Project Risk Management

Project Risk Management Dec 2010

2 What is Risk? Risk is the uncertainty of an action or activity which may have an impact on the achievement of the (project’s) objectives, outputs & benefits It is the result of the combination of Impact & Probability

Project Risk Management Why? ,[object Object],[object Object],3 What? ,[object Object],[object Object],[object Object],Does not mean eliminating risk but reducing operational surprises/ losses

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],4 Risk Management Cycle Depends on risk appetite/preferences Assists in process of identification/ mitigation Based on assumptions which may be risky

5 Risk Identification Risk Inventory Pyramid

Risk Universe ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],6

10 UNACCEPTABLE RISKS ACCEPTABLE RISKS “ Black swan” Risk Assessment - Measurement Impact Description 6 ,[object Object],5 ,[object Object],4 Significant: delays in funding, impacts potentially > 1 component, requires urgent intervention of third parties (donors/ ministry), costly remedial actions 3 Moderate: requires remedial action as soon as possible, impacts on 1 component, modest cost 2 Low: requires some remedial action, minor costs 1 Negligible: no interference with other activities, no financial cost Likelihood Description 6 ,[object Object],5 ,[object Object],4 Likely to occur; some precedents 3 Unlikely, but not unprecedented 2 Unlikely, without precedent 1 Virtually impossible

8 L: Likelihood/ I: Impact/ RP: Risk Priority Risk Monitoring Log frame approach to risks - example # Basic objective Risk event Risk Consequence L I RP Risk Mitigation Strategy Actor Time frame 1 Profitable farmer managed and self-financing irrigation schemes established and operational Decline in the sugar price and impacts on the economic viability of sugar cane as an anchor crop ,[object Object],[object Object],[object Object],H H 5 ,[object Object],[object Object],[object Object],Project leadership, national Sugar Association, project beneficiaries Annual 2 Policy, institutional & social environment supportive of equitable integration of smallholder farmers into the commercial economy People resisting land use change Land and irrigation development delayed; less land is available for redistribution; Few landless people benefit from irrigation M H 5 Facilitate agreement on equity options acceptable to all parties Project leadership land owners, Traditional Authorities & project beneficiaries

Project Risk Management in IFAD ,[object Object],[object Object],[object Object],[object Object],[object Object],7

Project Risk Management

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