Free Custom «Value and Risk Management» Essay Paper

This report aims at the phase of Strategic Value and Risk management. The stage involves analyzing the risks apparent in carrying out a project and a determination of the value of the project; if is worth the risk. City authority is the clients planning to build a new local government headquarters to be located in the city centre. They aim to achieve the centralization of all public sector departments and relocate their staff to a centralized location which they intent to be more manageable and efficient. The client’s main aim is to achieve maximum value on the resources it invests in the project: rationalizing local government service departments. The plan is to centralize the departments in a high specification modern building that will be fit a developing and visionary city. The goal of this value and risk analysis report is to convince the client of the benefit of project by clearly showing that the values will outweigh the potential risks. This is achievable through identifying the client’s values and needs with respect to the parameters set by the client. A workshop is necessary to carry out value and risk management, which will be beneficial to the project progress. Data is collected through interviews and questionnaires administered to government staff, top officials in government offices and members of the public. The report aims to shed light on how the studies will benefit the client. It outlines pre-workshop activity required in the preparation of the studies. The stakeholders to be invited will also be listed and each study’s agenda identified for appropriate workshop activity. Finally, there will be recommendations included in the report according to findings of the study.

 

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Introduction

Value Risk Management is a management strategy applied in organizations aim to enlighten the stakeholders of a project or endeavor on the long-term benefits and associating those benefits to the most cost effective design strategies (Dallas, 2006). In simpler terms, value risk management can be defined as the study of the risks involved in carrying out a project and the benefits expected from it and weighing the two to see which one outweighs the other (Kelly, 2004). Such a study is important since the clients expect to maximize the value of the money and other resources that they will invest in the project. As a VRM Consultant, I specialize in providing Value analysis services to my clients on their chosen developments. Since the project is in its early stages of development, it is very important to consider carrying out a value and risk management workshop, which will illuminate all the key players on the benefits of proceeding with the project. The key to having a successful project is first to clearly understand the value and what it means to the client to accomplish the projects objectives (Griffin, 2006). In addition, the value and risk management study will aim at addressing these four specific issues: How the study will benefit the client and project, any pre-workshop activity required in preparation for the studies, identification of the stakeholders to be invited and an agenda for each study, which will identify the appropriate workshop activity.

Key Principles of Value Management

The key principles of value management are different from other management styles in that they compose of attributes that are normally found together (Othman, 2004). They are:

• Emphasis on team work and communication: involves encouraging people to work together towards a common goal
• A focus on what things do rather than what they are
• Identifying Business Needs

It is very important that clients have a clear understanding of their business needs. They should also take into consideration other responsibilities such as safety and health sustainability. They should have a clear vision on what they expect the finished facility to deliver. They should clearly define what value means to them according to their project to avoid indecisive situations leading to changes during the project (OGC, 2003). By knowing what the client expects from the project, it will be clearer to map out the risks involved and determine whether the value expected back is achievable. The objectives of the project will help in identifying alternative options to meeting them. Risk analysis should be carried out for each alternative and calculations for allowances for identified risks carried out. The objectives should reflect the business needs and the risks are reflected in estimate. This will help in determining whether the project is affordable or not. A standard form of contract should be adopted where possible. The study will ensure that the risks identified are allocated to parties best able to manage them and suggest arrangements to monitor risk allocation over the project lifecycle. The contact documentation should reflect the business needs (Othman, 2004).

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Benefits of Value Management

Proof that the initial design was indeed the best: due to the deep analysis of all the options available, the best design is chosen for the project: one that minimizes risks and maximizes value.

Peace of mind of the owner that he is receiving good value for money: buy a proper conducting of value and risk management, the client can be confident that his project is on the right path and that the decisions made have been well analyzed and all the risks involved accounted for. The client has a picture of what he expects back as value and is prepared upfront of any risk that will emerge.

Higher quality output: since the risks are identified at an earlier stage, plans on how to take care of them or avert them are made earlier therefore ensuring high quality output.

A clear focus on the objectives of the project: during the value and risk management process, the client’s objectives are clearly laid down and defined: ensuring that the project is on the right path without deviating from the client’s requirements.

An alternative view of the design: as risks are identified during the value and risk management process, alternatives are also identified to avoid or handle those risks. This leads to the coming up of alternative designs which can be considered.

An opportunity for detailed analysis of the required project: Value and Risk management is a deep analysis process of the project. It maps out the whole project up to the last detail. This gives a highly detailed analysis of the required project. Value management has already proved to be successful in achieving value for money for clients such as British Airways, BP and various rail companies.

Value management workshops are one of the primary techniques of value management. Before a value management workshop begins there has to be a pre-workshop activity required in preparation for the studies, information has to be collected to determine its objectives and deliverables. This will determine what shape and form the workshop will take. The workshop should commence with a tour of the study area in this case the construction site. This will provide an opportunity for further familiarization with the study area and for community representatives and other workshop participants to identify key issues and points of interest within the area. Then the participants will have an overview of the process and introductions among themselves

A three-phase process characterizes value management workshops:

1. The diagnosis and orientation phase in which the value manager prepares for the study by: arranging a meeting with the project sponsor and main players who will be involved in the study, document review, holding interviews and briefings and laying down the agenda for the workshop stage.
2. The workshop phase is where alternative views on the problem of value are put together through a team-based activity managed by a value manager and initiated through the application of specified team based techniques (Kirk, 1995). Members of the team provide innovative ideas to satisfy the functional requirements identified according to the value criteria chosen. A workshop report will be produced including an action plan to ensure the implementation of the value solutions and options in the post workshop phase. Workshops help keep the team focused on the project. Another advantage of workshops is that developing of the project also considered as the gestation period of the project occurs during the workshop process. Workshops also help in keeping the team committed to the task. It discourages partial attendance and ensures there is continuity of the project development process. It shows the importance of a workshop and pre-workshop: that their significance cannot be undermined. The stakeholders to be invited for this workshop are a good number of government staff who is working in the current departments to be relocated, the departmental heads of those government offices and the construction engineers who have the contact of constructing the new building. The agenda of the workshop will be to identify the objectives of the project. It what is expected to be achieved or the goal after the completion of the project. The workshop will also help in achieving the identification of the potential risks associated with the project. During the workshop, the risks will be compared to the value expected decisions will be made according to whether the value outweighs the risk or vice versa.
3. Assessment of the modified alternatives is compared against the assessment criteria. Another agenda would be to lay down a well-structured project procurement lifecycle as the procurement framework for the project, which ensures value, and risk studies are integrated in the process. The senior management from the key parties in IST and the client to form an integrated project team (IPT). This team will agree on common goals, come up with a detailed criterion of sharing benefits, and confirm delegations (financials and decision-making). A value review of the initial plans, sections, and cost plans of the proposed building will be in the Outline Sketch design (OSD) workshop. It will involve statement of the design direction, the layout of the site and access, identifying the conditions of the construction ground and planning constraints, a well laid down cost plan and schedule of activities, specification outline for environmental systems and the risk and risk management strategy. The workshop will help create an atmosphere of equality, a good foundation for teamwork and promote frequent and open communication among the participants focused on achieving the results.

Conclusion

As stated above, the importance of a pre-workshop and workshop cannot be undermined to, effectively, carry out the study in value and risk management. It would be a very bad idea to, blindly, dive into the project without first analyzing all the potential risks involved. The information gathered from the workshops will help in assuring the client whether or not to invest in the project or not. It will also help the project team have a clear understanding of the projects objectives. It will help keep the project on track and ensure proper utilization of resources. The client will have a projection of what is expected during the project development lifecycle. It will set realistic and achievable goals according to the current circumstances such as changes in the economy, availability of labor, changes in the prices of inputs, and much more.