Question

At corporate (business) organization level projects could be divided into broad two phases, the construction or development phase and operational or commercialization (commencement of operations) phase, therefore the project risk management process shall cover both phases of the project to ensure organization success. In this regards explain your own comprehension on the following points;

1. Project risk during construction phase (what type of risk will be assessed during this phase)
2. Project risk during operational or commercialization phase, (what type of risk will be assessed during this phase)
3. Which phase of project risk will be carrying higher weight (importance) for an organization, and why would you think so (give rationale).

Answer 1

During the construction phase, project risks include schedule delays and cost overruns, while the operational phase focuses on commercial and financial viability risks. The importance of each phase's risks varies, but operational risks may be more critical due to their impact on long-term profitability and sustainability.

Step-by-step explanation:

Project Risk During the Construction Phase

The construction or development phase of a project faces various types of risks, such as schedule delays, cost overruns, contractor disputes, and technical challenges. During this phase, project managers assess these risks to ensure timely and within-budget completion of the project's physical or conceptual development. Effective risk management strategies are crucial to mitigate potential issues that may arise from unexpected events or miscalculations.

Project Risk During the Operational or Commercialization Phase

Once a project moves into the operational phase, the risks shift towards commercial and financial viability. This includes market demand assessment, revenue projections, operational costs, and maintenance considerations. The focus is on achieving the expected rate of return and maintaining profitability while navigating market fluctuations, competitive pressures, and evolving customer needs.

Relative Importance of Risk Phases

The importance of risk during the construction and operational phases can vary based on the nature of the project. However, commercialization phase risks may carry a higher weight due to their direct impact on the organization's long-term success and the actual rate of return. Factors such as market dynamics, regulatory changes, and technology advancements can significantly influence the sustainability and profitability of the project over time.