ASSIGNMENT ON PROJECT MANAGEMENT C-702

Submitted To:Ankur Wahal

Submitted By:Shikha Hota PGDM VII (A) Roll No. :- 58

ASSIGNMENT
A. Project Management and Overview.

Ques1. Define Project Management and write down its salient features. Ans1. Every organization steps into the world of business looking to fulfill certain needs of the people. They set certain objectives and the entire workforce works simultaneously in completing the mission. But achieving and accomplishing organizational goals is not an easy task by any means. It requires channelizing all efforts in a single direction by dividing work into projects and accomplishing them one by one. This is where in every field, being it business, entertainment, construction or manufacturing, the most important process is project management. Project management is a process by which an organization plans, organizes and manages resources in accomplishing organizational goals by the application of knowledge, tools and processes.

Features of Project Management:The salient features of project management are as follows:i)

Define the goal to be achieved. ii) Plan how to achieve the goal. iii) Define the resources needed to do the work. iv) Fix the check-points in order to control the risks. v) Control the status of the project and take the necessary actions in order to fulfill the main goal. vi) Evaluate the difference between the output and the goal.

Ques2. What is the difference between a Project and Process? Ans2. Work generally involves either process or project. A Project is defined as: Temporary endeavor undertaken to create a unique product or service. Has a definite beginning and an end. Uses resources. Causes change. Meets pre-established goals for cost, schedule, and quality.

Process can be defined as: Ongoing and repetitive- normal business. Sometimes the product of a project.

Ques3. What do you mean by a Project Life Cycle? Ans3. The Project Management Life Cycle has four phases: Initiation, Planning, Execution and Closure. Each project life cycle phase is described below, along with the tasks needed to complete it. You can click the links provided, to view more detailed information on the project management life cycle.

Initiation

Develop a Business Case. Undertake a Feasibility Study. Establish the Project Charter. Appoint the Project Team. Set up the Project Office. Perform Phase Review.

Planning

Create a Project Plan. Create a Resource Plan. Create a Financial Plan. Create a Quality Plan. Create a Risk Plan. Create an Acceptance Plan. Create a Communication Plan. Create a Procurement Plan. Contract the suppliers.

Execution

Build Deliverables. Monitor and Control.

Closure

Perform Project Closure. Review Project Completion.

B. Risks and Risks mitigating strategies.

Ques1. Define risks. What are the different kinds of risks a project faces? How as a project manager steps you would take to mitigate them. Ans1. The chance that an investment's actual return will be different than expected. Risk includes the possibility of losing some or all of the original investment. Different versions of risk are usually measured by calculating the standard deviation of the historical returns or average returns of a specific investment. A high standard deviation indicates a high degree of risk. Types of Risks in a Project: Risks can arise during the construction phase as well as operational phase which are as follows: Pre completion Phase Risks Planning Risk (Activity) Activity Planning involves delineating Time and resources to basic activities

 Delay in one activity has a major fall out on the other activity Monitored through Gantt Charts Critical Path Method (CPM) Program Evaluation and Review Techniques

Technological Risk Generally Technologies in Infrastructure Projects are tried and tested before implementing.

Construction Risk or Completion Risk May take various forms Force Majeure Completion with costs over-runs Delayed Completion Completion with Performance deficiency This risk is rarely allotted to Lender must be borne by the Contractor or Sponsor

Post-completion Phase Risks Three Major Risks Supply of inputs Performance as per the Project Standards Sale of Product or Services They directly affect the cash flow generation Lower cash flows affect repayment capacity To lenders To sponsors This risk is rarely allotted to SPV or Lender must be borne by the Contractor or Sponsor

Pre & Post-completion Phase Risks Interest Rate Risk

Major risk of interest rates fluctuations indiscriminately affects both the domestic or international projects Construction phase the project does not generate cash flows but, draw-downs attract interest payouts. The higher the debt component the higher the interest burden

Fixed vs. Floating: Since the Cost of Debt is indexed to the base rate then interest rates will be varying Thus Post completion the sustainability lies with operating cash flows as interest rate risk can properly be covered on post completion.

Exchange Rate Risk It arises when some of the financial flows of the company are in foreign exchange. Mainly arises in case of international operations/projects where the revenues and cost are in foreign currencies. Risk coverage is done through currency matching - try to have as many cash flows as possible in domestic currency. Other strategies: Forward Agreement between buyer and Seller Futures on exchange rates Options on exchange rates Currency Swaps Inflation Risk There is a sudden dynamics of cost escalation and cant be passed on due to corresponding increase in revenues.

Typically in Infra Projects the price of supply of goods are predefined for a certain period.

Environmental Risk Typically deals environment with the impact on the surrounding

Impact in the form of: Air, Water, Noise Pollution

Building and operating can damage the Environment. Change in norms can lead to costs. Public Opposition can impact the Project Progress. Regulatory Risk The Permits needed to start a Project The basic concessions for the Projects are re-negotiated The core concessions are revoked

Political and Country Risks

Lack of Government stability Most common types are: Investments Risk Change-in-law risk Quai-political risk: contractual, local, administrative Very important in the developing country scenario could be supported by Government Guarantee Agreements

Legal Risk Majorly impacts the lenders. Domestic vs international International Country Risk Guide Corruption Risk Expropriation Risk for private properties Contract repudiation

Credit or Counter Party Risk Risk mainly associated with all the vendors who enter into contract with the SPV

Off Balance-sheet vs Balance Sheet Financing Here the Credit worthiness is very important to: Contractor Product Buyer Input Supplier Plant Operator

Steps to be taken to mitigate the risks are as follows: Identify Risk Analyze Risk Respond to Risk Document Risk

Risk Containment Clearly define insurance responsibilities in contracts Use qualified personnel Document and communicate project strategy Define roles and responsibilities Prepare contingency plans for critical activities

 Use up-front team building Use qualifies contractors and vendors

1. Pre-completion Phase Risks Activity Planning Technological Construction

Risk Mitigation of the above risks can be done through Turnkey ContractsI

2. Post Completion Phase Risks Supply Risks Risk Mitigation can be done through : (a) Put or pay agreement (b) O&M agreement (c) Off-take agreement 3. Risks Common to both above are as follows: Interest Rate Risks

 Exchange Rate Risks Inflation Risks Environment Risk Regulatory Risks Legal Risks Credit/Counterparty Risks

The Project Manager tries to mitigate the above risks through: (a) Derivative Contracts (b) Insurance Policies

C. Project Selection Process

Ques1. Define Project Appraisal. What are the different types of Project Appraisals? Ans1. Project appraisal is a generic term that refers to the process of assessing, in a structured way, the case for proceeding with a project or proposal. In short, project appraisal is the effort of calculating a project's viability. It often involves comparing various options, using economic appraisal or some other decision analysis technique. In other words, it is the systematic and comprehensive review of economic, environmental, financial, social, and technical and other such aspects of a project to determine if it will meet its objectives.

Different Types of Project Appraisal are as follows: Financial Appraisal Under a financial project appraisal, owners and managers will review the project cost versus the potential revenues generated by the project. This review typically works off a budget, as the company will not desire to overspend on a project. Some alterations to a project may result in higher revenues once the project is complete, however.

Economic appraisals tend to focus less on costs and more on the entire benefit the project brings to a company. For example, assets needed to complete the project add wealth to the company so long as the project does not increase costs over the benefits brought from the asset. Environment Appraisal Economic Sector: State of the economy Overall rate of Growth Cyclical fluctuations Inflation Growth of Primary, Secondary &Tertiary Sectors Growth rate of world economy Trade Surplus and deficits Balance of Payments Government Sector: Industrial Policy Government Programs and Projects Tax Structure EXIM policy Financing norms Subsidies, incentives and concessions Monetary Policy

Technological Sector: Emergence of new technology Access to technological know-how Socio-demographic sector Population trend Age shift in population Income distribution Attitude towards consumption and Investment

Competition Sector: number of firms in the industry and market share of top few. Degree of homogeneity and product differentiation Entry Barrier Availability of substitute Supplier Sector Availability of raw material Cost of energy Cost of Capital

Corporate Appraisal Marketing and Distribution: Market Image Product Line Product Mix

Distribution Channels Customer Loyalty Production and Operations Conditions and Capacity of P&M Raw Material and Power Cost Structure Location Advantage

Following a standard review process will help owners and managers of a company complete project appraisals in a universal manner. The initial assessment will define the objectives of the review and what the companys management team expects to see during the review process. If using an outside team to help complete the appraisal, owners and managers will discuss the review process at this time. Defining problems is another essential step during a project appraisal. Companies may combine this step with the initial assessment if they expect to find problems with the project. Problems can result from unexpected issues that arise during the project or factors external to the company that reduce the opportunity for succeeding at the project. This project appraisal phase also works in tandem with developing options to correct the problems. Companies with multiple projects going on at one time may experience a number of issues regarding the inability to allocate scarce assets for proper project completion. Correcting problems

related to projects will ensure the company meets any internal or external deadlines. The project appraisal may also generate suggestions to improve the project. Hiring external individuals to review the project will often result in better, unbiased opinions on project improvement. Companies may also base employee bonuses on the project process and how well the employee performs or meets stated guidelines.