Risk Analysis-I - Project Management A Managerial Approach...

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Project Management A Managerial Approach Risk Analysis
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This chapter- Theoretical aspects of risk Types of risk  Risk Management process Hillier model Certainty equivalent approach Risk adjusted discount rates Sensitivity analysis Game theory  Monte Carlo simulation (already covered)
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Risk Versus Uncertainty Analysis Under Uncertainty - The Management  of Risk The difference between risk and uncertainty Risk  - when the decision maker knows the  probability of each and every state of nature and  thus each and every outcome.  An expected value  of each alternative action can be determined Uncertainty  - when a decision maker has  information that is not complete and therefore  cannot determine the expected value of each  alternative
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Involved at all stages of project management What is risk?an event about which we are uncertain  and the possibility of the result is unfavourable. If it is favourable, it turns out to be an opportunity. PROJECT RISK is the cumulative effect of the chances of  an uncertain occurrence adversely affecting the project  objectives. Or, the degree to which project objectives are  exposed to negative events and their probable  consequences, as expressed in terms of scope, quality,  Risk
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Types of risk  the project may be lower than expected due to an  estimation error or lower quality of management  project may be effected by some unanticipated  actions of the competitors  3.  Industry -specific risk-unexpected technological  specific to the industry to which the project  cash flows of the project as well
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4.  Market risk-unanticipated changes in macroeconomic  factors like GDP growth rate, interest rate, inflation etc. have  an impact on all projects in varying degrees. 5. International risk-in case of foreign projects exchange rate  risk /political risk may effect cash flows. An evaluation of potential risks can show at an early stage  whether or not a proposal is worth pursuing. The risks can be 1) the project will fail completely 2) The project will be compromised on time, cost or both.
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Contingency Plans  to tackle significant risk situations  should surface in the project proposal.  Formal use of risk  analyzing techniques may be required.  Broadly, the steps to gauge risk are:
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Risk Analysis-I - Project Management A Managerial Approach...

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