Financial Risk Assessment (Infra)

VCE Summer Internship Program 2023
Smart Task Submission Format
Intern’s Details
Name Mohammad Hamza
Email-ID mohammadhamza563@gmail.com
Smart Task No. 1
Project Topic Financial Risk Assessment (Infra)
Smart Task (Solution)
Task Q1: What is risk? How are risk assessments usually done? Why is it important to have
a risk assessment before investing in a project?
Task Q1 Solution:
In simple terms, risk is the possibility of something bad happening. In finance, risk refers to the degree
of uncertainty and/or potential financial loss inherent in an investment decision.
The following five risk management measures should be taken to ensure that your risk assessment
is carried out correctly:
 Determine the dangers.

 Determine who would be harmed and how they would be harmed.
 Assess the risks and make a decision on control steps.
 Make a note of your conclusions and put them into action.
 Examine your assessment and, if applicable, amend it.
The Risk Management Process is designed to minimise crisis management. Although certain
unanticipated events will still occur, the majority of these can be controlled rather than responded to
by sound risk management.
 Identify the risks early in the phase of your project.

 Communicate about potential hazards.
 Risks should be prioritised and assessed.
 Prepare responses to the threats.
 Create a contingency plan for each risk.
 Create tasks for each risk's preventative measures.
ST Solution Page 1 https://techvardhan.com

The value of project risk assessment is enormous because project failure results in lost dollars that
rob investor profits and have a negative effect on the organization's bottom line. Risk assessments
enable you to deal with unforeseeable project events in a proactive manner. This enables you to
complete your project on schedule, within budget, and with high-quality performance.
500 Words (Max.)
Task Q2: Make a list of potential risks that you found out from your research which can be
significant for an infrastructure project.
Task Q2 Solution:
A project's risk assessment should reflect its credit quality during its most vulnerable time before the
obligation is repaid by project cash flows. The separation of the construction and service phases
allows a risk evaluation to determine if the worst time occurs during either or both phases.
Examples of issues to review during the construction phase include:
1. Technology and design: There is a risk that costs will be underestimated or that design
changes/enhancements will necessitate additional funding.
2. Building: Due to the difficulty of the design and delivery process, there is a risk that construction
counterparties will fail to perform.
3. Project management: There is a risk that management may fail to meet its obligations (e.g., cash
management, design approvals, permit retention, and dispute resolution).
4. Construction funding: The risk of insufficient construction funding in comparison to planned

needs.
Examples of issues to review in the operations phase include:
1. Project operations: The risk that a project's anticipated cash flows will not be realised due to the
project's failure to deliver products/services.
2. Resources and supply chains: The risk of a project experiencing a shortage of production or
service provision due to supply chain disruptions or a lack of raw materials to meet baseline
specifications.

3. Market risk: The possible effect of volatile markets, fluctuating demand, and a lack of competitive
advantage in comparison to peer ventures.
4. Country issues: The risk of a company's domicile being in a country with possible geopolitical
issues.
5. Liquidity and refinancing: The risk associated with the presence and suitability of contingency
accounts and the ability to refinance debt in different scenarios.
Adding to these, environmental, social, and governance (ESG) concerns such as climate change,
waste management, and human rights are constantly influencing decision-making processes for
long-term investment strategies.
500 Words (Max.)
Task Q3: What are the ways to address a particular risk? How to find the means to mitigate
the risks?
Task Q3 Solution:
There are four ways to deal with any risk we face. Depending on the circumstances and type of risk,
each may be an acceptable option:
Avoiding Risk
The most effective way to eliminate possible loss from a particular operation is to avoid it entirely.
The problem is that when we avoid a danger, we often lose out on the benefits of engaging in the
associated operation. Furthermore, certain dangers, such as sickness or natural disaster, cannot be
entirely prevented.
Risk Reduction
We should take measures to minimise the likelihood and seriousness of failure associated with an
activity if we are unable or unable to prevent it. When it comes to investing, thorough due diligence,
diversification, seeking the guidance of qualified professionals, and focusing on what we understand
or can manage to some degrees are all ways to minimise risk.

Risqué Transfer
Transferring threats to a third party is another way to deal with risks that we can't or won't fully
eliminate. We can pass risk in a variety of ways, but for high-severity risks with a low likelihood of
occurrence, insurance is the most realistic, cost-effective, and widely used method.
Keeping Risk
We maintain a risk by default if we do not make a deliberate effort to stop or move it, taking full
responsibility for the possible loss. Retaining a chance isn't always a bad idea. Retaining a risk in
some cases could totally devastate us. When the potential severity of a loss is minimal, regardless
of how often it is likely to occur, or when the cost of insuring the risk will be greater over time than the
real potential loss incurred, retention is the best option.
500 Words (Max.)

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VCE Summer Internship Program 2023

Smart Task Submission Format

Smart Task No. 1

Project Topic Financial Risk Assessment (Infra)

Smart Task (Solution)

 Determine the dangers.

 Identify the risks early in the phase of your project.

ST Solution Page 1 https://techvardhan.com

500 Words (Max.)

Examples of issues to review during the construction phase include:

4. Construction funding: The risk of insufficient construction funding in comparison to planned

Examples of issues to review in the operations phase include:

ST Solution Page 2 https://techvardhan.com

500 Words (Max.)

ST Solution Page 3 https://techvardhan.com

500 Words (Max.)

ST Solution Page 4 https://techvardhan.com

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