- 2072 Chaitra · 1+4 marks
Risk analysis with hydropower example
Short answer
Risk is an uncertain event affecting project objectives, measured as probability times impact. Analysis is qualitative (rating probability and impact on a matrix) then quantitative (EMV = probability x impact, sensitivity, simulation). For a 20 MW hydropower project, total EMV of five risks is Rs 114 million, used as contingency reserve.
Define project risk. How can risk be analysed? Explain with an example of a hydropower project.
Project risk
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.
How risk is analysed
Risk analysis is done in two stages after identification.
- Qualitative analysis: give each risk a probability and an impact rating and place it on the matrix.
Impact -> Low Medium High
Prob.
High Medium High High
Medium Low Medium High
Low Low Low Medium
- Quantitative analysis: for high-priority risks calculate EMV = probability x impact, and use sensitivity analysis or simulation for the cost and schedule effect.
Example: a 20 MW run-of-river hydropower project (assumed)
| Risk | Probability | Impact (Rs million) | EMV (Rs million) | Priority |
|---|---|---|---|---|
| Flood damage to headworks | 0.2 | 150 | 30 | High |
| Poor rock in tunnel | 0.4 | 100 | 40 | High |
| Delay in land and compensation | 0.5 | 40 | 20 | Medium |
| Price rise of cement and steel | 0.3 | 30 | 9 | Medium |
| Transmission line delay | 0.3 | 50 | 15 | Medium |
The total EMV is 30 + 40 + 20 + 9 + 15 = Rs 114 million, which is used to set the contingency reserve. Rock condition and flood are first priority, so they get detailed responses (more drilling, insurance and flood-resistant design).
✓ Answer checked by Claude Opus 5.5 (high effort)
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