We expect to see growing awareness and utilization of risk and value management locally as economic pressures continue and access to capital is constrained. The benefits will steadily become more visible in the region, already spearheaded by inward investor companies who are accustomed to using this approach internationally. The ethos of best practice is also becoming more relevant and more aspirational in Singapore and this again supports the use of more formalized processes.
So what benefits does risk and value management bring?
Risk management provides the confidence that project executives frankly yearn for when committing large sums of monies to a project or when broadcasting opening dates for their new projects to the wider public.
Value management ensures that what is delivered is shaped to provide best value in terms of fulfilling the vision that led to the inception of the project in the first place.
Risk management at its highest level follows a standard approach which is:
- Manage risks
Experienced clients however utilize best practice risk management tools and are therefore able to maximize confidence in the cost and schedule. Faithful+Gould provides Quantitative Cost Risk Analysis (QCRA) and Quantitative Schedule Risk Analysis (QSRA), enabling informed decisions on budgets and programmes that ultimately help secure funders’ buy-in to the business case.
What do these models provide?
QCRA models help clients establish efficient division and allocation of monies to each project in the portfolio. More efficient resourcing may mean a further project can be added to the programme, to further the client’s profitability.
Using a standard percentage contingency will not enable the programme budget to be optimized in this way. QSRA, on the other hand, helps clients shape their plans for delivery, providing an early identification of measures needed to de-risk the project.
The confidence levels for cost and schedule can then be presented as 50% or 80% etc. Essentially this identifies the likelihood of the cost or date being exceeded.
QSRA successfully used
Faithful+Gould has provided QSRA for organizations in a variety of sectors. For example, on a retail development in Scotland we advised on the likelihood of delivering a major new retail centre by their advertised date. Leases were being agreed date but our analysis attributed low confidence levels to achievement of the completion date. By working with the client and the contractor, we helped re-sequence future activities and target specific areas of works early. We identified the key risks that caused the low confidence levels and thereby helped the client deliver the centre as planned.
We also provided value management services, helping develop the client’s identification and understanding of the corporate values sought through the project’s delivery.
On a major new corporate headquarters in China, we provided a QCRA function to help identify the budget needed to achieve an 80% confidence level on costs. We also provided value management services, helping develop the client’s identification and understanding of the corporate values sought through the project’s delivery. This helped identify areas of cost savings to reduce the overall budget whilst maintaining high confidence levels.
Corporate real estate developers and portfolio holders in the region have yet to fully embrace this discipline, but the seminar participants were keen to find out more and to consider how this could help their own organisations and/or clients.