--- title: "Risk analysis with hydropower example" subject: "Project Engineering" chapter: 5 key: "semester_7/project_engineering:risk-analysis-hydropower-example" source: https://www.bctengineer.com/q/semester_7/project_engineering/risk-analysis-hydropower-example site: BCT Engineering --- # Risk analysis with hydropower example Project Engineering · Chapter 5: Project Risk Analysis and Management - Asked in: 2072 Chaitra, 1+4 marks - Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14 - Page: https://www.bctengineer.com/q/semester_7/project_engineering/risk-analysis-hydropower-example - Whole chapter: https://www.bctengineer.com/md/semester_7/project_engineering/chapter-5 ## Question Define project risk. How can risk be analysed? Explain with an example of a hydropower project. ## 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. ## Answer #### 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. 1. **Qualitative analysis:** give each risk a probability and an impact rating and place it on the matrix. ```text Impact -> Low Medium High Prob. High Medium High High Medium Low Medium High Low Low Low Medium ``` 2. **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). ## Check yourself The answer's key points as multiple-choice questions, with the correct option and why. 1. Which statement best defines project risk? A. A certain event that will damage project cost B. An uncertain event or condition that, if it occurs, affects project objectives positively or negatively C. Any loss that has already happened on site D. Only the chance of a cost overrun Answer: B. Risk is an uncertain event or condition with a positive or negative effect on scope, time, cost or quality; it is measured as probability x impact. (Key point: Definition of risk) 2. How is risk analysed after identification? A. Only by simulation B. Qualitative stage then quantitative stage for high-priority risks C. Quantitative stage only D. By monitoring only Answer: B. Analysis has a qualitative stage (probability-impact rating) and a quantitative stage (EMV, sensitivity, simulation). (Key point: Stages of analysis) 3. In the example, flood damage has probability 0.2 and impact Rs 150 million. What is its EMV? A. Rs 15 million B. Rs 30 million C. Rs 150 million D. Rs 750 million Answer: B. EMV = 0.2 x 150 = Rs 30 million. (Key point: EMV of flood) 4. The total EMV of Rs 114 million is used for what? A. Setting the contingency reserve B. Fixing the tariff C. Choosing the turbine D. Counting insurance premium Answer: A. Sum of EMVs (30+40+20+9+15 = 114) sets the contingency reserve. (Key point: Total EMV use) ## Related in Project Engineering - [Risk identification and analysis, rural road](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Arisk-identify-analyse-rural-road) — Project Engineering, chapter 5 - [Need of risk management; hydropower risk types](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Arisk-management-necessary-hydropower-types) — Project Engineering, chapter 5 - [Managing three hydropower project risks](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Arisk-manage-three-hydropower-risks) — Project Engineering, chapter 5 - [Qualitative and quantitative risk analysis methods](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Aqualitative-quantitative-risk-analysis-methods) — Project Engineering, chapter 5 - [Why risk analysis is important in planning](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Arisk-importance-analysis-planning) — Project Engineering, chapter 5 - [Define risk; types of project risk](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Adefine-risk-types-of-risk) — Project Engineering, chapter 5, asked 2× ## Related in other subjects - [Qualitative versus quantitative risk analysis](https://www.bctengineer.com/question.md?key=semester_7%2Fict_project_management%3Aqualitative-vs-quantitative-risk) — ICT Project Management, chapter 12 - [Quartz significance for hydropower project](https://www.bctengineer.com/question.md?key=semester_4%2Fengineering_geology_ii%3Aquartz-hydropower-significance) — Engineering Geology II, chapter 1 - [Gumbel flood at given risk, 50-year project life](https://www.bctengineer.com/question.md?key=semester_5%2Fengineering_hydrology%3Agumbel-risk-63-58-4200) — Engineering Hydrology, chapter 6 - [Safety risk-benefit analysis; dispute resolution](https://www.bctengineer.com/question.md?key=semester_8%2Fengineering_professional_practice%3Asafety-risk-benefit-conflict-resolution) — Engineering Professional Practice, chapter 6