Assignment

1. Define Project Review Administrative Aspect with reference to

a. Abandonment Analysis
B. administrative aspects of capital budgeting
Answer:
A Project Management Review is an exercise undertaken at the end of each
Project Phase to identify the current status of the project. The Project Review
identifies the deliverables which have been produced to date and determines
whether or not the project has met the objectives set.
a. Abandonment analysis
Project management is certainly a very dynamic process. Anything can happen in
this fast-changing dynamic world. Here is where abandonment analysis comes into
the picture. Abandonment analysis is a technique which is used for existing
projects and even for new projects that whether the existing project terminated or is
to be continued.
New Project: - A project in which the major amount of investment is yet to be
made is known as a new project. Hence the cash outflow here is relevant. The cash
flow estimates are uncertain in this case.
Existing Project: - A project in which most of the investments are made and this
investment represents the sunk cost. The cash flow estimates are quite precise
Some rules are to be considered when making a decision regarding whether to
divest, continue or terminate the project. Before getting to know about the rules we
must first be aware of the following terms:
PVCF- the present value of expected cash flows
SV- salvage value or the value which can be expected by terminating the project
and selling the assets
DV- divestiture value or the price which the third party is ready to pay for buying
the project
The rules to consider are:
If PVCF<SV<DV then it is highly advised to divest the project because the
divestiture value is highest in the case and makes the most sense to divest.
If PVCF<DV<SV then the project must be terminated because the SV value is
highest and we will get the most benefit by terminating the project.
If SV<PVCF<DV then we should divest the project because at this stage we are
getting the most value by divesting the project.
If SV<DV<PVCF then we should continue with the project because we will get
the most benefit by continuing the project.
If DV<PVCF<SV then we must terminate the project because neither divesting
nor continuing the project will help.
b. administrative aspects of capital budgeting
We discussed all capital budgeting in our earlier post. So here we are going to
discuss some of the administrative aspects required for capital budgeting
Administrative Aspects of Project review are :
 Identifying investment opportunities.
 Classifying the investments into categories.
 Finalizing and submission of the proposal.
 Making decisions.
 Performing capital budgeting.
 Implementing..
 Review.

II. What is project risk analysis? What are different techniques of risk analysis?
Explain with suitable example.
Answer:
The project risk analysis or risk management is the process of identification,
analysis and response to any risk that occurs during the project. Analyzing the
risks that may lie behind the execution of a project, predicting the possible
obstacles and having a vision of the solutions in advance is certainly vital for any
project. It serves to help the latter stay on track and reach his goal. But risk
management cannot and must not be just an action in response to something. It
should itself be part of the project planning process, in its evaluation phase. IN
fact, during the planning of the project, the potential risks should be assessed and,
obviously, also the possible solutions in order to manage these risks should be
evaluated. But what does “risk” mean?
A risk is anything that could potentially affect the timing, performance or budget
of the project. Risks are considered as potentialities and, in a project
management context, if they become reality, they are classified as “problems“,
which must be addressed accordingly. Thus, risk management is the process of
identification, categorization, prioritization and risk planning before they become
problems. Risk management can be managed differently depending on the project
and its scope.
Risk analysis involves examining how project outcomes and objectives might
change due to the impact of the risk event. Once the risks are identified, they are
analyzed to identify the qualitative and quantitative impact of the risk on the
project so that appropriate steps can be taken to mitigate them.
Risk analysis involves examining how project outcomes and objectives might
change due to the impact of the risk event. Once the risks are identified, they are
analyzed to identify the qualitative and quantitative impact of the risk on the
project so that appropriate steps can be taken to mitigate them. Risk analysis
involves examining how project outcomes and objectives might change due to the
impact of the risk event. Once the risks are identified, they are analyzed to identify
the qualitative and quantitative impact of the risk on the project so that appropriate
steps can be taken to mitigate them. Risk analysis involves examining how project
outcomes and objectives might change due to the impact of the risk event. Once
the risks are identified, they are analyzed to identify the qualitative and quantitative
impact of the risk on the project so that appropriate steps can be taken to mitigate
them.
Qualitative Risk Analysis
Project Risk Management is a continuous and collaborative process, which
includes the application of both Quantitative and Qualitative Risk Analysis
techniques. Most projects will include several mandatory Quantitative Risk
Analysis studies in their scope; however, managing the day-to-day risks inherent
on every project is often over-looked in terms of formal Qualitative Risk Analysis
requirements. Managing these types of risks typically requires on-going
collaboration between project team members, and regular risk review workshops to
be held. The methods used in Qualitative Risk Analysis can vary significantly,
depending on the type of project being run and the risk management resources
available to the project. In this article, we consider five of the most useful
Qualitative Risk Analysis techniques applied in project management, which are as
follows:
 Delphi Technique
This is a form of risk brainstorming, but the essential difference between
traditional risk brainstorming and applying the Delphi Technique is that the
Delphi Technique makes use of expert opinion to identify, analyze and
evaluate risks on an individual and anonymous basis. Each expert then
reviews every other expert risks, and a risk register is produced through
continuous review and consensus between the experts.
 SWIFT Analysis
Standing for “Structured What-If Technique”, this is a simplified version of
a HAZOP. SWIFT applies a systematic, team-based approach in a workshop
environment, where the team investigates how changes from an approved
design, or plan, may affect a project through a series of “What if”
considerations. This technique is particularly useful in evaluating the
viability of Opportunity Risks.
 Decision Tree Analysis
Similar to Event Tree Analysis, but without providing a fully quantitative
output, Decision Tree Analysis is most often used to help determine the best
course of action wherever there is uncertainty in the outcome of possible
events or proposed plans. This is done by starting with the initial proposed
decision and mapping the different pathways and outcomes as a result of
events occurring from the initial decision. Once all pathways and outcomes
have been established, and their respective probabilities evaluated, a course
of action may be selected based on a combination of the most desirable
outcomes, associated events and probability of success.
 Probability/Consequence Matrix
This has become the standard method in establishing risk severity in
Qualitative Risk Analysis. Risk Matrices will often vary in size, but they all
essentially do the same thing, and that is: Provide a practical means of
ranking the overall severity of a risk by multiplying the likelihood of risk
occurrence against the impact of the risk, should it still occur.
For example, suppose it is established that high-impact risks are those that
could increase project costs by 5%.Only a few potential risk events will
satisfy this criterion. These are therefore potential risk events on which the
project team should focus on creating a mitigation plan. The probability and
impact of risk are both classified as high, medium or low. A risk mitigation
plan normally concerns events that have high results on both factors. There
is a positive correlation between the risk of the project and the complexity of
the project. In the case of highly complex projects, an external expert can be
included in the risk assessment process and the risk assessment plan can take
on a more prominent role in the project implementation plan.