Risk and Uncertainty Analysis

Abstract

One statement that can confidently be made about any transport project is that the costs and benefits are uncertain. An important question is 'how uncertain'? By analyzing the risk and uncertainty which surrounds the project the probability of a poor outcome can be assessed. In addition, it is often possible to identify ways in which the project can be made more robust, and to ensure that the risks that remain are well managed. Risk and uncertainty analysis is therefore a standard component in the project reporting requirements for Bank projects. Risk and uncertainty analysis also features other in Bank tools, such as the RED model (see Note Low Volume Rural Roads). This note reviews the general principles of risk and uncertainty analysis in transport (Section 1); and outlines the three principal methods which may be used- sensitivity analysis (Sectio