---
title: "Risk, sources, risk response planning"
subject: "Project Engineering"
chapter: 5
key: "semester_7/project_engineering:risk-define-sources-response-planning"
source: https://www.bctengineer.com/q/semester_7/project_engineering/risk-define-sources-response-planning
site: BCT Engineering
---

# Risk, sources, risk response planning

Project Engineering · Chapter 5: Project Risk Analysis and Management

- Asked in: 2070 Asar, 1+5+4 marks
- Video: [Risk Response Planning](https://www.youtube.com/watch?v=JFPuA4XUVYU) — Project Management Tips and Lectures
- Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14
- Page: https://www.bctengineer.com/q/semester_7/project_engineering/risk-define-sources-response-planning
- Whole chapter: https://www.bctengineer.com/md/semester_7/project_engineering/chapter-5

## Question

Define 'risk'. Explain various sources of project risk. Elaborate 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.

## Answer

#### 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

1. **Technical sources:** incomplete or wrong design and drawings, inadequate survey and investigation, difficult geology, new technology, quality of materials and workmanship.
2. **Estimating and planning sources:** unrealistic cost estimate and schedule, missing activities, over-optimistic productivity, poor risk allowance.
3. **Management sources:** weak project manager, poor coordination between client, consultant and contractor, lack of skilled manpower, poor monitoring and decision making.
4. **Financial sources:** shortage of funds, delay in release of budget or payment, inflation, interest and exchange rate changes.
5. **Contractual and legal sources:** vague contract documents, variation orders, claims and disputes, change in laws, land acquisition and compensation problems.
6. **Political and social sources:** government change and policy change, bandh and strikes, local community demand, corruption, security situation.
7. **Natural and environmental sources:** flood, landslide, earthquake, heavy rain, climate change, environmental impact and clearance requirements.
8. **Resource and market sources:** shortage or price rise of material, fuel, labour and equipment; supplier delay; transport problem (especially in remote areas of Nepal).
9. **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.

## 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. Which is an example of the avoid strategy?
   A. Buying a CAR insurance policy
   B. Shifting a bridge site away from an unstable slope
   C. Keeping a 5% contingency
   D. Giving extra soil tests
   Answer: B. Avoid changes the plan so the risk cannot occur, such as moving the site or using proven design. (Key point: Avoid strategy)

3. What is the difference between passive and active acceptance?
   A. Passive does nothing now; active keeps a contingency reserve
   B. Passive buys insurance; active changes the design
   C. Passive is for opportunities; active for threats
   D. There is no difference
   Answer: A. Accept means doing nothing now (passive) or holding a contingency reserve (active). (Key point: Accept strategy)

4. Which strategies apply to positive risks (opportunities)?
   A. Avoid, transfer, mitigate, accept
   B. Exploit, share, enhance, accept
   C. Insure, bond, guarantee, subcontract
   D. Identify, analyse, plan, monitor
   Answer: B. Opportunities are handled by exploit, share (e.g. joint venture), enhance and accept. (Key point: Opportunity strategies)

5. What rule should a chosen response satisfy?
   A. It should cost more than the expected loss
   B. It should cost less than the expected loss and not create new risks
   C. It should be free
   D. It should be decided after the risk occurs
   Answer: B. A response must be worth its cost and must not introduce new risks. (Key point: Response cost rule)

## Related in Project Engineering

- [Risk response planning strategies](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Arisk-response-planning-strategies) — Project Engineering, chapter 5, asked 3×
- [Sources of project risk](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Asources-of-project-risk) — Project Engineering, chapter 5
- [Risk planning; internal, external; risk reduction](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Arisk-reduction-internal-external-planning) — Project Engineering, chapter 5
- [Risk transfer, reduction as response techniques](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Arisk-transfer-reduction-response-justify) — Project Engineering, chapter 5, asked 2×
- [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
- [Risk, sources of risk, risk management steps](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Arisk-define-sources-steps) — Project Engineering, chapter 5

## Related in other subjects

- [Importance of risk response planning](https://www.bctengineer.com/question.md?key=semester_7%2Fict_project_management%3Arisk-response-planning-importance) — ICT Project Management, chapter 12
- [Sources of risk; best building height](https://www.bctengineer.com/question.md?key=semester_6%2Fengineering_economics%3Arisk-sources-nepal-building-floors) — Engineering Economics, chapter 6
- [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
- [Project risk](https://www.bctengineer.com/question.md?key=semester_7%2Fict_project_management%3Aproject-risk) — ICT Project Management, chapter 12