TypicalProjectRisks HowDoestheProjectManagerKnowWhenThereisaProjectRisk? Someofthemostcommongeneralprojectrisksituationsencountered: General Theprojectsponsor(andtheprojectmanager)donotrecognizethateveryprojectisanexercise inrisk. Thisprojectisverydifferentfromthelastone. Thereisafeelingofuneasiness. Whentheprojectisinitsearliestphase,projectriskandopportunityarehighest(butthe amountatstakeislowest). Theprojectscope,objectivesanddeliverablesarenotclearlydefinedorunderstood. Alargenumberofalternativesareperceivedaspossible. Someoralltechnicaldataislacking. Thetechnicalprocessand/ordesignarenotmature. Standardsforperformanceareunrealistic(thebestthereisforeverything)orareabsent.

rareabsent. Costs,schedulesandperformancearenotexpressedinranges. Thefuturetimingofactivitiesandeventsarevague. Designlacksproductionengineeringinput. Prototypeofakeyelementismissing. ThereisahigherthanusualR&Dcomponent. Someorallenvironmentalpermitsareoutstanding. Othersimilarprojectshavebeendelayedorcancelled. Awidevariationinbidsarereceived. Somekeysubsystemsand/ormaterialsaresolesource. Noappropriatecontingencyplanshavebeendeveloped. Theprojectteamreliesentirelyonthecontingencyallowance. Someonestartshedgingtheirbets! SpecificProjectRisks Thefollowingdetailedlistingsprovideconvenientgroupingsofprojectrisksgenerallyclassified accordingtosource.Thedegreeofpredictabilityandabilitytomanageappropriateresponsevariesbut, inanycase,isindependentoftheriskeventstatus(probabilityandamountatstake). ExternalUnpredictable(anduncontrollable) Regulator),i.e.,unanticipatedgovernmentinterventionin: o Supplyofrawmaterials o Environmentalissues o Designsmartcards o Productionstandards

o Sitelocation o Productorservicesalesorexport o Pricing o Specialrequirements NaturalHazards,i.e.,asaresultofnaturalelements: o Location o Storm o Flood o Earthquake PostulatedEvents,i.e.,asaresultofdeliberateintent: o Vandalism o Sabotage IndirectEffects,i.e.,occurringasaresultoftheproject: o Environmental o Social Comp1etion~i.e.,failuretocompletetheprojectonaccountofoneofthefollowing: o Failureofthesupportinginfrastructureasaresultofothers o Failureofdesign,executionorsupplycontractsduetobankruptcyorreceivership,etc. o Failuretoprovidefinancialsupporttotheendoftheproject o Inappropriateprojectconceptorconfiguration o Politicalunrest o Lackoffinalacceptance ExternalPredictable(butuncontrollable) Changesinthefollowingarepredictablebuttheextentanddirectionisuncertain. MarketRisks o Availabilityofrawmaterials o Costofrawmaterials o Demand,includingcustomer/userrejection o Economics o Competition o Endvalueinthemarket o Willingnessofbuyerstohonorpurchaseagreements Operational(i.e.,afterprojectcompletion) o Maintenanceneeds o Fitnessforpurpose o Safety EnvironmentalImpacts SocialImpacts CurrencyChanges Inflation

Taxation

Internal,Nontechnical(butgenerallycontrollable) Management,i.e.,difficultiesdueto: o Insincerity/lackofintegrity o Incapacity o Inadequacies o Lossofcontrol o Incompatibilityofgoals o Seniorstaffchanges o Inappropriateorlackoforganizationalstructure o Lackofappropriatepoliciesandprocedures o Inadequateplanning o Unrealisticscheduling o Lackofcoordination o Inadequateprojectmanagement Schedule,i.e.,delaysandtimeoverrundueto: o Delaysduetomanagementdifficultiesabove o Regulatoryapprovals o Laborshortages o Laborproductivity o Laborstoppages o Materialshortages o Latedeliveries o Unforeseensiteconditions o Sponsor/userscopechanges o Accidentorsabotage o Startup,turnoverorlaunchdifficulties o Lackofaccess Cost,i.e.,overrunsdueto: o Anyofthescheduledelayslistedabove o Inappropriateprocurementstrategy o Paynegotiations o Managementand/orworkforceinexperience o Lackofunderstandinghowpartsfittogether o Contractorclaims o Underestimating o Anyoftheexternalfactorslistedpreviously CashHow o Squeezing o Interruption

o Insolvency LossofPotential,i.e.,removalof: o Benefit o Profit

Technical(andgenerallycontrollable) ChangesinTechnology o Renderingpartsoftheprojectobsolete o Partsdiscontinued o introducedbycompetitors,renderingtheprojectobsolete, o Uncompetitive,orunacceptable o Complexityintroducedasaresultofnewtechnology Performance o Quality o Rateofproduction o Reliability RisksSpecifictoProjectsTechnology o Increatingtheentityorproduct o Inoperatingormarketingit Design o Inadequatedata o Designer/detailerinexperience o Designinadequacies o Detail,precisionandsuitabilityofthespecification o Likelihoodofchangesduringthecourseoftheproject o Designvs.executionmethods Sheersizeorcomplexityofproject Legal(generallycontrollable) Difficultiesarisingfromanyofthefollowing: Licenses PatentRights Contractuali.e.,difficultiesdueto: o Misinterpretation o Misunderstanding o Inappropriatecontractingstrategy/Contracttype o Failure OutsiderSuit InsiderSuit ForceMajeure