Past studies have indicated that if project managers are able to perceive project risks accurately, they may be less likely to continue failing IT projects. A computer simulation based experiment was carried out to investigate the influence of individual self-efficacy and project risk factors on the perception of risk in failing IT projects. Results indicated that project managers with higher self-efficacy are likely to perceive the risks of a failing project to be lower compared to those with lower self-efficacy even though same information about project progess was provided in both conditions. Further, the results suggested that project managers are likely to underestimate the risks of a project with endogenous risk factors as compared to a project with exogenous risk factors.