Project RiskThe risk that a program, project or initiative will run overbudget or fail to deliver anything of value with a fixed budget. Due to the sunk costs of a project it is tempting to continue pouring money into a project that has failed to deliver. As such, it is possible for a project to have cost overruns an order of magnitude higher than the original budget. unit costs.
Input CostsThe risk that input costs will rise due to inflation or problems with suppliers or supply chains. For example, a trade dispute that increases the cost and availability of a material you require to manufacture a product.
Interest Rate RiskThe potential for your cost of capital to increase due to rising interest rates. For example, a home builder with large floating rate loans may be heavily exposed to interest rate risks.
Exchange Rate RiskThe risk that exchange rate volatility will result in greater costs.
Legal & ComplianceThe risk of legal or compliance costs.
Taxation RiskThe risk that tax rules or interpretations will change resulting in higher taxes.
SummaryThe following are common types of cost risk:
OverviewCost risk is the potential for cost overruns or unexpected costs. This is related to all other types of risk because risks always have a cost.
|Definition: Cost Risk
The probability of cost overruns.