“Politics, Institutions, and Project Finance: The Dabhol Power Project. ” Risk Breakdown Structure Prepare a risk Breakdown Structure assessing the main categories of risks. The risk breakdown structure is a hierarchical framework presenting possible sources of risk, used to structure risk identification and qualitative assessment. [ (Simon, 2007) ] Risk Categories are a common listing of sources of risk. Depending on the size of the project, one might employ a Risk Breakdown Structure (RBS).
The main categories of risks assessed for the Dabhol Power Project are: technical, management, commercial and external risks. Risk Breakdown Structure (Simon, 2007) Prioritizing Risks From this RBS, develop a prioritized list of the top three (3) risks (potentially most critical). There are several quantitative techniques exist. The sensitivity analysis, decision tree analysis and the simulation techniques are a few means prioritizing risks. The first step is to determine the probability and impact of the risks. Qualitative and quantitative risk analysis are means to rate the risks.
Qualitative risk analysis is a process that determines what impact the identified risks will have on the project and the probability that they will occur. Rank orders risks in priority order according to their effect on the project objectives. (Kim Heldman, 2005) The Probability scales are created by using high for critical risk, medium for significant risks and low for negligible risks. For example, high score on the probability or impact scale would be considered critical. This means the risk will occur frequently, has occurred on past project, and conditions exist for it to recur. Kim Heldman, 2005) The Monte Carlo analysis is the most common simulation technique and requires the use of a computer and software written for this purpose. Monte Carlo looks at schedule and cost risks individually and from the perspective of the whole project. (Kim Heldman, 2005) Prioritizing the top three risks for this project are: technical, management and commercial risks. Nature of Risk Describe the nature of each risk, why the risk is significant to project success and assess the factors that are causing the risk.
The three main risks in the Daghol Power Project are technical, management and commercial risks. (1) Technical risk is associated directly with the knowledge base being employed and its technical aspects including such things as understanding, reproducibility and the like. In this project, Dabhol Power the technical risk is in the planning and the bidding process of the project. (2) Management risk refers to future conditions or circumstances that exist outside of the control of the project team that will have an adverse impact on the project if they occur.
Whereas an issue is a current problem that must be dealt with, a risk is a potential future problem that has not yet occurred. [ (TenStep) ] Project management processes, such as risk analysis are critical to project success. Examples like test and acceptance, changes in the middle of the project or additional requirements could cost money are management risks. (3) Commercial risk a company takes by offering credit with no collateral is a common term in the business world. The lack of financial resources from the central government to finance part of the project is a risk factor for success of this project.
They don’t have the financial experts to evaluate these companies. A reactive project manager addresses issues when they occur. A proactive project manager addresses potential problems before they occur. This is the art of risk management.
Kim Heldman, P. (2005). Project Manager’s Spotlight on Risk Management. San Francisco: Jossey-Bass. Simon, D. H. (2007). Practical Project Risk Management; The ATOM Methodology. Vienna: Management Concepts, Inc. TenStep, I. (n. d. ). TenStep. Retrieved Nov. 18, 2012, from 7. 0 Manage Risk: http://www. tenstep. com/open/7. 0Managerisk. htm1