ABSTRACT
Managing a real estate development project is about risk-taking. From previous research (Akintoye and MacLeod, 1997; Lyons and Skitmore, 2004; Gehner et al., 2006), it can be concluded that techniques of risk analysis are little used in the real estate development sector for reasons that include the paucity of objective data, time constraints and the lack of confidence in outcomes. Other methods are apparently used with success to manage risks in a project. A technocratic approach alone to risk management seems, however, insufficient to gain insight into these methods. The approach views risk as the probability of an event multiplied by the magnitude of loss related to that event (Raftery, 1994). Risk should be regarded in a broader, cognitive and sociological context in which individuals perceive risk differently and their willingness to take risk varies (Sitkin and Pablo, 1992). Thus, risk must be seen in the context of choice (Stallen, 2002) or, in other words, ‘risk is a consequence of a decision’ (Luhmann, 1993). This implies that the way real estate developers treat risk is expressed to a large extent in the decision-making process. Much research has been carried out on decision-making, but not much in this sector and not specifically from this perspective. Research into the decision-making process is, therefore, needed in order to understand how risks are treated and how the risk management process could be facilitated in the real estate development sector. In this chapter, a single case study of a Dutch real estate developer is analyzed using a framework derived from the strategic decision-making literature in order to gain understanding of how the decision-making process is organized and contributes to risk management.
