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Project Risk Management

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Project Risk Management IFAD Kenya Country Team Training Financial Management & Good Governance Nairobi, April 2009 What Is Risk? Risk is the uncertainty of outcome ... – PowerPoint PPT presentation

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Title: Project Risk Management


1
Project Risk Management
  • IFAD Kenya Country Team Training
  • Financial Management Good Governance
  • Nairobi, April 2009

2
What Is Risk?
  • Risk is the uncertainty of outcome
  • positive opportunity or negative threat
  • of activities and events
  • It is the result of the combination of Impact
    Probability, including perceived importance
  • Project risk is defined as any area of concern
    that could prevent a project from achieving any
    or all of its objectives and outputs/ benefits

3
Why What is Project Risk Management?
  • Why?
  • Undertaking any project entails risk
  • A random and ad hoc reaction to the
    identification and analysis of risk is often
    fatal to the success and/ or sustainability of
    the project unexpected risks arise which have to
    be dealt with on an emergency, often post factum
    and more costly basis
  • What is it?
  • Systematic process of managing a project's risk
    exposures to achieve its objectives in a manner
    consistent with public interest, human safety,
    environmental factors, and the law
  • Planning, organizing, leading, coordinating, and
    controlling activities undertaken with the intent
    of providing an efficient plan that minimizes the
    adverse impact of risk on the project's
    resources, objectives and outputs

4
10 Golden Rules of Project Risk Management
  • Rule 1 Consider Risk Management as Creating
    Value
  • Rule 2 Embed Risk Management into the Project
  • Rule 3 Identify Risks Early
  • Rule 4 Communicate About Risks
  • Rule 5 Consider Both Threats and Opportunities
  • Rule 6 Clarify Responsibility
  • Rule 7 Prioritise/ Assess Risks
  • Rule 8 Plan and Implement Risk Responses
  • Rule 9 Document and Track Project Risks
    Associated Tasks
  • Rule 10 Continuously update, improve and enhance
    process

5
Risk Management
Risk Response
Avoid
Accept
Reduce
Share
Source Business Risk Assessment. 1998 The
Institute of Internal Auditors
6
Risk AssessmentIdentification of Key Risk Areas
7
Risk Assessment - Measurement
IMPACT Assessed ValuesImpact X Probability Assessed ValuesImpact X Probability Assessed ValuesImpact X Probability
High Mitigate and Monitor Mitigate and Report Mitigate and Report to IFAD
Medium Accept Mitigate and Monitor Mitigate and Report
Low Accept Accept Mitigate and Monitor
0-33 33-66 66-100
PROBABILITY/LIKELIHOOD PROBABILITY/LIKELIHOOD PROBABILITY/LIKELIHOOD
UNACCEPTABLE RISKS
ACCEPTABLE RISKS
8
Risk Assessment MeasurementAssumptions and
risks
  • Assumptions should not be only about external
    conditions but also about the internal logic of
    the project strategy.
  • For example, when increasing agricultural
    production to increase income, the assumption is
    that there is a market for the produce
  • Remember that if an assumption is highly
    risky, then the project design should be adjusted
    to lower the risk

9
Risk Responses
  • Avoid
  • Divest
  • Prohibit
  • Stop
  • Screen
  • Eliminate
  • Accept
  • Retain
  • Re-design
  • Self-insure
  • Offset
  • Reduce
  • Control
  • Diminish
  • Isolate
  • Improve
  • Relocate
  • Diversify
  • Share
  • (Re-)insure
  • Hedge
  • Securitize
  • Transfer
  • Outsource
  • Indemnify

10
Project Risk Management in IFAD
  • Begins at COSOP
  • Countries with high corruption/ governance trends
    subject to additional checks/ controls embedded
    into project
  • Risks highlighted in project design documents
  • Review Log frame data - approach to be expanded
    to each supervision mission
  • Annual Portfolio review assess fiduciary
    aspects, project implementation progress, outputs
    outcomes, sustainability, likelihood of
    achieving development objectives and impact in
    increasing physical financial assets
    improving food security

11
Risk MonitoringLog frame approach to risks
  • Risk
  • Smallholders and their organizations.(which
    are) managing and coordinating project activities
    lack sufficient implementation capacity are not
    sustainable at the end of project
  • Risk Mitigation
  • Continue to provide training and technical
    assistance to build the institutional capacity of
    all these groups and organizations
  • Using temporary village change agents embed
    agricultural extension expertise into village
    organizations integrate smallholders into the
    commercial agriculture sector
  • Indicator
  • Adequate provisions made in project design for
    project implementation
  • Intensive implementation support provided to
    improve execution
  • Responsible
  • PMU/ IFAD (CPM)/
  • PMU/ consultants
  • Timeframe
  • Design document finalised, but provisions to be
    re-examined in mid-term review
  • Next mission (./2009)
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