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Abstract
Dubailand is one of the mega that Dubai Holding has ever taken over the past decade. Initiated in 2003, it faced financial constraints that forced the company to halt operations in 2008. The company has sourced the needed funding and the project is currently underway. The study focused on identifying risks that the project faces and the way the management of the company can address them. The finding shows that inflation, natural disasters, and occupational risks are the main threats that the project faces. The study has identified ways in which these risks can be managed to ensure that the project is completed by the end of 2020 as scheduled.
Introduction
In the business arena, companies are often confronted with risks, which may have devastating impacts on their operations and existence. According to Chapelle (2019), it is not possible for a firm to avoid risks in the market. One of the main characteristics of risk that makes it impossible to avoid is unpredictability. The management may not know exactly when it will occur, its magnitude, and the impact it will have on the organization. However, Sadgrove (2015) argues that some practices and decisions made by different stakeholders may increase or reduce the probability of a risk occurrence. Some of the riskiest decisions that a firm may take maybe the most profitable because most competitors avoid them.
The concept of high-risk high return has become popular among some firms that have the capacity to explore new ventures. However, Chapelle (2019) warns that when taking any risk, it is important for the management to ensure that it will not have a devastating impact on the existence of the firm. Measured risks are necessary as they help in ensuring that operations continue in case a disaster occurs (Ielasi, Rossolini & Limberti 2018).
In this paper, the researcher seeks to explain the concept of risk, discuss the importance of risk analysis and management, and outline how a risk management strategy can be constructed for the Dubailand project. The goal is to empower Dubai Holding, the developer of this mega project so that its management can understand the risks the firm faces in this project and how to deal with them effectively.
Understanding the Concept of Risk
Defining the Concept of Risk and How it Can Be Managed in Different Projects
The Dubailand is a megaproject that the Dubai Holding Group is expected to complete by the end of the year 2020. However, the project faces numerous risks that may affect its cost and the time within which it will be completed. It is important to start by defining the concept of risk. Pal and Ghosh (2018, p. 56) define risk as A threat of damage, injury, liability, loss, or any other probable negative occurrence that is caused by external or internal vulnerabilities, and that may be avoided through preemptive action. As shown in the definition, the risk is anything the occurrence of which may have a negative impact on the project (Allen & Luciano 2019).
One cannot predict when it will occur, but measures can be taken to reduce the probability of its occurrence and the impact it would have on the firm. Sometimes it may be caused by internal weaknesses within the firm while in other cases it may be because of external forces. The Dubailand project faces numerous risks such as cost inflation, natural disasters, structural mistakes, design mistakes, and occupational risks among workers in this project. It is critical to risks in both small and large projects, as discussed in the sections below.
Critical Analyses the Projects Risks
The management of Dubai Holding has to understand each of the risks that may affect the implementation of this mega project. As mentioned above, one of the main risks that the management should be ready to address is the inflation in the cost of the project. This project was unveiled in 2003 with an estimated budget of $64.3 billion (Balakrishnan et al. 2017). However, the global economic recession and Dubai financial crisis affected its implementation and all activities at the site stopped in 2008. Dubai Holding managed to raise funds and activities resumed in mid-2013 (Balakrishnan et al. 2017). However, it is important to note that the time factor has inflated the overall cost of the project, and the risk still exists. The cost of labor is also rising, and the management has to develop ways of addressing such concerns.
Natural disasters pose a serious threat to the project and the management would need a proper intervention plan. Earthquakes, tropical storms, floods, and landslides may not be frequent in the country but they have been witnessed within the past 20 years. An event like a landslide or earthquake may cripple the project and destroy most of the already developed structures (Cruz-Rambaud & Sanchez-Perez 2018). Floods and tropical storms may also have varying impacts on the project depending on their magnitude. The management should understand that these are real threats that can occur at any time. The problem with natural disasters is that a firm cannot precisely determine the time of their occurrence and the magnitude of their impact.
Occupational threats should also be taken into consideration when identifying risks that the project faces. It is the responsibility of the management to ensure that everyone working on this project is protected from any physical or emotional harm (Eckert & Gatzert 2019). The state has rules and regulations that require all firms to ensure the safety of their employees at work. The problem is that in the construction sector, workers are often subject to numerous risks such as falling debris, sharp objects, or prolonged exposure to harmful substances. When an employee sustains a serious injury or loses their life when at work, the firm may be required to pay for the damages, a situation that may further inflate the overall cost of the project.
How It Can Be Measured and Ranked
When the management has acknowledged the possibility of the occurrence of various risks, the next step is to classify them effectively. The classification makes it possible for the management to know how to plan for the intervention. According to Artikis and Artikis (2015), a firm can use three main ways to classify risks. The first strategy is to use the probability of their occurrence. In this case, risks that are more likely to occur would be ranked higher than those that are less likely to occur. The goal is to ensure that the management gives focus to managing the risks that are more likely to occur. The second strategy focuses on the magnitude of the risk.
Events whose occurrence may have a devastating impact on the project are ranked higher than those that have a minimal impact. The third strategy is known as the weighted approach, which combines the above two approaches. Each of the risk factors would be assigned a value based on the above two matrices and then ranked based on their score, as shown in the table below.
Table 1: Ranking the Main Risks That the Project Faces.
As shown in the table above, the risks have been measured by two parameters, the likelihood of occurrence and the magnitude of the impact. The table shows that at the top of the list is the problem of inflation. The management of Dubai Holding will need to give it a priority when developing a risk management plan. Natural disasters come second, while occupational risks come third. It is important to note that while this study has identified three main threats, other concerns may emerge that the management would have to address.
How a Project Risk Management Strategy May Be Constructed For a Project
When risks are identified and appropriately ranked, the management should then develop a risk management strategy for each of the issues. All risks should be insured irrespective of their magnitude and propensity of occurrence (Knewtson & Qi 2019). The strategy may increase the overall cost, but it gives the firm an assurance that even if a major disaster occurs, such as an earthquake, the project will continue. This strategy is particularly effective when dealing with external risks that the firm cannot control. The management can also develop its own internal mechanisms to deal with accidents and other issues within the firm. Having these strategies not only reduces the probability of occurrence but also makes relevant stakeholders aware and prepared in case they occur.
Importance of Risk Analysis and Management
Risk analysis and management are critical for any project, irrespective of its size or the time it will take to be completed. According to Chapman (2014), one of the main reasons why most projects are canceled before being completed is the lack of a risk assessment plan. Failing to know risks that a given initiative may face means that when they occur, such a firm will not have a proper way to respond. It will be impossible to deal with such unfortunate events, and the firm will be forced to stop the project (Chapelle 2019). Dubailand almost faced a similar problem when activities were suspended for five years because the management of Dubailand had not anticipated the occurrence of the financial crisis witnessed in 2008. The analysis reveals issues of interest to the project, which enables the management to develop a reliable management plan of action.
How Appropriate Practices Can Assist In Minimizing Risk for a Project
Appropriate practices can assist in minimizing risks for a project in a significant way. Each of the identified risks would require appropriate practices to minimize the possibility of their occurrence. Occupational risks are often avoidable, as Chapman (2014) observes. One of the appropriate practices that can minimize this risk is to ensure that all stakeholders working at or visiting the site wear appropriate protective gear.
Debris should be cleared from construction sites within the shortest period possible, especially those that pose risks to the workers. The management should develop a code of conduct for all the employees to ensure that they do not engage in activities that may put their lives at risk. Having strict policies that effectively eliminate theft and wastage of resources in this project can help Dubai Holding to lower the cost.
According to Chapelle (2019), although it is not possible to predict when a natural disaster will strike, it is possible to embrace practices that will minimize the associated risks. Drilling has become a common practice to help employees understand how to respond to natural disasters. For instance, when there is an earthquake, workers should know places to avoid and how to move to safe places as soon as possible. They should not panic because they may make mistakes that can put their lives and that of their colleagues in danger. Timely completion of tasks is also important because it affects the duration of the project. If each task can be completed within the set duration, then Dubailand will be completed by the end of the year 2020 as scheduled.
The Research Origination of These Practices
Different scholars have researched the practices discussed above and their effectiveness confirmed. The appropriateness of drilling as a way of preparing people to cope with natural disasters has been confirmed by several studies (Aven 2015). Knowing how to respond to earthquakes, floods, cyclones, and landslides can save lives. Before professional medical assistance arrives, it is important for one to know what to do.
Managing pilferage is another issue that has attracted the attention of many scholars. Chapelle (2019) explains that one of the main factors that often increase the cost of a project is the theft of resources by employees and those in management positions. It was also evident that other issues such as timely completion of projects, elimination of dangerous debris in the worksite, and proper assignment of responsibilities have also been researched in terms of their relevance in minimizing risks for a project.
Review and Application of Risk Theories
The concept of risk management has attracted the attention of many scholars who have developed different models of understanding and dealing with it. According to Sadgrove (2015), reviewing theories of risk management makes it possible to understand the rationale of some of the popular ways of dealing with different threats in the environment. Dubailand is one of the most important projects for Dubai Holding and the country at large. As such, the management should understand how to protect it from various threats that may affect its completion. Reviewing theoretical models that have been used in different contexts may help the management to address these issues. Reflexive modernization and Risk society are theories that may help define ways of dealing with this problem.
Theoretical and Practical Risk Management Strategies
Reflexive modernization, also known as reflexive modernity, is one of the popular risk theories of the 20th century. Developed by Ulrich Beck, Scott Lash, and Antony Giddens, this theory focuses on various social issues, including the rise of human-made dangers in modern society (Chang 2017). One of the issues that this theory talks about is the life choices that people make and the subsequent impact. Based on the researchers experience, choices that one makes, especially if they are in managerial positions, affect the success of a project significantly. In the current globalized society, a firm may take different strategies when undertaking a major project. Best practice has become a common tool that companies are using to define their operations.
In this context, the management can make a choice to embrace a model used by other similar projects in the country or in other parts of the world to enhance efficiency and lower the overall cost of the project. Best practices are important because the management of Dubai Holdings will not have to spend on inventing a new effective method of undertaking this project. Instead, it will use models and practices that have been tested to be effective in delivering value (Aven 2015).
As explained in this theory, the management needs to realize that in the current globalized society, it should not be limited to local practices when implementing the project. As a way of overcoming the numerous risks that the firm faces, it can make the decision of following a path that is less risky.
Risk society is another theory that is relevant when discussing risks that the Dubailand project faces. According to Mythen (2014), the theory involves a systematic manner of addressing risks and insecurities associated with modernization. Authors of this theory argue that modernization has created many hazards as people look for comfort in a way that upsets nature. These events have led to the realization that it is important to manage various risks as a way of protecting the future. This theory emphasizes the need to embrace dynamism when undertaking activities. This philosophy of dynamism would be crucial when managing risks that the project faces. The management of Dubai Holdings must appreciate that a lot has changed in the construction sector since the project was initiated in 2003.
Technology has become a critical tool that helps in the planning, execution, and assessment of projects. Effective use of technology may reduce many risks in the project. For instance, most of the occupational risks can be eliminated at construction sites when technology is used. Chapman (2014) explains that modern construction tools have eliminated the need for human labor in undertaking some risky tasks. Technology can also be used to make various tasks less risky. One of the ways of managing the risk of inflation is to ensure that the project is completed within the shortest time possible. Using modern construction tools and approaches, Dubailand can be completed earlier than the current schedule. Technology would also be a critical tool in managing the various natural disasters discussed above.
Conclusion
Dubailand is one of the most ambitious projects that Dubai Holding has ever taken. Once completed, it will transform this city and attract more tourists. Initiated in the year 2003, this project has taken longer than was expected because of the financial constraints that it faced. Now that it is back on course, the management of Dubai Holdings should manage other risks that may make it difficult to complete it within the set schedule. The study has identified natural disasters, cost inflation, and occupational risks as the main issues that the management should address. It is evident, from the study, that classifying and ranking these risks makes it possible for the management to understand how to prioritize each of them when developing a management plan.
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