- Asked 2/26
- 2081 Baisakh · 2+4 marks
- 2080 Bhadra · 2+4 marks
Define risk; types of project risk
Short answer
Risk is an uncertain event or condition that, if it occurs, affects project objectives positively or negatively, measured as probability times impact. Categories include technical, schedule, cost, financial, management, contractual, political/social, environmental/natural, safety and health, and market/commercial risks. Risks can also be pure or speculative, internal or external, negative or positive, and known or unknown.
Define risk. Explain the different types (categories) of project risk.
Definition
Risk is an uncertain event or condition which, if it occurs, has a positive or negative effect on the project objectives (scope, time, cost, quality). It is measured by the probability of the event and the size of its impact: Risk = Probability x Impact.
Types (categories) of project risk
| Category | Examples in a project |
|---|---|
| Technical risk | Faulty design, new or unproven technology, poor geotechnical data, change in specifications |
| Schedule (time) risk | Late site handover, late approvals, slow work, monsoon delay, strikes |
| Cost risk | Wrong estimate, price rise of cement, steel and fuel, exchange rate change, variations |
| Financial risk | Delay in payment or loan release, interest rate change, cash-flow shortage |
| Management / organisational risk | Poor planning, weak coordination, lack of skilled staff, unclear responsibility |
| Contractual / legal risk | Unclear contract clauses, disputes, claims, land acquisition and court cases |
| Political and social risk | Policy change, bandh, local opposition, corruption, compensation conflict |
| Environmental / natural risk | Flood, landslide, earthquake, adverse weather, environmental clearance problems |
| Safety and health risk | Accidents, collapse, health hazards at site |
| Market / commercial risk | Fall in demand, change in tariff, competition, supplier failure |
Other classifications
- By nature: pure risk (only loss is possible, e.g. fire, accident, flood) and speculative / business risk (gain or loss is possible, e.g. price change, market demand).
- By source: internal risk (within the control of the project team: estimate, design, management, labour, equipment) and external risk (outside its control: government policy, weather, inflation, market, law).
- By effect: negative risk (threat) and positive risk (opportunity).
- By knowledge: known risks (identified, so responses can be planned and covered by a contingency reserve) and unknown risks (cannot be foreseen, so they are covered by a management reserve).
✓ Answer checked by Claude Opus 5.5 (high effort)
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