Risk Management Essay - 1734 Words

RISK MANAGEMENT ESSAY The following essay has been written by analyzing the risks associated from the construction managers/ project managers’ point of view. Citing the possible risks associated while working on international or varied geographical location. Risks are associated with almost all levels of the project life cycle and is mutually shared and mitigated by all parties employed within the construction industry. There are many evidences to state that poor risk mitigation leads to poor performance and hence establish risk management processes and practices are required to be adhered to in order to turn any project’s outcome into a success. The 2000 edition of the Guide to the Project Management Body of Knowledge (PMI,2000) states†¦show more content†¦New entrants who set up similar projects may have access to long term loans at the prevailing rate of interest which may be cheaper. In such a situation, projects that were implemented with high cost borrowings will find it difficult to compete with the new entrants. On the other hand if the interest rate increases in the future, the interest on working capital finance (which normally carries a floating interest rate) increases which will result in lower profit margins than estimated at the time of project appraisal. interest rate risks can be managed to some extent by entering into interest rate hedging agreements like ‘interest cap’, ‘interest swap’ etc. 13 | P a g e ï‚ · EXCHANGE RATE RISK Exchange rate risk, also called as ‘currency risk’ is the risk arising from currency fluctuations. Volatile exchange rates can reduce cost and productivity advantages gained over years of hard work. Firms exposed to international economy face this risk. When a firm has already committed to a foreign currency denominated transaction, the firm is exposed to a exchange rate risk. 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