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Project Risks

In business terms, especially in the gold mining business, there is an objective need to create an own research facility within the Company in order to foresee possible risks, evaluate the chance of their occurrence and calculate the damage caused to the company by these risk events.

This project includes some potential business risks assessed based on the scale of probability (the impossible event is "0", the low probability is "1", the average probability is "2", the probable event is "3", the high incidence - "4").

  1. Production risk occurs due to decrease in the volume of production or its sell (due to a decrease in the productivity of personnel or equipment - unplanned down time, accidental breakdowns, etc.); reduction in the unit price (due to decrease in competitors’ prices of, a decrease in product quality, i.e., failure to meet standard brands and grades); due to an unforeseen increase in costs; due to overspending the wage fund; due to payment of increased taxes, fees and other payments; due to losses caused by other circumstances, such as payment of penalties, fines, damages, expenses in case of natural disasters.
  2. Commercial risk occurs in the process of selling goods and services purchased by the company, i.e. at their resale.
  3. Operational risk is a set of the following risks - transport, organizational and informational. Transport risk arises when the goods are transported; Organizational risk is losses due to ineffective business management, recruiting mistakes; Information risk is losses due to leakage of business information.
  4. Financial risk occurs during financial or business activities as well as financial transactions.
Type of risk Subtype of risk The probability of occurrence (0-4)
Production risk Decrease in the volume of output and its realization 2
Reduction of unit price 1
Unforeseen increase in material costs 3
Over expenditure of the wage fund 1
Payment of increased taxes, deductions and payments 3
Losses caused by other circumstances 2
Commercial risk Unfavorable changes in the price of purchased materials, raw materials, energy, fuel and other 2
Decrease in the price of products 1
Loss or decline in product quality 2
Excess of costs over project 1
Operational risk Transport risk 3
Organizational risk 1
Information risk 2
Financial risk Insolvency of one of the parties to financial transactions 1
Change in the rate of securities, currency 2

Table 10. Calculation of possible project risks.

To minimize risks, the following methods are used: