Typical project risks. Project implementation risks

A year before the 2008 economic crisis, one Russian financial journal, together with the company engaged in corporate finance, held a business plan contest. After statistical processing of the stated work, it turned out that the most vulnerable part was the analysis of project risks. Such an internal error was made possible by the emergence of investment mistakes, which attracted significant potential losses. In most competitive business plans, there was an indication of the existence of potential hazards in the project implementation, but the analysis and risk assessment were not conducted.

Historical projects do not exist. An increase in the complexity of the project always directly increases the scale and the number of related risks. However, the assessment of the risk of project implementation is, though mandatory, but the interim process, the result of which is the result of a clear plan for reducing the degree of riskiness and response plan in the event of a potential threat.

Under the design risk it is customary to understand the possibility - the likelihood of adverse situations that potentially lead to the deterioration of the final and intermediate indicators of the project efficiency. At the same time, the event itself may have a different degree of uncertainty and various reasons.

Risk management includes not only the statement of uncertainty and analysis of the risks of the project, but also a set of methods of influence on risky factors to neutralize damage. Methods that are combined into the planning system, tracking (monitoring) and correction (adjustment) include:

• Development of risk management strategy.
• Compensation methods that include monitoring the external socio-economic and legal environment in order to predict it, as well as the formation of a project reserves system.
• Localization methods that are used in high-profile projects in a multi-market system. Such localization involves the creation of special divisions that are engaged in the implementation of highly risky projects.
• Distribution methods using different parameters (time, participants, etc.).
• Risk refusal methods related to the replacement of unreliable partners, the introduction of the guarantor, risk insurance. Sometimes risk care implies a refusal of the project.

What is happening indefinite events are not always accompanied by a negative effect. For example, the care from the project of one member of the team may entail the appearance on the project of a more qualified and efficient employee. However, uncertain events with a positive (and "zero") effect are not always accepted as a subject of consideration when assessing the risk of the project. The nature of uncertainty binds to the loss of internal and external circumstances.

The design specificity is determined by the dynamism of the risk card with a change in riskiness as it goes from one project task to another:

• In the initial stages of the project, there is a high probability of threats with low levels of possible losses.
• At the final stages, the risk of threats is reduced, but the magnitude of potential losses is increasing.

Taking into account this, the analysis of project risks is advisable to conduct repeatedly, transforming a risk card as needed. At the same time, this process has a special meaning at the stage of formation of the concept and carrying out work on design - the creation of project documentation. For example, if the error in the selection of the material is found in the early stages, it will result in a disruption of the timing. If this error is detected during execution, the damage will be much more significant.

The risk assessment of the project team and investors is based on the importance of the project, its specifics, the availability of sufficient resources for the implementation and financing of the likely consequences of risks. The degree of permissible risky values \u200b\u200bdepends on the planned level of profitability, the volume and reliability of investments, the project's habitualness for the company of the complexity of the business model and other factors.

The sequence of measures to assess and manage project risks is stacked in a specific management concept, which includes a number of mandatory elements.

Project Risk Management Concept: Basic Elements

Until recently, in the risk management methodology, there was a passive character. In modern presentation, this methodology provides for active work with the sources of threats and the consequences of the detected risks. Risk management is interconnected processes, and the value is not only the behavior of each stage, but also their sequence. In general, this project management subsystem has the following structure:

• Identifying risks and their identification.
• Analysis of project risks and their assessment.
• Selection of effective methods, sudium risks.
• The use of these methods in a risk situation and responding directly to the event.
• Development of risk reduction measures.
• Control over reduction and development of solutions.

Since today in the project management, most managers are focused on the format proposed by the PMBOK framework, it is better to consider more than 6 risk management processes that are offered in PMBOK:

1. Planning Risk Management.
2. Identification of factors affecting risks. At the same stage, their parameters are documented.
3. Quality assessment.
4. Quantitative assessment.
5. Reactance planning.
6. Monitoring and control.

After that, the cycle renews again from the 2nd to the 6th point, since during the project the context of the project's existence may vary.

Project risks are managed by the project manager, but all participants in the project (for example, with a "brainstorming", discussion, and expert assessments, etc.) are involved in solving this task. This matters also because the information context involves identifying not only external risks (economic, political, legal, technological, environmental, etc.), but also internal.

In the future, to illustrate the implementation of the main elements of the management concept, examples from the project will be given, which have the following conditional characteristics. A jewelry plant, which brings new gold chains to the market, for their manufacture purchases imported equipment installed in the premises, which still have to be built. The price of gold as the main raw material is established according to the results of trading in the London Metal Exchange in US dollars. The planned sales volume - 15 kg of products per month, of which 4.5 kg (30%) are supposed to be implemented through its own chain of stores, and 10.5 kg (70%) through dealers. Sale is subject to seasonal changes with activation in December and attenuation in April. The optimal period for launching equipment is the eve of the December sales peak. The project implementation period is five years. The main indicator of the project efficiency becomes NPV (net present value), which in the calculated plans is equal to $ 1765.

Risk management planning

The introductory process in the list of procedures for working with project threats is planning risk management. Since the same PMBOK is a framework, and it does not provide recommendations for working with a specific project, then at this stage the methods and tools are specified that apply to the real starting project and in the real context. In the expanded form, the risk management plan contains the following sections as a document:

In the recommendations of the PMI Institute, this stage is required to communicate all stakeholders. At the same time, the company may already have established and spent risk management techniques, which, by virtue of their usual, is preferable.

Identification of risk factors and basic types of design risks

All the variety of uncertain events that can become risk factors, reduce and describe quite difficult, so all and all are attracted. That is, not only the project manager and the team participate in the process of identifying factors, but also customers, sponsors, investors, users specially invited experts.

Moreover, identification is a content (repeated during the entire life cycle) and a process combined with continuous analysis. During the project, new risks are often found or information about them is updated. Therefore, the composition of the expert committee may vary depending on the specific iteration, the characteristics of which, in turn, change depending on the specific risk situation and the type of threat. Similar types of risks can be classified according to different features, but the most practical criteria for controlling, sources of risk, its consequences, how to reduce threats are considered.

Not all threats are controlled, and some are also poorly classified as definedly controlled. Under a number of definitely uncontrolled factors, it is advisable to allocate resource reserves in advance.

In general, external risks are controlled worse than internal, and predictable - better than unpredictable:

• To definitely uncontrolled external risks include interference of state structures, natural phenomena and natural disasters, conscious insertion.
• To external predictable, but poorly controlled - social, marketing, inflationary and currency.
• Partially controlled internal - risks associated with the organization's organization, availability of financing and other resources.
• To controlled - internal technical risks (related to technologies) and contractual legal (patent, licensed, etc.).

The criterion of the source of threats is particularly significant at the initial stages of identification. Criteria of the consequences and method of elimination of threats - at the stage of analyzing factors. It is important not only to identify, but also to competently formulate a risky factor in order not to mix the risk source with its consequences. Therefore, the formulation itself should be doubled: "Source of risk + threatening event."

For classification by risk sources, corrective standardized pairs are made up:

• Technical factors - emergency situations and erroneous forecast as a type of risk.
• Financial factors - unstable currency correlations.
• Political - coups and revolution, religious and cultural threats.
• Social - strikes, terrorist threats.
• Environmental - man-made catastrophes, etc.

But below the example of the example considered not all, but only the main types of controlled or partially controlled design risks are considered.

Marketing risk

This threat is associated with inconsistent profits, the reason for which the price price is becoming a decrease in the product price or the volume of sales due to the rejection of the new product by the consumer or reassessing the real volume of sales. For investment projects, this risk is of particular importance.

The risk is called marketing, as it often arises due to the flawlessness of the marketers:

• insufficient examination of consumer preferences
• incorrect positioning of goods,
• errors in the assessment of market competitiveness,
• incorrect pricing,
• improper way of promoting the product, etc.

In the example of the sale of gold chains, an error in the planned distribution of sales volume in a ratio of 30% by 70% leads to the fact that the sale of the product through dealers in 80% of cases reduces the amount of profit, since the dealers acquire goods from the supplier at lower prices than retail consumer. The external factor in this example will be a situation in which the activity of visiting new stores in shopping centers depends on the "promotion" and the popularity of the shopping centers themselves. In this situation, the risk decline in this situation will be a detailed preliminary analysis and lease agreement with a number of popularizing parameters: convenient parking, transport communication systems, additional entertainment centers on site, etc.

General economic risks

Poorly controlled external risks associated with changes in the exchange rate, inflationary processes, an increase in the number of sectoral competitors, etc., are threatened not only by the current project, but also the company as a whole. In the case of the example described, the main from this group becomes currency risk. If the final product price in rubles for the consumer does not change, but the purchase is produced in dollars, then when the dollar is raised, there is an actual income of profits in relation to the calculated values. The situation is potentially possible when after the sale of the chain in rubles and the transfer of funds to dollars, for which gold is purchased, the actual amount of revenue will be less than the amount required at least for the resumption of the commodity mass.

Risks related to project management

These are not only the threats associated with management errors, but also external risks caused by the reasons for which, for example, a change in customs legislation and cargo delay. Violation of the project's schedule increases its payback period and extension of the calendar period, and affected by profit. In the example with gold chains, the delay is especially dangerous, since the goods have a pronounced seasonality - after the Peak December, sell gold jewelry will be much more complicated. This also includes the risk of budgeting.

In the practice of project management, there are simple ways to identify the real line (and cost) of the project. For example, a pert analysis in which three times (or cost) are specified: optimistic (x), pessimistic (y) and most realistic (z). Expected values \u200b\u200bare introduced into the formula: (x + 4x z + y) / 6 \u003d planned period (or cost). In this scheme, the coefficients (4 and 6) are the result of a large array of statistical data, but this proven formula works only if all three estimates can correctly substantiate.

In cooperation with external contractors, special conditions are negotiated to minimize risks. Thus, in the example, with the launch of a new jewelry line, it is necessary to build new buildings, the cost of which is determined by 500 thousand dollars, after which it is planned to obtain a total profit in the amount of 120 thousand dollars per month at a profitability of 25%. If the fault of the contractor has a delay for a month, then the lost profits are easily calculated (120x25% \u003d 30 thousand) and can be entered into an agreement as compensation per failure of the timing. This compensation can be "tied" and to the cost of construction. Then 30 thousand dollars will be 6% of the cost of work in 500 thousand.

The result of the whole stage should be a hierarchical (ranked in the degree of danger and magnitude) a list of risks.

That is, the description should provide the possibility of comparing the relative impact on the project's progress of all identified risks. Identification is made in a totality of all studies and identified on their basis of risk factors.

Analysis of design risks transforms information collected during identification into management, allowing to accept responsible decisions at the planning stage. In some cases, high-quality analysis is enough. The result of such an analysis should be a description of uncertainties (and their reasons) inherent in the project. To facilitate the procedure for identifying risks for analysis, special logical cards are used:

• In a group " Market and consumers»Questions about the presence of unsatisfied customers' needs, on the trends in the market development and whether the market will develop in general.
• In a group " Competitors»Estimated the possibility of competitors to influence the situation.
• In a group " Company opportunities»Questions about marketing and trading competence and so on.

As a result of the collection of answers, potential risks are revealed due to the failure of the sales plan due to:

• incorrect assessment of consumer needs and market size,
• lack of a sufficient product promotion system
• underestimation of competitors' opportunities.

As a result, a ranked list of risks with a hierarchy is for the importance of threats and the magnitude of potential losses. So in the example with jewelry, the main risk group includes, in addition to the disposal of the number of sales and reducing financial volume due to lower prices, even reducing the rate of profit due to the increase in raw materials prices (gold).

Quantitative risk analysis

Quantitative analysis is resorted to determine how the most significant risk factors may affect the project efficiency. For example, it is analyzed if a small (10-50%) change the volume of sales. Significant profit loss, making a project unfavorable, or the project will remain profitable even when selling, for example, only half of the planned amount of implementation. For quantitative analysis, there are a number of methods.

Sensitivity analysis

This standard method is to substitute various hypothetical values \u200b\u200bof critical parameters to the financial model of the project, followed by their calculation. In the example, with the start of the jewelry line, the critical parameters are the physical sales volume, cost and sale price. The assumption is made to reduce these parameters by 10-50% and increasing them by 10-40%. After that, the "threshold" is calculated mathematically, behind which the project will not pay off.

The degree of exposure to critical factors on the final efficacy can be demonstrated on the chart, which reflects the priority effect on the sale price result, then the cost of production, and then - the physical volume of sales.

But the significance of the price change factor does not yet talk about the significance of risk, since the probability of price fluctuations can be low. In order to determine this probability, step by step form the "probability tree":

The total risk on efficiency (NPV) is the sum of the results of the final probability and the value of the risk value for each deviation. The risk of changing the sale price reduces the NPV project from an example to 6.63 thousand dollars: 1700 x 3% + 1123 x 9% + 559 x 18% - 550 x 18% - 1092 x 9% - 1626 x 3%. But after the recalculation of two other critical factors, it turned out that the most dangerous threat should consider the risk of a decrease in the physical volume of implementation (its expected value was 202 thousand dollars). The second place in danger in the example took the risk of price change from the expected value of 123 thousand dollars.

This analysis allows you to simultaneously measure the risk of several critical factors. According to the results of the sensitivity analysis, 2-3 factors are selected, more than other influence on the result of the project. Then consider usually 3 development scenarios:

Here, too, relying on expert validations, for each scenario, the likelihood of its incarnation is determined. Numeric data for each scenario is substituted into the real financial model of the project, resulting in one comprehensive evaluation of efficiency. In the example with a jewelry project, the expected NPV value is obtained equal to 1572 thousand dollars (-1637 x 20% + 3390 x 30% + 1765 x 50%).

Simulation modeling (Monte Carlo method)

In cases where experts can not name the exact estimates of the parameters, and the estimated oscillation intervals apply the Monte Carlo method. It is often used in evaluating currency risks (during the year), macroeconomic threats, risks of percentage rates, etc. Calculations must simulate random market processes, therefore special software or Excel functionality is used to analyze.

The application of the Statistical Rule "Three Sigma" suggests that with a probability of 99.7% NPV will fall in the range of 1725 thousand dollars ± (3 x 142), that is, with a high probability, the result of the project in the example will be positive.

Anti-grayscale measures: planning reaction methods

The result of risk analysis can be a risk map with visualization of the likelihood ratio and degree of impact on indicators. It facilitates the regulated procedure for minimizing threats.

The fourth of the main types of response includes:

1. The adoption, involving conscious readiness for risk with the transfer of efforts not to prevent, but to eliminate the consequences.
2. Minimization working for controlled risks.
3. Transmission-insurance when there is a third party, ready to take the risk and its consequences for themselves.
4. Avoidance in which the full elimination of risk sources is assumed. The passive and irrational form of avoidance is considered to be a refusal of individual project elements.

Modern software tools are designed for different levels of project management. For a large company with a large design portfolio, risk management tools are more common immediately to the ERP-class integrated package. For small and medium-sized businesses, the latest versions of MS Project are suitable, where the ability to configure the risk management block on identification, classification processes, as well as estimates and qualitative analysis of risks with the construct of probability matrix. Simulation modeling can be carried out using Project Expert programs, Alt-Invest.

Main definitions

A business plan is a document that describes the development strategy of the company, its internal resources, an external market environment. The task of the business plan is to give an economic substantiation of the activities of the company, competently predict its cash flows, profits, profitability and a number of other indicators. The business plan describes the stages of the development of the company, analyzes its competitors and development prospects.

The table briefly describes the main sections of the business plan and their content. Depending on the specific industry and business objectives, the business plan may contain other sections.

Entrepreneurial risk is the danger that the firm will not reach the planned results. Thus, invested funds, resources, time and strength will be lost. The risk is also understood as the danger of economic damage in the process of doing business. Analysis of business risks is the necessary element of the business plan, without it, the document loses its meaning. It is the definition and prevention of risks that the weight in the eyes of entrepreneurs and investors give a business plan.

Classification of business risks

The general description of entrepreneurial risks is represented in the table.

Uncontrolled risks cannot be managed by the company itself, while the enterprise can affect controlled risks. The business plan should provide for the prevention of all types of business risks.

Prevention of risks in the business plan

The risk section, as a rule, comes after the description of the production, financial, personnel and marketing strategies of the firm. The task of this section is a generalized critical analysis of the business plan, the revision of a number of paragraphs in terms of description and prevention of risks, issuing specific recommendations for preventing and minimizing business risks.

Depending on the type of entrepreneurial risk, the following prevention methods are used in the business plan.

Uncontrollable risks

Despite the fact that the firm can not affect the emergence of these risks, the business plan should provide for how to minimize their consequences. There are financial and organizational methods for the prevention of uncontrolled risks.

Financial include:

• property insurance;
• creating cash reserves;
• related investment.

Organizational measures include:

• the development of IT infrastructure and the creation of backup copies of all critical data so that in the event of a disaster, not to lose commercial information;
• expansion of the geography of the presence of the company and diversifying sales regions;
• material and technical prevention of the effects of natural disasters.

Also, the prevention of uncontrolled risks include the increase in the liquidity of products and its value in the eyes of the consumer, which allows to preserve demand even in conditions of changes in macroeconomic conjuncture.

The impact of this type of risks can either remove at all or reduce to a minor level. In many respects, it is the competent advantage of a number of companies. Consider how to prevent and eliminate these risks.

1. Control over material and technical equipment, competent management of depreciation and replacement of outdated equipment.
2. Control over key points of the technological process, optimization of production chains.
3. Quality control of products at all stages of production.

1. Control over the financial stability of the company, the management of the share of borrowed funds in the total financing.
2. Diversification sources of financing.
3. Competent management of receivables.
4. Analysis and prediction of the company's cash flows.
5. Attracting a financial auditor.

1. Lining the correct HR policy of a firm aimed at attracting, holding and developing the best specialists.
2. Monitoring and compliance with labor legislation.
3. Timely familiarization of personnel with safety techniques and the peculiarities of the technological process.
4. Organization of training and advanced staff skills.
5. Rotation frames.

1. Short-term and long-term analysis of the market, industries and competitors.
2. Operational response to the emergence of new technologies, changing consumer preferences and entering the market of new players.
3. Monitoring legislation and government regulation.
4. Company diversification on industry and geographical features.
5. Expansion of the range.

Operating risks

When analyzing a specific business plan, it should be gradually to go through all the well-known risks and apply them to the business case under consideration. It should be analyzed by the influence of each risk on the company's activities, rank risks in the level of danger and describe in the business plan to eliminate or minimize the influence of each risk.

It is important to understand that the business plan is not a static, but a dynamic document. Risk analysis is not a one-time event, because the market environment is constantly changing. Risks should be analyzed and leveled at each stage of the company's activities.

An expert assessment of all negative factors that cannot be influenced by the impact and study of the options for minimizing risks will help to take into account the main threats to the implementation of the investment project.

Olga Senov. , consultant in economics LLC Alt-Invest

Revealing and analyzing investment risks of the projectThe company tries to take into account the likelihood of the onset of the negative consequences and the amount of missed benefit. In business projects, they can be divided into two large groups:

1. Systematic risks of the project.These are the risks that are not affected and management, but are always present and are taken into account in the business plan:

Political (political instability, socio-economic changes);

Native and environmental (natural disasters);

Legal (instability and imperfection of legislation);

Economic risks (measures of the state in the Sfe-Republic of Taxation, restrictions or expansion of import exports, currency legislation, etc.).

The magnitude of systematic risk is determined not by the specifics of a separate project, but the general situation in the market. In those countries where it is developed, to determine the degree of influence of these threats most often used coefficient B.which is calculated on the basis of statistics for a particular industry or organization. In Russia, such data is not enough, therefore, as a rule, only expert assessments apply.

1. Non-systematic risks of the project.On them, the financial director should pay special attention, since it is possible to manage them, which means minimize the impact on the project. They are divided into several large blocks: production (non-fulfillment of planned work, deviation from scheduled production schedules, etc.), financial (non-receipt of expected income from project implementation, problems with liquidity failure) and market risks (changing market conditions, loss of positions in the market , price change). In other words, these are the threats that should be taken into account in obligatory.

Risk of incomplete income when implementing the project

During the implementation of the project, the risk of non-receipt of the expected income is manifested in the form of a negative NPV or an excessively long payback period. This group of threats can be attributed to all that is due to the forecast of cash flows on the operational phase.

• How to reduce the financial risks of the investment project

Marketing risk can significantly affect revenue. Similar to that unfulfilled planned sales volume or reducing a previously defined sale price. Evaluation of marketing risks is particularly relevant for projects when the existing production is created new or expands. Its impact is minimized by analyzing the market when the key factors of influence are determined and pros are determined. These include a change in the conjuncture, increased competition and loss of positions, reducing the capacity of the market or prices for products, fall or lack of demand for goods.

Example
When building a hotel, marketing risks concern, first of all, two characteristics - prices per room and fill in. Suppose that the investor determined the first indicator, relying on its location and class, and then the main factor in the uncertainty will be the occupancy rate of numbers. When analyzing the risks of the project, you need to learn the hotel's ability to make at least minimal income for various downloads. The range of this data is taken from the market statistics on similar objects. If the information was not obtained, at least the maximum of the guests simultaneously living in the rooms will have to be determined analytically.

The risk of growth in the production cost of products occurs if the production costs exceed the planned indicators, thereby reducing the profits of the project. Therefore, in a business plan, it is necessary to analyze the costs, relying on these enterprises, evaluate the cost and suppliers of raw materials (reliability, availability, possibility of alternative purchases).

Example
If among the raw materials consumed during the project, there are agricultural products or a significant share of the costs occupy petroleum products, it will have to be taken into account that prices for them depend not only on inflation, but also from specific factors (crop, conjuncture in the energy market, etc. .). Often, the increase in the cost of raw materials cannot be fully transferred to the price of products (for example, the production of confectionery products or the work of the boiler room), in this case it is necessary to study the dependence of the project results from the cost of cost.

Technological risks can also affect the profitability of the project when the company cannot enter the planned production volumes or control the cost increase. Key factors include:

• features of the technology used, primarily its reprocessability and the possibility of use in specified conditions, the compliance of raw materials, etc.;
• the unscrupulousness of the equipment supplier, that is, breakdowns of shipments, delivery of low-quality equipment, etc.;
• the lack of available service for maintenance of the acquired equipment, since the remoteness of the service services can lead to processes in production.

Example
In a business plan for the construction of a brick factory, when the building is already there, the sources of raw materials are studied, and the turnkey production line supplies a well-known manufacturer, technological risks will be minimal. However, if the building is not yet erected, the place of production of raw materials (quarry) is not developed, the equipment will be purchased and mounted on their own from different suppliers, the project becomes less stable. Then the external investor will most likely require additional guarantees or minimize risks (study of the situation with the raw material, attraction of the gener-row, etc.).

The risk of exceeding the budget when implementing the project

A common situation, when in the prognal budget at the end of the period of cash balances is negative. Determining these risks can occur both on investment and operational phase for several reasons.

The risk of exceeding the project budget occurs, perhaps, most often - investments required more than it was planned. Its impact can be significantly reduced at the planning stage - compare with similar projects or production, analyze the technological chain, take into account the necessary amount of working capital. Also worth the pre-looking additional financing of unforeseen expenses. Even with a thorough investment planning, the exchange of budget is 10 percent is considered the norm. If a loan is attracted to the project, it is desirable to agree with bankers about raising a limit.

The risk of non-compliance with the financing schedule, as a result of which the funds come with a delay or in insufficient volume, or are allocated to excessively tight graphics that does not allow deviations. The task of specialists who make up a business plan - to reserve money in advance in the company's accounts in advance (if the project is funded by its own funds) or provide a flexible schedule for receiving money from the bank (if it comes to borrowed funding).

The risk of lack of funds during the outlet of the project capacity can delay the operation on the operational phase and slow down the output to the planned power. Such a problem occurs when the financing of working capital was not fully analyzed in the planning process.

The risk of lack of funds for the operational phase arises due to the influence of internal and external factors, which lead to a fall in profits and issues with repayment of obligations to creditors or suppliers. If the project is implemented with the help of borrowed funds, it is worth using a debt coating coefficient when building a loan repayment schedule. Its essence is that the possible fluctuation of cash flow takes into account the expected market and economic situation. For example, with a coating coating equal to 1.3, the company's profit can decrease by 30 percent, while maintaining the ability to fulfill the obligations under the loan agreement.

Example
Construction of a business center can be attributed to a not very risky project, if you focus only on price fluctuations per square meter for rental area. However, the very different picture is developing when the rate of renting and the combination of income with payments is taken into account. The business center built on credit funds can easily go bankrupt due to relatively short-term (compared with the period of its operation) of the crisis. This is how it happened to many objects, the beginning of which had to be held for 2008-2009.

The risk of retention of planned work on the investment phase arising from organizational or other reasons, and, as a result, a late or incomplete start of operational stage. It is possible to minimize the negative effect with the help of a qualified command of the management project, the choice of reliable equipment suppliers, contractors.

In conclusion, it is worth noting that there are many risk classifications. A specific option that will be used in a business plan is determined by the features of the project. Frequently often there is a scientific approach and numerous complex descriptions, but it is not necessary to get involved. It is more expedient to indicate precisely the potential problems that are most significant for a particular investment project.

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No risk projects. An increase in the complexity of the project leads to an increase in the number and scope of associated risks. When we comprehend project management, we do not think more about risk assessment, which is an intermediate action, but how to develop such a response plan to achieve a reduction in riskiness. Project risk management has its own specific features that will be discussed in this article.

The concept of project risk

Under risk in project activities, we will understand the likely event, as a result of which a subject that has decided, loses the ability to achieve the planned project results or its individual parameters that have a temporary, quantitative and valuation. The risk is characterized by certain sources or reasons and has consequences, i.e. It affects the results of the project. Keywords in definition are:

• probability;
• event;
• subject;
• decision;
• losses.

The risks of the project are always associated with uncertainty. And in this regard, we must take care of two points: the degree of uncertainty and its causes. Under uncertainty, it is proposed to understand the state of objective conditions in which the project is adopted for execution that does not allow to foresee the effects of decisions due to inaccuracy and incompleteness of available information. The degree of uncertainty is essential because we are able to control only those risks for which there is any significant information.

If there is no information, then such risks are referred to as unknown, and they have to lay a special reserve without implementing management procedures. For this situation, an example of the risk of sudden change in tax legislation is quite suitable. For threats, which there is at least minimum information, you can already develop a response plan, and the minimization of risk becomes possible. The following shows a small scheme of risk management boundaries from the position of its certainty.

Scheme of risk management boundaries from a certainty

The next point to understand the specifics of the risk of the project is the dynamism of the risk card changing as the project problem is implemented. Pay attention to the scheme placed below. At the beginning of the project, the likelihood of threats is high, but possible losses are distinguished by low levels. But by the end of the implementation of all work on the project, the magnitude of the loss increases significantly, and the probability of threats is reduced. Taking into account this feature, two conclusions follow.

1. It is advisable in the process of implementing the project to carry out risks several times. At the same time, the risk card is transformed.
2. Risk minimization is most optimally occurring at the concept of developing a concept or at the time of the development of project documentation. This option costs much cheaper than at the stage of direct implementation.

Model Dynamics Risk Chance and Loss Value

Consider a small example. If at the very beginning of the project, the threat of the quality of its product is detected due to expensive material that is not suitable for specifications, the costs associated with correction will be insignificant. Changing the Project Plan caused by the material replacement will entail a small delay in the timing. If possible negative consequences will be revealed at the order execution stage, the damage may be essential, and it will not be possible to achieve loss reduction.

Project Risk Management Concept Elements

Modern design risk management methodology involves an active approach to working with sources and consequences of detectable threats and hazards, in contrast to the recent past, when the response was passive. Under risk management, it is necessary to understand the set of interrelated processes based on identification, risk analysis, the development of measures to reduce the level of negative consequences arising from the occurrence of risk events. PMBOK highlights six risk management processes. The visual scheme of the sequence of these processes is presented below.

Process Process Management Processes for PMBOK

The main procedures of this type of management are:

• identification;
• evaluation;
• react planning;
• monitoring and control.

Identification implies a risk determination based on the identified factors of their occurrence, documenting their parameters. Qualitative and quantitative analysis of the causes of the occurrence, the probability of negative consequences form an estimate procedure. The response planning for identified factors implies the development of measures to reduce adverse effects on the results and parameters of the project. The project type of activity is characterized by dynamism, the uniqueness of events and related risks. Therefore, their monitoring and control occupy a special place in the management system and are performed throughout the life cycle of the project task. Risk management ensures the following.

1. The perception by participants of the draft uncertainties and threats in the environment of its implementation, their sources and likely negative events due to the manifestation of risks.
2. Search and expand opportunities for an effective and effective solution of the project problem, taking into account the identified uncertainty.
3. Development of ways to reduce project risks.
4. Refinement of design plans, taking into account the identified risks and a complex of measures to reduce them.

Project risks are subjected to a control influence from the project manager. All participants of the design task are involved in this work. The software and mathematical apparatus, methods of expert assessments, interviewing, discussion, brainstorming, etc. are used. Before starting the control, an information context is formed, including the identification of external and internal conditions in which the tasks will be solved. External conditions include political, economic, legal, social, technological, environmental, competitive and other aspects. Possible internal conditions consist of:

• characteristics and goals of the project itself;
• characteristics, structure and objectives of the company;
• corporate standards and regulations;
• information about the resource support of the project.

Risk management planning

The first process among the total composition of work procedures with project threats is to plan risk management. It allows you to clarify the selected methods, tools and the management level of the management in relation to a specific project. The PMI Institute of this process takes an important role for communications with all stakeholders. Below is a process planning scheme posted in the PMBOK manual.

Risk management planning data flow chart. Source: PMBOK Manual (Fifth Edition)

The risk management plan is a document that includes a certain composition of sections. Consider an example of the detailed content of this plan.

1. General.
2. The main characteristics of the company.
3. Authorized project characteristics.
4. Goals, risk management tasks.
5. Methodological partition. Methodology includes methods, analysis and evaluation tools, sources of information that is recommended to be used to control the risks of the project. Methods and tools are painted by software.
6. Organizational section. It includes the distribution of the role of the participants of the project team with the establishment of responsibility for the implementation of the procedures provided for by the plan, the composition of relationships with other components of the project management.
7. Budget section. The rules for forming and ensuring the implementation of the risk management budget are included.
8. Regulatory section, including timing, frequency, duration of risk management, forms and composition of management documents.
9. Section of metrology (estimates and recalculation). Principles of evaluation, rules for recalculating parameters and reference scales are determined in advance, serve as auxiliary means of high-quality and quantitative analysis.
10. Risk thresholds. Taking into account the importance and novelty of the project implementation, the permissible values \u200b\u200bof the risky parameters at the project level and individual threats are established.
11. The reporting section is devoted to the issues of frequency, forms, the procedure for filling, passing and considering reports under this project management unit.
12. The section of monitoring and documentation management risk management.
13. Partition templates for risk management.

Identification of project risks

The next process of the control unit under consideration is the identification of risks. In the course of its implementation, project risks are detected and documented. As a result, a list of risks ranked by their degree of danger. Not only team members, but also all participants in the project should be attributed to identifying factors. In the PMBOK manual, this process is described as follows.

Extract from section 11 of the PMBOK manual.

Identification is made according to the results of the study of all identified factors. At the same time, we should not forget that not all factors are identified and to be managed. During the development and refinements of project plans, new possible sources of threats and hazards often arise. The trend is such that as the project progresses to complete the number of probable risky events is growing. Quality identification depends on the presence at hand detailed. One of the beneficial classification features is the level of their control.

Classification of risks by level of control

The classification of design risks based on a sign of control unit is useful to certain, under what uncontrollable factors need to start reserves. Unfortunately, risk controls often do not guarantee success in managing them, therefore other division methods are important. It is worth noting that there is no universal classification. This is due to the fact that all projects are unique and accompanied by a mass of specific risks. In addition, it is often difficult to accumulate the border between similar types of risks.

Typical signs of classification are:

• sources;
• effects;
• ways to reduce threats.

The first feature is actively used precisely at the identification stage. The last two find themselves useful when the analysis of risk factors is carried out. Consider the types of design risks in connection with the uniqueness of their factors.

1. Specific threats from the position of the local project. For example, risks affected by the specific introduced technology.
2. Specific threats from a project implementation type. Factors for construction, innovative, IT projects, etc. have specificity.
3. Common risks for any projects. You can cite an example of the mismatch of plans or low levels of budgetary study.

For identification, the literacy of the risk wording is imported, the source, consequences and risk itself are impossible. The wording should be twisted and include an indication of the source, due to which the risk arises, and the actual threatening event. For example, the "risk of breaking financing due to mismatch in". As noted, the types of design risks are often divided into major sources. The following is an example of the most common version of such a classification.

Classification of project risks on sources

Analysis and assessment of project risks

Analysis and risk assessment are manufactured in order to convert minimized information to information in the course of identifying information to make responsible decisions. During the process of high-quality analysis, a number of expert assessments of possible adverse effects caused by the identified factors are made. In the process of quantitative analysis, the values \u200b\u200bof the quantitative indicators of the likelihood of threatening events are determined. Quantitative analysis is significantly more time-consuming, but also more accurate. It requires the quality of input data, the use of developed mathematical models and higher competence from personnel.

There are situations where high-quality analytical studies are sufficient. At the output of the analytical work, the project manager intends to get:

• a list of risks grouped by priority;
• list of positions requiring additional analysis;
• assessment of the risks of the project as a whole.

There are expert estimates of the likelihood of adverse events and the level of impact on the project. The main output of the quality analysis process is a list of ranked risks with estimates or decorated risks. And probabilities and influences are divided into categorical groups in a specified range of values. As a result of the assessments, various special matrices are built, in the cells of which are placed the results of the product of the probability value to the level of exposure. The results obtained are divided into segments that serve as the basis for the ranking of threats. An example of such a "probability / impact" matrix can be found in the PMBOK manual, it seems to your attention below.

An example of a probability matrix and impact.

The results of investment activities are largely dependent on how fully and objectively risks are taken into account on the pre-investment stage, even before deciding. To understand whether the game is worth the game, you can put a risk amendment in the discount rate, if we are talking about small projects, or carry out a comprehensive risk study if the project is large.

In this article you will learn:

Most investment projects are building projects for which both common investment risks and specific ones are characteristic. Among all the risks inherent in investment and construction projects, it is possible to distinguish the decline in profits, the cost of assets, the emergence of additional costs. Accordingly, the tasks of risk analysis is to obtain reliable criteria for the effectiveness of the investment project and increasing the reasonableness of the investment decision 1.

Cumulative method

One of the most simple ways to take into account the risks of the project - to reflect their level in the discount rate, which is used in the calculations of the indicators of the economic efficiency of the project (NPV, IRR, PI, PP). For these purposes, according to the author, the most appropriate is the cumulative calculation method (Build-Up Approach), which allows to identify various risk factors by expert way:
r \u003d R C + R F,
where R is the discount rate,%;
r c is a risk-free rate of profitability,%;
r a - amendment (premium) in risks,%.

As a risk-free bet, you can use the average annual value of the profitability of securities corresponding to the investment project on time and currency. For example, if the estimated currency of investment dollars, then the rate of yields of the US Treasury Bonds are taken into account, the urgency of which approximately corresponds to the date of investments.

As for the risk amendment, you can apply different approaches here. For example, to rely on guidelines for assessing the effectiveness of investment projects (appliances. Ministry of Economy, the Ministry of Finance, the Russian State Building 21.06.99 No. 477). However, the method will be more accurate in which individual risk factors are distinguished that affect the implementation of this project. They can be combined into groups: macroeconomic, political, social, regional and sectoral risks, as well as construction conditions (that is, the implementation of a specific project).

Table 1. Range Ride Amendment Object Factor

Personal experience
Sergey Glushkov

It should be remembered that the cost of working on risk identification and subsequent activities should not exceed the result. In practice, the number of revealing risks of the project can reach 150 for complex objects, but on average no more than 30-40 are considered.

The description of the risks does not provide information on possible losses or their probability, it serves as the basis for quantitative risk analysis.

Table 3. Project risks of an investment and construction project (extraction)

Preinvestment Stage		Investment (construction) stage			Stage of operation
Research	Preparation for construction <1>	Organization of procurement <2>	Construction and installation work (CMR)	Completion
Errors when determining the location of the object	Delay in the development of PSD	Delay when choosing applicants	Displacement of construction schedule	The emergence of civil liability (ecology, etc.)	Errors when determining the price of implementation
Errors in determining interest payments for credit	Errors when making permits for the project	Additional tender costs	Increase the cost of CMR as a result of shifts in the timing	Putting-commissioning	Warranty occurrence
Errors on physical output of square. m on the project	Delay in the stage of coordination and approval of the PSD		Low quality work	Delay in the commissioning of the object into operation	Delay in the deadlines
Translation of revenue abroad			Unexpected delivery of materials	Unexpected demobilization of resources
Delay of the deadlines for conducting examinations	Delay in obtaining a construction permit		Unreasonable supply of equipment	Defects in Equipment

<1> The stage includes the development of design and estimate documentation (PSD) and work planning. - approx. ed.
<2> The stage includes tenders and conclude supply contracts. - approx. ed.

Table 4. NPV sensitivity analysis

Risk factor
	–20%	–10%	0%	+10%	+20%
Changing the cost of construction and installation works (CMR)	2369	2070	1704	1363	1150
	1159	1406	1704	1968	2232
Shift deadlines	3493	2982	1704	878	273
Delay in the development of design and estimate documentation	1772	1740	1704	1689	1644
Unimpressed land plot	1744	1705	1704	1686	1668

Table 5.. Risk factor probability scale

Quantitative risk analysis

The task of quantitative analysis is to identify the most significant risks in terms of their impact on pure NPV Cost Project and determine the likelihood of their offensive. According to his results, it can be concluded whether to implement a project with a detected risk level and corresponding to the size of potential losses.

Personal experience
Sergey Glushkov, Head of the Department of Investment Projects of Environmental Products (Moscow)

Risks must be assessed at least two scales: materiality and probability. Those whose consequences will be negligible, it is possible to neglect, even if the probability of their implementation is great. At the same time, it should be focused on managing the most significant risks - on time to take countermeasures, prevent the onset of risky events, avoid them, insure. It should be noted that only a relatively small number of risks is essential. For example, for construction projects, this is most often deviations for timing and costs.

Sensitivity analysis. The most significant risks that have a significant impact on the size of NPV are allocated by analyzing sensitivity. It can be carried out in all revealed risks, but it is too time consuming. For this reason, enlarged risk factors are allocated, the most important, according to experts, often occurring in practice or contributing to the emergence of other risks. For example, for almost any investment and construction project, enlarged risk factors are a change in the cost of construction and installation work, shift the timing of the project implementation, change in the sale price of 1 kV. M of the area of \u200b\u200bthe object, delay in the development of design and estimate documentation and untimely removal of land. The value of each risk factor and its influence on the income and project costs are determined on the basis of expert opinion, then the planned NPV value is recalculated.

Note that the calculation of the sensitivity of the NPV begins with the selection of the range of possible changes in the risk factor values. It is assumed that each of the risk factors has five possible implementation scenarios: a decrease by 20%, by 10%, an increase of 20%, by 10% and an intermediate scenario that does not imply changes (0%). NPV values \u200b\u200bobtained for each of the scenarios are reflected in the table (Table 4). Thus, with a decrease in the cost of SMR, 20% NPV increases from $ 1704 thousand to $ 2369 thousand, and with an increase in the cost of SMR, 1% decreases to $ 1363 thousand.

Of the highlighted risk factors, you need to choose those that have the most significant impact on the NPV value. As can be seen from the table. 4, most significantly on NPV affect the shift of the implementation of the implementation, the change in the price of the implementation of 1 square meters. m area of \u200b\u200bobject and fluctuations in the cost of construction and installation work. For them, further analysis is carried out. The number of significant factors depends on which threshold of the NPV reduction of the project is acceptable for the investor company. If, for example, it is 5%, then all the risks that have a greater impact on the NPV can be attributed to significant.

The likelihood of risks. So that there were no disagreements between experts in determining the probability of occurrence of risky events, it is advisable to use auxiliary (explaining) scale (Table 5).

The probability of implementing significant risk factors is determined in two stages. First, the probability that the factor will change in principle (the so-called probability of the first level) is calculated. For example, according to expert assessment, the probability of compliance with the periods of implementation is 40% (that is, the timing will be broken with a probability of 60%).

At the second stage, the likelihood that the risk factor changes to a certain amount (the probability of the second level) is determined. It is assumed that the same as in the analysis of sensitivity, each of the risk factors has five possible implementation scenarios. The final probability for each risk factor is obtained by multiplying the probability of the first and second level (Table 6). Thus, in our example, the final probability of a shift of the project's implementation in the direction of an increase in the term by 10% will be 18%, and the probability of a term shift by 20% is 2%.

Table 6. NPV sensitivity analysis

No. p / p	Risk factor	NPV values \u200b\u200b($ thousand) when changing the risk factor on
		–20%	–10%	0%	+10%	+20%
1	Changing the cost of construction and installation work
2	Probability of the 1st level,%	40	40	20	40	40
3	Probability of the 2nd level,%	95	5	100	30	70
4	The final probability (p. 2 x p. 3/100),%	38	2	20	12	28
5	<1>	2369	2070	1704	1363	1150
6	Changing the sale price of 1 kV. M.
7	Probability of the 1st level,%	30	30	40	30	30
8	Probability of the 2nd level,%	5	95	100	80	20
9	The final probability (p. 7 x p. 8/100),%	1,5	28,5	40	24	6
10	nPV infection when changing the risk factor, $ thousand.<1>	1159	1406	1704	1968	2232
11	Shift deadlines
12	Probability of the 1st level,%	20	20	60	20	20
13	Probability of the 2nd level,%	70	30	100	90	10
14	The final probability (p. 12 x p. 13/100),%	14	6	60	18	2
15	nPV infection when changing the risk factor, $ thousand.<1>	3493	2982	1704	878	273
16	The average value of NPV, $ thousand (on page 5, 10, 15)	1764

<1> NPV values \u200b\u200bcorrespond to Table. 4 "NPV sensitivity analysis". - approx. ed.

Designing scenarios

An analysis of the project development scenarios allows us to evaluate the impact on the draft possible simultaneous change in several risk factors. It can be performed both using spreadsheets (for example, MS Excel) and using special computer programs.

It implies the calculation of such indicators as dispersion, standard deviation and coefficient of variation in the array of NPV values \u200b\u200bobtained during sensitivity analysis (Table 7). Standard deviation (?) Reflects the possible variation of NPV values \u200b\u200bfrom the mean (most likely) value. The coefficient of variation is a risk measure per unit of profitability, therefore it can serve to compare various projects from the point of view of their risks.

Based on the results of the design of the scenarios, it is concluded how risky the project is and what is the expected loss of profitability in the event of a negative development of events. In our example, the most likely value of the NPV on the project is $ 17,64 thousand, which in principle corresponds to the expected level of $ 1704 thousand. Nevertheless, the project can be characterized as extremely risky, as evidenced by the coefficient of variation (57.4%) and the standard deviation value ( $ 1014 thousand). This means that with a probability of 68%, the Company may incur losses in the amount of 57.4% ($ 1012 thousand) from the average NPV 3. Moreover, the main risk factor is the shift of the project implementation (the largest variation of NPV values). The final decision is made from the calculation, whether the investor is ready with a probability of 68% to obtain an income of $ 752 thousand ($ 1764 thousand - $ 1012 thousand) instead of the planned $ 1704 thousand.

It should be remembered that no technique allows with a 100% warranty to select projects that will be successful and profitable. Much depends on the reliability of the expert assessment, so you need to carefully approach the selection of experts.

1 For more about this, see the article "How to take a faithful investment decision" ("Financial Director", 2008, No. 2 or on the site). - approx. ed.
2 Risk management and control over them (Stage 4) are not considered in this article. - approx. ed.
3 Analysis of the data obtained in Table. 7 is carried out using the "three SIGM" rule, in accordance with which the deviation of NPV on its average value will not exceed the standard deviation (?) With a probability of 68.27%, two standard deviations - with a probability of 95.45%, three - 99, 7%.