Project Execution and Control Financial Risk

Question: Discuss about theProject Execution and Controlfor Financial Risk. Answer: Risk Management Plan Risk Identification and Assessment The possible risks for this case study are as follows. Financial Risk Due to the large size of the stadium, the cost of construction will be significantly high. Hence, there is a very high chance for financial risk. The main reason behind this risk will be inaccurate cost estimation during the project planning phase (Phillips, 2013). For instance, let the estimated cost for the stadium construction is $15 million. On the other hand, the actual cost of construction comes out to be $25 million. In this case, the company will lose a huge amount of funds. This will significantly reduce the cost benefit that has been estimated during the project planning. Hence, accurate cost estimation is necessary to avoid financial risks. Poor Quality of Materials The stadium is a huge structure that will hold more than 40,000 spectators during a game. Hence, it is important that the stadium be built with the best quality of materials in order to avoid accidents during a game. Even small accidents can cause fatalities in the crowd. Poor quality materials will result in high chances of accidents when the stadium is fully packed with spectators. Accidents Another major risk during the construction phase is unforeseen accidents. This mainly occurs due to mishandling of large instruments like cranes, lifters and others (Turner, 2014). Due to these accidents, some on-site workers may lose their lives. Hence, it is necessary to be careful during the execution of the construction phase. Other Risks There are chances of other risks as well that include political, social, cultural and others. These risks can be mitigated if proper precautions are taken before the execution of the project. The following table shows the risk register including risk probabilities and impacts. Type of Risk When Risk Can Occur Response to Risk Consequence of Risk (e.g., High/Low) Likelihood of Occurrence Priority Financial During and after the project Extra funds, new sponsorship deals Extreme High High Poor Quality Materials After the project Selection of reliable vendors for the supply of materials Extreme Medium High Accidents During construction Installation of first aid and safety structures, controlled operations of large instruments High Low Medium Other Risks (Political, Social, Environmental, etc.) Throughout the course of the project Compliance with government and construction rules and guidelines Medium Low Medium Risk Management and Reporting In order to mitigate the risks identified for this project, the company needs to develop risk mitigation strategies for the project. The suggested mitigation strategies are provided as follows. Financial Risks For avoiding financial risk, it is important to avoid errors in cost estimation during the project planning phase. Hence, the company should take up a suitable strategy for cost estimation. For this purpose, the company should execute more market analysis studies to learn the changes in prices of the materials that are needed for the construction (Klakegg, 2016). Moreover, the contractors should be chosen with some fixed contracts so there are no deviations from the costs spent to pay the contractors. Finally, the company should use softwares for more accurate cost estimations and cost benefits. Another recommendation is that during project planning and cost estimation, the company should also consider some buffer budget that can be used during emergencies. Poor Quality Materials The company can call tenders for selection of a suitable vendor of the materials needed for the construction of the stadium. The terms of the contract should be such that the vendor provides the best qualities of materials or legal actions will be taken against them. Accidents The company must take suitable steps to minimize chances of accidents during the construction. Safety equipments and first aid systems must be used to ensure safety of the on-site workers (Liu, Meng Fellows, 2015). Moreover, extra precautions should be taken in order to prevent mishandling of large equipments that result in serious and fatal accidents. Other Risks The company should ensure the project is executed by following legal, government and environmental policies and guidelines. Necessary legal paperwork must be done and signed before the project is executed so that there are no further complications in the future. Stakeholder Roles Stakeholders play the most important roles in mitigating the risks encountered during the project. During the risk management activities, the project manager must take an active part and ensure the project is executed by following all the construction rules and guidelines. Moreover, he should also ensure proper safety measures are taken during execution of the construction (Cagliano, Grimaldi Rafele, 2015). The financial manager should ensure the cost estimation process is accurate and the project costs should not exceed the project budget by a long margin. The construction manager should ensure the qualities of materials are not poor and the operations are executed carefully and within safe environment. References Cagliano, A. C., Grimaldi, S., Rafele, C. (2015). Choosing project risk management techniques. A theoretical framework.Journal of Risk Research,18(2), 232-248. Klakegg, O. J. (2016). Project Risk Management: Challenge Established Practice. Liu, J., Meng, F., Fellows, R. (2015). An exploratory study of understanding project risk management from the perspective of national culture.International Journal of Project Management,33(3), 564-575. McNeil, A. J., Frey, R., Embrechts, P. (2015).Quantitative risk management: Concepts, techniques and tools. Princeton university press. Paul, V. K., Basu, C. (2016). Scenario Planning and Risk Failure Mode Effect and Analysis (RFMEA) based Management.Journal of Construction Engineering and Project Management,6(2), 24-29. Peixoto, J., Tereso, A., Fernandes, G., Almeida, R. (2014). Project Risk Management Methodology: A Case Study of an Electric Energy Organization.Procedia technology,16, 1096-1105. Phillips, J. (2013).PMP, Project Management Professional (Certification Study Guides). McGraw-Hill Osborne Media. Turner, J. R. (2014).The handbook of project-based management(Vol. 92). New York, NY: McGraw-hill.