Skip to main content

Internal/external risks; Nepal; hydropower

Short answer

Risk is an uncertain event measured by probability × impact. Internal risks are controllable from within (wrong estimate, poor design); external risks are outside (policy, flood). In Nepal, internal risks include inaccurate estimates, weak planning, skill shortage. For hydropower, key internal risks are inadequate data, poor management, financial closure issues, contract variations, and transmission line interface delays.

Define project risk. Differentiate between internal and external risks. What are the sources of internal risks in Nepal in the present context? Explain internal risks for the implementation of a hydropower project in Nepal.

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.

Internal and external risks

BasisInternal riskExternal risk
SourceInside the project/organisationOutside the project/organisation
ControlCan be controlled by the project teamCannot be controlled, only reduced or transferred
ExamplesWrong estimate, poor design, weak management, skill shortagePolicy change, inflation, flood, earthquake, bandh
ResponseAvoid, mitigateTransfer, accept, contingency

Sources of internal risk in Nepal at present

  1. Inaccurate cost estimate, schedule and unrealistic bid.
  2. Incomplete and poor design, drawings and surveys.
  3. Weak planning, coordination and project management.
  4. Shortage of skilled labour, engineers and equipment.
  5. Poor financial management and cash-flow problems.
  6. Poor quality control and lack of safety culture.
  7. Delay in decisions, approvals and payments by the client.
  8. Weak contract management and disputes with subcontractors.
  9. Frequent change of design or scope (variations).
  10. Weak procurement and contract management in public agencies, and low capacity of local contractors.
  11. Migration of skilled workers abroad, causing labour shortage.

Internal risks in implementing a hydropower project in Nepal

  1. Estimating and design: inadequate hydrology and geology data, which gives wrong capacity, cost and schedule.
  2. Project management: weak management, late decisions and poor coordination between the developer, EPC contractor and consultants.
  3. Financial: difficulty in financial closure, equity shortage, cost overrun, delay in loan release.
  4. Contract: unclear scope, variation claims, disputes with civil, hydromechanical and electromechanical contractors.
  5. Technical and quality: poor construction of tunnel/headworks, delay in equipment supply, sediment-handling design faults.
  6. Resources: shortage of skilled labour and equipment at remote sites.
  7. Safety: accidents in tunnels and river works.
  8. Interface: the transmission line and power house not ready at the same time.

✓ Answer checked by Claude Opus 5.5 (high effort)

Related questions

All Project Engineering chapter 5 questions →