Comprehensive Analysis of Risk Management and Contractual Risk

This report provides an overview of project risk management, emphasizing the importance of risk mitigation in uncertain environments. It covers key strategies such as risk identification, evaluation, and mitigation planning, including the use of contingency plans to manage unforeseen events like financial issues or cost overruns. The report also delves into contractual risk, discussing contract management processes and various pricing models like fixed price, cost plus, and time and material contracts, highlighting the uncertainties for both buyers and sellers. Furthermore, it outlines risk management strategies including risk avoidance, sharing, reduction, and transfer, providing a comprehensive understanding of how to manage and mitigate risks in projects. Desklib offers a wide array of solved assignments and study resources for students.

Project Management and Risk

INTRODUCTION
• Risk is an inherent element associated with every project and
in today’s uncertain and competitive time, none of the
manager can make plans without considering the key risks that
might a project can face.
• Therefore, every project manager creates risk mitigation plan
with the key aim to eliminate associated risky events or
occurrence.

Strategies of Risk management
• Risk identification
• Risk evaluation
• Risk mitigation plan
• Contingency plan

Risk Identification
• It is the disciplined process to identify likely risky events or
occurrence that may have negative impact on the project
• Risk Breakdown structure (RBS) can be designed to classify
and segregate different risk into sup-parts as follows:
• Technical
• Financial
• Political
• Environmental
• Contractual
• Cost overrun

Risk evaluation
• Some risk have catastrophic impact on project whereas others
may do not have a significant impact.
• Risk and impact matrix must be designed to know likelihood
and impact of different risks in a project.
• On the basis of it, risk events can be scored to high, law or
average.

Risk mitigation plan
• Project team must design a mitigation plan to avoid the
occurrence of unexpected events.
• It is necessary for the manager to first avoid such risk that will
impact project to a considerable extent.

Contingency plan
• Contingency plans are developed to set some fund aside as
reserves so that any unforeseen events such as financial issues
or cost overrun can be managed successfully.
• High-risky projects like construction work always maintain
some contingency budgets.

Contractual risk
• Every project needs various kinds of contracts with different
parties such as suppliers, employees and others.
• Contract management is the procedure of creating, executing,
analyzing and managing contract successfully.
• Failure of contractor in satisfying the decided conditions and
terms is known as contractual risk.

Key dimensions of contractual risk
• Procurement
• Utilization
• Pricing
• Fixed price (FP): Buyer has low uncertainty of cost
whereas seller has high margin uncertainty.
• Cost plus (CP): Buyer suffer high uncertainty due to high
cost whereas seller has low uncertainty of margin.
• Time and Material (T&M): Both the contractual parties
i.e. buyer and seller share uncertainties.

Risk management strategies
• Risk Avoidance
• Risk sharing
• Risk Reduction
• Risk transfer

Bibliography
• https
://pm4id.org/chapter/11-2-risk-management-process/
• https://
www.project-management-skills.com/project-risk-ma
nagement.html
• https://www.pmbypm.com/types-of-contracts-and-
risk/

Thank You!