Revista Argentina de Clínica Psicológica 2020, Vol. XXIX, N°1, 1138-1143
DOI: 10.24205/03276716.2020.162 1138
A
PPLICATION OF
P
SYCHOLOGICAL
H
INT AND
C
ROWD
B
EHAVIOR IN
R
ISK
M
ANAGEMENT OF
P
UBLIC
-P
RIVATE
P
ARTNERSHIP
P
ROJECT
Xiaofan Yan
*, Zhicheng Fang
Abstract
The public-private partnership (PPP) has been widely adopted in urban infrastructure projects. However, the PPP model may amplify the risk of these projects. Based on relevant theories, this paper applies psychological hint and crowd behavior into the risk management of PPP projects, aiming to effectively control the risk in urban PPP projects. On this basis, a PPP project risk management assessment model was established and the risks of actual PPP projects were classified. The results show that, to mitigate PPP project risk, the psychological hint should be applied with the focus on psychological guidance, i.e. stimulating the subconsciousness to cope with risk; the crowd behavior shares risk through optimal risk allocation and risk premia, but the project risk may be pushed up indirectly by the crowd behavior between the project parties; proper risk control measures should be taken in each phase of PPP projects. The research findings lay the theoretical basis for the application of psychological techniques in PPP project risk management.
Key words: Public-Private Partnership (PPP) Model, Project Risk, Psychological Hint, Crowd Behavior, Risk Management.
Received: 16-01-19 | Accepted: 28-07-19
INTRODUCTION
The PPP project, as one of the most useful routes internationally recognized for participating in the allocation of public resources in the market, can be implemented in various
ways such as “franchising” and “equity cooperation”. It will be able to strengthen and
improve the supply capacity of public products and services while increasing the operation rate of social resources (Foody, Samara, & Carlbring, 2015). However, more and more application of PPP-based projects in urban infrastructure construction may add to the risk in the regard (Evans & Finn, 2017, Milenka & Rade, 2013). The PPP projects involve multiple stakeholders and risk-sharing parties with heavy inputs in the early stage and long return cycle, so that the risk factors in project construction process get more
National Institute of Development Administration, Bangkok 10240, Thailand.
E-Mail: [email protected]
complicated. It is wisdom to fully make prognosis during this period based on the principle of achieving the best practices, for example, the corresponding risk control is optimal, the return matches the shared risk, and the risk can be flexibly shared (Collins, 2015). Infrastructure construction based on PPP projects features non-competition and sharing, potential benefits, scale effects and long periodicity. How to construct a partner's risk management capacity and spread optimal risks becomes a hot topic in current study (Chan, Yeung, Yu et al., 2011).
Human psychology hint is attributed to desires, concepts, emotions and judgments of outside world and others. Directly influenced by the subconsciousness, it will appear as the psychological and behavioral effects in real life (Fedotova, 2014). In this paper, the psychological hint in PPP project risk management can self-regulate people's behaviors by adjusting human perceptual and rational thinking modes (Srivastava, 2017). Crowd behavior refers to the decision behavior
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of human. PPP project risk management is to spread risks on all parties at a specific ratio depending on human strategies. The dynamic change of crowd behavior plays an important part in risk sharing (Carbonara, Costantino, Gunnigan et al., 2015; Ameyaw & Chan, 2013). The psychological hint, if arisen in PPP project risk management, can ensure the effectiveness and practicability of risk control. Further, psychological hint and crowd behavior arouses and influences the experience precipitated in the past, based on which to manage the project risks (Zou, Wang, & Fang, 2008). This paper introduces the psychological hint and crowd behavior theory in the risk management of PPP projects to manage and control the risks possibly arisen in PPP projects in urban construction.
ANALYSIS OF CURRENT SITUATION AND
MAJOR ISSUES OF PPP PROJECT
IMPLEMENTATION
For now, there are three modes of PPP projects, i.e. outsourcing, franchising, and privatization, whose operation mechanisms vary from each other (Chang, 2013). In relation to traditional construction projects, PPP projects emerge under public partnerships between the government and the society. They can enjoy social resources and risk sharing (Song, Song, Zhang et al., 2013). The landing PPP projects in China in recent years are shown in Fig. 1. It is obvious that the landings and the landing rate of PPP construction projects have increased significantly, and the number of landings of PPP projects has a positive linear relationship with the time frame. It is found from the analysis of
landing rate that China’s PPP projects as
percentage of the total are still lower. Fig. 2 illustrates the number of PPP demonstration projects and the number of landings in various areas in 2018. It can be seen that PPP demonstration projects in Northeast, Central and West China are more than that in Northeast China.
In the current period, the participation activeness of private capitals in the construction of PPP projects is low, so does the return on investment. The fund raising is harder. PPP project risks are diverse, variable, relative, persistent, integrated and uncertain (Hu et al., 2011). There are more challenges in the development of urban construction PPP projects in China. For project risk management, there are
still some issues, for example, there is the lack of effective project risk identification methods, the initial risk allocation is not clearly determined, and the shares of risks lacks effective identification methods.
Figure 1
.
The landing quantity of national
PPP projects in recent years
2012 2013 2014 2015 2016 2017 2018
1000 2000 3000 4000 5000 6000 7000
Years
Tot
al number of PP
P pr
ojects
landed
20 22 24 26 28 30 32 34 36
Pr
oject landing rate
Figure 2
.
Number of PPP Demonstration
Projects and Landing Number of Regional
Infrastructure in 2018
0 50 100 150 200 250 300
Northeast Western
Central
Quantity
Eastern
Demonstration project Landing project
APPLICATION OF PSYCHOLOGICAL HINT AND CROWD BEHAVIOR IN RISK MANAGEMENT OF PPP PROJECTS
Psychological hint
Psychological study believes that human psychology state features commonality and uniqueness. Any project construction builds on the principle of ensuring that construction projects are safe, applicable and efficient, and it is not allowed to increase project risks for anything. The psychological hint technique in the risk management of PPP projects sets about the psychological guidance to activate the
APPLICATION OF PSYCHOLOGICAL HINT AND CROWD BEHAVIOR IN RISK MANAGEMENT OF PUBLIC-PRIVATE PARTNERSHIP PROJECT 1140
subconscious mind with various risks arisen during project construction. It can be regarded as an unconscious and indeliberate navigation system. The psychological hint technique in PPP project risk management think more about the subconscious mind of how to deal with risks. In addition to instinctive emotions inspired and influenced by psychological hint, it can also contact existing projects or venture cases for stimulus elements associated with surrounding environment to produce emotion that deals with the risk level. Figure 3 illustrates the analysis of psychological hint vs. the PPP project risk management. People's subconscious mind of risk will be influenced by emotions, concepts, wishes and judgments. Even if risks appear, people's attitudes can lead psychological experience and behavioral performance in an attempt to achieve risk management control.
Figure 3
.
A methodological analysis of
psychological risk management based on
psychological suggestion
Thought
Subconscious
Attitude
Psychological experience
Behavior performance
Risk management control and sharing Emotion
Desire
Concept
Judge Stimulate
Influence
Achieve
Application of crowd behaviors in PPP project risk management
Crowd behavior may also belong to a form of psychology. In PPP project risk management, it includes group decisions and group sports. The former provides support for the group's strategic behavior. Situated at the level above the group sports, group decision is the premise of group sports. It is significant for group decision to share project risks. In order to minimize the risk of PPP projects, all parties involved in PPP projects are interactive with and interdependent on each other. As the most important feature of crowd behavior, they develop themselves with similar
goals and in similar moods. Crowd behavior focuses on people. The corresponding person needs to share project risk when it appears. This is just an important representation form of the crowd behavior. The project risk sharing effect on PPP projects is shown in Figure 4. It is not a simply linear relationship with random costs and benefits. There is a reasonable risk sharing program that can be manifested as the maximum willingness burdened by crowd behavior, the least time spent in risk sharing, the maximized spillover benefit, and ensuring that the total cost of the PPP projects will be under control. The PPP project has a long cycle, heavy inputs and many shareholders. According to the analysis of crowd behavior, the involvement level of the shareholders is different from each other, and the crowd behavior appears as a game process, indirectly leading to an increase in project risk.
Figure 4
.
Risk sharing effect of PPP project
Risk taking duration
Risk taking spillover benefit
Risk-bearing cost
Risk willingness
Pr
oject risk effectivene
ss
Minimum risk scheme
ESTABLISHMENT OF PPP PROJECT RISK MANAGEMENT ASSESSMENT MODEL
Identification of PPP project risk management factors
As shown in Figure 5, the PPP project risk management process includes risk identification, risk analysis and risk response. Among them, risk identification as the first risk management phase is a process that most closely involves human psychology hint and crowd behavior. The PPP projects depend on the specific implementation, so that it is inevitable to encounter risks occurred interactively with various operations of projects. The PPP project modes act as important ways for advancing China's infrastructure and new urban construction. Project risk
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management undergoes three phases, i.e. pre-occurrence, in progress and post-occurrence. The risk control requires two psychological activities of human: psychological hint and crowd behavior. People should be calm down and timely share the risk once it occurs. here, the risk identification process is shown in Figure 6. It is required to analyze risk uncertainty from the whole process, objectives, operation phases of project and project construction environment after collecting relevant information to environment, similar projects and project operations, create the initial risk list, identify risk events, aggregate and classify risks to determine risk identification lists.
Commonly used PPP project risk identification methods include Delphi, SWOT analysis, situation analysis and fault tree. It is possible to either analyze the primary risk factors that lead to PPP project failure, or self-examine hidden risks in the PPP projects by
psychological hint. When identifying risk factors, the selected risk factors should have greater flexibility between projects of different types and in different states and compatibility with them, while factors themselves must objectively respond to where it is in order to facilitate people to identify and analyze risks.
PPP project risk management and control
As shown in Fig. 7, the actual PPP project risks are classified. The project risks run through the whole life cycle of the PPP project, including risks in the decision phase, the construction phase and the operational phase. The distribution of PPP project risks in Nanjing is shown in Fig. 8. As the single-sample T-test on the exposed project risks shows, there is no significant difference in the evaluation on the sharing of 8 key risks. The greater the rating of shared risk, the higher the risk stewardship.
Figure 5
.
PPP project risk management process
Risk
identification Risk analysis
Risk response
Find out the source of risk and determine the
risk factors
Find out the source of risk and determine the
risk factors
Take strategies to prevent risks and reduce risk losses
Figure 6
.
Risk identification process
Collect and organize information and materials
Analysis of uncertainty and establishment of a
preliminary risk list
Identify risk events, summarize and categorize risks
Collect environmental information, Information on similar projects, Relevant information about project
operation process
The whole process of the project, project objectives,
operation stages and construction environment
Project risk identification list
Figure 7
.
Risk classification of practical PPP projects
PPP project risk management
Risk in decision-making stage
Risk in construction stage
Operational phase risk
Credit Risk, Technology Risk, Financing Risk
Risk of delays in approval, Overexpenditure risk of construction cost,
Land acquisition risk, Completion risk,
Design risk, Force Majeure Risk
Market demand change risk, Charge change risk, Operation and maintenance risks,
APPLICATION OF PSYCHOLOGICAL HINT AND CROWD BEHAVIOR IN RISK MANAGEMENT OF PUBLIC-PRIVATE PARTNERSHIP PROJECT 1142
Figure 8
.
PPP project risk management distribution status
0 1 2 3 4 5 6 7
Operation and maintenance risk
Charge change risk
Market demand change risk
Completion risk
Construction cost overrun risk
Approval delay risk
Financing risk
Technical risk
Project management risk value
The risk management and control require the crowd psychology hint since it can mitigate, transfer, and even evade the risks. Once the risk occurs, it can be shared by the crowd behavior following the optimal risk allocation principle and risk premia parity. The risks of PPP projects should be spread across the projects to fully exerting people's enthusiasm for crowd behaviors and cooperation, and do everything to make the most reasonable allocation of risks. Further, it is also required to strengthen measures against the occurrence of risks caused by human factors, truly reflect fair and equitable crowd behaviors, and ensure a sufficient balance between risk liability and authority.
CONCLUSION
Based on the psychological hint and behavior theory, this paper discusses its application in risk management of PPP projects. The risk management and control are also carried out on urban construction PPPs. Here come specific conclusions:
The PPPs as percentage of the total in China are still at a low level, and the number of PPP demonstration projects in Northeast, Central and West China is greater than that in Northeast China.
In the current period, there are some problems in project risk management, for example, there are the lacks of effective project
risk identification methods, clear attribution of initial risk sharing, and effective identification methods for risk sharing.
The psychological suggestion method can increase the subconsciousness of responding to project risks. The degree of participation of the project participants is different. The behavior of the crowd shows the game process, which will indirectly lead to an increase in project risk.
The management and control of risk requires the psychological suggestion of the crowd. The psychological suggestion can reduce the risk, transfer the risk and even avoid the risk. Once the risk occurs, the risk can be shared by the crowd behavior, and the risk sharing of the population follows the optimal risk distribution. Principles and principles of risk-reciprocal equivalence.
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