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Chapter 34

Chapter 34. Risk Analysis and Mitigation. Objectives. Tools to mitigate risk. Feasibility studies, SWOT analysis, PEST analysis. Feasibility Study. A feasibility study is a preliminary investigation to determine the viability of a project business venture.

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Chapter 34

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  1. Chapter 34 Risk Analysis and Mitigation

  2. Objectives • Tools to mitigate risk. • Feasibility studies, SWOT analysis, PEST analysis.

  3. Feasibility Study • A feasibility study is a preliminary investigation to determine the viability of a project business venture. • The study may look at cost, technology, culture, legal implications, etc. • At the conclusion of the study, management determines whether to proceed with the project or business venture.

  4. Risk Analysis • When analyzing risk, we often deal with the concept of expected profit. • See example 34.1 on page 351. • Risk analysis for real life problems is less precise because the probabilities to win or lose are usually not known and must be estimated.

  5. SWOT • SWOT (Strengths, Weaknesses, Opportunities, and Threats) is an effective strategic planning tool applicable to a business or project objective. • Strengths and weaknesses are identified with respect to the internal capabilities of an organization (fig 34.1, page 353). • On the other hand opportunities and threats look outside an organization. • When analyzing SWOT, the question to ask is,” How can the organization leverage its strengths or improve its weakness to take advantage of the opportunities while mitigating or eliminating the threats?”

  6. PEST • 1. Political: Look at political stability, threat of wars, regulatory issues, tax considerations, labor problems, laws, etc. • 2. Economic: Look at exchange rates, market conditions, unemployment rates, inflation factors, interest rates, etc. • 3. Social: look at educational considerations, demographics, health factors, cultural implications, etc. • 4. Technological: Look at new technology developments, rate of technological change, cost impact of technology, etc. (see fig 34.2, page 354).

  7. Unintended Consequences • It is important to put measurement systems in place that reflect unintended consequences of proposed actions.

  8. Summary • A feasibility study is a preliminary investigation to determine the viability of a project business venture. • When analyzing risk, we often deal with the concept of expected profit. • When analyzing SWOT, the question to ask is,” How can the organization leverage its strengths or improve its weakness to take advantage of the opportunities while mitigating or eliminating the threats?” • PEST stands for Political, Economic, Social, and Technological factors. • It is important to put measurement systems in place that reflect unintended consequences of proposed actions.

  9. Home Work • 1. What is a feasibility study? • 2. When analyzing SWOT, what question should we ask? • 3. What does the acronym PEST stand for?

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