ABSTRACT
This chapter continues the exploration of systematic risk management, taking up from the identification of risks discussed in the previous chapter. The risk statements that are the outcome of the risk identification process form the input to the risk analysis stage of the RMS cycle. Risk analysis is an evaluative process that serves the purpose of establishing some understanding of the magnitude of the risks faced by an organisation in undertaking a project. The analytical process decomposes each risk into its constituent components and subjects them to some form of assessment. While the risk analysis stage itself is often lengthy it is not always necessary for the risk assessments to be exhaustively exact in terms of mathematical accuracy. Indeed, accuracy criteria would be difficult to define in terms of many of the risk factors relating to projects. The financial performance of an investment project, such as a proposed shopping centre, for example, can rarely be forecast accurately (and perhaps more importantly, reliably) to within two or three percentage points in early stage modelling of internal rates of return for the project.
