Improving Mechanisms for Assessing and Minimising Risks in Investment Project Management

The article examines why conventional, single-point appraisal of investment projects systematically understates risk and proposes an integrated mechanism for assessing and minimising risks across the project life cycle. The mechanism combines a structured risk register, sensitivity and switching-value analysis, Monte Carlo simulation of net present value, tail-risk indicators such as the probability of loss and expected shortfall, and a cost-effectiveness rule for selecting mitigation measures, supported by stage-gate monitoring with key risk indicators. The approach is demonstrated on an illustrative manufacturing project of 120 billion soums. The deterministic appraisal yields a positive NPV of 19.8 billion soums and an IRR of 21.4%, whereas the stochastic assessment, once realistic cost overruns and delays are included, shows a mean NPV of only 1.6 billion soums and a 50.7% probability of loss. A package of contractual and financial mitigation measures raises the mean NPV to 6.0 billion soums, cuts the probability of loss to 44.7% and improves the 5% expected shortfall by about 30 billion soums at a present-value cost of 7.5 billion soums. The results show that risk-adjusted indicators should become a mandatory part of project appraisal and monitoring in Uzbekistan's rapidly growing investment programme.