The document discusses risk management for investment projects. It defines risk management as identifying, analyzing, and either accepting or mitigating uncertainty in investment decision making. The key aspects of risk management for a project are: identifying potential risks and uncertainties, analyzing their potential impact, prioritizing the most important risks, taking actions to mitigate risks when possible, planning emergency responses for significant risks, and monitoring risks over the project lifetime.

2. Objectives:
Provide Detailed Technical Analysis of Critical Design
Features
Characteristics:
• Limited Scope
• Performed by Technical Experts
• Answer Key Questions
• Degree of Rigor Commensurate with Stage of
Project Development

3. • Markets
• Inputs
• Location
• Technology
• Equipment

4. Comparing ProjectCharacteristicswith Criteria

5. • All Sectorsof Economy
• Revenueand Non-revenue Projects
• All Typesof Projects
• New Investment
• Modernization
• Expansion
• Privatization
• TechnologyAcquisition
• Equipment Replacement
• Public and Private Investment

6. • Commitmentof ScarceResources
• Expectation of Future Benefits
• Inherent Uncertainties

8. PARTICIPANT INVESTOR FINANCIER REGULATOR GUARANTOR SUPPLIER
Commercial 1 2 2 1 2
Market 1 2 2 1 2
Technology 1 2 2 2 2
Finance
•Return 1 2 2 2 2
•Liquidity 2 1 3 1 1
•Debt
Servic
e
2 1 3 1 2
Economy 3 3 1 3 3
1 VERYIMPORTANT
2 SOMEWHATIMPORTANT
3 NOTSOIMPORTANT

9. • Isit compatible with other Investment
Activities?
• Isthe Project potentially bankable?
• Doesthe project makethe best useof the
Sponsor’s Resources?
• DoI havethe capacity to energize the project
and to retain its momentumin the face of
obstaclesto growth?

10. Local Partner
(onthe ability of Foreign
Partner to contribute more
equity)
• “He canafford it.”
• “Theexchange rate is
wrong.”
• “He wantsour market.”
Foreign Partner
(onthe reason to offer lower
price for participation)
• “Political and EconomicRisk”
• “LowPurchasingPowerin the
Marketplace”
• “Uncertain Future Earnings”
• “Workers’ Demands”
• “Book Value isIrrelevant”

11. MICRO
ProjectLevel
COMMERCIAL
PROFIT
ABILITY
MACRO
NationalLevel
NATIONAL
PROFIT
ABILITY

12. • Doesthe Project Make Sensefor the Country?
• Consistentwith Development Goals?
• PositiveImpactonMacro-economicIndicators?
• Satisfy EconomicRateof ReturnCriterion?

13. • Purpose
• Project Background
• Analysis of
• Commercial/ Market
• Technology
• Environmental Impacts
• Institutional / Managerial
• Financial
• Economicand Social
• Conclusion

14. • Isit a SoundBusinessConcept?
• Isthere a Market for Product
/ Service?
• Isthe Marketing Strategy Viable?
• Are the SalesProjections Realistic?
• Isthe Distribution Plan Viable?

15. • Isthe production at a competitive price?
• Isthe processtechnologyaccessible?
• Are the operating conditions sustainable?
• Will webe able to provide the quality demanded by the
market?
• Are the inputsto the planning reliable?
• Are there adequate technical personnel?

16. • Do process emissions and
effluents meet or exceed
regulated standards?
• Are products environmentally
acceptable?
• Doimpactsindicate future
regulatory actions?

17. • Are the following Competent?
• Entrepreneur
• Implementation Management
• Operations Management
• Isthe organization capable of executing
necessary functions?

18. • Are the financial resourcesadequate to
planning?
• Will there be adequate returnsto the investor?
• Are the financial criteria of other participants
satisfied?
• Are the financial risksand risk sharing
acceptable?
• Isthe financial structure acceptable?

19. • Wrong Timing
• Non-optimal Financing
• Over-estimated Market Potential
• Under-estimated Capital Cost
• Under-estimated Competition
• Planned Capacity Inconsistentwith Market
• Unidentified Sourcesof Skilled Personnel
• Inadequate Infrastructure
• Project Design Alternatives
• Ineffective Planning

21. Theprocessof identification, analysis and either acceptance or
mitigation of uncertainty in investment decision-making.
Essentially,risk management occursanytime an investor or fund
manager analyzes and attempts to quantify the potential for
lossesin an investmentand thentakesthe appropriate action (or
inaction) given their investmentobjectives and risk tolerance.
Inadequate risk management canresult in severeconsequences
for companiesaswell asindividuals. Forexample, the recession
that began in 2008 waslargely causedby the loosecredit risk
managementof financialfirms.

22. Anyproject organization issubject to risks.One whichfinds itself in
a state of perpetual crisis,isfailing to manage risks properly.
Failure to manage risksischaracterized by inability to decide
what to do, whento do it, and whether enoughhasbeen done.
RiskManagement isa facet of Quality, usingbasic techniquesof
analysis and measurementto ensurethat risksare properly
identified, classified, and managed.

23. • Identify Uncertainties
Explore the entire project plans and look for areas of uncertainty.
• Analyze Risks
Specify howthoseareas of uncertainty canimpact the performance of the
project, either in duration, costor meeting the users' requirements.
• Prioritize Risks
Establishwhichof thoseRisksshouldbe eliminated completely, becauseof
potential extreme impact, whichshouldhave regular management
attention, and whichare sufficiently minor to avoid detailed management
attention.

24. • Mitigate Risks
T
akewhatever actions are possible in advance to reduce the effect of Risk. It
isbetter to spendmoneyonmitigation than to include contingency in the
plan.
• Planfor Emergencies
Forall thoseRiskswhichare deemed to be significant, have an emergency
plan in place before it happens.
• Measureand Control
Trackthe effects of the risksidentified and manage themto a successful
conclusion.