A Study Of Cultural Risk Management In International Project Contracting

With the development of globalization, international project contracting has become one of the most important modes of international cooperation. However, since the cultural environment of host country is quite different from home country, there will be a great many potential cultural risks existing in the process of international project contracting. Therefore, the study of risk management has drawn some scholars’attention. Most of scholars focus on technical risks in international project contracting, while other non-technical risks are seldom touched. Actually, the conflicts and misunderstandings caused by cultural risks have negative impact on both the project itself and future development in local market. How we can control these cultural risks and avoid those uncertainties became an important research.Based on the theory of four cultural value dimensions given by Greet Hofstede, this dissertation analyzes the cultural diversities in four cultural value dimensions, which are Power Distance, Individualism, Masculinity and Uncertainty Avoidance. At the mean time, the empirical test of the cultural risk management in international project contracting is made in order to calculate the cultural risk index of each country and region. By adopting the factor analysis which is a statistical method used to describe variability among observed, correlated variables in terms of a potentially lower number of unobserved, uncorrelated variables called factors, this dissertation analyzes how the four cultural value dimensions cause the cultural risks and provides a more intuitive view of cultural risks as well.In order to have an effective monitoring and avoidance of cultural risks which are disruptive for the development and completion of the project, the cultural risk management system has been concluded at the end of this dissertation. By identifying the cultural risks in the process of international project contracting and setting up the early warning system of cultural risk management, the cultural risks can be diminished and controlled in the future conduct of international project contracting.