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CA1 > Project Risks > Flashcards

Project Risks Flashcards

1
Q

Design risks

A
  • Brief not clear
  • Lack of key info
  • Failure to investigate (site)
  • Redesign necessary later
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2
Q

Design mitigation

A
  • Transfer risk to specialist designers, penalties for errors
  • Share risk of success with info providers (eg gov), avoid suppression of key info
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3
Q

Project risks

A
  • Poor planning in relation to budgets, timescales and responsibilities
  • Objectives not clearly specified
  • Critical path issues
  • Benefit less than expected/ costs greater than expected
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4
Q

Project mitigation

A
  • Research and time for planning stage; involve project management experts (could subcontract)
  • Build safety margins into timescales to reduce risk
  • Thorough cost/ben analysis before decision to proceed
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5
Q

Approval/political risks

A
  • Opposition to from locals
  • Failure to get planning permission
  • Legislative changes
  • International project- one country pulls out, war/terrorism in a country
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6
Q

Approval/political mitigation

A
  • Research legislative environment

* Meetings with residents/ local businesses/ local gov, foster positive relationships

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7
Q

Financial risks

A
  • Capital costs higher than expected
  • Failure to find sufficient capital
  • Insolvency of a sponsor
  • Higher than expected interest costs
  • Incorrect cashflow estimates
  • Supplier default
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8
Q

Financial mitigation

A
  • Sensitivity test cashflow and profit projections

* Share financing risk by using several sponsors to minimise impact of one pulling out

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9
Q

Site clearance risks

A
  • Pollution
  • Discovery of place of archaeological significance
  • Higher than expected cost
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10
Q

Site clearance mitigation

A
  • Insurance against pollution risks
  • Conduct environmental impact survey
  • Research likely costs under different scenarios; subcontract to third party
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11
Q

Construction/ third party risks

A
  • Strikes
  • Bad weather
  • Safety hazards
  • Loss of key personnel
  • Problems with suppliers/ contractors
  • Criminal action
  • Labour/ material costs
  • Construction delays
  • Shortage of raw materials
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12
Q

Construction/ third party mitigation

A

• Insurance
o Property
o Employers liability
o Public liability
o Key person (intellectual property)
o Fidelity guarantee (employee dishonesty)
o Pecuniary loss (protect vs credit risk)
o Insurance against environmental conditions
• Research background of all key personnel (crime)
• Profit share with suppliers to incentivise
• Subcontract to third party – agree fixed price in advance/ enter into forward arrangements; consult with experts; penalties for delays

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13
Q

Operational risks

A
  • Dissatisfaction from public/ new residents
  • Structural faults
  • Difficulties in finding purchasers/tenants = lower revenue than expected
  • Higher running costs than expected
  • Increase in perceived terrorism may impact demand
  • Competitors launch similar project = reduced market share
  • Change in demand due to trends etc
  • Communication risk (overseas)
  • Supply chain risk of failure (esp if rely on sole supplier)
  • Legal risk – contracts not worded properly (lack of familiarity with overseas law)
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14
Q

Economic risks

A
  • Change in interest rate affecting cost of borrowing
  • Downturns in economy affecting demand for project
  • Adverse exchange rate movements (international project)
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15
Q

Economic mitigation

A
  • Derivatives to hedge interest rate/ FX risk
  • Speak to analysts and research outlook
  • Build contingency margins into projections
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16
Q

Operational Mitigation

A
  • Advertise/ market site/ product well – gain commitment from purchasers in advance (poss at discount/ intro offer)
  • Build margins into budgets/ timescales
  • Surveys to determine needs/wants of potential customers
  • Employ bilingual managers, provide language training for staff
  • Diversify suppliers, ensure infrastructure adequate for deliveries
  • Use legal firms with expertise domestically and overseas
17
Q

Other

A
  • Risk – As a new business venture there may be significant unknown hazards not considered in advance of set up.
  • Mitigation – Consider use of experts from each region, or targeted hiring of established individuals.
  • Risk – Market risk, the stock market may regard the new venture as very risky and put a lower valuation on the whole group.
  • Mitigation – Explain to investors the plans for expansion and the strategies that are being put in place to minimise the risk and maximise the return
  • Risk – Industrial action if redundancies occur
  • Mitigation – offer attractive redundancy packages, provide opps for some workers to be moved to other areas of company operations

CA1 (21 decks)

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