Intelligent Prediction And Countermeasure Decision For Political Risk In International Projects

In recent years, international project contractors' overseas-contracting business has made remarkable progress under the guidance of "going out" strategy by Chinese government. But at the same time, political risk exposed in the international market really has brought catastrophic damages to those contractors. With the implementation of the strategy of "One Belt, One Road", an ever increasing number of Chinese contractors will enter the international market. Political risks, originated in political events (revolutions,coups and civil wars), social events (terrorist attacks and protests), government behaviors (corruptions, the legal changes and policy regulations) and behaviors of some strong social organizations (strikes of trade unions and protests of environmental protection organizations), change the business environment of international contractors. The uncertainty of political risk has a great potential impact and adverse consequences on the profit of the enterprises. Chinese international contractors must pay more attention to political risks. This research aims at revealing the formation mechanism of political risk in international engineering, exploring the key influencing factors of political risk, predicting political risk of international engineering with the multidisciplinary technology of Risk Conduction Theory, Vulnerability Theory, Data Mining Theory, Bayesian Network Theory and System Engineering Theory, and evaluating the effect of risk countermeasures under different risk scenarios. Combined with the characteristics of the construction industry and "Chinese characteristics",this study quantified and simulated the poltical risks of Chinese international contractors. This study would help Chinese contractors to conduct political risk prediction and political risk response in the decision and implementation phase of their international projects.(1) Based on the detailed literature reviews, this paper summarized the current research situation on the definition, influence factors, assessments and management of the political risk, research, assessments and control and strategies of the political risk in construction industry. This paper pointed out the deficiencies in study on political risks of international engineering projects. Aimed at these deficiencies, this paper presented the research objectives and contents, and established the research framework and technical route.(2) This paper analyzed and defined the connotation of political risks of international engineering projects. It confirmed the definition of political risk through analysis on the connotation and characteristic of international engineering and discrimination of national risk, sovereign risk and political risk. According to the literature research, it identified 15 different types of events on political risk of international engineering.These events were classified by the causes of political risk into three major categories: government factors of host country, social factors of host country and international relations.(3) It established the research framework based on the Risk Conduction Theory and the Vulnerability Theory, and identified the influencing factors of political risk of international engineering. From two aspects of the state of the host country's political system and the vulnerability of the international engineering project,this paper identified 31 influencing factors in 8 categories: home contact, governance ability, social and political stability, economic environment, economic performance, status of construction industry of host country, risk exposure and risk response capability of projects. In addition,this paper verified the rationality and science of the influencing factor system by questionnaire survey of experts from academia and industry.(4) This paper proposed the theoretical hypothesis model of forming path of political risk of international engineering by collecting and analyzing 301 events of political risk of international engineering from all over the world with China as the home-country. The hypothesis of the model was verified and modified based on the data of these 301 events. It built the final fitting model of forming path of political risk of international engineering, and explored the relationship among different factors and effect of influence factors on political risk of international engineering.(5) Combined with Logistic Regression Model and Bayesian Network, the intelligent prediction model was built to forecast the political risk of international engineering. It identified six types of variables directly related to political risk by Logistic Regression Model. Variables indirectly related to political risk were identified by Pearson correlation analysis. Therefore, the number of nodes in the Bayesian Network were reduced significantly to simplify the calculation of the Bayesian Network. The final prediction model was obtained by fitting the model and doing parameter learning for the model with 271 samples. The robustness of this model was verified with 30 cases randomly chosen.(6) The choice of countermeasures was researched from two aspects of political risk prevention and political risk management. This study identified the factors that contribute to the probability of the occurrence of risk events by model-based sensitivity analysis. A set of preventive measures of the political risk of international engineering were established by literature research. According to the sensitivity analysis on different types of political risk,preventive measures of the political risk were matched to each type of political risk. Build the evaluation system dynamics model of treatment measures of political risk of international engineering, which can simulate the effective probability and effect of different treatment measures under certain circumstances. It simulated the effect of measures by Anylogic7, and analyzed the sensitivity of risk response capacity, risk exposure, bargain power of contractors, countermeasures and demand of host country.Design the political risk management mechanism for the contractors with the content and process of political risk management of international engineering.