Risk Management Essay

1729 Words Nov 23rd, 2011 7 Pages
RISK MANAGEMENT ESSAY
The following essay has been written by analyzing the risks associated from the construction managers/ project managers’ point of view. Citing the possible risks associated while working on international or varied geographical location. Risks are associated with almost all levels of the project life cycle and is mutually shared and mitigated by all parties employed within the construction industry. There are many evidences to state that poor risk mitigation leads to poor performance and hence establish risk management processes and practices are required to be adhered to in order to turn any project’s outcome into a success.
The 2000 edition of the Guide to the Project Management Body of Knowledge (PMI,2000) states
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Many exchange rate risk hedging tools such as forward cover, leads and lags, currency options, currency swaps etc are available which can be efficiently made use of to maneuver exchange rate risk.
TECHNIQUES OF RISK ANALYSIS
BREAK EVEN ANALYSIS
The financial viability of a project is estimated by making various assumptions like the cost of raw material, cost of consumables, cost of labor, expected sales realization, expected capacity utilization of the plant etc. after implementation, the project starts earning profit or starts incurring loss depending on the actual sales volume that it could achieve, the actual cost of inputs, the actual sales realization etc of these factors, the , the cost of the inputs and the cost of outputs are decided by the cost of market forces. Of these factors, the only thing that is under the control of the project promoter is the level of output (ie. Capacity utilization). Hence it is very essential to know the level of operation below which the project will incur losses. Breakeven point (BEP) refers to the level of operation at which the project neither incurs profit nor incurs loss. Calculation of BEP for the given cost and price levels indicates the minimum capacity utilization that the project should aim at in order to be in a no-profit, no-loss situation. BEP also helps in identifying the level of profit/loss for a specified level of operation and the level of operation required to attain a specified

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