Project management

1. PROJECT RISK ANALYSIS
 PRESENTED BY: RUPESH
MISAL

2. INTRODUCTION
 Through this presentation we will try to identify the
underlying risk and explore the consequences
 Risk is inherent in almost every business decision. More
so in capital budgeting decision as they involve cost and
benefits extending over a long time during which many
things can change in unanticipated ways.
 The following slides suggest ways to handle risk in capital
budgeting.

3. RISK

4. SOURCES OF RISK
 Project-specific risk
 Competitive risk
 Industry-specific risk
 Market risk
 International risk

5. SENSITIITY ANALYSIS

6. SCENARIO ANALYSIS
 In this analysis several variables are varied
simultaneously. Most commonly 3 scenario are
considered.
 3 scenario are :
- Expected scenario
- Pessimistic scenario
- Optimistic scenario

7. BREAK EVEN ANALYSIS
 This analysis helps in knowing how much should be
produced and sold at a minimum to ensure that the project
does not “loose money”
 BEP occurs when
 Total revenue = Total cost

8. TYPES OF BREAK ANALYSIS
 ACCOUNTING BREAK EVEN ANALYSIS
 Break even in accounting term is like a stock that
gives a return of 60% without considering the time
value of money
 A project that merely breaks even in accounting
terms will have negative NPV.
 FINANCIAL BREAK EVEN ANALYSIS : It
takes into account time value of money and is only
concerned with the NPV and accounting profits.

9. MANAGING RISKS

10. METHODS TO INCORPORATE RISK
 Conservative estimation of revenues: Revenues
expected from projects are conservatively estimated to
ensure the viability of project.
 Safety margin in cost figures: A margin of safety is
included in estimating cost figures
 Flexible investment yardsticks: The cut off points for
an investment varies according to the judgment of
management about the riskiness of the project.

11. THANK YOU