Cost risk

Cost risk is like when you want to buy a toy but you are not sure how much it will cost. Sometimes the toy might be more expensive than what you have planned and you might have to save more money or not buy it at all. This happens in grown-up situations too, like when companies make plans for a project, they are not always sure how much it will cost.

The cost of a project depends on many things, like the materials needed, the time it will take to complete, the people working on it, and unexpected situations that may come up. These unexpected situations are called "risks" and they can make the project more expensive.

For example, if a company wants to build a new building, they will need to buy materials like cement, steel, and bricks. But what if the price of steel suddenly goes up? This is a risk because it will make the cost of the project go up too.

To manage cost risk, companies try to plan ahead as much as possible. They make a budget for the project and estimate how much it will cost. They also try to think about all the risks that might come up and make a plan for how to deal with them. This way, they can be prepared and not be surprised when unexpected things happen.

In summary, cost risk is when we are not always sure how much something will cost and unexpected things can make it more expensive. Companies try to plan ahead and manage these risks as much as possible to keep the project within budget.