Project Management Accounting: Budgeting, Tracking, and Reporting Costs and Profitability, Second Edition

Project Specific Risk

Before you begin execution of a project, risk assessment is a requirement. A good starting place is to identify threats to the milestones of the project. It is impossible to anticipate everything that could go wrong, neither is it practical to spend 10 years working on a risk assessment for a 90-day project. The objective here is to create a consciousness of the potential risks that should be addressed in the planning of the project. Here is a list of questions to start with:

1. What is the bargaining power of your suppliers of products or services? Are they easily substituted for?

2. Is there a threat of a new entrant into your marketplace?

3. What is the bargaining power of your customers? Can they substitute easily for you?

4. How easily are your products or services substituted for?

5. What is the rivalry amongst competitors?

6. What is the impact of governmental intervention?

7. Are there regulatory compliance issues?

8. How will project failure damage the Company's reputation?

9. Is there on-going litigation?

10. Is the Company or project located in an area prone to natural disasters, including but not limited to flooding, tornados, earthquakes, fire, and environmental?

11. Does the Company or project rely on a key person?

12. Can the funding of the project become an issue?

The first five questions are attributed to Michael Porter and are known as Porter's Five Forces. In this context these questions are used to set up an external environmental understanding ...