Identification of Risk Sources

Question: Discuss about the Identification of Risk Sources. Answer: Introduction Aminbakhsh, Gunduz and Sonmez (2013) characterize uncertainty as an absence of data ampleness. Banaitiene and Banaitis (2012) concurred that uncertainty is a circumstance of lacking information and affects project managers administration style. Indeed, most tasks are confronting uncertainty with various level of effect on their results and uncertainty in project management is a future occasion could be anticipated or not. Hwang and Ng (2013) proposed to characterize uncertainty by their source (technical aspects, market, individuals, cost, schedule and quality) or by potential effect and contended that every instability sort is unmistakable and a solitary venture regularly may endure blend of each of the four sources. Kuo and Lu (2013) contended that there are two sorts of uncertainty; the first is quantifiable 'danger', and the second, unquantifiable equivocalness, or instability. In undertaking administration, danger can be appointed a likelihood esteem, though uncertainty is totally limitless (Dainty and Loosemore 2013). Danger is the likelihood that something can turn out badly and meddle with the fruition of the work (Harris and McCaffer 2013). It is measured by increasing the likelihood of event by result of the disappointment of accomplishing the concerned objective. Consequently, both the likelihood and outcome must be considered in danger administration (Kelly, Male and Graham 2014). It is similar to note that risk is worried with target probabilities (based an investigation), though instability requires thought of subjective probabilities (individual's close to home judgment) (Kerzner 2013). It is noticed that risk is a sort of instability that effect the undertaking results with anticip ated outcomes (Lingard 2013). In the other hand issue is a risk that has been happened (Osipova and Eriksson 2013), along these lines there is contrast amongst issues and risk since danger may happen or not. Description of Project The proposed project is construction of a residential tower in Qatar, comprising of residential apartments, including parking facilities with high quality, 3 basements, a ground floor and 23 typical floors. The Plot has an approximate area of 4413 sq.m. The total built up area will be a maximum of 25798 sq.m and service areas of 3400 sq.m. and total area 29198 sq.m. The project comprises of three level basements below grade with total area of 7214 sq.m. to serve as parking space. Details of the Project Budget The estimated budget to construct the tower is QAR 400 million. The budget includes structural work, electro-mechanical works and finishes. Timeline The project duration is 23 Months, commencement date is 1stJune 2016 and completion date shall be 30thApril 2018. Schedule 2016 2017 2018 6 7 8 9 10 11 12 1 2 3 3 4 5 6 7 8 9 10 11 12 1 2 3 4 Demo Project Completion Sharing Foundations Basement Structure West Structure (Podium to Roof) Exterior Structure Interior Structure East Structure (Podium to Roof) East Tower Exterior East Tower Interiors Figure: Estimated timeline divided over the months (Source: Created by Author) Strategic Business Strategic Business Context Analysis Strategic Business Context Analysis in the Residential Tower Project Departments Stakeholders Location Area of Business Administration Company Directors Headquarters Administration, Business Strategy Approval, Project Approval, Delegation of Funds Finance Accountant, Finance Manager Finance Office Expenses and Finances Project Management Project Manager On-site, Project Managers Office Construction, Replication of blueprint in real size, Approval of Funds Construction Workers and Team Members On-site Construction, Materials used, Use of Project Design for Construction Investments Investors and Sponsors Sponsors Office Availability of funds, Financial backing City Administration Corporation, Mayor / City Administrator Corporation Office, Police Station, Fire Station, Hospital, High Court Availability of land at a suitable price, Security, Emergency Services, Availability of Sufficient Materials, Legal Issues Sales Sales Manager, Customer Sales Department House Sale of the rooms or flats in the residential towers Media Media Personnel, Marketing Manager Media Office, Conference Room Promotion, Marketing Importance of Business Context Analysis in Risk Management These analyses are required in project risk appraisal due to the following reasons: Identifying the type of the Risk Business context analysis is required to understand the types of risks that may be encountered during the course of the project. Risks come in various types and forms and each risk has different mitigation measures (Walker 2015). Moreover, use of wrong mitigation method may cause the risk to increase further, which is not at all desirable. In this project, the type of risks include over-expenses, exceeding of the budget, low market demand, low popularity among customers, market incompetency among the business related factors and poor quality materials, natural hazards, poor project management, poor quality of the craftsmen and other workers, legal issues among the administration related factors. Identification of the Location of the Risk Another main importance of business context analysis is to identify the exact location of the risk. This is required for understanding the location and the nature of the risks so that suitable actions can be taken properly (Taylan et al. 2014). In addition, the location of risk also enables the assessor to understand where the changes are to be brought in the project or organizational structure. In this particular project, risks can be located at various levels of the company. There are potential risks in the business, administration, management as well as on-site aspects. If any potential risk is located in any one of these levels, immediate mitigation measures should be provided immediately in order to avoid any further or possible losses. Identification of Risk Impacts Business context analysis is also needed to analyze the impact of possible risks that may arise during the course of the project. Mitigation measures are to be taken for those risks first that has massive impacts on the companys business (Kelly, Male and Graham 2014). There are some risks that do not have much impact on companys business. These are generally temporary risks. On the other hand, there are some risks that can have massive impact on the companys business. In this project, some minor risks include temporary market fall, minor administrative mistakes and others. On the other hand, risks like use of poor quality of materials, poor business planning and others can have massive impact on the business of the company. Identification of Responsible Stakeholders Business Context Analysis also helps to identify the responsible stakeholders in different aspects of the project and hence, in case of potential risks arising in an aspect, the stakeholder can be held directly responsible. In this project, stakeholders include main developer, consultant, Lusail City administrators, project manager, team members, facilities managers, shareholders, designers, workers, subcontractors, public administration, banks, service suppliers, media, insurance companies, public, neighbouring communities, regional development agencies. They have their own share of responsibilities in the project and they will be responsible for risks arising in their respective departments. Potential Risks Importance of Risk Identification Risk identification is necessary to remove all the shortfalls associated with the project and bring out the best quality of work. For this purpose, changes are needed to be brought in all related aspects like stakeholders, area of business, designing and others. Stakeholders The stakeholders list includes main developer, consultant, Lusail City, project manager, team members, facilities managers, shareholders, designers, workers, subcontractors, public administration, banks, service suppliers, media, insurance companies, public, neighbouring communities, regional development agencies (Dainty and Loosemore 2013). The influential groups are suppliers, pressure groups, trade associations, regulatory authorities, emergency services, marketing and procurement. These groups relate to each other as they support each other during the entire project (Aminbakhsh, Gunduz and Sonmez 2013). Area of Business The project is shall be at Lusail City in Doha, the capital of Qatar. The location offers a range of entertainment venues (Banaitiene and Banaitis 2012). The location considers the most ambitious project. Risks and Issues The sources of risks identified with development of residential tower are expenses, finances, consumer happiness, inhabitancy rates and changes that are in demand. The project risk examination is essential before making a decision is unforeseen to a few choices and options. If the business setting was not considered for undertaking risk evaluation, it might prompt a wrong decision making. Details of Potential Risks and Relevant Rationale Risk Risk Sources Stakeholders Rationale for Sources and Stakeholders Customers Unmet expectations Investors, Tenants The customers are the tenants of the residential tower, there are risks associated with compromised quality with the interiors or exteriors that may not be worth the investment Market Changes Change in demand, economic recession Governmental Regulations, customers The change in economic regulations and foreign exchange regulations can affect the consumer purchasing power. The people may not choose to buy a residential house or rent it Technology Changes Changing technologies Designers, Architectural technician, Investors With the changes in technology, the project completion schedule can vary affecting investors to invest early. The designers and technicians can make changes in the structure based on technological changes Legal or Government Political forces, legal forces Regulatory bodies The regulatory bodies can make political changes and legal changes affecting the construction industry Fixed Assets Damage, loss Project Manager The project manager is liable for any loss or damage of fixed asset during the construction of the residential tower Risk Ref. No. Risk Category Risk Description Risk Cause Impact Likelihood Rating 1 Commercial The customers are the tenants of the residential tower, there are risks associated with compromised quality with the interiors or exteriors that may not be worth the investment Unmet expectations, Low Customer Satisfaction 4-Major 3-Possible High 2 Commercial The change in economic regulations and foreign exchange regulations can affect the consumer purchasing power. The people may not choose to buy a residential house or rent it Change in demand, economic recession 5-Catastrophic 3-Possible High 3 Commercial With the changes in technology, the project completion schedule can vary affecting investors to invest early. The designers and technicians can make changes in the structure based on technological changes Changing technologies 4-Major 4-Likely High 4 Legal/Regulatory The regulatory bodies can make political changes and legal changes affecting the construction industry Political forces, legal forces 5-Catastrophic 4-Likely Extreme 5 Finance The project manager is liable for any loss or damage of fixed asset during the construction of the residential tower Damage, loss 5-Catastrophic 3-Possible High (Refer to Appendix) References Aminbakhsh, S., Gunduz, M. and Sonmez, R., 2013. Safety risk assessment using analytic hierarchy process (AHP) during planning and budgeting of construction projects.Journal of safety research,46, pp.99-105. 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