Risk management study
Risk management involves identifying any future uncertainties and possible threats on a project and coming up with the necessary measures to prevent the occurrence of such threats and in case they occur, the risk management strategy invents ways in which the adverse effects can be minimised. A risk is something which may or may not happen but when it does, its impact on the project may have very negative effects and in fact, it may lead to the eventual collapse of the project resulting into huge losses (Berzirkan 2004).
A risk management study may be carried out at any time of the project cycle and it involves identifying, quantifying and classifying the risks to determine their future impact on the project in case they happen (McGeorge 2002). Issues to be evaluated. The major issues to be evaluated in the risk management study for TechWatt corporation which will be carried out following the contract award and immediately before the site set up should include; identification of the risks, quantification of those risks, coming up with strategies to respond to such risks and solutions on how to control the risks.
An example of a risk which should be addressed in a risk management study on TechWatt corporation project scheme is the exhaustion of the funds allocated for the project as a result of a rise in the cost of the raw materials needed for construction to prices higher than those estimated by the original budget. If not properly addressed, this would lead to stagnation of the project which would greatly affect the expansion plan put in place by the corporation (Mulazzani 2003).
This study should focus on identifying such risks which are likely to emanate from related projects, resources (scarcity), technical problems, politically instigated issues, undefined time schedules, commercial problems, socio-economic issues, labour related problems, financial constraints, industrial relations, unreliable suppliers, environmental issues, liability issues, organisational managerial problems, natural disasters among others (Haralambos 2005). A risk management study should therefore clearly analyse the five major issues which may affect the accomplishment of the project mission.
This include: • A strategic risks study which should involve understanding the competitive environment of the corporation as well as its long term plans regarding the deployment of resources for its expansion plans. • Financial risks study on the other hand should be carried out to understand the sources of revenue for the proposed project and the reliability of these sources in funding the project. • A study of operational risks is also important and this would involve critical analyses of all the systems put in place to support the project’s mission and vision and ensure that they are all efficient.
• A compliance risk study for the project would involve checking whether the proposed site and all the activities involved in the project are in accordance with the rules and regulations of the government as well as the policies and procedures of the corporation. • Lastly, the study should look at the reputational risks which are concerned with the ability of the project to fulfil the expansion mission of the TechWatt corporation and how it is bound to affect the reputation of the corporation locally and internationally. Who should be involved in the study.
A risk management study for the project should mainly involve project managers who have the sole responsibility of overseeing the whole study and their team members. A project manager must have great communication skills, be highly organised, have the ability to negotiate and provide great leadership skills for the project to successed. This particular study should involve three groups (of about five team members and one project manager each) which will address the risks involved in all the three sections of the proposed scheme.
The risk management study is bound to last for a period of one week which should involve three days of in-door workshops and for the remaining four days or so, the team members should do a through field analysis of the field environmental factors which may pose a threat to the project. This would involve visiting the proposed project site to check on things like the topography and the ability of the soil to hold a firm foundation which should be able to withstand natural calamities such as earthquakes, floods and so forth.
Client information for the study. At this point, the client (TechWatt corporation) is expected to provide information concerning the actual site for the project, the size, the amount of available funds and the sources of revenue, a well detailed budget plan and documented project proposals, the relevant legal documents such as title deeds for the land on which the project is to be set up and so forth.
Considering that the team studying the risks is external and completely new to this particular project, the client is expected to provide all the background information necessary for the team to completely understand the project and be in a good position to assess the risks involved. Proposed agenda for the study. As mentioned above, the risk management study is bound to last for a period of one week. The three day workshop should address the following issues: Risk awareness;- the study team should throughly analyse the potential threats and uncertainties which are likely to face the project.
The risks should be clearly documented together with their respective causative factors. Risk assessment;- the next agenda for the workshop should be to assess the identified risks. This involves a deep analysis of the impacts of the risks in case they happen and how they can be avoided. This is the most difficult part of risk management study since the team members have to throughly analyse all the threats and come up with practical solutions and if the risks are too high, then they should come up with alternative methods to counteract the risks either in form of other projects or solutions.
Risk assurance;- at this point the respective team members should document their findings and solutions which are meant to give the corporation managers a quality assurance that all the risks are under control so that the project can go ahead. The remaining four days of the proposed period of risk management study, the team members should do a through field study on the proposed project site and the resources available to see whether the risks and the respective solutions offered in the earlier three day workshop are practical.
On the last day, the teams should have a conclusive documentation of all their findings and risk control measures ready for presentation to their client. Conclusion. Both value and risk management complement each other in that management of the project value can help to minimise the occurrence of a risk and on the other hand, risk management can help to increase the value/benefits of a project as well as helping to minimise loss of value (Bilnett, Jones 2007).
Value and risk management studies enable organisations to establish stable and successful projects by clearly speculating the possible outcomes and putting into practice the necessary measures aimed at maximising the benefits and minimising the uncertainties. By the end of the value and risk management studies discussed above, the management of TechWatt corporation will be in a better position to understand the viability and the practicability of the proposed project and the value of the expected long-term benefits.
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