WELCOME TO THE PRESENTATION OF

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WELCOME TO THE PRESENTATION OF Group 2 :

TOPIC: RISK MANAGEMENT WELCOME TO THE PRESENTATION OF Group 2

PowerPoint Presentation:

Phan Nguyễn Văn Phước . Nguyễn Thị Thận . Nguyễn Thị Thu Mai. Trần Thị Khánh Ly. Group’s members :

Content:

The purpose of learning Risk management framework Risk identify and Classification Risk analysis Risk response Project financing Content

I. The purpose of learning :

Understand what risk is and the importance of risk management project. Understand the Risk Management process. Describe the process analysis techniques and tools to help identify the risk project. Provide the method used in the risk management process. Describe the software can assist in managing project risks. I. The purpose of learning

II. Risk management framework :

Definition: Risk management is an organized means of identifying and measuring risk and developing, selecting, and managing options for handling these risks Risk management, in the project context, is the art and science of identifying, analyzing, and responding to risk factors throughout the life of a project and in the best interest of its objectives II. Risk management framework

II. Risk management framework (cont):

2. Risk and uncertainty : Risk and uncertainty characterize situations where the actual outcome for a particular event or activity is likely to deviate from the estimate or forecast value II. Risk management framework (cont)

II. Risk management framework (cont):

Risk: Risk is the potential harm that may arise from some present process or from some future event or mean that the problem may happen in the future. Example: Loss or damage by fire, earthquake, flood II. Risk management framework (cont)

II. Risk management framework (cont):

Uncertainty: A situation we do not know for sure what happened as well as the possibility of these events. One can not specify what would happen; the possibility is definitely what percentage. Example: These cases are often seen as risky gamble scratch, buying lottery tickets, etc II. Risk management framework (cont)

II. Risk management framework (cont):

Risk identification (Identify source & type of risk) Risk classification (Type of risk and its effects) Risk analysis (Evaluate consequence & impact of risk) Risk response (How risk should be handled) Risk attitude (Attitude of people involved) II. Risk management framework (cont) 3. Risk Framework :

K+ profile introduction:

K+ profile introduction K+ is the biggest satellite television in VN This is a channel television satellite with the highest quality in image and sound. K+ is really suitable for LCD television. Viewers can watch all of K+ channels in everywhere with a parabol (60cm) and an modern idiot box New technology is one of the strong point of K+. K+ Channel television is broadcasted through satellite with modern equipments. K+ can broadcast 96 channel SD and 16 channel HD. Almost all K+ foreign channels is Vietnamized by a lot of forms => have advantages for television watchers. Satellite television Viet Nam - Limited liability company (VSTV) with K+ brand name will be one of new factors in this technology fight. VSTV is a join-venture company between Television Station Viet Nam (VTV) and Canal + French Media Group will supply many service packs with 60 high quality channels, receive signal directly through satellites and cover television wave in Viet Nam totally.

III. Risk identify and Classification :

Risk identification: The first step in risk management is to identify and assess all potential risk areas. The thoroughness with which this identification is accomplished determine the effectiveness of risk management. Not all risks are high-level risk that will have a critical impact on a project. However, the cumulative effect of combining low-level risks could have a severe impact. III. Risk identify and Classification

III. Risk identify and Classification (cont) :

It is useful to work closely with the project team and to consider explicity these areas: Risks internal to the project: + Nontechnical: labor stoppages, safety issues, cash flow problem + Technical: change in technology, design issues, operation/maintenance issues (unproven technologies, inadequate logistic support, etc) + Legal: subcontractor performance, patent5 rights, licenses, etc. Risks external to the project: + Government regulations, natural hazards, etc. + Borrowing rates, raw material availability. III. Risk identify and Classification (cont)

Principle sources of risk::

Principle sources of risk: Physical Environmental Design Logistical Financial Legal Political Constructional Operational

III. Risk identify and Classification :

Physical : III. Risk identify and Classification

III. Risk identify and Classification :

Environmental: Ecological damage, pollution, waste treatment Public enquiry III. Risk identify and Classification

III. Risk identify and Classification :

Design: New technology, innovative applications, reliability, safety Detail precision and appropriateness of specifications Design risk arising from surveys, investigations Likelihood of change Interaction of design with method of construction III. Risk identify and Classification

III. Risk identify and Classification :

Logistical : Loss or damage in the transportation of materials and equipment Availability of specialized resources- expertise, designers, contractors, suppliers, plant, scarce construction skills, materials Access and communications Organizational interfaces III. Risk identify and Classification

III. Risk identify and Classification :

Financial : Availability of funds, adequacy of insurance Adequate provision of cash flow Losses due to default of contactors, suppliers Exchange rate fluctuation, inflation III. Risk identify and Classification

III. Risk identify and Classification :

Legal : Liabilities for acts of others, direct liabilities Local law, legal differences between home county and home countries of suppliers, contractors, designers III. Risk identify and Classification

III. Risk identify and Classification :

Political: Political risks in countries of owner and suppliers, contractors- war, revolution, changes in law III. Risk identify and Classification

III. Risk identify and Classification :

Constructional: Feasibility of construction methods, safety Industrial relations Extant of change Climate Quality and availability of management and supervision III. Risk identify and Classification

III. Risk identify and Classification :

Operational: Fluctuations in market demand of product or service Maintenance needs Fitness for purpose Safety of operation III. Risk identify and Classification

III. Risk identify and Classification :

3. Risk classification: III. Risk identify and Classification

IV. Risk analysis :

1. Definition : Risk analysis is the process of quantitatively or qualitatively assessing risks. This involves an estimation of both the uncertainty of the risk and of its impact. IV. Risk analysis

IV. Risk analysis (cont) :

2. Qualitative Risk Analysis : Definition Qualitative Risk Analysis is the process for prioritizing risks for subsequent further analysis or action by assessing and combining their probability of occurrence and impact. IV. Risk analysis (cont)

IV. Risk analysis (cont) :

IV. Risk analysis (cont) Tools and Techniques : Risk probability and impact assessment. Probability and impact matrix. Expert opinion: many companies rely on intuition and experience of experts to help them for identifying the project risks. Experts can classify risks as high, medium or low without the complex calculations Top 10 risk item tracking

Example of Top 10 Risk Item Tracking:

Example of Top 10 Risk Item Tracking Monthly Ranking Risk Item This month Last month Numbers of months Risk resolution progress Inadequate planning 1 2 4 Working on revising the entire project plan Poor definition of scope 2 3 3 Holding meetings with project customer and sponsor to clarify scope Absence of leader ship 3 1 2 Just assigned a new project manager to lead the project after one quit Poor cost estimates 4 4 3 Revising cost estimates Poor time estimates 5 5 3 Revising schedule estimates

IV. Risk analysis (cont):

3. Quantitative Risk Analysis : - Definition: Measuring the probability and consequences of risks and estimating their effects on project objectives. Tools and Techniques : . Expected monetary value analysis (EMV) . Decision tree analysis . Sensitivity analysis . Simulation . Scenario analysis IV. Risk analysis (cont)

V. Risk Attitude :

Risk loving : prefer to accept risk even when the expected (monetary) benefit is negative. Risk averse : is unwilling to accept risk even when the expected benefit is positive. Having a low tolerance for risk. Risk neutral : -Base the decision on the expected benefit . - A balance between risk and payoff -This strategy is often used to offset risk of price fluctuation and exchange rate. V. Risk Attitude

V. Risk response :

After identifying risks, how should you decide to deal risks? There are basically 4 types of Risk Management:  Risk Avoidance  Risk Reduction  Risk Retention  Risk Transfer V. Risk response

V. Risk response (cont) :

Fundamental considerations which govern the allocation of risk : Who can best control the source of the risk Who can best manage the risk if is occurs Is it preferable to retain an involvement in the management of risk? Who should carry the risk if it is not controlled? Whether the risk premium is reasonable and acceptable Is the transferee likely to be able to sustain the consequence of risk? If the risk is transferred, whether it leads to the possibility of risks of different nature being transferred back. V. Risk response (cont)

V. Risk response (cont) :

Define of risk response : Risk transfer Risk avoidance Risk reduction Risk retention V. Risk response (cont)

VI. Project financing :

Definition: Project finance is the long term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of the project sponsors. VI. Project financing

VI. Project financing (cont) :

Why should we have project financing ? New Financing Opportunities: it would be easy to have more resource to help in the project as greater input of finance would enable the process of project to be in time without any problems. Off-balance sheet borrowing: allow the project to borrow the resource from outside without effect the sponsor’s credit. Risk sharing: this is obviously due to by sharing the risk to more parties, each parties receive a small amount of risk would be better than 1 party to get the huge risk which is hard or unable to handle and result in failure of project. VI. Project financing (cont)

VI. Project financing (cont) :

2. Type of capital and debt :  Equity: Equity simply means the value of shares issued by a company  Quasi-equity: is being used to describe a new type of finance package being introduced currently by Future builders and the Esmeé Fairbairn Foundation  A debt  Unsecured loans: Are monetary loans that are not secured against the borrower's assets.  A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan. VI. Project financing (cont)

VI. Project financing :

3. Popular form of financial project :  Build-Operate-Transfer (BOT )  Build-Own-Operate VI. Project financing

VI. Project financing (cont) :

4. Connection between Risk Management and Project Financing : Financiers are concerned with minimizing the dangers of any events which could have a negative impact on the financial performance of the project, in particular, events which could result in: (1) the project not being completed on time, on budget, or at all; (2) the project not operating at its full capacity; (3) the project failing to generate sufficient revenue to service the debt; or (4) the project prematurely coming to an end. VI. Project financing (cont)

VI. Project financing (cont) :

4. Connection between Risk Management and Project Financing : The minimization of such risks involves a three step process. The first step requires the identification and analysis of all the risks that may bear upon the project. The second step is the allocation of those risks among the parties. The last step involves the creation of mechanisms to manage the risks.  If a risk to the financiers cannot be minimized, the financiers will need to build it into the interest rate margin for the loan. VI. Project financing (cont)

Conclusion:

Above information show us how important of risk management now a day. Risk manage play an key role to the success of a project. In the addition, manager should be careful in Risk Identification, Risk Classification and Risk Analysis which allow managers to have best solutions in dealing with risks. Conclusion

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