This article will talk about the risks of the project, examples will be given, what is called - "from life". The same goals are always set to control the process of fulfilling work: to save time and invested money. To minimize project risks, the examples of which are very numerous, a risk management is created, armed with a special methodology. And this is in addition to the fact that the project sponsor will see the effectiveness of such work. Any dangerous event is likely to take place, but not the fact that its influence on the conduct of work will be necessarily negative. From time to time, the positive risks of the project are also noted. Example: suddenly a real expert appears in a project, who will completely destroy all the work done, but in the end it will significantly speed up the appearance of results and add quality to them.
How to foresee the probability?
Risk is a probabilistic event that can happen either guaranteed or abruptly. It is not at all that difficult to anticipate guaranteed project risks. Example: licensed software almost always rises in price at the end of the year. It’s even difficult to call it a risk - it is rather a given, which must be taken into account when resources are planned.
But there are really dangerous examples of investment project risks that are almost impossible to foresee. For example, a decrease in the solvency of the population and a loss of demand for project products, then you will have to adjust prices or take other, rather painful measures.
Any projects related to investments cannot but relate to the future, and therefore there is never confidence in the predicted results. Both inflation and the collapsed economic crisis, as well as any force majeure event: natural disaster, fire and the like, can affect. It does not make sense to expect such an event, but you still need to be prepared. Moreover, minor troubles nevertheless always happen as the investment project is implemented.
Examples of risks: competing manufacturers appeared on the market in a multitude. How to be Only benefits on deliveries will save the project. Or something that was not expected to happen (external changes of any nature can have an impact - from inflationary, political, social, commercial to the sudden emergence of new technologies): there is clearly not enough money to continue the project. Here you will probably have to slightly suspend the development of the project with a delay in launching for the required period. In a word, there is always a certain risk.
Project Risk Assessment
The example of predetermination given above, when the cost of software is planned to increase, is very characteristic. There are techniques to evaluate and predict many and not so simple situations. Here is an example of a project risk assessment with the selection of a specific position. Any investment project implies, first of all, the vision of the investor, and not the intermediaries and the entrepreneur implementing the project.
The first thing to consider is the macroeconomic situation - both in the host country and in the world as a whole, if the project risks are assessed. An example of the announcement of sanctions in front of everyone. If the situation is examined carefully, it can be assumed accurately how good or weak the economy will develop.
The following is an analysis of the situation in the industry, where the project is expected to be implemented in risk management. An example of this is the successfully operating enterprises in our difficult conditions of the global crisis and numerous sanctions, where the necessary marketing research was carried out in time, an analysis of the activities of competitors was made, prices were forecasted, domestic and foreign technologies were analyzed, and all measures were taken to successfully overcome difficulties in case of sudden the appearance of the latest products from competitors.
The next step is to examine directly the investment project, considering it from the point of view of production. All possible implementation scenarios are considered, the optimal one is chosen where project risk management is possible. Examples of such work are known to every entrepreneur and project manager, since these are the basics of entrepreneurial activity. However, this is not all. It is impossible to do without a detailed study of commercial and industrial activities: stocks of materials and raw materials, production technology, as well as sales, production costs and much more.
Concrete and Uncertainty
As soon as a project has a variation in decisions, as well as in outcomes, it automatically goes into the category of uncertain and risky. Specific examples of the project risk analysis may not be given, since each new case is unique, circumstances and conditions everywhere are different. Most often, the creators of the project believe that it is not necessary to count the risks for many years to come - the future management of the enterprise will worry about this. This is not entirely honest, and therefore wrong.
To complete the analysis of the risks of the investment project on the example of a particular enterprise, we can only show that in addition to identifying risks, measures are outlined that are necessary to minimize them. Naturally, at each enterprise both risks and measures are not similar to those which neighbors are racking their brains for. However, the concepts of uncertainty and risk are somewhat different from each other. The first is a certain inaccuracy of information or its incompleteness in identifying project risks . Examples usually relate to implementation conditions. And risk is the occurrence during the implementation of conditions that necessarily lead to certain negative consequences either for the entire project, or for its individual participants.
This means that uncertainty is an objective characteristic, affecting absolutely any participant equally. It can also be a financial risk of the project. Example: the future price of raw materials is not determined. This, of course, will affect many participants in the project to varying degrees: the price of, for example, fuel will force one of them to abandon the project altogether, and the other will risk it. Thus, this risk is significantly more subjective, although it caused its usual uncertainty.
The impact of risk on the project
Risk is necessarily associated with subsequent negative consequences. Examples of risks of a social project (and many others): losses, failures in the term of the project, and the like. There is another interpretation: this is the possibility of absolutely any deviations - positive or negative - in terms of the projected values.
Risk, according to this interpretation, is a possibility of danger, an event that either will happen or not. If this happens, there will be options for the consequences: the result is positive (for example, profit or any other gain), the result is negative (loss, damage, loss, etc.), the result is zero (when the project was without loss or without profit).
During the analysis of financial or organizational threats, the identification of project risks is of great importance. An example of the most successful opposition to negative conditions of any kind can only be given by a team where all participants are engaged in documentation, identifying the characteristics of the risks that pose a threat. Moreover, this process is ongoing, at all stages of the project. First of all, an analysis of the documentation is done - project plans, data on previous contracts, etc.). From here in the analysis appear the first and main introductory.
Virtually all project documentation can serve as a source of information regarding risks - from product descriptions and assumptions to historical data. The method of collecting information that is most effective is used. This can be the Delphi method, brainstorming, a variety of polls and the like.
An analysis of checklists is also carried out, which contains a list of risks for such projects. On the Internet, for example, you can find a huge number of them. Next, a register of project risks is formed. Examples of register compilation contain not only a list of detailed risks, but also a list of possible response strategies if risks are identified. And finally, the final analysis is carried out - quantitative and qualitative.
Risk Breakdown Structure
To identify risks, categorize them and make an analysis, a hierarchical structure such as a risk tree is used. Examples of risk-managed projects show a qualitative analysis, which provides a full-fledged process of identification and systematization to the smallest levels in detail and traced links with other elements of the project. Similar to the breakdown structure: organizational project management, breakdown of project cost, project resources, and so on. Only the elements on the tree are sorted by significance and character.
Modern management of various projects involves the use of standard templates to break down the risks of a project. The technology for creating such a risk tree is very similar to the technology for splitting work. Hierarchical elements are sometimes replaced by a simple list of expected project risks, more often by not too complex hierarchical structure of two or three levels.
However, the lower level is always quantified risks or a description of project risks. Examples can show one or more events in the aggregate, but always with visible consequences. The work tree and the risk tree are developed on the basis of a wide variety of decompositional foundations. These are importance, priorities, significance, the need for more in-depth analysis, the nature of the consequences, the response and so on.
Project Management Plan Elements
One such element is the project risk register. Business examples can be found everywhere. First of all, this is a document that contains the results of a qualitative and quantitative risk analysis, as well as a response plan for their consequences, if they occur.
The risk register details all the alleged dangers to which their detailed description is attached, the category, reason, level of probability, positive or negative impact on the ultimate goals. Of course, each perceived risk is accompanied by a perceived response. The current status is also indicated there. This is one of the main elements of a project management plan.
A separate stage of risk management is their assessment by the project participants. When large capital investments are made, the level of uncertainty is very high, and the probabilistic and statistical methods here are clearly insufficient. Moreover, there is still little initial information at the source of the project and it is very difficult to foresee unique situations.
Risk matrix
It is at such moments that the game theory comes to the rescue, a separate course of applied mathematics at the beginning of the twentieth century is a methodology where the payment matrix is applied using the ideas and methods of game theory, as well as the project risk matrix . The examples show the same use of elements of applied mathematics.
With their help, optimal solutions are modeled if any uncertainty arises. For example, you can take turns to consider the target actions of one or another party, studying its interests, while all parties are in conflict if their goals are at different poles.
This is a very interesting and even fascinating theory, which is constantly used in solving practical problems, a peculiar method of finding solutions that come from conflicting interests and rational actions.
The first way to classify risks
It is necessary to allocate risks and classify them from the very beginning of the process of preparing contract documents and building a business plan. What does “classify risks” mean? This is the usual distribution of them according to certain signs and criteria into different groups, so that the goals are achieved. For example, it is advisable to share risks, predicting the possible result of the impact of each of them on the course of the investment process.
Risks can be clean when the result is zero or negative. This includes disasters such as earthquakes, tsunamis, and the like, natural factors, fire, floods and other natural shocks, harmful gas emissions and other environmental disasters, a change of regime in the country, default, and many other political reasons that affect the economy as a whole and business of any level, a variety of traffic accidents. Some commercial risks also relate to pure ones, for example, theft, sabotage, causing property damage, equipment breakdowns and other production problems, payment delays, delays in deliveries of goods in trade risks.
The other group is speculative risks, they are characterized by the ability to get both positive and negative results. Financial risks are most clearly represented here, since they are an important part of commercial ones. There is a second criterion necessary for classification. This is the reason why the risk occurred at all. Depending on these reasons, the following types appear: commercial risks, transport, political, environmental, and natural.
The second way to classify risks
Another way divides the risks of an investment project into internal and external. The latter are connected with the not quite stable situation in the economy, as well as the shakiness of economic legislation, insufficiently favorable investment conditions and the inability to freely use the profit. External risks associated with the external economy are created by a situation where trade restrictions can be introduced, borders are closed, and the like.
There is also a high level of external risks with the uncertainty of the political picture and there is the possibility of its sharp deterioration. Any change in climatic conditions fraught with natural disasters does not depend on the will of the investor. And of course, a huge risk arises from fluctuations in market conditions - exchange rates, prices, GDP, and so on.
A variety of factors of a smaller scale, but also with very, very painful consequences, can serve as internal risks of an investment project. An earthquake does not happen as often as the mistakes of the project participants themselves. For example, if the project documentation is not complete enough or worse, it is not accurate.
There are always technical and technological risks in production - equipment failure, accidents, defects and the like. If the project team acts in the way that Schuka, Cancer and Swan did in Krylov’s fable, that is, if the selection of participants was initially made incorrectly; if the team does not define goals, does not focus on the main interests and the behavior of the project participants harms the common cause - there is a risk that it will not be possible to achieve the set goals.
A huge misfortune will turn out to be a risk if the priorities change during the implementation of the project, if the support from the leaders is lost. If the business reputation of the team as a whole or its individual members leaves much to be desired, if there is no accuracy and completeness of information about finances, internal risks increase. If the prices of products or demand, as well as the capabilities of competitors are incorrectly assessed, the risks will necessarily bring negative consequences.
The third way to classify
Finally, it is possible to classify risks according to their predictability. There are risks that are outwardly unpredictable and outwardly predictable. The first include unexpected government actions to regulate production, production and design standards, actions in the field of environmental protection, land use, taxation and pricing. And the list goes on and on. Of course, natural disasters affect the degree of risk. But more often - crimes: refusal to do work, threats, intimidation, violence, etc.
Suddenly, a variety of environmental and social causes of risks appear that threaten negative consequences. Bankruptcies of contractors also occur, due to which the necessary infrastructure for the implementation of the project does not happen on time. There are major mistakes in determining the priorities of the project.
Outwardly predictable risks also make up a fairly extensive list. An example of possible project risks from the most frequent ones is market risk when opportunities worsen: upon receipt of raw materials, upon an increase in its value, upon changes in consumer requirements, upon strengthening competitors and the loss of one's own market position. Here, too, you can list for a long time.
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findings
However, during the implementation of the project, not a single uncertainty of conditions is specified. Therefore, constant monitoring of the conditions in which the project is carried out is necessary, it is necessary to carry out the adjustment of data, work schedules, as well as carefully monitor the conditions of relations of the project participants. The following situation can be considered an example of risk assessment of an investment project.
To assume a fire in the company’s office or to plan for a sudden refusal to sponsor a sponsor would be strange, although the consequences of this risk look scary in terms of their impact on the business. The probability is low, the risk is at the "yellow" level. But if the software does not arrive on time, the project will suffer very much. This happens much more often. The risk level is clearly “red”. But the main thing is that this risk can be avoided during the normal work of the project participants. Risk probability - calculating the possibility of its implementation from 0 to 100%.
When a project is implemented, one task replaces another, and with them the types of risks change. Therefore, the analysis should always be present, and the risk map should be transformed as necessary. This is of particular importance at the initial stage of the project: the earlier the risks are identified, the more opportunities to prepare for them. All this reduces losses.