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      The Requisite Knowledge for Construction Professionals in the Middle East Regarding Foreign Exchange Currency Fluctuation Risk

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      Risk Management, Construction Management, Project Management
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            Summary

            Most international management frameworks, project guidelines and procedures always stress the benefits of proper risk management, with the increasing probability that a planned asset, project or portfolio achieves its objectives and ensures that overruns are avoided (Stephenson, 2015; Durst, et al., 2019). One of the common risk categories that is arguably not identified or quantified, and also poorly managed by construction professionals is the financial category (Burtonshaw-Gunn, 2016; Antón, et al., 2011; Kolhatkar, et al., 2013). In recent years, the unstable global and regional economies, the financial difficulties experienced by both the contractors and clients, and the unfavourable consequences observed at organisational levels, as a result, add pressure on the professionals in the region to explore ways to manage these risks more effectively (Mohamed, et al., 2013; El-Sayegh, 2008; Al-Sabah, et al., 2012; Albogamy, et al., 2013). However, the role and impact of the currency fluctuation (FOREX) risk, in particular, is still confusing and not appropriately managed at extensive levels (Ehrlich, et al., 2012; IMF , 2015, p. 54; Rocha, 2011).

            This article aims to provide the practitioners on the area with an overview of the currency fluctuation risk within the context of the construction industry and the associated challenges, and it attempts to offer a framework for the regional companies that could mitigate the FOREX risk.

            Abstract

            Construction is commonly known as a high-risk business; the risks and uncertainties associated with construction activities are usually higher and more dynamic than any other industry. One of the risks imposed on the firms working abroad is related to the impact of currency fluctuation on operating performance. In the Middle East, the data collected on the ground indicate that many construction professionals, including estimators and cost controllers, either lack the necessary related knowledge or they tend to pay insufficient attention to this critical risk in their projects. Because of the unstable global economy, a decreasing pipeline of new opportunities due to the deterioration of oil prices, and the more laborious and lengthy payment terms enforced in contracts across the Middle East, exchange rate movements play an increasing role in the contractors performance. Those who work in this region have begun to realise the challenges associated with managing the foreign currency exchange (FOREX) fluctuation risk. This article provides an overview of the currency fluctuation risk within the context of the construction industry, identifies the associated challenges and attempts to offer a framework for the regional companies that could mitigate the FOREX risk.

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            Journal
            ScienceOpen Preprints
            ScienceOpen
            18 November 2020
            Affiliations
            [1 ] Business School, University of Sydney Sydney Australia
            Article
            10.14293/S2199-1006.1.SOR-.PPWOQK0.v1
            4884ccc0-3c5d-4748-8793-f442b4e443ff

            This work has been published open access under Creative Commons Attribution License CC BY 4.0 , which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. Conditions, terms of use and publishing policy can be found at www.scienceopen.com .


            All data generated or analysed during this study are included in this published article (and its supplementary information files).
            Management
            Risk Management,Construction Management,Project Management

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