What Is a Demand Risk?

Project risk refers to the uncertainty that may lead to project losses. American project management master Marx Wildman defines it as the possibility that an event will adversely affect the project goals.

Project risk

Project risk management is a dynamic work process. In this process, various project risk operations are carried out and carried out in an overlapping and overlapping manner. Project risk identification is an important part of project risk management. Without accurately identifying all the potential risks that a project faces, the best time to deal with these risks is lost.

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Project risk evaluation refers to the continuous identification and analysis of project risks throughout the life cycle of the project, providing a basis for effective risk control.

Current project risk treatment methods mainly include three types of risk control, risk retention, and risk transfer. Among them, project risk control refers to adopting all possible means to avoid project risks, eliminate project risks, or take emergency measures to control the risks that have occurred and their possible risk losses to a minimum or acceptable range. Project risk control must be based on certain assumptions and costs. For example, risk aversion means that project decision makers will lose the opportunity to obtain high returns or must respond to risks through high-cost technical solutions. The essence is still to pay. A lot of risky expenses. In addition, project risk control means that in addition to skills, decision makers must have sufficient experience and knowledge, early accumulation, and financial support, otherwise effective project risk control will be difficult to achieve.

Project risk retention is also one of the processing methods for project risk control. The premise is that through the evaluation of the project risk, it is concluded that the probability of occurrence is small or the probability is high but the risk loss is small, or the probability and risk loss are both large but Within the expected or acceptable range. In addition, when risk cannot be effectively controlled but the project is necessary, the project decision maker will adopt a risk retention strategy. Most projects in China do not conduct risk assessment or set a small amount of project reserves (such as unforeseen fees) to consider that they can tolerate all risks. This is usually incorrect.

At present, project management in China is mainly based on risk control and risk retention. The economic root cause of the problems and disadvantages is that all project investment undertaken by state-owned large and medium-sized enterprises or government departments is usually paid by the government for project risks. Or the project leader is not responsible for the project risk loss. The inefficiency of project risk management has led to the "three supers" phenomenon of project management, that is, budget overestimation, budget overestimation, and final budget overestimation. With the establishment of a socialist market economic system in China, the economic responsibilities of investment entities (state-owned enterprises or governments) have become increasingly clear and concrete, and decision makers of project investment have begun to pay more and more attention to the accuracy of investment estimates and the effectiveness of project risk treatment Great improvement.

Compared to project risk control and project risk retention, project risk transfer is a more effective project risk treatment method. For example, transferring a project to a professional insurance company or other venture capital institution engaged in risk consolidation matters is a fair transfer method that complies with market economic rules. According to the regulations (model texts of construction contracts) jointly formulated and promulgated by the former Ministry of Construction and the Administration for Industry and Commerce, the project owner and project contractor can jointly negotiate insurance. At present, due to the small number of projects participating in the actual insurance business, the premiums charged by China's three major insurance companies are relatively expensive, and the terms of insurance contracts are obviously not conducive to project parties. As the number of insured projects increases year by year, and the competitiveness of insurance companies is becoming more and more obvious, premiums and services will be transformed in a direction that is conducive to project parties, and project risk transfer strategies will become more sophisticated and mature.