PROJECT RISK ASSESSMENT: A EUROPEAN FIELD STUDY

One of the practical problems faced by managers when appraising strategic investment opportunities, is how to deal with the uncertainty of the outcome(s). They often make subjective judgements about the riskiness of prospective projects, but these are rarely formalized into their strategic decision-making processes. Little attention is paid to this qualitative side of investment appraisal in the corporate finance literature. This paper reports on a field-based study carried out in the logistics industry, which followed an innovative action research approach, operationalized by the use of focus groups and repertory grids. Using a repertory grid technique, constructs were elicited, which managers used to explain the riskiness of a particular project, compared to other projects of a similar type that they had knowledge of from past investment appraisals. The results of the study include a set of 12 project risk attributes, a project typology which defines three types of project, each with a set of weightings reflecting the relative importance of the attributes to the participants. These provide a useful insight into managers' perceptions of the risk attached to strategic investment projects in a large European group. In addition to the context-specific results, conclusions are drawn regarding the use of repertory grids as a framework for a risk assessment technique in other organizational settings.