Risk Analysis in International Construction Projects: A Look at the Prefabricated Wood Construction Sector in the Province of Quebec

Abstract

Construction projects that are completed abroad involve not only the typical risks that are faced at home but also various complex risks that are specific to international transactions. However, little research has been conducted on the risks that exist in prefabricated construction projects, but they need to be discussed. This paper aims to analyze the operational and financial risks associated with the internationalization of small and medium-sized enterprises (SMEs) in the province of Quebec operating in the prefabricated wood construction sector in the American market. Firstly, a literature review was carried out on operational and financial risks in overseas construction projects. This research identified 36 risks, including 21 operational and 15 financial. Next, the risks identified were divided into eight categories: design, standards, coordination, resources, internal to the alliance, partner, customer, and market. Professionals from different types of wood prefabrication companies were then asked to identify the probability of occurrence and magnitude of the impact of each identified risk. This information was used to calculate the criticality of each risk using Monte Carlo simulation to generate scenarios for use as a decision-making tool in risk assessment. The results show that highly critical operational risks are concentrated in the operational risk categories of coordination and resources. It should be noted that the most critical risk is that of ineffective communication and coordination, which is linked to project governance. On the other hand, financial risks with high criticality are spread across the four financial risk categories. A comparison of the criticality of the operational and financial risks identified revealed that the financial risks were the most critical.