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Risk Management Strategies Used By Corporations

Question

Task: In this assessment in Part A students are asked to imagine they have been engaged by Apple (Apple Inc APPL) (or a similar technology company) to develop a report on key aspects of project risk management and how they might be used in proposed future projects in order to manage and limit risk.

In Part B you are asked to conduct a capital budgeting analysis for the Apple Corporation.

PART A: Imagine you have been engaged by a technology company to develop a report on key aspects of project risk management. Please chose a company in the technology sector (based anywhere in the world) and write a report to address the below areas. The report should begin with a short executive summary and conclude with several, short general recommendations. The content you include in the report should link the project management principles detailed above with the practices of the technology company you have chosen.

The topics on which students need to make recommendations in their report include:

  1. Project selection – How should the company you select determine what projects to undertake and what ones to avoid? What tools, measures, and practices are available to project analysts in this industry?
  2. Cost management – What is the role of project cost management for your chosen company? Why is it important? What strategies or approaches should the company you have chosen adopt in order to effectively manage project costs?
  3. Funding – What funding measures or options are generally available to assist companies like the one you have chosen to fund proposed new projects? The report should include reference to any implications associated with different funding types or models
  4. Implementation and winding up – Are there any particular issues associated with commencing a project that your company must consider? Why are they important? Who do they impact or affect? What happens when the project finishes? How are projects wound up? Do they just end or are there resource or infrastructure considerations? Are there environmental issues associated with the end of a project?

Part B: The project is funded only using ordinary shares which have a required return of 10%. So the cost of capital is 10%.

  • What are the FCFs for this project?
  • What is the NPV of this project?

Answer

Executive summary
In the following report, certain evaluations will be made upon the operational, funding and cost management of the entity. With this regard, the key focus of the report has been implemented upon the risk management curriculum on the basis of several challenges emerged from these issues. With this regard, certain considerations have been taken into consideration where the costing and operational efficiency have been prioritized on the basis of the profitability of the entity.

Introduction
In terms of the success of any projects, the management principles are being taken into consideration in this regard where the work is being underpinned ethically. Under the principles of project management, the concept of risk management is being taken under utter consideration. In order to evaluate its key significance, the evidences of Samsung will be taken into consideration where the project selection, funding, cost management and implementation of several risk management procedure will be taken into consideration. The company was situated in 1938 and since then, a revolutionary success has been observed by the management of the company. The entity has been engaged with several industries such as electronics, engineering etc and has a global employee base of more than 3,200000 worldwide (Young, 2016). The following report will be concentrated upon several factors with related to its risk management procedure.

Part A
Project Selection: The key consideration of Samsung Company related to its choice of project is related to offering the customers the products with best features within the value of money. In this respect, feature, efficiency and price is being taken into consideration (Weber, Alfen and Staub-Bisang, 2016).

The key area for enhancing the efficiency of the entity is lies within the price and features of the entity. In this regard, for each projects taken into consideration by the company, the market efficiency has been prioritized by the management where the market efficiency with regards to the production, promotion and distribution has been emphasised by the management (Yang, Lan and Zhao, 2017).

In terms of gaining the efficiency, the company has considered the tool which is being used in order to provide the customers best features within a reasonable price. In this respect, the company has aimed for delivering the best prices by which, it can gain competitive advantages in terms of its competitors (Wang, 2015).

The features of the devices whether it is a mobile phone or a refrigerator, the quality has been aimed to improve over the period of time where the management has always tried to provide some more features on their sales of the products on the basis of its competitors in this respect. With this regard, the company has been given to its customers the utmost features while maintaining the quality of the device.

With regards to the project selection procedure of the company in this respect, three major considerations are being taken into mind in this regard. First of all, the efficiency of the project can never be compromised in this regard with respect to the key operations of the entity. Along with this, in terms of the flagship phones or the budget phones of the company, a continual attempt have always been made in this respect with regards to the development of the features always been provided in this respect (Vanclay, 2017). Beside this, it has also been taken into consideration about the fact that the company should also provide the items in terms of sustainable price so that it can incur more of the market due to its operation.

Cost management: In terms of gaining the cost efficiency, the management have taken into consideration certain key factors such as the controlling operations and the safety and quality standard of the goods. In this respect, the controlling operations are being taken into consideration on the basis of the operations which are being performed in order to ensure that all the standard cost assumptions which were taken by the cost manager into consideration are being implied into the project operations (Sadgrove, 2016). In this respect, the key concern of the manager lies upon the fact that whether the individual departments can be efficient enough in terms of managing the production procedure within the budgeted cost.

In terms of gaining the cost efficiency, the management have taken into consideration certain key factors such as the controlling operations and the safety and quality standard of the goods. In this respect, the controlling operations are being taken into consideration on the basis of the operations which are being performed in order to ensure that all the standard cost assumptions which were taken by the cost manager into consideration are being implied into the project operations (Sadgrove, 2016). In this respect, the key concern of the manager lies upon the fact that whether the individual departments can be efficient enough in terms of managing the production procedure within the budgeted cost.

These two procedure of the cost management program of the entity helps to maintain the inflow and outflow of the entity along with the pre-estimated cost budget of the organisation. By taken into consideration related to the budget of the entity, the project management can ensure certain facts related to the allocation of additional capital to a specific operations (Ogunsanmi, 2016). With this regard, the management of NPV of the organisation is being taken into utter consideration in this respect where the cost management is an integral part of the project operations of the entity.

With this regard, certain recommendations can be implemented in this respect so that it can enhance the cost efficiency in the project during their operations.

In terms of the labour costs of the entity, it has been seen that when comparing to its competitor, the company pays a much lower wages to its labours measured at 27.3%. In this regard, the company is unable to compete with its key competitors in terms of the human resource development. Due to such concern, the company needs to invest more on its human resources in terms of providing incentives to its employees for better management of the labour cost efficiency.

It has also been measured that the depreciation cost of the entity is also little higher than its key competitors. In this regard, the costs have been estimated as 17.7% higher than its key competitors. With this regard, the management needs to cut of certain depreciation provisions so that the cost efficiency of the operations of the entity can be enhanced.

In terms of providing the prices to the customers, the estimated reduction has been measured as 34% for the company. In this respect, the management can launch certain DRAM programs with regards to gaining certain competitive advantages with regards to its competitors (Minnis and Sutherland, 2017).

Funding: In a commercial project, managing the capital funding is one of the key tasks for the project management. In this respect, in order to maintain the cash inflow of the organisation, the equity funding and the debt funding is being taken into consideration in order to initiate and complete the project.

The first major consideration in accordance with this funding is the equity. In this regard, in order to generate capital resources in the IT sector, the equity funding is given the most priority due to its availability and less liability upon the project managers (Kerzner, 2017). In this regard, the distribution of the earning is dependent upon the profits made by the entity and apart from this, in case certain losses are incurred in the business entity, the amount of return can be variable with this regard. in order to generate adequate capital resources and inject it to the operations of the entity, certain amount of shares are being issued by the entity and these shares are being sold in share market among the shareholders of the company and the profits or the interest upon the investment of the shareholders are being divided on the basis of the net profit of the company. Such dividend policy of the company is quite flexible so that it can be modified in terms of the capability of the company to generate revenue.

In terms of the generated profits of the company, there are certain considerations which are needed to be taken into consideration in this respect. First of all, the entity does not have to compulsorily pay to the investors in case the company does not make any profits. Apart from this, the shareholders also obtain certain suggestion making rights which enables them to vote for the decision making procedure of the company (Hopkin, 2018). Beside this, it also does not add any further burden to the management in terms of their liability. Along with this, in terms of the direct association with the profitability of the company, no significant impact can be seen in this respect.

Debt financing is another key part of the financing of the organisation which is being taken into consideration in terms of generating the payments on the basis of the procurement techniques of funding. In this respect, certain funds are being collected from the debtors as the debt finances and the company is liable for paying the debt irrespective of the profitability of the company (Heldman, 2018). Apart from this, in case the company is unable to provide certain distinguished finances along with the interest, certain penalties can be implicated upon the operations of the company.

The key considerations of debt financing are that, it helps the company to gain sufficiency amount of debt capital and inject it to the operations of the company. Apart from this, the obligations incurred by the company in terms of the debt financing are one of the key considerations which creates certain pressure upon the management and the operations done by it (Haz?r, 2015).

Implementation and winding up
In terms of the implementation of the taken strategies, there are two major challenges which can be a burden to the project management procedure. In this respect, these challenges are, risk management and insufficient skills (Acharya, Mehran and Thakor, 2016). The first considerations related to the risk management is associated with the huge amount of projects incurred by the management and certain risks such as competitive, production and market risks associated with it. On the other hand, the risks related to the insufficient skills signify the key challenges associated with the training of the employees or development of the newer technologies in the workplace.

In terms of managing a project, certain key considerations can be implied in this given respect. First of all, in order to ensure efficient performance of the company by the management, certain trend analysis is needed to be done in this respect in order to evaluate the most suitable strategy for such operations (Hall, Mikes and Millo, 2015). Along with this, certain competitive advantages can also be obtained in this respect with such implementations.

When the production procedure of the company is being completed, the warehousing and delivery facility of the entity is being considered. In this respect, certain strategies related to the storage and deliverance of the product is being considered where the rendering of the product is considered (Cagliano, Grimaldi and Rafele, 2015). With this respect, the human resource of the management is being considered in terms of the completion of the operations where their efficiency is subjected to meet the targets for the entity.

Along with this, certain infrastructural development is also required for the advancements of the project in this respect. First of all, the infrastructure such as the data center is very crucial (Adrian, Covitzand Liang, 2015). In this respect, the cooling, power and building elements are being taken into consideration where the data storage, servers, switches and systems are being implemented and developed. Along with this, the security for all these assets is also required to be thoroughly scrutinized.

Technology is another inseparable factor for the production of the electronic products for the company. In this respect, the advancement in technology gives the company certain edges in terms of their competitive advancements (Brustbauer, 2016). These implementations of the technological factors help the company to enhance the efficiency in operations as well as increase the satisfactions of the customers.

Along with this, certain impacts of the economic, environmental and social environment can also impact the business of the entity with regards to the overall outcome of the project.

Part B
FCFs for the project: The FCF for the period of the investment is -6.3. 1st period FCF is 0.792. 2nd period FCF is 0.792. 3rd period FCF is 0.792. 4th period FCF is 3.092.

NPV for the project: The NPV of the project is determined in terms of measuring the tendency of cash flow for a company due to its operation. In this respect, a negative result of -2.2 has been estimated in this respect which signifies that the company is more likely to generate cash outflow than the inflow of cash (Burtonshaw-Gunn, 2017). With this regard, certain evaluations related to the profitability of the project can be made where it signifies less profitability during its upcoming operations till the completion of the current projects.

Decisions on investment: With regards to the decisions on investment for this particular project is concerned, the company should not consider this project for their upcoming operation due to the fact that there are risks for lower profitability or even of gaining loss from the project. Despite the fact that a positive NPV has been measured in this regard, the international rate of return is very low. Thus, the project will be able to generate a very lower amount of profits due to their upcoming operations. A higher capital will be required for the project and the outcome will be insignificant in terms of the investment (Block et al. 2018). Along with this, a very high probability of cash flow has been observed in this respect where such project will be unfruitful for the company.

Funding decisions: In terms of generating the funding for the company, it is required to generate ordinary shares through its operations. With such implementation, the company will be less obliged due to the fact that there is higher probability of incurring certain losses due to the projects.

Along with this, if the company considers generating the capital funding thorough debenture financing, it will be less effective for the operations of the company. On one hand, the calculated NPV of the company have been shown a negative impact over the operations of the company (Angeloni, Faia and Duca, 2015). Beside this, there are chances that the entity will be less likely to generate the desired cash flow in terms of the expenses incurred by the company.

Conclusion
In the ending statement of the report, certain considerations are needed to be made in this respect. First of all, certain issues can be emerged in terms of the cost management with regards to the labour costs of the entity. Apart from this, debt financing can also be a major issue for allocating the capital funding for the entity. Beside this, the natural calamities can also be influential for the profitability of the company. Certain other considerations can also be emerged in this respect in case of obtaining the incentives for the research and development program for the project. In terms of contingent liabilities of the company can also be emerged in this respect with relation to the cost management of the entity. Risk Management assignments are being prepared by our online project risk management assignment help experts from top universities which let us to provide you a reliable assignment help online service. ?

Reference List
Acharya, V.V., Mehran, H. and Thakor, A.V., 2016. Caught between Scylla and Charybdis? Regulating bank leverage when there is rent seeking and risk shifting. The Review of Corporate Finance Studies, 5(1), pp.36-75.

Adrian, T., Covitz, D. and Liang, N., 2015. Financial stability monitoring. Annual Review of Financial Economics, 7, pp.357-395.

Angeloni, I., Faia, E. and Duca, M.L., 2015. Monetary policy and risk taking. Journal of Economic Dynamics and Control, 52, pp.285-307.

Block, J.H., Colombo, M.G., Cumming, D.J. and Vismara, S., 2018. New players in entrepreneurial finance and why they are there. Small Business Economics, 50(2), pp.239-250.

Brustbauer, J., 2016. Enterprise risk management in SMEs: Towards a structural model. International Small Business Journal, 34(1), pp.70-85.

Burtonshaw-Gunn, S.A., 2017. Risk and financial management in construction. Routledge.

Cagliano, A.C., Grimaldi, S. and Rafele, C., 2015. Choosing project risk management techniques. A theoretical framework. Journal of Risk Research, 18(2), pp.232-248.

Hall, M., Mikes, A. and Millo, Y., 2015. How do risk managers become influential? A field study of toolmaking in two financial institutions. Management Accounting Research, 26, pp.3-22.

Haz?r, Ö., 2015. A review of analytical models, approaches and decision support tools in project monitoring and control. International Journal of Project Management, 33(4), pp.808-815.

Heldman, K., 2018. PMP: project management professional exam study guide. John Wiley & Sons.

Hopkin, P., 2018. Fundamentals of risk management: understanding, evaluating and implementing effective risk management. Kogan Page Publishers.

Kerzner, H., 2017. Project management metrics, KPIs, and dashboards: a guide to measuring and monitoring project performance. John Wiley & Sons.

Minnis, M. and Sutherland, A., 2017. Financial statements as monitoring mechanisms: Evidence from small commercial loans. Journal of Accounting Research, 55(1), pp.197-233.

Ogunsanmi, O.E., 2016. Risk classification model for design and build projects. Covenant Journal of Research in the Built Environment, 3(1).

Sadgrove, K., 2016. The complete guide to business risk management. Routledge.

Vanclay, F., 2017. Project-induced displacement and resettlement: from impoverishment risks to an opportunity for development?. Impact Assessment and Project Appraisal, 35(1), pp.3-21.

Wang, Y., 2015. Evolution of public–private partnership models in American toll road development: Learning based on public institutions' risk management. International Journal of Project Management, 33(3), pp.684-696.

Weber, B., Alfen, H.W. and Staub-Bisang, M., 2016. Infrastructure as an asset class: investment strategy, sustainability, project finance and PPP. John wiley & sons.

Yang, K., Lan, Y. and Zhao, R., 2017. Monitoring mechanisms in new product development with risk-averse project manager. Journal of Intelligent Manufacturing, 28(3), pp.667-681.

Young, T.L., 2016. Successful project management. Kogan Page Publishers.

Risk Management Strategy Assignment


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