--- title: "Risk, sources of risk, risk management steps" subject: "Project Engineering" chapter: 5 key: "semester_7/project_engineering:risk-define-sources-steps" source: https://www.bctengineer.com/q/semester_7/project_engineering/risk-define-sources-steps site: BCT Engineering --- # Risk, sources of risk, risk management steps Project Engineering · Chapter 5: Project Risk Analysis and Management - Asked in: 2071 Chaitra, 2+5+5 marks - Video: [Risk Management | Process and Approaches | Real-Time Examples | in 14 min](https://www.youtube.com/watch?v=jfaABy0E6r4) — Leaders Talk - ThinkEduca - 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-steps - Whole chapter: https://www.bctengineer.com/md/semester_7/project_engineering/chapter-5 ## Question Define risk. Explain various sources of project risks. Describe the important steps of risk management. ## Short answer Risk is an uncertain event affecting project objectives, measured by Probability × Impact. Sources: technical, estimating, management, financial, contractual, political, natural, resource, and human. Steps: plan risk management, identify risks, qualitative and quantitative analysis, response planning, and monitoring and control. ## 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. #### Steps of risk management 1. **Risk management planning:** decide the approach, team, roles, budget, tools, risk categories, probability-impact scales and reporting. The output is the risk management plan. 2. **Risk identification:** find the risks which may affect the project and document them in a risk register (brainstorming, checklist, Delphi, SWOT, interviews, experience). 3. **Qualitative risk analysis:** rank the risks by probability and impact using a probability-impact matrix to find priority risks. 4. **Quantitative risk analysis:** estimate the numerical effect of the main risks on cost and time (expected monetary value, decision tree, sensitivity analysis, Monte Carlo simulation). 5. **Risk response planning:** select the strategy for each risk (avoid, transfer, mitigate/reduce, accept) and prepare contingency plans and reserves. 6. **Risk monitoring and control:** track identified risks, watch for new risks, check the response is working, update the risk register and report. ```text Plan -> Identify -> Qualitative -> Quantitative ^ | | v Monitor and control <----------- Response planning ``` ## 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 a financial source of risk? A. Incomplete drawings B. Delay in release of budget, inflation or exchange rate change C. Flood and landslide D. Accidents and negligence Answer: B. Financial sources include fund shortage, payment delay, inflation, interest and exchange rate changes. (Key point: Sources of risk) 3. Which are tools for risk identification and where are the risks recorded? A. Monte Carlo and EMV; recorded in the schedule B. Brainstorming, checklist, Delphi, SWOT, interviews; recorded in a risk register C. Probability-impact matrix; recorded in the BOQ D. Decision tree; recorded in the contract Answer: B. Identification uses brainstorming, checklists, Delphi, SWOT and interviews and documents risks in a risk register. (Key point: Risk identification tools) 4. Which is the correct order of the risk management process? A. Identification, planning, quantitative, qualitative, response, monitoring B. Planning, identification, qualitative analysis, quantitative analysis, response planning, monitoring and control C. Planning, qualitative analysis, identification, response, quantitative, monitoring D. Identification, response planning, analysis, planning, monitoring Answer: B. The process is plan, identify, qualitative analysis, quantitative analysis, response planning, then monitoring and control. 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