BUS 519 Assignment 4: Project Progress

Assignment 4: Project Progress

Name

Dr. Name

BUS519 Project Risk Management

Date

Project Progress

During the risk workshop conducted for Environmental Quality International’s (EQI) sustainable development project in Siwa, Egypt it was determined that biggest threats to the project were economic downturns and drought. The most significant opportunity identified was third party recognition and accolades for EQI’s sustainable development model. Additionally, the scenarios of exhausting the risk management budget and the risk management schedule are explored. Before proceeding with the project, it is necessary to analyze the impacts of the realization of these project risks, including exploring the possibility of mitigation activities, schedule and budget changes, and finally updating the risk register to reflect the new risk environment of the project.

Threat 1 – Economic Downturn

Impact

Due to an economic downturn, access to financing for EQI’s development project in Siwa has become much more difficult to secure. This leads to delays in delivery of vital project resources, payments to contractors, and has results in construction delays, project phase delays, and ultimately, projected project completion delays.

Mitigation Activities

The PMBOK Guide (2013) suggests that taking early action to reduce the impact of the occurrence of the risk is often more effective then trying to repair the damage after the risk has happened. Because economic downturn was determined to be a principle risk of the Siwa project, secondary financing sources were identified and secured after the risk workshop. Once it was determined that the “economic downturn” risk was occurring, the project finance team, identified in the risk register as the risk owners, responded, initiated the risk response (Simon & Hillson, 2012). Having this secondary source of financing significantly lowered the impact of this risk.

Budget and Schedule

There are no immediate changes to the schedule for the project, as the availability of the second tier financing was designed for that purpose. However, as identified in the risk register, the secondary financing options have higher interest rates, which will impact the project budget. If the project is completed on schedule and the economic downturn is short-lived, there will be little negative effect, as EQI will likely recoup its investment as the tourism and development markets reestablish themselves. However, if the downturn is enduring, EQI’s future budgets will be constrained, which represents a new risk to add to the register.

Risk Register Update

The occurrence of the risk was noted in the risk register log (Simon & Hillson, 2012) and the following changes were made to the register to reflect that this risk had occurred, and to highlight subsequent risks that might occur as a result:

Nbr Date Description Pre-Response Probability
    Cause Risk Effect  
1r 12/5/15 Enduring Economic Downturn Increased difficulty in accessing capital, increasing financing costs Increased costs MEDIUM
Response Risk Owner Status
Time Cost Quality Other Implement phase delays, construction, contract slow downs. Financial Team Active
>6 Months <$1 Million N/A N/A      
     

(Hillson & Simon, 2012)

Threat 2 – Drought

Impact

Because EQI’s Siwa project is taking place in an oasis of the Sahara Desert, it was well understood that the availability of water would likely be a problem throughout the project. A drought threatens the ability of the construction crews to meet their deadlines, possibly resulting in a delay in the completion of the project. A prolonged drought may also lead investors to question the viability of the Siwa oasis as a model of sustainable development (Story, 2009).

Mitigation Activities

Due to the unavoidable nature of the risk of drought in desert environments, it was necessary to plan for the mitigation, rather than avoidance of the risk (PMBOK Guide, 2013). EQI contracted to have water transported from outside the drought stricken area to the oasis. This allowed construction to continue, built goodwill with the locals, as local water sources were under less constraint, and may ultimately provide additional investment opportunities in the region in the future.

Budget and Schedule

EQI’s risk register for dealing with drought included risk triggers which indicated at which levels of water deficiency the project should begin to contract with outside water vendors (Heldman, 2005). This early action allowed EQI to seize the initiative, negotiate favorable terms, and put them in a good position above their competition (PMBOK Guide, 2013). The schedule will not be affected at this time because of the mitigation effects. Likewise, while the project risk budget is paying for outside water from contingency funds, the overall project budget will not be affected.

Risk Register Update

The occurrence of the risk was noted in the risk register log (Simon & Hillson, 2012) and the following changes were made to the register to reflect that this risk had occurred, and to highlight subsequent risks that might occur as a result:

Nbr Date Description Pre-Response Probability
    Cause Risk Effect  
2r 12/5/15 Renegotiation of water contracts Unscrupulous regional water suppliers may preempt contracts, force renegotiation Cost increases, or schedule delays LOW
Response Risk Owner Status
Time Cost Quality Other Negotiate fair contracts with water suppliers, offer renegotiations with longer durations PM Active
>3 Months >$1 Million N/A N/A      
     

(Hillson & Simon, 2012)

Opportunity 1 – Recognition for Sustainable Development

Impact

In light of its sustainable development work in Siwa, the first opportunity on the register for EQI, earning international recognition for its work, has occurred. For impacts, there have been an influx of investors, increased grant money, and more access to capital. There has also been increased media and regulator scrutiny of the work performed in Siwa and other EQI sites.

Mitigation Activities

In large part, EQI was prepared to simply prepared to accept the risk this opportunity presents, which means that no that the project management plan has not been changed to deal with this contingency (PMBOK Guide, 2013). The project financial team used the leverage gained from the publicity of this event to seek better financing rates and the public relations team was assigned the task of ensuring that the company and workers would continue to look good under the increased scrutiny stemming from it.

Budget and Schedule

The schedule has been unaffected to this point; however, the budget has been positively affected. Lower interest rates, increased grants, and increased interest from investors have lowered capital and borrowing costs for the project.

Risk Register Update

The occurrence of the risk was noted in the risk register log (Simon & Hillson, 2012) and the following changes were made to the register to reflect that this risk had occurred, and to highlight subsequent risks that might occur as a result:

Nbr Date Description Pre-Response Probability
    Cause Risk Effect  
1r 12/5/15 Bad publicity from media scrutiny of projects/company. Media disclosure of negative information about company and/or personnel. Reduced financing options, higher interest rates. LOW
Response Risk Owner Status
Time Cost Quality Other Public relations campaign. EQI PR Team Active
>1 Month >$1 Million N/A N/A      
     

(Hillson & Simon, 2012)

Exhausted Risk Management Budget

Impact

EQI has exhausted its risk management budget, and there are significant impacts likely throughout the project. Because many of the risk responses recorded in the risk register involve using risk management funds in order to meet project objectives, it will be necessary to conduct a major review, “essentially… a single workshop to repeat all the steps that make up the First Risk Assessment, providing a full reassessment of the project’s risk position” (Hillson & Simon, 2012). This will allow a new updated risk register, with new risk responses to be created.

Mitigation Activities

As Heldman (2005) points out, mitigating this “may include increasing the budget (to bring on more resources), decreasing project [risk management] scope (to keep the schedule intact), or decreasing quality standards.” Additionally, new mitigation measures will be determined during the major review.

Budget and Schedule

Exhausting the risk management budget is likely to have major implications for both the budget and the schedule, as time, money, and personnel resources may need to be re-allocated to deal with risks as they occur.

Risk Register Update

When there is a significant change to the project, a major review may be necessary (Hillson & Simon, 2012). As an output of the major review, the entire risk register will be reviewed and “updated with the latest information and status of all risks” (Hillson & Simon, 2012).

Shortened Risk Management Schedule

Impact

When there is a significant change to the project, a major review may be necessary (Hillson & Simon, 2012). Like with the exhaustion of the risk management budget, abbreviating the schedule by two months for a project as complex as EQI’s will require a major review of the project risk management plan.

Mitigation Activities

During the major review, risks will be reevaluated for their impact to the project’s timeline. Mitigation activities for such risks will be selected and prioritized during the review, with more weight given to their timeliness than to their cost. For example, when hiring outside contractors to handle risk mitigation, fewer bids would be solicited than usually, and time to completion would be a more important factor than cost in awarding the contract.

Budget and Schedule

In order to meet heightened scheduling demands, while mitigating project risks, and without reducing the scope of the project, it is likely that the budget would also be under considerable pressure, and might exceed original considerations (Heldman, 2005). Requesting additional funds is also an option.

Risk Register Update

When there is a significant change to the project, a major review may be necessary (Hillson & Simon, 2012). As an output of the major review, the entire risk register will be reviewed and “updated with the latest information and status of all risks” (Hillson & Simon, 2012).

References

Heldman, K. (2005). Project manager’s spotlight on risk management. San Francisco, Ca.: John Wiley & Sons.

Hillson, D., & Simon, P. (2012). Practical project risk management the ATOM methodology. Tysons Corner, Va.: Management Concepts.

Project Management Institute. (2004). A guide to the project management body of knowledge (PMBOK guide). Newtown Square, Pa: Project Management Institute.

Story, J. (2009). Environmental quality international in Siwa. Fontainebleau, Fr.: INSEAD.

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