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RISK AND UNCERTAINTY IN PROJECT MANAGEMENT

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RISK AND UNCERTAINTY IN PROJECT MANAGEMENT That is, the probability that the expected result will not be achieved. From conception or identification to implementation ... – PowerPoint PPT presentation

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Title: RISK AND UNCERTAINTY IN PROJECT MANAGEMENT


1
RISK AND UNCERTAINTY IN PROJECT MANAGEMENT
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  • That is, the probability that the expected result
    will not be achieved.
  • From conception or identification to
    implementation, risks issues arise and do affect
    the project in a number of ways.
  • risks may be due to environmental or managerial
    factors

3
Types of Risk
  • Completion Risks
  • Permitting Risks
  • Price Risks
  • Resource Risks
  • Operating Risks
  • Casualty Risks
  • Technology Risks

4
Classification of risks
  • Measurable Risks
  • Immeasurable Risks
  • Manageable Risks
  • Insurable Risks
  • Investment Risks

5
Risk Management Plan
  • Risk Identification
  • Risks Quantification
  • Risk Response
  • Risk Monitoring and Control

6
  • Risk Identification
  • Risk identification determines what might happen
    that could affect the objectives of the project,
    and how those things might happen.
  • identification process must be comprehensive

7
  • The process should be structured using the key
    elements to examine risks systematically, in each
    area of the project to be addressed
  • Techniques
  • brainstorming

8
Info for Risk Identification
  • Historical Data,
  • Theoretical Analysis,
  • Empirical Data And Analysis,
  • Informed Opinions Of The Project Team And Other
    Experts, And The Concerns Of Stakeholders
  • To identify and name the risks

9
Risk Quantification
  • Risk need to be quantified in two dimensions

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  • The Range
  • The Standard Deviation

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  • Sensitivity Analysis
  • scenario analysis or simulation analysis
  • examination of possible cash flows and returns on
    an investment when one uncertain element is
    altered
  • "what if?" analysis
  • Sensitivity analysis illustrates the effects of
    changes in assumptions

18
  • Sensitivity Analysis
  • can be used to get an idea of a project's
    possible future cash flows and their risk.

19
  • Sales
  • Cost of goods sold and gross profit
  • Operating expenses
  • Interest rates
  • Accounts receivable days
  • Inventory days
  • Accounts payable days on hand
  • Major fixed asset purchases or reductions
  • Acquisitions or closings

20
Risk Response
  • Strategies
  • Avoid the risk.
  • Do something to remove it.
  • Use another supplier for example.
  • Transfer the risk.
  • Make someone else responsible.
  • Perhaps a supplier can be made responsible for a
    particularly risky part of the project.

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  • Mitigate the risk.
  • Take actions to lessen the impact or chance of
    the risk occurring.
  • If the risk relates to availability of resources,
    draw up an agreement and get sign-off for the
    resource to be available.
  • Accept the risk.
  • The risk might be so small the effort to do
    anything is not worth while.

22
  • A risk response plan
  • Strategy
  • action items to address the strategy.
  • what needs to be done,
  • who is doing it,
  • when it should be completed.

23
Risk Control
  • continually monitor risks to identify any change
    in the status, or if they turn into an issue.
  • best to hold regular risk reviews to
  • identify actions outstanding,
  • identify risk probability and impact,
  • remove risks that have passed,
  • new risks.

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Incorporating Risk into Discount Rate
  • The discount rate itself has an element of risk
  • To take account of additional risk increase the
    discount rate
  • Refer to theories guiding choice of discount rate
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