviews carried out with six professionals from four Turkish construction companies operating in international markets. After finalization of the RBS, utilization method of practical aspects of RBS is questioned by interviewing the experts. Finally, a case study is conducted to propose a company-specific system for iv the implementation of RBS. The case study findings demonstrate the applicability of RBS and its potential as a systematic country risk assessment tool.