Business Project Management Case Study For Housing Authority – Risk Management Approach

Objective

Describe the Case Study for Business Project Management for Housing Authority.

“The effective and efficient working of the project can be achieved by using the tool of project management” (Mohammad, 2009). In this paper, we are focusing on contemporary issues related with project management. The risks associated with the project are the important part in the success and progress of the project. The Contractor Company focuses on the business risk associated with the company due to clients such as Housing authority, requirement of statutory, ramification or penalty due to poor performance, and associated suppliers and staffing. The partnership between public and private authority, finance initiative of private projects has the major impact on the construction industries. A risk can be defined as the future harm which can be caused due to present working condition of the organization. “The loss can occur in terms of finance, credibility, data or information loss, or any other” (Alfawaz, 2011). The Process of Risk Management is associated with the number of steps which focus on the identification of the risk, analysis of the risk, prioritization of the risk, planning, communication, mitigation, and monitoring of the risk. The process of risk management is divided into two integrated phase’s assessment of the risk and controlling of the risk. Risk is defined as the exposure of loss of economy due to the occurrence of uncertainty.  “The management of risk includes handling of logical and systematic procedures used for identification, analysing, evaluation, and communication to handle risk associated with the activity going within the organization” (Lane, 2012). The functions which are associated with the risk management are categorised as identification, diversification, quantization, concentration, analysing, hedge, allocation, leverage, response, insurance, and prevention. The major concern is to identify the sources of risk associated with the project which can be due to commercial relationship, circumstances changes with the economic loss, prediction of change in employees working nature within the organization, political risk, issues related with trend and technology, management of flow of activities, and many others. “The risk adversely affects the area associated with assets and resources of the firm, cost, community, people, and environment, behaviour of the employees and organization, and performance” (Perking, 2015). “The success of the project depends on the interlinking and the integration of the risk management process and the working practices in completion of the project” (Mark, 2011).

Objective: The objective of the paper is to provide the brief study of on contemporary issues related with project management. The Contractor Company focuses on the business risk associated with the company due to clients such as Housing authority, requirement of statutory, ramification or penalty due to poor performance, and associated suppliers and staffing.

Scope

Scope:

The scope of the project is associated with strategies behind project risk planning, project risk assessment, project risk mitigation, project risk monitoring and control, project risk in the success of the project, and contemporary issues related with project management. The aim of the project risk management program is to minimize the losses and damages incurred with the project completion, reduction in the cost identified, controlling and minimizing the associated risk effects, and many others.

Literature Review:

From the research and literature review on the projects of construction industry in Hong Kong it has been seen that “the success of the project depends on participants commitment towards the project functionality, competence of the owner and the contractor, coordination between the participants of the project” (Danchev, 2009), favourable working environment provided to the employees, competency skills of the project manager, support provided by the top management, interaction and communication between the employees of the project working together. The management of risk includes handling of logical and systematic procedures used for identification, analysing, evaluation, and communication to handle risk associated with the activity going within the organization. The success of the project depends on the interlinking and the integration of the risk management process and the working practices in completion of the project. Risk associated with the business can be categorised as in relation with damage occurs to environment, in relation with payment given to government, dumping of waste, noise pollution, should follow the rules of transparency, ethics, and consistency, Shareholders, and Investors. Risk associated with economy and politics can be defined as the economic factors can be categorised as inflation, crisis on finance, and increase in rate of interest, recession, and operating overseas. The political factors can be categorised as terrorism, kidnaping, diplomatic relation, and many others. Risk associated with procurement are known as difference in arrangement, issues related with rights and duties, and procurement risks can be categorised as traditional, designing, building, and others. The risks associated with the construction industry are complexity of the project can be increased, coverage of professional security, defects in designing of the infrastructure, in relation with work force relationship, and failure of the component working.

Risks associated with the Hong Kong Construction Industry are listed below:

• Construction risk based on technical uncertainties
• Performance Risk associated with the component and material used
• Maintenance and operational risk
• Risk associated with failure due to the accident or negligence
• Setting of minimum acceptable standards
• The work in use ensures the project risk

Success of the project:

The success of the project is divided into five modules which are named as tiers:

• Tier 1: When the delivery of the project is within the scope in accordance with project schedule and budget
• Tier 2: When the delivery of the project is within the scope in accordance with project schedule and within the limits of agreed budget
• Tier 3: When the delivery of the project is within the scope in accordance with project schedule, expected budget, and meets the quality standards
• Tier 4: When the delivery of the project is within the scope in accordance with objective, scope, project schedule, budget, quality, and outcome
• “When the delivery of the project is within the scope in accordance with net value of the project” (Banaitis, 2011)

The figure below shows the layers of project success:

Literature Review

The table below shows the success indicator of the project (Source: Alfawaz, 2011. A review of risk management in construction: Opportunities for improvement. 1st ed.):

Criteria of the Success	Stakeholders	Time scale
Increase in the value of stakeholder	Sponsors and stakeholder	At the end of the year
Owners profit	Owner of the company	At the end of the year
Satisfaction provided to the owners and the sponsors of the project	Owner Sponsor	At the end of the year
Satisfaction of the consumers	Consumers	At the end of the year
Achievement of the purpose and the goal	Stakeholders and the owner	At the end of the month
Specification should be meet	Stakeholder and the team	At the end of the weeks
Functionality should be meet	Stakeholder and the team	At the end of the weeks
Flexibility should be meet	Stakeholder and the team	At the end of the weeks
Reliability should be meet	Stakeholder and the team	At the end of the weeks
Maintainability should be meet	Stakeholder and the team	At the end of the weeks
Security should be meet	Stakeholder and the team	At the end of the weeks
Time, and cost	Project team members	At the end of the year
Satisfaction of the project team	Project team	At the end of the year
Profit received by the contractor	Project Team	At the end of the year

Role of Risk manager:

The risk manager is the person responsible for the identification and analysing the financial loss occurred of the organization. He makes use of cost effective opportunities for balancing the retention program of the enterprise. The preparation of budget and risk management programs is the key responsibilities of risk manager. He takes the step forward in allocating premium cost to the different departments of the organization. He also focuses on the reviewing of contracts, facilities, activities, and etc. associated with the implementation of the new program. The risk manager cover the areas related to market risks, operating risk, and credit risk. The functions which are associated with the risk manager are categorised as identification, diversification, quantization, concentration, analysing, hedge, allocation, leverage, response, insurance, and prevention. The risk manager focuses on handling of logical and systematic procedures used for identification, analysing, evaluation, and communication to handle risk associated with the activity going within the organization. The major concern of the risk manager is to identify the sources of risk associated with the project which can be due to commercial relationship, circumstances changes with the economic loss, prediction of change in employees working nature within the organization, political risk, issues related with trend and technology, management of flow of activities, and many others. The risk management program employed by the risk manager is to secure the success of the project and omission of the unknown or uncertain events to take place.

Risk Management process:

“The process of risk management is associated with the establishing of the context, identification of the risk, analysing of the risk, evaluation of the risk, treatment of the risk, monitoring and reviewing of the risk, and communication and consultation” (Brown, 2011). The preparation of budget and risk management programs is the key responsibilities of risk manager. The risk management program is employed to secure the success of the project and omission of the unknown or uncertain events to take place. “The risk management program can be efficient if it involves supporting organization factors, clarification for roles and responsibility” (Christini, 2011), and skills associated with technical analysis of the project. The aim of the project risk management program is to minimize the losses and damages incurred with the project completion, reduction in the cost identified, controlling and minimizing the associated risk effects, and many others. The focus is to manage the performance risk for the successful completion of the project.

Success of the project

The following are the steps followed for overcoming the performance risk:

Process of Risk Assessment:

The process of risk assessment should be implemented before risk identification because it helps in exploring critical activities of the project which can be like services, failure of the power, resources, manpower, and many others. “The risk assessment focuses on determining the estimation of qualitative and quantitative potential risk, evaluation of impact of these risks, scheduling the activities, and etc.” (Thomsons, 2013).

The table below shows the probability of the risk associated with the organization and its impact (source: Mohamed, N. 2009. Risk management in construction industry: A Case study. 1st ed.):

Priority	Probability of occurrence of risk	Consequences
Very Low	Negligible to occur	Negligible consequences
Low	Occasionally it occur	Some impact on time, cost and quality
Medium	May or may not be occur	Substantially get impact on time, cost, quality
High	Frequently occur	Substantially get impact on time, cost, quality
Very High	Certainly it may occur	It may threatens the project success

This process focuses on identifying the potential risk associated with the project. The project manager knows about the risk associated with the project than he will be able to make more realistic strategies for the completion of the project successfully. “Three techniques for the identification of risk are suggested by the Boyce which are categorized as brainstorming, interviewing, and Creation of risk database” (Shacklett, 2015).  The quality of the risk can be identified by the identification of the risk in the initial stage of the project, risk should be communicated properly, opportunities and threats should be considered, priority should be assigned to the risk, assessing of the risk, and developing the response associated with the risk.  “The identification of the risk includes handling of logical and systematic procedures used for identification, analysing, evaluation, and communication to handle risk associated with the activity going within the organization” (Serpella, 2011).

The table describes the work breakdown structure for identifying the risk (Source: Alfawaz, S. 2011. A review of risk management in construction: Opportunities for improvement. 1st ed.):

Level 1	Level 2	Level 3
Move the plan	·         Technical Risk ·         Cost associated Risk ·         Scheduling Risk ·         Client associated Risk ·         Contract associated risk ·         Finance and budget associated Risk ·         Political Risk ·         Environmental Risk ·         Cultural Risk	Potential Risk associated with the project.

1. Process of Risk Mitigation:

“The process of risk identification and assessment plays the basis of risk mitigation” (Reddy, 2012). The process of risk mitigation focuses on identifying the root cause of the identified risk. The second step it takes to evaluate the interaction of risk with other associated risk and their causes. The third step is to develop the alternative strategies for mitigating the risk. Fourth step focuses on priority given to the alternative chosen for mitigating the risk. Fifth step is the selection of resources for mitigating and overcoming the risk. “The strategies which are used for mitigating the risk are categorised into four modules which are named as risk acceptance, risk avoidance, risk limitation, and risk transfer” (Shankar, 2011).

“Risk monitoring and control is the on-going process of systematic tracking and evaluation of performance of mitigating the risk” (Kang, 2013). It works on updating mitigation plan according to the change of requirement, making choice of alternative which is best suitable for overcoming the risk, and implementation of contingency plan.

Role of Risk manager

The table below shows how process of risk monitoring and control works (Source: Sibomana, A. 2015. Effects of risk management methods of project performance. 1st ed.):

Input	Process (Tools and techniques implemented)	Output
·         Plan for risk management ·         Plan for risk response ·         Communication within the project ·         Identifying and analysing the additional risk ·         Change of scope	·         Response generated with project risk audits ·         Review of periodic risk associated with the projects ·         Analysis of earned value ·         Measurement of technical performance ·         Planning of response associated with additional risk.	·         Plans for workaround ·         Plans for corrective action ·         Request for project risk ·         Updating of the plan associated with the response to the risk ·         Database for the risk ·         Identification of the checklist ·

Common Approaches to risk which are used in the construction industry:

The details of some of the approach which are usually used for overcoming performance risks are “Umbrella Approach is an approach in which large risk premium is added to the price” (Sibomana, 2015). Ostrich Approach is an approach in which everything is treated as all right. Intuitive Approach is an approach in which the manager uses his own intuition. In this approach scientific analysis is not given much emphasis. Brute force Approach is an approach in which mainly emphasis on uncontrollable risk in order to control the risk. Analytical Approach is an approach which is mainly focuses on scientific methods used for analysis.

Methods of minimization of the risk in construction industry of the Hong Kong:

Minimization of the Performance risk can be done by focusing through the types of contracts, methods used for procurement analysis, legislation implemented on health and safety, legislation imposed on environment, and legislation imposed on employment. The project manager knows about the risk associated with the project than he will be able to make more realistic strategies for the completion of the project successfully. Risk is allocated in the organization in the series of step starting with condition of the contract, clauses of penalty, allowance provided on cost estimation, and charging of the insurance. The factors such as negligence to the supervision of the efficiency of the team, competence of the contractor, integrity of the project, and external influence over the working capability of the project will have the negative influence on the success of the project. The risks are transferred from client to contractors, passing of risk from contractor to subcontractor, and passing of risk between client, subcontractor, contractor, and insurer.

Risk associated with the construction industry in Hong Kong:

Rules listed for assessing the Performance risk:

The process of identification of the Performance risk should be done in the initial stage of the project. Risk should be communicated properly. Opportunities and threats should be considered which are associated with the project. Priority should be assigned to the risk. Assessing of the risk associated with the project. The program should be used for developing the response associated with the risk. Risk is allocated in the organization in the series of step starting with condition of the contract, clauses of penalty, allowance provided on cost estimation, and charging of the insurance. Preventive measure should be developed for each individual risk. The Development of contingency plan should be done for individual risk. Registration of the project risk should be done according to the compatibility of the project. Tracking of risk and the task associated with the project.

Conceptual Framework of the construction industry in Hong Kong:

In the public construction industry of Hong Kong it has been seen that the success of the project depends on the goal of the project and its scope. The other major factors which play a crucial role in the success of the project are participation of the stakeholder, assessment of resources, and the management of the risk associated with the project. “The project manager knows about the risk associated with the project than he will be able to make more realistic strategies for the completion of the project successfully” (Villy, 2011). The committee which is responsible for decision making activity should focus on the analysis report of risk management and should give emphasis on overcoming procedure associated with the risk. “The functions such as distribution of authority and responsibility, selection of the contractor, scheduling of the project, costing and budgeting and documentation of the project plays a key role in overcoming the risk attached with the implementation phase” (Wang, 2013). The factors such as negligence to the supervision of the efficiency of the team, competence of the contractor, integrity of the project, and external influence over the working capability of the project will have the negative influence on the success of the project. From the research and surveys, it has been seen that the partnership between public and private authority, finance initiative of private projects has the major impact on the construction industries in Hong Kong.

Independent variables of the construction industry	Intervening Variables of the construction industry	Dependent Variable of the construction industry
Planning of project risk Assessment of project risk Mitigation of the project risk Monitoring and control of project risk Measurement of project risk	Size of the project Complexity of the project Skills of project managers Experience of project manager	Indicator of project risk Budget Scope Schedule Quality Project value

The study makes clear the concept of relationship between risk of the projects and the success of the project. It is highly recommended that when the planning of the construction project undergoes then the list of critical success factors and indicators should be highlighted. The risk management program is employed to secure the success of the project and omission of the unknown or uncertain events to take place. The focus should be given on identifying the risk and assessment of risk in every step of project development life cycle. The success of the project depends on the interlinking and the integration of the risk management process and the working practices in completion of the project.

Conclusion:

In this paper, we provide the brief study of issues occurred in the risk management in the project management program of the public construction industry of Hong Kong. In the given scenario, it has been seen that the partnership between public and private authority, finance initiative of private projects has the major impact on the construction industries in Hong Kong. The major concern is to identify the sources of risk associated with the project which can be due to commercial relationship, circumstances changes with the economic loss, prediction of change in employees working nature within the organization, political risk, issues related with trend and technology, management of flow of activities, and many others. From the research and literature review on the projects of construction industry in Hong Kong it has been seen that the success of the project depends on participants commitment towards the project functionality, competence of the owner and the contractor, and others. The process of risk management is associated with the establishing of the context, identification of the risk, analysing of the risk, evaluation of the risk, treatment of the risk, monitoring and reviewing of the risk, and communication and consultation. The identification of the risk includes handling of logical and systematic procedures used for identification, analysing, evaluation, and communication to handle risk associated with the activity going within the organization. The risk management program is employed to secure the success of the project and omission of the unknown or uncertain events to take place. The factors such as negligence to the supervision of the efficiency of the team, competence of the contractor, integrity of the project, and external influence over the working capability of the project will have the negative influence on the success of the project. Minimization of the risk can be done by focusing through the types of contracts, methods used for procurement analysis, legislation implemented on health and safety, legislation imposed on environment, and legislation imposed on employment.

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