Risk Management Processes - Thomson Morgan Associates - Case Study Example

Running head: Business Case Student name: Student number: Course title: Lecturer: Date: Contents Contents 2 1.0 Introduction 1 2.0 Business Objective, aim and goal 1 3.0 Current Situation and Problem/Opportunity Statement 2 4.0 Critical Assumptions and Constraints 3 5.0 Analysis of Options and Recommendation considering the PESTLE theory and model 4 6.0 Preliminary Project Requirements 5 7.0 Budget Estimate and Financial Analysis 6 9.0 Potential Risks 6 Exhibit A: Financial Analysis 7 References 8 1.0 Introduction Thomson Morgan Associates, which is an Architectural Design and Management institution, had been consulted to develop Design and Access statement for the property located at 6 Queenstown Road, Battersea, London, SW8 3RX. The statistics about the usage of the building cannot be accurately ascertained; however the building has been rented to a Chemist which has been utilizing for the last five years. The property is however in a state of serious disrepair, yet it is strategically located adjacent to local shops and transport connections, and as well it is near the Battersea Park and Queenstown Road while the bus routes stop adjacent to the site, hence being a vital location for business location (Jones & Mohammed, 2003). The building is an old design and in a state of disrepair hence exposing the residents to risks and lack of comfort, however the building is a listed building since it is of particular architectural merit, hence placed in Statutory List of Buildings of Special Architectural or Historic Interest. The property requires special permission from the local planning authority for it to be demolished, extended or altered. Moreover, legal and regulatory requirements can be used to compel the owner of the building to repair and maintain it, and can be prosecuted if they perform unauthorised alterations or fail to repair and maintain as required. The ultimate solution to make the building usable is therefore through renovation, without making adverse alterations to the structure and the design of the property. 2.0 Business Objective, aim and goal The aim and goal of the project is to develop the most strategically significant utilization of the property owned by the company, so as to reap optimal benefits, financial, social or otherwise. The strategic objective of refurbishing the building is to ensure that the building is made reusable, while attaining strategic competitive advantage of the fact that the building is listed, to ensure that the building is then used for an activity, which results to maximum economic, social and environmental benefits. Moreover, the business objective is to utilize the current building, without demolishing and constructing a new building. This enables the company to use fewer resources to refurbish the building, while maintaining the artistic value of the property. This results to realization of higher income in terms of rent, while keeping the building as a souvenir. Moreover, the refurbishment of the building benefits the company in terms of council grants of £30,000 for two flats, moreover the company shall benefit from renting the building to the council for three years, hence the company realizing multidimensional benefits in terms of rent, grants, maintain the building as a listed building while making the property usable and attractive. 3.0 Current Situation and Problem/Opportunity Statement The current situation is that the building has not been economically viable to the company. The entire property has been rented to a Chemist in the last five years; however the Chemist has not been paying good rent, considering that the property has been in a deplorable state, and the flat has been empty. Accordingly, several parts of the property have depreciated such as in the Basement level, there is need to repair and refurbish the staircase to ground floor level, there is need to retain, repair and restore all doors to original condition, skim all walls, provide heating, ventilation and lighting as well as maintain the timber works. At the ground Floor level, there is need to fully refurbish the existing windows, Bedroom, as well as plumbing, drainage and ventilation, having been left unutilized for some time, the building fails to meet legal and regulatory requirements, such as the building code. There is however and opportunity in terms of grants from the council, as well as reduced taxation, combined with the opportunity of the council to rent the property. 4.0 Critical Assumptions and Constraints There are several occurrences’ which were presumed to be true in the project. Considering that the property is a listed property, input from several regulatory agencies is of paramount importance. In the project, it is presumed that the legal and regulatory requirements demanded for listed buildings have been satisfied. This includes, satisfying the Planning (Listed Buildings and Conservation Areas) Act 1990, the requirements of the council, and other stakeholders such as the Department for Culture, Media and Sport (DCMS), Department for Communities and Local Government (DCLG) and the Department for the Environment, Food and Rural Affairs (DEFRA). It is also assumed that all the concerned participants in the refurbishment of the building have been identified and engaged, such as the contractors and the suppliers. It is also assumed that the council shall avail, the required grants on time, and that the exogenous factors, shall not alter the schedule of the project significantly. 5.0 Analysis of Options and Recommendation considering the PESTLE theory and model There are various options and strategies that could be utilised by the company as regards the utilization of the building. These options were developed considering the PESTLE theory and model, in terms of Political, Economic, Sociological, Legal and Environmental constructs relating to the renovation of the building. 1. Considering that the property is in a state of serious disrepair, yet the building is a listed building since it is of particular architectural merit, the company can decide to do nothing, so as to maintain the architectural uniqueness of the building. However, considering that the building is worth £ 500, 000, it may not be financially feasible for the company to leave the building to continue degrading (Greer, 2002). 2. The company can also opt to refurbish the building. This involves fixing parts of the building which have depreciated over time such as the floor, the fitted joints, balustrade, heating and plumbing as well as electrical services. This shall maintain the architectural design of the building while also benefiting from government scheme of making the building to be a usable condition, through council grant of £30,000 for two flats and renting out the building to the council for three years. Moreover, this alternative shall not be bowed by the stringent legal and regulatory requirements of listed buildings (Blaine, 2006) 3. The company can also pursue the alternative of bringing the building down and constructing a new building from scratch. Considering that the property is located at a strategic position at 6 Queenstown Road, Battersea, London, SW8 3RX, while it is adjacent to local shops and transport connections, and as well it is near the Battersea Park and Queenstown Road while the bus routes stop adjacent to the site, the company can opt to demolish and construct a bigger building, housing more business space (John & Roy, 2002). However, this alterative is unworthy, considering that the building is a listed building, and the existing rules and regulations bar the listed building owners, from demolishing listed buildings, unless the follow long and rigorous process (Farhad, 2005). Based on the financial analysis, legal and regulatory requirements as well as consultations with the company management, the second option is the most feasible alternative (Harold, 2009). 6.0 Preliminary Project Requirements Based on the analysis of the state of the property, several preliminary project requirements are vital towards successful completion of the project. 1. The property is a listed building, therefore the company has to meet the regulatory requirements, since according to the Planning Act 1990, any building work requires 'listed building consent', which the company shall get from the local planning authority, (Frank, & Ronald, 2001). Considering that the penalties for not subscribing to the act are heavy including unlimited fine and/or up to a 12-month prison sentence 2. The company shall also develop a project timeframe, during which several milestones have to be achieves, such as the inspection of the state of the building, refurbishments of different parts of the building such as the floor, electrical works, plumbing and drainage, fitted joinery, sanitary ware, paintings and internal decorations. 3. The company shall also source for grants from the local authority, and as well seek to sign a lease agreement with the council, so that after completion of the renovation, the company can rent the property to the council. 7.0 Budget Estimate and Financial Analysis It is estimated that the project shall cost a total of £ 188,500 , the costs shall arise from flat roof coverings £ 2,500, preliminary and general requirements such as scaffoldings and site protection £ 21,350, Enabling works demolitions and site clearance £ 17,500, as well as structural timber and general carpentry £ 20,000, plasterboard linings, plastering, rendering and screeding £ 21,100 in addition to joinery, finishing carpentry and glazing £ 50,000. Other expenses shall include floor and wall coverings £ 10,700, decorations £ 18,000, plumbing systems £ 12,150 and electrical systems £ 14,600. These estimates are subject to 20% VAT. 8.0 Schedule Estimate The renovation project is envisioned to take six months. The renovation shall be carried out in stages, with the preliminary stages site clearance being carried out, before the preceding stages. The project shall be deemed complete upon successful installation of decorations and electricity as the last stages, Barry & Robert, (2004). 9.0 Potential Risks There are some risks associated with the project. There exists a risk of injury to the renovation personnel, as well as the risk of the project objectives not being realised (Allan, 2006) and (Graham, 2002). There is also the risk of the contractor not completing the project within the stipulated timeframe. The risks shall be addressed through development of a risk management plan and mitigation strategies beforehand. In order to control the risks, the company has to adopt several strategies which include avoiding the risk, transferring the risk to another party, reducing the negative consequences of the risk, and accepting all or some of the consequences of a particular risk. The company shall also adopt s strategy of developing and implementing risk control strategies, which include engineering controls, administrative controls and having personal protective equipment (George, 1994), Exhibit A: Financial Analysis Year 1 2 3 4 Costs 226,400 0 0 0 Grants 30,000 0 0 0 Discounted costs 196,400 0 0 0 Benefits (Rent) 31,000 31,000 31,000 31,000 Discount Factor Discounted benefits 31,0000 31,000 31,000 31,000 Discounted benefits - costs -165,400 31,000 31,000 31,000 Cumulative benefits - costs -165,400 -134,400 133,400 102,400 Assumption The average percentage yield in Battersea London sw8, is 6.2 Percent. Since the property is worth 500,000 the annual yield shall be 32,000. The renovation shall attract 20 percent VAT. References 1. Allan, Ashworth 2006, Contractual procedures in the construction industry, Pearson/Prentice Hall, London. 2. Baker, Sunny et al. 2003, Complete Idiots Guide To Project Management. New York, Alpha Books. 3. Barry, Fryer & Robert Ellis 2004, The practice of construction management: people and business performance, Wiley-Blackwell, Hoboken. 4. Beylerian, George & Andrew, Dent 2007, Ultra materials: how materials innovation is changing the world, Thames & Hudson, London. 5. Blaine, Erickson, Brownell 2006, Transmaterial: a catalog of materials that redefine our physical environment, Princeton Architectural Press, Princeton. 6. Farhad, Ansari 2005, Sensing issues in civil structural health monitoring, Springer Harvey Whipple, Concrete, Concrete-Cement Age Publishing Co, Michigan. 7. Frank,Harris & Ronald, McCaffer 2001, Modern construction management, Wiley-Blackwell, Hoboken. 8. George, Ritz, 1994, Total construction project management, McGraw-Hill, London. 9. Graham, Winch 2002, Managing construction projects: an information processing approach, Wiley-Blackwell, New York. 10. Greer, Michael 2002, The project manager's partner: a step-by-step guide to project management. New York, AMACOM. 11. Harold, Kerzner 2009, Project Management: A Systems Approach to Planning, Scheduling, and Controlling, John Wiley & Sons, Hoboken. 12. John, Kelly & Roy, Morledge 2002, Best value in construction, Wiley-Blackwell, New York. 13. Jones, Martyn & Mohammed Saad 2003, Managing innovation in construction, Thomas Telford, London. Read More