Risk

Grauber, Schmidt & Proske: Proceedings of the 6th International Probabilistic Workshop, Darmstadt 2008

Practical Use of Monte Carlo Simulation for Risk Management within the International Construction Industry

Dr.-Ing. Tilo Nemuth Bilfinger Berger Nigeria GmbH, Wiesbaden

Abstract: A multiple of German contractors endeavor to develop new business segments in the international market as a result of the regressive construction activity in Germany since 1995, coupled with the high stress of competition in the domestic German market. Furthermore the Corporate Sector Supervision and Transparency Act (KonTraG) - operative since 1998 - demands the installation of an efficient risk management system for capital companies. Albeit shortages in the case of risk management are identifiable in the German construction industry, this situation is the initial position for an implementation of a risk analysis tool for construction project evaluation in the tender phase based on Monte Carlo Simulation. The result and conclusion is a contribution for the risk management of an international contractor based on project risk assessment. Risks for international construction projects are shown on a practical point of view and action alternatives will be discussed.

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A typical publication for the 6th International Probabilistic Workshop

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Introduction

Theoretic Model of Risk Management Circle

The theoretical deduction in the risk management circle and these phases show, that risks are in principle controllable and assessable. A risk identification at an early stage and an integrated in-house risk management is therefore an indispensable requirement for a monetarily positive result of a project. The risk management circle according Figure 1 is the guideline for the establishing of a risk management system.

Fig. 1: Schematic Risk Management Circle according STEMPOWSKI [1]

The following definition of risk could be used in general: Risk = probability of risk...