GROUP 8

PROJECT RISK, RISK

MANAGEMENT
TECHNIQUES IN PROJECTS
AND PROJECT FINANCE
Arc612- PROJECT FINANACE
AND MANAGEMENT FOR
ARCHITECTS
Group members
BALOGUN Semiyu Temitope
EDMP 19/20/H/1174

SANNI Adam Opeyemi

EDMP19/20/H/1173

OGUNJINMI Olatunji Abdulqodri

EDMP19/20/H/1664

OSINOWO Ifeoluwa
EDMP19/20/H/1178
CONTENTS

What is Project Risk?

What is Risk Management?

What is Project Risk Management?

Types of risks in projects

Sources of Risk

Why do we need project risk management?

Risk management processes

Conclusion
 What is Project Risk?

⬣ According to Project Management institute in their guidelines for project

management body of knowledge (PMBOK 2008) stated that
⬣ Project risk is an uncertain event or condition that, if it occurs, has an effect on
at least one project objective. Objectives can include scope, schedule, cost, and
quality. A risk may have one or more causes and, if it occurs, it may have one or
more impacts. A cause may be a requirement, assumption, constraint, or
condition that creates the possibility of negative or positive outcome.

⬣ Project risk is any potential issue that could negatively impact the successful
completion of your projects. Risks could be due to internal or external factors.
For instance, a key supplier going out of business and a key team member
leaving your organization—both qualify as project risks.
 What is Risk Management?

⬣ Risk management is a series of steps whose objectives are to identify, address,

and eliminate risk items before they become either threats to successful
operation or a major source of expensive rework. (Boehm, 1989)
⬣ Risk management is the process of identifying, assessing and controlling financial,
legal, strategic and security risks to an organization’s capital and earnings. These
threats, or risks, could stem from a wide variety of sources, including financial
uncertainty, legal liabilities, strategic management errors, accidents and natural
disasters.
⬣ If an unforeseen event catches an organization unaware, the impact could be
minor, such as a small impact on her overhead costs. In a worst-case scenario,
though, it could be catastrophic and have serious ramifications, such as a
significant financial burden or even the closure of your business.
 What is Risk Management?
⬣ To reduce risk, an organization needs to apply resources to minimize, monitor
and control the impact of negative events while maximizing positive events. A
consistent, systemic and integrated approach to risk management can help
determine how best to identify, manage and mitigate significant risks.

What is Project Risk Management?

⬣ Project risk management is the process of identifying, assessing, and
responding to unexpected risks that might affect your project's goals and
progress.
⬣

⬣ Simply put, project risk management is a process that aims to reduce project
risks that have already occurred, are occurring, or are likely to occur in the
future. It focuses on risk reduction by identifying the root causes of risks and
minimizing their impact, if not completely eliminating them.
 Types of risks in projects
1. There are many types of project risks. These risks can lead to cost, scheduling,
or performance issues and may create other types of adverse consequences for
the organization
2. The most common risks in projects are:
1. 1. Cost risk
2. 2. Program risk
3. 3. Performance risk
4. 4. Governance risk
5. 5. Strategic risks
6. 6. Operational risk
7. 7. Market risks
8. 8. Legal risks
9. 9. Risks associated with external hazards
 Types of risks in projects

⬣ Cost risk: usually escalating project costs due to low accuracy costs estimation and scope
increase.
⬣ Program risk (calendar): the risk that the activities will take longer than expected. The
reductions of the program usually increase the costs and also delay the receipt of the
benefits of the project, with a possible loss of the competitive advantage.
⬣ Performance risk: the risk that the project will not produce results in accordance with the
project specifications.
⬣ Governance risk: refers to the performance of the administration regarding the
company's ethics and reputation.
 Types of risks in projects

⬣ Strategic risks: result from errors in strategy, such as choosing a technology that cannot
be operated.
⬣ Operational risk: includes risks due to poor implementation and process problems, such
as procurement, production, and distribution.
⬣ Market risks: include competition, foreign exchange, commodity markets, and interest
rate risk, as well as liquidity and credit risks.
⬣ Legal risks: arise from legal and regulatory obligations, including contractual risks and
litigation against the organization.
⬣ Risks associated with external hazards: including storms, floods and earthquakes;
vandalism, sabotage and terrorism; labour strikes; and civil unrest.
 Sources of Risk
⬣ The sources of project risk can vary depending on the nature and complexity of the
project, but here are some common sources

⬣ 1. Unclear project objectives: When the project objectives are not clearly defined or
communicated, it can lead to confusion, misalignment, and lack of focus.
⬣ 2. Scope creep: As the project progresses, new requirements or changes may be
introduced, leading to scope creep, which can cause delays, budget overruns, and a
decrease in quality.
⬣ 3. Inadequate planning: Poor planning, inaccurate estimates, or failure to identify
potential risks can lead to project failure.
 Sources of Risk

⬣ 4. Resource constraints: Insufficient resources, including staff, budget, and equipment,

can impact the project's success.
⬣ 5. Stakeholder conflicts: Conflicting interests or priorities among stakeholders can
cause delays, miscommunication, and project failure.
⬣ 6. External factors: External factors such as changes in regulations, economic
conditions, or market dynamics can impact the project's success.
⬣ 7. Technology challenges: Technical challenges such as hardware or software failures,
integration issues, or cybersecurity risks can impact the project's success.
⬣ 8. Human factors: Human factors such as lack of skills, experience, or motivation can
lead to errors, delays, and decreased productivity.
 Sources of Risk

⬣ 9. Communication breakdowns: Miscommunication, lack of clarity, or poor

communication can cause misunderstandings, delays, and conflicts.
⬣ 10. Legal and regulatory compliance: Failure to comply with legal or regulatory
requirements can result in penalties, fines, or legal action, leading to project failure.

Why do we need project risk management?

I. 1. Identifies and Evaluates Risk

II. 2. Reduce and Eliminate Harmful Threats
III. 3. Supports Efficient Use of Resources
IV. 4. Better Communication of Risk within Organization
V. 5. Reassures Stakeholders
VI. 6. Support Continuity of Organization
 Why do we need project risk management?

I. 1. Identifies and Evaluates Risk

II. Risk management identifies and analysis various risk associated with business. It
identifies risk at early stages and takes all necessary steps to avoid their harmful effects.
Information from past is analyzed to recognize all possible future unfortunate events.
Risk management properly evaluates risk originated in business and develops a proper
understanding regarding its real causes. This all help in taking all measures in mitigating
the effects of these risks.

III. 2. Reduce and Eliminate Harmful Threats

IV. Harmful risks and threat are part of every business Organization. They have negative
effect on productivity and profitability of business. Risk management techniques helps in
avoiding and reducing the effect of these threats to business. Risk manager formulates
strategic plans for each department and monitors their performance from time to time.
 Why do we need project risk management?

I. 3. Supports Efficient Use of Resources

II. Risk management aims at efficient utilisation of all resources. Fuller utilisation leads to
better productivity and increased profits. Risk management techniques support strategic
planning for better results. It sets plans for functioning of business and ensures that all
activities are going on their planned track. Certain targets are set for each division within
organizations and perform routine check-ups from time to time. If any deviations arise, it
takes all possible steps.

III. 4. Better Communication of Risk within Organization

IV. Risk management develops better communication network between directors,
managers and employees. It helps in spreading all information regarding risk easily
around the Organization timely. All people are able to interact with each other effectively
and discuss about core solution about these risk. This helps in better understanding of
several threats and taking timely action against them.
 Why do we need project risk management?
I. 5. Reassures Stakeholders
⬣ Stakeholders are an important part of every business Organization. Business must aim at
serving the interest of its stakeholders for their support. Risk management helps in
increasing the confidence of stakeholders in business and assures them of non-
occurrence of any unfortunate incident.
⬣ They feel safe by the implementation of risk management techniques that will timely
control and avoid all harmful risk. This leads to better trust among business and its
stakeholders.

I. 6. Support Continuity of Organization

⬣ Risk management has an efficient role in long term growth and survival of the business.
Every business faces several risk and unfortunate events during its life cycle. These
unfortunates, if not treated timely, will affect the Organization capital and profit or even
leads to its termination.
 Risk management processes
⬣ Risks are an inherent part of any project. While it’s impossible to eliminate all risks, it’s
indeed possible to limit their impact by managing them. The following process will guide
to competently reduce and control all potential project risks.

⬣ 1. Identify potential risks

⬣ 2. Analyze the identified risks
⬣ 3. Create a response plan
⬣ 4. Implement the response plan
⬣ 5. Monitor and evaluate risks
 Risk management processes
⬣ 1. Identify potential risks
⬣ The first step is identifying all potential risks that could affect your project’s timeline or
goals. It includes closely analyzing the overall project plan and determining any potential
issues that could arise.
⬣ One way to ace this step is by scheduling brainstorming sessions with your project team
and stakeholders. Once you identify the risks, put them into a risk register. This will help
you track all the risks along with their details such as duration, impact, priority, and
status.
 Risk management processes
⬣ 2. Analyze the identified risks
⬣ Once you identify the risks, start analyzing them to understand how and to what extent
they can impact your project. Focus on quantitative and qualitative risk analysis.
Quantitative risk analysis assigns a numerical value to risk probability, while qualitative
risk analysis is used to identify and assess risks that can’t be quantified. Both help identify
risks that need your immediate attention.
⬣ When assessing risks, consider three key factors: risk probability (likelihood of a risk
event occurring), risk impact (consequences of a risk event occurring), and risk
vulnerability (extent to which a risk event can be controlled). These will help you
understand the overall project risk level and plan mitigation measures accordingly.
 Risk management processes
⬣ 3. Create a response plan
⬣ Now that you have a better understanding of potential project risks, it’s time to develop a
response plan. The response plan should include how you’ll address each of the
identified high-priority risks. The plan should also be achievable, practical, and tailored to
fit your project’s specific needs. Transfer, mitigation, avoidance, and acceptance are four
different ways to respond to risks. Based on your risk tolerance, create a response plan
to either transfer, mitigate, avoid, or accept potential project risks.

⬣ 4. Implement the response plan

⬣ After developing a response plan, it’s time to implement it. This will require close
coordination between team members and stakeholders. Make sure everyone involved in
the project is aware of the risks and knows what they need to do to mitigate them.
⬣ To execute the plan effectively, designate someone to be in charge of each step so there
is continuity and no confusion. As the project progresses, keep a close eye on the risks
and make changes to the response plan as needed.
 Risk management processes
⬣ 5. Monitor and evaluate risks
⬣ Risk management is not a one-time activity; it’s an ongoing process that should be
revisited regularly. And that’s why you should never stop monitoring and evaluating
project risks. Continuous monitoring will allow you to track the progress of mitigation
measures, ensure they are effective, and make necessary adjustments when required.
 Conclusion

⬣ Remember, a well-conceived risk management plan will lead your projects to

success.
⬣ Timely risk management helps projects succeed by identifying and mitigating
potential risks before they become actual issues. By taking a proactive approach to
risk management, you can avoid common pitfalls and costly delays that may lead to
project failure. Revisit the risk management process throughout the project lifecycle
and make your project a big hit.
THANK
YOU!