1 Current shortcommings and uncertainties in the risk assessment of GMOs W. Müller.
Uncertain outcome, failure, loss, hazard, threat to profit. Projects are unique in nature and imply...
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Transcript of Uncertain outcome, failure, loss, hazard, threat to profit. Projects are unique in nature and imply...
Uncertain outcome, failure, loss, hazard, threat to profit.
Projects are unique in nature and imply risk uncertainties
Risk level of a project is associated with the level of uncertainty about factors such as technology, time schedules, cost budgets
Risk = f ( likelihood, impact)
Internal – promoters , stakeholders and project managers have control over them Market risk Technical risks Price risk Project completion risk
External - promoters , stakeholders and project managers have no control over them Political risk Interest rate risk Exchange rate risk
Risk identificationRisk Quantification (Analysis)Risk response development ( how to
handle risks)Risk response controlRisk monitoring
Schedule riskCapital cost riskSchedule and cost riskEconomic feasibility riskContractual riskPre completion risksPost completion risksFinancial risksCountry risks
Ordinal scale (example)
Very low Low Moderate High Very High
Cardinal Scale (example)
0.05 0.1 0.2 0.4 0.8
Cost Insignificant cost increase
<5% cost increase
5-10% cost increase
10-20% cost increase
> 20% cost increase
Schedule Insignificant schedule slippage
<5% schedule slippage
5-10% schedule slippage
10-20% schedule slippage
> 20% schedule slippage
Scope Scope decreases barely noticeable
Minor areas of scope are affected
Major areas of scope are affected
Scope reduction unacceptable to the client
Project end item is effectively useless
Quality Qlty degradation barely noticeable
Only very demanding applications are affected
Qlty reduction requires client approval
Qlty reduction unacceptable to the client
Project end item is effectively unusable
AvoidReduceTransferAcceptContingency
RISK ANALYSIS OF SINGLE INVESTMENTS
(Rs. ‘000) Year 0 Years (1-10)
Investment (20000)
Sales 18000
Variable Costs @ 66.67%
12000
Fixed costs 1000
Depreciation @ 10%
2000
PBT 3000
Tax @ 33.34% 1000
PAT 2000
CFAT 4000
Discount rate @ 12%
5.650
Present value 22600
Net present value 2600
Scenario AnalysisPessimistic (worst)Expected Optimistic (best)