Session 3: Project Risk Considerations

Module 2.2 explained the concept of risks in the capital structure of the firm. Some basic definitions on the risk have also been explained. In Projects there are however number of risks which are discussed in this section. Learners will learn these types of risks which in most of cases, are not quantified.

Types of Risks Associated with Projects

Market risk
Where there is no enough information on the market of the product/services the project is intended to offer. This will cause decline of the project return.

Human resource
Some of the projects requires highly specialized people who might not be obtained in the home country or who are not obtained easily. So there is a risk that the project will not deliver its best in terms of human resources consideration. This applies to the technical related projects such as ICT projects.

Financial resources
In most cases, projects can be financed by the use of various sources as discussed in Module 2. However, the financing sources of the project can not be raised easily or the sources can be very expensive than expected.

Technology risk
In the ICT industry, innovation on the various projects to be implemented may be associated with the available technology. ICT industry is one of the dynamic industries of which changes in the technology experienced occasionally. So the issue of technology should be analyzed fully in terms of its availability and sustainability.

Management risk
Sometimes the management for the project can be a risk of itself. Management requires special skills to be developed and maintained. The successful management of the project will lead to the desired results and the vice versa is also true.

Timing
Timing of the project is very important to its success. Timing is important in the exploring the opportunities which are not always in place. Poor timing may result to the copying of the project idea by the competitors in the market.

Intellectual property right issues
The consideration of the intellectual property rights is very important in projects. This is because some of the resources for the project may be subject to the intellectual property rights and thus making the company incurring extra costs for this purpose.

Regulation risks
Changes in regulations can also be regarded as risk component in the implementation and survival of ICT projects. For instance in the telecommunication regulations, if the regulatory body changes the policies regarding to pricing and trafficking, this has effects on the some of the telecom projects in the country. Another set of regulation risk is tax changes on the pricing of the ICT products/services.

Risk Management and Contingency
In the project management, the parties involved in the implementation of the projects should look to among other thing on the risk management measures. Projects should not be moved forward to implementation stage without proper risk analysis and mitigation measures.

Contingency
Contingency is one of the ways that risks can be dealt with. Contingency can be applied to various issues such as time, cost, resources and workscope. The projects should be planned in a such a way that it provides for a contingency plan schedule, incase anything happened.

When analyzing a project, the above mentioned risks need to be considered and included in the analysis. risks in consideration may change the decision made on the project.