Risk measurement and risk identification for BOT projects: A multi-attribute utility approach

Abstract

This paper aims to identify and assess the potential risks faced by private sectors in holding BOT projects through the risk assessment model developed herein. The multi-attribute utility function and aggregation utility are established using the multi-attribute utility theory to evaluate the risk state of each uncertainty, and in turn to determine whether such an uncertainty is a risk factor or not from the negotiator group's view point. This model shows that the uncertainty is regarded as a risk factor only when the aggregation utility value is less than the average aggregation utility value when the outcome, attribute, and states of a factor as well as its occurrence probability a real lindependent. A numerical example is also utilized to demonstrate the application of the developed risk assessment model. Results of the numerical example reveal that the concession period of a BOT project is the primary risk factor whereas the foreign exchange ratio is the secondary risk factor. Accordingly, the concession period dominates the negotiation results of BOT projects. (C) 2008 Elsevier Ltd. All rights reserved.