- 2070 Asar · 1+5+4 marks
Risk, sources, risk response planning
Short answer
Risk is an uncertain event affecting objectives, measured by Probability × Impact. Sources: technical, estimating, management, financial, contractual, political, natural, resource, human. Response planning: for threats—avoid, transfer, mitigate, accept; for opportunities—exploit, share, enhance, accept; each with owner, cost, trigger.
Define 'risk'. Explain various sources of project risk. Elaborate risk response planning.
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.
Sources of project risk
- Technical sources: incomplete or wrong design and drawings, inadequate survey and investigation, difficult geology, new technology, quality of materials and workmanship.
- Estimating and planning sources: unrealistic cost estimate and schedule, missing activities, over-optimistic productivity, poor risk allowance.
- Management sources: weak project manager, poor coordination between client, consultant and contractor, lack of skilled manpower, poor monitoring and decision making.
- Financial sources: shortage of funds, delay in release of budget or payment, inflation, interest and exchange rate changes.
- Contractual and legal sources: vague contract documents, variation orders, claims and disputes, change in laws, land acquisition and compensation problems.
- Political and social sources: government change and policy change, bandh and strikes, local community demand, corruption, security situation.
- Natural and environmental sources: flood, landslide, earthquake, heavy rain, climate change, environmental impact and clearance requirements.
- Resource and market sources: shortage or price rise of material, fuel, labour and equipment; supplier delay; transport problem (especially in remote areas of Nepal).
- Human and safety sources: accidents, labour dispute, health problems, errors and negligence.
Risk response planning
Risk response planning develops options and actions to reduce threats and increase opportunities, using the results of risk analysis. Each response has an owner, a cost, a time and a trigger.
Strategies for negative risks (threats)
| Strategy | Meaning | Example |
|---|---|---|
| Avoid | Change the plan so the risk cannot occur or its impact is removed | Shift a bridge site away from unstable slope; change to proven design |
| Transfer | Shift the impact and ownership of the risk to a third party (it is not removed) | Insurance (CAR policy), performance bond, fixed-price contract, subcontract |
| Mitigate (reduce) | Reduce the probability and/or the impact to an acceptable level | Extra soil tests, early procurement, quality control, training, safety measures |
| Accept | Do nothing now (passive) or keep a contingency reserve (active) | Minor price change accepted with contingency of 5% |
Strategies for positive risks (opportunities)
| Strategy | Meaning |
|---|---|
| Exploit | Make sure the opportunity happens (assign best staff to finish early) |
| Share | Give ownership to a party best able to catch the opportunity (joint venture) |
| Enhance | Increase probability or impact of the opportunity |
| Accept | Take the benefit if it comes, without extra effort |
Output: risk register update, risk-related contracts (insurance, bonds), contingency reserve for time and cost, fall-back plans and the project plan updates. The response should cost less than the expected loss and should not create new risks.
✓ Answer checked by Claude Opus 5.5 (high effort)
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