Contingency Theory

Researchers have identified a number of theories that can explain the role and nature

of risk management strategies. One of the theories constantly mentioned in the risk

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management landscape is the contingency theory, which has been applied to project

management research since the 1950s. The theory was developed from the systems theory that tends to integrate

the role of the project macro-environment in project management decision making. The

contingency theory argues that there exists no fixed or optimal way to organize a business or

make strategic decisions. The theory claims that the optimal course of action is determined by

the internal or external operating environment, which makes decisions contingent on different

situations. The theory also reflects the works of Thompson, who draws attention to the

environmental factors that influence the performance of an organization. The contingency

theory emphasizes the role played by flexible and dynamic business operations amid rapid

and uncertain changes in the operating environment.