---
title: "Internal/external risks; Nepal; hydropower"
subject: "Project Engineering"
chapter: 5
key: "semester_7/project_engineering:risk-internal-external-nepal-hydropower"
source: https://www.bctengineer.com/q/semester_7/project_engineering/risk-internal-external-nepal-hydropower
site: BCT Engineering
---

# Internal/external risks; Nepal; hydropower

Project Engineering · Chapter 5: Project Risk Analysis and Management

- Asked in: 2074 Asoj, 1+2+2+2 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-internal-external-nepal-hydropower
- Whole chapter: https://www.bctengineer.com/md/semester_7/project_engineering/chapter-5

## Question

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.

## 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.

## 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.

#### Internal and external risks

| Basis | Internal risk | External risk |
|---|---|---|
| Source | Inside the project/organisation | Outside the project/organisation |
| Control | Can be controlled by the project team | Cannot be controlled, only reduced or transferred |
| Examples | Wrong estimate, poor design, weak management, skill shortage | Policy change, inflation, flood, earthquake, bandh |
| Response | Avoid, mitigate | Transfer, 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.

## Check yourself

The answer's key points as multiple-choice questions, with the correct option and why.

1. What is the key difference between internal and external risk?
   A. Internal risk arises outside and cannot be controlled; external risk is controlled by the team
   B. Internal risk arises inside and can be controlled by the team; external risk arises outside and can only be reduced or transferred
   C. Both are fully controlled by the project team
   D. Internal risk is only positive and external risk only negative
   Answer: B. Internal risks come from within the project/organisation and are controllable; external ones are outside control. (Key point: Internal vs external)

2. Which is an external risk?
   A. Wrong estimate
   B. Weak management
   C. Policy change, inflation, flood or bandh
   D. Skill shortage in the team
   Answer: C. Policy change, inflation, flood, earthquake and bandh are outside the project's control. (Key point: Classify risk)

3. Which responses suit internal risks?
   A. Only transfer and accept
   B. Only ignore them
   C. Only contingency from the government
   D. Avoid and mitigate
   Answer: D. Internal risks are controllable, so they are avoided or mitigated; external ones are transferred, accepted or covered by contingency. (Key point: Response to internal risk)

4. What is an interface risk in a Nepal hydropower project?
   A. Transmission line and power house not ready at the same time
   B. Rise in interest rate set by the central bank
   C. Flood in the river during monsoon
   D. Change of government policy
   Answer: A. Interface risk occurs when parts like the transmission line and power house are not completed together. (Key point: Hydropower interface risk)

## Related in Project Engineering

- [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
- [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
- [Internal risk of Nepalese construction project](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Arisk-internal-construction-nepalese-company) — Project Engineering, chapter 5
- [Risk sources in over-budget, delayed projects of Nepal](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Arisk-sources-nepal-delayed-projects) — Project Engineering, chapter 5
- [Sources of project risk](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Asources-of-project-risk) — Project Engineering, chapter 5
- [Impact of unmanaged risk; risks by phase](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Arisk-impact-unmanaged-phases) — Project Engineering, chapter 5

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