Prioritizing Project Interdependent Risks: A Network-based Approach

Abstract

Projects are usually exposed to numerous and interdependent risks both internally and externally, making the project risk management process essential to the successful realization of project objectives. Instead of analyzing project risks individually, this paper presents a network-based approach to capturing complex risk interdependencies while prioritizing project risks, which is grounded in the theoretical framework of social network analysis and considers two typical dimensions (i.e., risk occurrence probability, and risk impact) of risk modeling. The concept of the design structure matrix is used to facilitate the establishment of a project risk interdependency network. Five risk indicators (e.g., risk degree centrality, risk betweenness centrality, risk closeness centrality, risk local influence, and risk global influence) are tailored and proposed to prioritize project risks, which can provide project decision makers with a more comprehensive understanding of the project risk profile. Appropriate risk mitigation actions can then be formulated to mainly control critical project risks. An application example is presented to illustrate the utility and validity of the proposed approach.