PMPG 5018 – Group Assignment 3

Instructor Name Professor Al Badrul Alam

Assignment Name Case Study: Risk Workshop

Group Number Group 3

Submission Date 24th November 2021

The following students were present for the group discussion and
contributed to the assignment as indicated:

Student Name Contribution to the assignment

Kavin Ponraj Introduction, Purpose

Pragati Kaur Sablok Issues/Problems, Recommended solutions,

Assumptions

Setu Shah Limitations, Conclusion

Srushti Sawant Potential solutions, Evaluation of solutions

Introduction
Titan construction, one of the reputed construction companies in the Greater Toronto
area have proposed a project to build Row Housing project with a total number of 20
townhouses in phase 1 construction, having a total budget of $2,100,000 at the
Scarborough location. The main objective of the “Major case study” assignment was
to read the case ‘Risk workshop’ and to provide the team's understanding on it and
answer as a project manager on how to convey the importance of the risk involved in
the project and to address clients' concern. Additionally, our team members will give
all the required information to keep the risk workshop session on track so that the
client will not side track the workshop session.

Purpose
During the planning phase of the project, the project manager Ron conducts a risk
workshop with the owner and other key stakeholders to explain the importance of the
risk involved in the project. By this time, the owner of Titan construction gets worried
that the risks that are involved will affect the corporate brand and reputation of his
business. So, Ron and his team are in a situation to explain the importance of
identifying the risks that have been involved and the ways to mitigate the risk to take
their project to success.

Issues/problems
There were a few issues that we as project managers came across in the risk
workshop which was conducted at the planning phase of the project aiming to
introduce the owner to various risks and their mitigation strategies. While going
through the workshop, the owner seemed to be worried about a couple of things
such as
1. The company's reputation could be at stake considering the amount and types
of risks involved in the project.
2. It might affect the overall business of the corporate brand.
3. The company may be at loss at the end of the project.

Potential solutions
Risk mitigation is critical to avoid risks becoming issues that disrupt business
operations and have a negative impact on the bottom line.
Risk identification allows the project manager to create contingency plans for high-
risk activities and focus risk control efforts on risks that would have a major impact
on the project which is construction of Row houses as well as the workshop, if they
became an issue. Stakeholder management, both internal and external, necessitates
risk mitigation. Investing effort in a thorough risk assessment and mitigation process
demonstrates that a project manager cares about a successful project outcome and
is doing everything possible to ensure that everything runs smoothly. The potential
solutions for the issues mentioned above are
1. Consider reputational risk as part of your overall strategy and preparation.
Once all of the risks have been identified, the company should develop a risk
mitigation plan to prevent the risk from occurring and to protect the company's
reputation.
2. Control procedures - By focusing on continuously providing high-quality
services in terms of the row house construction as well as the workshop,
there's a considerably lower chance of making any errors which can lead to a
risk that could affect the company.
3. Acknowledge stakeholder expectations - By determining what the stakeholder
or client requires, such as the type of final design of the row house, the
amenities included in it, the project's budget, and so on, as well as the
workshop's requirements and outcomes. The risk connected with the project
can be understood and reduced by recognizing all of these details.
4. Develop response and contingency strategies - A contingency plan must be
created when all of the project's risks have been identified. The risks can be
classified according to their severity and likelihood, and then the most
significant risks can be recognized. After that, a contingency plan for the
major risks can be developed and distributed across the team.

Evaluation of solutions
The processes for validating a complete solution or a part of a solution that is about
to be implemented or has already been implemented are referred to as solution
evaluation. The effectiveness of a solution in meeting the business needs
represented by stakeholders, including giving value to the customer, is determined
by evaluation.
We assign a score to risks based on the likelihood and effect of their occurrence.
The categories are offered in the form of a risk matrix and provide a quick and easy
approach to categories a new risk. Risk categories aren't static, and successful risk
management entails revisiting and reassessing risks and opportunities as the
business environment evolves. The first step is to identify the risk. However, it is
inadequate. Taking precautions to mitigate risk is a must. Knowing about risk and
considering it is not the same as taking action to mitigate it.
There are about four different strategies to mitigate risk:
Avoid, Mitigate, Transfer or Accept
1. Avoid: When it comes to risks, the greatest thing you can do is avoid them. It
will not harm the project if you can avoid it from happening. The simplest
method to eliminate the risk is to avoid executing a specific activity that
contains it, however this may not be an option for the project.
2. Mitigate: If the team can't prevent the risk, it can at least mitigate it. This
entails taking steps to ensure that it causes the least amount of damage to the
project as feasible. The project team can create a risk mitigation plan and put
it into action to limit the loss as a result of the risks.
3. Transfer: Paying someone else to bear a risk for you is an effective strategy to
cope with it. The most popular method in this category is to purchase
insurance. This can also be done by maintaining the contingency reserves of
any project.
4. Accept: The project team must take a risk if they cannot avoid, mitigate, or
transfer it. Even if the team accepts a risk, at the very least they have to
consider the alternatives and must be aware of the consequences if it occurs.
Accepting the danger is the only option if the team can't prevent it and there's
nothing which can be done to mitigate its effects.
Recommended solution
It is important to keep the workshop on track for successful completion of the project.
The team needs to work on keeping the client focused in the workshop so that the
owner doesn’t derail the project. In order to achieve the same, here is a
recommended solution on the above-stated issue:
● Being Project managers, we need to highlight the benefits of risk identification
at earlier stages in the project.
● The team needs to concentrate on risk mitigation strategies in order to help
the client understand that how we can eliminate the risks throughout the
phases of the project.
● Risks are identified with each main group of activities once the project has
been approved and moved into the planning stage. To identify increasing
levels of thorough risk analysis, a risk breakdown structure (RBS) might be
used
● The owner needs to be walked through the financial plan allocated with risks
distribution among all parties involved so that the client understands that all
the risks are not just accumulated to their company but are equally divided
among stakeholders. Financing the project helps in an equitable allocation of
project risks between stakeholders.
● Profit analysis of the project needs to be clearly explained showing the overall
profit percentile of the project after considering all risk factors.

Overall cost information of the construction of the project is as follows-

Row housing construction project

Items Value

Gross floor area 40,000 sq.ft.

Cost of land $350,00

Rent rate $4/ sq.ft.

Rate of construction $40/ sq.ft.

Yield required 5%

Interest rate 7%

Occupancy rate 90%

Development Period

Items Value
Pre contract 4 months

Contract 12 months

Design fees 5%

Developers profit target 20%

Management cost 10%

Borrowing factor 0.5

Calculation of gross development value (GDV)

Gross area = 40,000 sq.ft.
Utilization = 90%
Net rentable area = 36,000 sq.ft.
Total Rent = $4 X 36,000 = $144,000
Management fee(less) = 10%
Net rent income = 129,600/ year
GDV= Net income/ yield
=129,600 / 0.05 = $2,592,000

Calculation of the achievable profit value:

Cost of construction = Total area X unit rate of construction

= 40,000 X 40 = $1,600,000
Design fee = 1600000 X 0.05 = $80,000
Design + construction = 1600000 + 80000 = $1,680,000
Cost of land = $350,000
Financing cost = Cost of design & construction X Duration (in years) X Interest rate
X borrowing factor
= 1,680,000 X 1 X 0.07 X 0.5 = 58,800
Total cost excluding profit = $2,088,800

Profit = GDV - total development cost

= $503,200
Profit % = 19.4 %

Assumptions
Following are some assumptions that the team has considered while planning the
project:
● The company has enough resources: both human and material, to complete
the project.
● There are no weather challenges faced during the execution phase of the
project.
 ● The company has enough funds for the calculated budget along with the
contingency reserves.
● All team members have the required skill set and would contribute to the
successful completion of the project.
● The business case and project charter have been approved by the required
stakeholders.
● Construction cost, design fees, cost of land are ballpark figures assumed by
the team.
● There is no additional cost involved in the successful completion of the
project.
● All required stakeholders will attend the risk workshop.

Limitations
Here are some of the limitations of the project:

● The company cannot exceed the given amount of resources for the project.
● The company may be affected badly if all the risks are not identified by all
stakeholders in the risk workshop.
● There was a cost constraint as the budget of the project was fixed. The cost
cannot exceed the fixed amount.
● Team needs to follow the planning and building regulation restrictions.
● Project team needs to stick to the finalized CCDC contracts and work
accordingly.
● Specific performance requirements are to be followed for successful
completion of the project.
● Construction team needs to work with limitations to site access, right of ways,
right of lights etc.
● The company needs to comply with a plan according to existing site
conditions, neighbourhood and boundaries.
● All the risks and its mitigation strategies should be identified in the risk
workshop only during the planning phase to ensure the success of the project.

Conclusion
The identification of the risks and proposing mitigation strategies is the most crucial
part of any construction project, all the stakeholders, owners, and clients should
know the importance of it. As the construction sector is growing rapidly, this kind of
risk workshop will help maintain the smoothness of the project and it will also help all
the stakeholders to gain a proper understanding of risk management.

To summarize, working together and staying on the same page will allow all the
stakeholders, owner, and the client to identify, evaluate and manage all the risks
before it becomes a bigger problem.
References
Watt, A. (2014, August 14). 16. Risk Management Planning – Project Management.
Pressbooks. https://opentextbc.ca/projectmanagement/chapter/chapter-16-risk-
management-planning project-management/

Risk mitigation table. (2015). [Table]. mondayblog. http://oversitesentry.com/wp

content/uploads/2015/02/riskmanagmentmatrix.png