Risk
Modeling
In
risk modeling a project is treated as model and such model is constructed based
on the expected outcomes. This model then checks by changing the outcomes (i.e.
inflow and outflows).
1. Model Construction
First
step in risk modeling is construction of well planned model. Such model is based
on future expected outcome is created. a lot of working and detail analyses is performed
to create a suitable model for project.
2. Analyses with Variation
Second
step is risk Modeling is analyses with variation in outcome. It means that how
the result (NPV) will change by changing the different outcome (variable) of
model. For investment appraisal mainly there are two main variable revenue,
cost, and investments.
