A Research On The Input-output Model Of Risk Management Based On The Law Of Cost Overrun

It is quite often that construction projects experience economic losses. Lack ofknowledge and controlling on risks has become the obstacle of constructioncompanies’ surviving and developing. A comprehensive understanding on therelationship between risk management input and output could be essential tooptimizing the resource allocation and improving the management efficiency.This paper first conduct a meta-analysis on the empirical studies of cost risks andcost overrun to extract the law of risk factors transforming into risk events and losses.After explaining the nature and applicability of risk management activities from aperspective of process, this paper then illustrates how the risk management input takesshape and how to distinguish and measure it by applying ideas of Activity BasedCosting and Enterprise Risk Management. On the basis of risk loss and managementinput related concepts, this paper uncovers the mechanism of risk managementactivities affecting the law between risk factors and events with the value chain theory.Ultimately, to reveal the mechanism of risk management input converting intomanagement output, this paper establish an Input-Output Analysis Model whichclearly demonstrates resource allocation and the benefits that management activitiesbring about. The IOA model could be analyzed forward and backward under variedconditions.The research objective is the risk management of cost overrun. This paper adoptsboth theoretic and mathematic approaches to elaborate how risk management inputchange into management output. There contains three innovative points:①the law ofrisk factors transforming into risk events and losses;②the forming process andmeasuring method of risk management input;③the transforming mechanism of riskmanagement input to output. Conclusions drawn from this paper will be helpful forboth scholars better understand risk management efficiency, and constructionpractitioners better decide cost risk management plans.