Bg007 : Project Management : Assessment Answers

1. How can we as managers position our company to be able to primarily gain from randomness and chaos?

2. Project financial management process includes project control, costing, budgeting, and forecasting. Other important aspect of project financial management includes contracting, billing and performance reporting. Implementation of organization projects has associated risk, which requires assessment of emerging risks. Some of the important part of total cost of risk includes lifetime operational cost, contractor cost, maintenance cost and personnel cost. The identified cost factors play an important role in the process of attainment of project objectives. For example, budgeting for maintenance and lifetime operational cost ensures organizations attain adequate productivity from project implementation. Risk management in financial project management involves processes, which include risk assessment and mitigation strategy (Jordan, 2013). Risk assessment process focuses on identification of possible risk and evaluation of the effects on project implementation.

Cost factors incurred in risk management determines of the level of project success. For example, use of risk avoidance as part of mitigation strategy would require an organization to select a contractor with a proven experience in industry as compared starter contractors. This will result in operational cost factor reduction during project lifetime. The cost of risk sharing will result in considerable reduction in overall project implementation cost , for example, multinational organization tend to form partnership with local companies in countries of operation for purposes of reducing legal ,regulatory and potential political risk (Hillson, 2011). The cost of risk transfer is another essential aspect of risk management in financial project planning. Risk transfer will involve acquiring insurance cover critical project infrastructure component, for example, heavy machinery for construction companies. Effective risk management plan will enhance support project financial by ensuring appropriate allocation of resources. Risk management plan also helps in financial control, which is essential in determination of project variance."

3. How some short-term strategies that seemed ideal at the time of implementation later transformed into major issue for the projects. What are your thoughts on the long-term consequences of cost-saving strategies?

1. Solar Inc is known to be expert in the domain of providing Solar PV solution. Chaos and randomness theory is considered to be beneficial in providing guidance to the behavior of this organization that is solar Inc. It is totally based on project-based work which checks for its vitality. The theory helps us in having small initial state or condition which can have huge impact on any project (Sonneville et al., 2015). It mainly helps in checking things which are unpredictable. Organization being chaotic obey some rules which helps in analyzing regular patterns. It is considered to be similar to the human behavior in any organization. A proper approach is all about understanding the implementation of project management which helps in analyzing the list of things which can be learned. It mainly focuses on achieving better and harmonious outcome of the project. It can be achieved by focusing much more attention on human behavior patterns. It mainly takes advantage of team members to be good which is taken to be best for the organization. Changing global economy and technology are considered to be evidence of some of visible chaos. Business should not respond to the given changes which can cause lack of flexibility in the given organization (Eckles, Hoyt & Miller, 2014). It is main reason behind the fact that organization like Solar Inc should restructure and adapt to these changes. They should expand their markets and keep up with developing technological advancements.

2. Cost is considered to be as one of major factor which is needed for understanding the success of the project. Cost is taken to be a part of three multiples that are cost, schedule and lastly scope. The project manager of Solar Inc can easily provide quality products and services on the given time (Reddy et al., 2015). It is mainly under budget which requires high demand. At the starting time of schedule, cost is considered to be variable and duration of the project is fixed. After the approval of budget, cost tends to become fixed and comes up with high priority. It is done because once the budget has been approved it can set new challenges to program sponsor and increasing the budget. A large number of methods can be used for developing training program for project managers on the given risk management which puts pressure on cost reduction like:

Cheaper Contracts: It is considered to be as one best way for lowering the cost. Various contractors can easily discover whether they can compete and adjust with their cost-ineffective way (Eckles, Hoyt & Miller, 2014). Solar Inc should open the contract to various subcontractors and after that selection should be done on the basis of best value.

Cheaper resources: Although the organization requires experience candidates so they should hire graduates and provide them training (Reddy et al., 2015). It is mainly done as it is cheapest way for getting experienced candidate.

Forming Alliance: As a manager, it is very much difficult to depend on external stakeholders for materials, resource and lastly expertise. It can be expensive to easily keep up the vendor expenses every month. So Solar Inc should tend to form strategic alliance and enter into proper cost saving techniques for vendor and suppliers.

3. Solar Inc focuses on Institute for cutting down the cost which can measure the stream the effect of economic downturn (Kind, Wouter Botzen & Aerts,2017). Improving the profit by reducing the cost can easily have serious consequence on cutting the potential. It can ultimately lead to production of short-term gain but in the long term, it can have severe consequences. Cutting cost on the given four parameters that are cost driver, labor and communication can have several effects on the project.

Cost Driver: Organization like Solar Inc can be easily used for differentiating between good cost and Bad cost (Kerzner & Kerzner, 2017). Good cost is considered to be one which comes up with proper fulfillment of goals. It is mainly done as a result of target marketing and along with research and development. While bad cost is not directly related to project goals or objectives.

Labor: It is considered to be one of the significant cost which is related to labor. Long-term cost saving can be attained by using temporary or part-time staff (Sonneville et al., 2015).  It mainly works with knowledge and experience which is needed for attaining project function.

Communication: There are some long-term strategies which are needed for reducing the overall cost on the project. It can be easily attained the various team members to easily make use of some of the cost-effective method of communication (Kind, Wouter Botzen & Aerts,2017). Meeting of the project can be easily conducted with the help of telephone or any web-based media. This two technology can easily reduce the overall cost.

In the initial stage there are many benefits of long term cost saving strategies but these can bring huge drawbacks. Cheaper resources and contracts can easily benefit in the initial stage but later on it can affect the quality of the project.  

References:

Eckles, D. L., Hoyt, R. E., & Miller, S. M. (2014). Reprint of: The impact of enterprise risk management on the marginal cost of reducing risk: Evidence from the insurance industry. Journal of Banking & Finance, 49, 409-423.

Kerzner, H., & Kerzner, H. R. (2017). Project management: a systems approach to planning, scheduling, and controlling. John Wiley & Sons.

Kind, J., Wouter Botzen, W. J., & Aerts, J. C. (2017). Accounting for risk aversion, income distribution and social welfare in cost?benefit analysis for flood risk management. Wiley Interdisciplinary Reviews: Climate Change, 8(2), e446.

Reddy, V. Y., Akehurst, R. L., Armstrong, S. O., Amorosi, S. L., Beard, S. M., & Holmes, D. R. (2015). Time to cost-effectiveness following stroke reduction strategies in AF: warfarin versus NOACs versus LAA closure. Journal of the American College of Cardiology, 66(24), 2728-2739.

Sonneville, K. R., Long, M. W., Ward, Z. J., Resch, S. C., Wang, Y. C., Pomeranz, J. L., ... & Gortmaker, S. L. (2015). BMI and healthcare cost impact of eliminating tax subsidy for advertising unhealthy food to youth. American journal of preventive medicine, 49(1), 124-134.

Steen Carlsson, K., Andsberg, G., Petersson, J., & Norrving, B. (2017). Long-term cost-effectiveness of thrombectomy for acute ischaemic stroke in real life: an analysis based on data from the Swedish Stroke Register (Riksstroke). International Journal of Stroke, 12(8), 802-814.