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
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.