Risk Assessment in Selected Hydropower Projects of Nepal under Engineering, Procurement and Construction Contracts
Student: Tikaram Niroula
Supervisor: Er. Gyaanendra Prasad Kayastha
Submitted Date:
May, 2022
Abstract
Risk is the combination of the likelihood for a certain problem to occur (an unwanted
situation) with the corresponding value (impact) of the damage caused. Project risk can be
defined as “An uncertain event that, if it occurs, has a positive or a negative effect on at least
one project objective, such as time, cost, quality, or scope.” Risk assessment only includes
the identification, evaluation and ranking of the risks and is the subset of risk management.
Risk management is a systematic process that includes risk assessment analyzing and
responding to the risks. This research primarily focus on the risk assessment and also studies
the possible risk management measures through risk allocation and other measures.
The objective of this study are “to identify the risks of Hydropower projects in Nepal under
Engineering, Procurement and Construction Contracts”, “to identify the major risks based
on probability, impact and risk score in hydropower projects under EPC contracts in Nepal”,
and “to suggest the possible risk management measures for hydropower projects in Nepal
under EPC contracts”. To achieve the objectives of this research, the list of risks has been
identified from the review of various literatures and has been verified with the experts of
relevant fields in connection with the preparation of questionnaire.
The questionnaire survey has been carried out to find the probability and impacts of each
risks and the significance of proposed risk management measures using 5 scale Likert’s
Scale. The questionnaires were sent to the professionals from Employer, Contractor and
Consultant of selected hydropower projects. The set of questionnaire was sent to 74
respondents of 4 projects and response from 62 respondents was received but only 60
responses were found to be valid. The significance of risks have been calculated as the
product of probability and impact of the risks and the risks has been ranked as per the level
of significance of risks. For ranking of the risks as per their significance, the Relative
Importance Index (RII) has been used for defining the overall risk score and risk rank. The
significance of possible risk management measures were evaluated from questionnaire
survey using the RII technique. As a part of risk management measure, the Key Informant
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Interview (KII) was done to find the risk allocation to Employer, Contractor, shared risks
and transferred risks. The relative importance index of each risk along group and overall RII
was calculated, ranked to find the correlation between the different ways and the testing of
hypothesis was done to find out the significance of correlation.
The major 46 risks grouped into 9 groups were identified and those risks were used for
further study of their significance. The total risk score was calculated as the product of
probability and impact. The most significant risks identified were “risk of subsurface
geology”, force majeure” and “construction delays.
From the study it was found that the major risks have been shared by the parties and one has
been transferred to other party as risk management measures. The other most significant
risk management measures identified were “preparation of contract documents by highly
experienced personnel”, “competent project management team” and “conduct sufficient
investigations and feasibility before procurement”.
This study has recommended to work out on the detailed risk management of projects before
project formulation and minimizing the unforeseeable risks and the risks of subsurface
geology should be taken by the Employer.
Keywords
Risk assessment, Risk management, Hydropower, Engineering, Procurement
and Construction (EPC) Contracts