Risk Analysis Using Simulation Software Applied on a Road Infrastructure Project

Abstract

Risk management in infrastructure projects has been a very important process to achieve the project objectives, namely: time, cost, quality, safety and environmental sustainability. Huge investments are made in infrastructure construction projects like roads, railways, ports, airports, electricity, telecommunication, oil gas pipelines and irrigation. This growing Increase in investment in infrastructure investment projects demands requires close monitoring of costs to ensure a net return. The evaluation of returns on investment at the conceptual stage plays a vital role in this phase. Software tools help in bringing out near accurate analysis of returns on investments and to support project viability under multiple circumstances. The paper presents an analysis of how software was applied to evaluate and mitigate risk during the case of a six lane road infrastructure project. The unit of analysis was the impact of cost of construction cost, interest rates for loans, methods of depreciation, revenue sharing on various financial indices: IRR, MIRR, DSCR and payback period. The interpretation was that software tools can be used to perform risk analysis, sensitivity analysis and scenario analysis. The case study makes a contribution to the body of knowledge by developing guidelines for using software tools in risk management.