The document discusses project life cycles and risk management. It provides an overview of the project cycles used by the Asian Development Bank and World Bank. It then discusses the four phases of a typical project life: pre-investment, investment, operations, and evaluation. The document also outlines steps for risk management, including identifying uncertainties, analyzing risks, prioritizing risks, mitigating risks, planning for emergencies, and measuring/controlling risks. Effective risk management is important for any project to avoid severe consequences.

1. By Abigail Pugal Somera

2. To be able to understand the
phases of a Project Life we first
have to understand the different
interpretations of a Project Life
Cycle as interpreted by different
global organizations that deal with
governments.

3. • ADB Project Cycle
Completion
/ Evaluation
Implementatio
n
Country
Partnership
Strategy /
Regional
Cooperation
Strategy
Preparation
Approval

4. • World Bank Project Cycle
Evaluation (6)
Implementation
and Completion
(5)
Implementation
and
Supervision (4)
Country
Assistance
Strategy (1)
Identification (2)
Preparation,
Appraisal and
Board Approval
(3)

5. Cycle Order
ADB
World Bank
1
Country Partnership
Strategy / Regional
Cooperation Strategy
Country Assistance
Strategy
2
Preparation
Identification
3
Approval
Preparation, Appraisal
and Board Approval
4
Implementation
Implementation and
Supervision
5
Completion /
Evaluation
Implementation and
Completion
6
Evaluation

6. I. Pre – Investment
II. Investment
III. Operations
IV. Evaluation
Support Studies:
•Opportunity Study
•Pre-feasibility Study
•Feasibility Study
•Appraisal and Decision
Negotiation and Contracting
Engineering Design
•Construction and Training
•Start-up

8. • Objective/s:
• Find Promising Business Opportunities
• Screen According to Criteria
• Classify for Further Study or Later Consideration
• Characteristics:
• Preliminary Information from Knowledgeable
Individuals and Promotion Agencies

9. Develop
Selection
Criteria
Screen Ideas
vs. Criteria
Further Study
YES
Profile Readily
Available Data
Acceptable
?
NO
Scan Sources
of Ideas and
Lists
Reject
Rework
Later
Reconsider

10. • Investment
Opportunities
• Demand
• Linkages
• Problems
• Resources
• Development
• Trade
• Technology
• Government Policy
• External Constraints
• Sources of Ideas
• National, Regional
Development Plans
• Sector Studies
• Local Resource Studies
• Other Countries’
Experience
• Product Classification
Lists

11. • Size and Growth of Market
• Local Resources
• Plant Size
• Appropriate Technology
• Size of Investment
• Estimated Financial Indicators
• Requirements and Constraints

12. • Varies according to Investigator
• Investor
• Lender
• Risk of All Concerned

13. • Set-up Screening System to Measure Long-Term
Potential
• Concentrate on Best Prospects
• Quick Negative Decision Better than Delay
• Assure Commitment of Potential Sponsor to
Implementation

14. Micro
• Business Concept
• Investors
• Market
• Resources
• Entrepreneur
• Criteria Satisfaction
Macro
• Business
Climate
• Business Cycle
• Economic Trend

15. Allocation of Investment Resources

16. PRE-FEASIBILITY
STUDY
ITERATIONS
OPPORTUNITY
STUDY
APPRAISAL
SUPPORT STUDIES
PROJECT
IDENTIFICATION
FEASIBILITY STUDY
IDENTICAL SCOPE AT ALL
LEVELS, INCREASING
ACCURACY AND
PRECISION
IMPLEMENTATION

17. • Related to preparation of investment studies
C
• Collecting
O
• Organizing
P
• Processing
A
• Analyzing

18. •
•
•
•
•
•
•
•
•
•
Executive Summary
Project Background and Basic Idea
Market Analysis and Marketing Concept
Raw Materials and Supplies
Location, Site and Environment
Engineering and Technology
Organization and Overhead Costs
Human Resources
Implementation, Planning and Budgeting
Financial Analysis and Investment
Appraisal

19. Objectives:
• Refinement of Business Idea
• Preliminary Evaluation of Alternative Approaches
• Preliminary Assessment of Strengths and Weaknesses of
Concept
Characteristics:
Sketchy, Based more on rough aggregate estimates than
on detailed analysis

20. Objectives:
• Preliminary Project Assessment
• Identify Project Alternatives
• Identify Critical Aspects that Require Special Support
Studies
Characteristics:
Intermediate Level of Detail Based Primarily on Secondary
Data

21. Objectives:
Provide Commercial, Technical, Financial and Economic
Information Needed for Investment Decision-Making
•
•
•
•
•
•
Characteristics:
Clear Project Concepts and Criteria
Comprehensive Project Design
Reliable Information, Often Primary Data
Quantified Prediction or Performance
Detailed Analysis with High Confidence Level
Consistent and Defensible Conclusion

22. Objectives:
Provide Detailed Technical Analysis of Critical Design
Features
Characteristics:
•
•
•
•
Limited Scope
Performed by Technical Experts
Answer Key Questions
Degree of Rigor Commensurate with Stage of Project
Development

23. •
•
•
•
•
Markets
Inputs
Location
Technology
Equipment

24. Comparing Project Characteristics with Criteria

25. • All Sectors of Economy
• Revenue and Non-revenue Projects
• All Types of Projects
•
•
•
•
•
•
New Investment
Modernization
Expansion
Privatization
Technology Acquisition
Equipment Replacement
• Public and Private Investment

26. • Commitment of Scarce
Resources
• Expectation of Future
Benefits
• Inherent Uncertainties

28. PARTICIPANT
INVEST
OR
FINANCIER
REGULATO
R
GUARANTOR
SUPPLIE
R
Commerci
al
1
2
2
1
2
Market
Technolog
y
1
2
2
1
2
1
2
2
2
2
•Return
1
2
2
2
2
•Liquidit
y
2
1
3
1
1
•Debt
Service
2
1
Economy
3
3
Finance
3
1
2
1 VERY IMPORTANT
2 SOMEWHAT IMPORTANT
1
3
3
3 NOT SO IMPORTANT

29. • Is it compatible with other Investment
Activities?
• Is the Project potentially bankable?
• Does the project make the best use of
the Sponsor’s Resources?
• Do I have the capacity to energize the
project and to retain its momentum in the
face of obstacles to growth?

30. Local Partner
(on the ability of Foreign
Partner to contribute more
equity)
Foreign Partner
(on the reason to offer lower
price for participation)
• “Political and Economic Risk”
• “He can afford it.”
• “The exchange rate is wrong.”
• “He wants our market.”
• “Low Purchasing Power in the
Marketplace”
• “Uncertain Future Earnings”
• “Workers’ Demands”
• “Book Value is Irrelevant”

31. MICRO
MACRO
Project Level
National Level
COMMERCIAL
PROFITABILITY
NATIONAL
PROFITABILITY

32. • Does the Project Make Sense for the Country?
• Consistent with Development Goals?
• Positive Impact on Macro-economic Indicators?
• Satisfy Economic Rate of Return Criterion?

33. • Purpose
• Project Background
• Analysis of
• Commercial / Market
• Technology
• Environmental Impacts
• Institutional / Managerial
• Financial
• Economic and Social
• Conclusion

34. • Is it a Sound Business Concept?
• Is there a Market for Product
/ Service?
• Is the Marketing Strategy
Viable?
• Are the Sales Projections
Realistic?

35. • Is the production at a competitive price?
• Is the process technology accessible?
• Are the operating conditions sustainable?
• Will we be able to provide the quality demanded by the
market?
• Are the inputs to the planning reliable?
• Are there adequate technical personnel?

36. • Do process emissions and effluents
meet or exceed regulated standards?
• Are products environmentally
acceptable?
• Do impacts indicate future regulatory
actions?

37. • Are the following Competent?
• Entrepreneur
• Implementation Management
• Operations Management
• Is the organization capable of executing
necessary functions?

38. • Are the financial resources adequate to
planning?
• Will there be adequate returns to the
investor?
• Are the financial criteria of other
participants satisfied?
• Are the financial risks and risk sharing
acceptable?
• Is the financial structure acceptable?

39. •
•
•
•
•
•
•
•
•
•
Wrong Timing
Non-optimal Financing
Over-estimated Market Potential
Under-estimated Capital Cost
Under-estimated Competition
Planned Capacity Inconsistent with
Market
Unidentified Sources of Skilled Personnel
Inadequate Infrastructure
Project Design Alternatives
Ineffective Planning

41. • The process of identification, analysis and either
acceptance or mitigation of uncertainty in investment
decision-making.
• Occurs anytime an investor or fund manager analyzes
and attempts to quantify the potential for losses in an
investment and then takes the appropriate action (or
inaction) given their investment objectives and risk
tolerance.
• Inadequate risk management can result in severe
consequences for companies as well as individuals. For
example, the recession that began in 2008 was largely

42. Any project organization is subject to risks. One which finds
itself in a state of perpetual crisis, is failing to manage
risks properly.
Failure to manage risks is characterized by inability to
decide what to do, when to do it, and whether enough
has been done.
Risk Management is a facet of Quality, using basic
techniques of analysis and measurement to ensure that
risks are properly identified, classified, and managed.

43. • Identify Uncertainties
Explore the entire project plans and look for areas of uncertainty.
• Analyze Risks
Specify how those areas of uncertainty can impact the performance
of the project, either in duration, cost or meeting the users'
requirements.
• Prioritize Risks
Establish which of those Risks should be eliminated completely,
because of potential extreme impact, which should have regular
management attention, and which are sufficiently minor to avoid
detailed management attention.

44. • Mitigate Risks
Take whatever actions are possible in advance to reduce the effect
of Risk. It is better to spend money on mitigation than to include
contingency in the plan.
• Plan for Emergencies
For all those Risks which are deemed to be significant, have an
emergency plan in place before it happens.
• Measure and Control
Track the effects of the risks identified and manage them to a
successful conclusion.

47. • UNIDO Methodology for the Identification, Preparation
and Evaluation of Investment Projects, Costa Rica, Sept
23-27, 2002
• http://www.investopedia.com/terms/r/riskmanagement.as
p
• http://www.netcomuk.co.uk/~rtusler/project/principl.html