Research On Risk Management Of Project Investment

Risk management is crucial in project investment management. The difficulty in risk management increases with the characteristics of a certain projects investment and the uncertainty of external environment. This paper provides some theories and methods for the investors to identify risks, quantify risks, evaluate risks and make decisions by applying risk benefit theory, prospect theory and psychology to risk management of project investment. The research work done by the writer is outlined as below: Firstly, the methods to classify risk factors in project investment were expounded according to characteristics of project investment. The necessity, motivation, organization, goal and procedure of project investment are also discussed in this part. Risk management of project investment includes mainly two aspects, risk analysis and risk decision. The process of risk analysis includes risk identification, risk quantification and risk evaluation. In this part of discussion, two kinds of biases in risk quantification are highlighted to assist risk managers to quantify risks more accurately. Risk analysis, providing basis for the investment risk decision, is not the only concern of risk management for project investment. In the paper, the relevant theories such as the theory of prospect and the theory of psychology are applied to the discussion of risk decision. The applications of risk profit preference, risk effect, and prospect theory, as well as response decision for risk management are mainly explored. The aim of this article is to set up a fundamental decision support system of projects by conducting sound theoretical knowledge stems from system management and decision support system, for the purpose of assisting the risk management decision support system with decision making of projects investment management. Based on the goals of risk management of project investment and the principle of being scientific, systematic, comprehensive, compatible and extendible, the article, first, designs and plans the function module according to the procedure of risk management. The function module is composed of five subsystems, which includes risk identification, risk quantification, risk evaluation, risk decision, risk response and the post evaluation of risk management. The five subsystems are mutually independent and organically integrated. Second, it presents the architecture...