Risk Assessment of a New Office Building - Assignment Example

The risk assessment matrix for the construction of the new office building

Risk factor

Risk ranking guidelines

Low

Medium

High

Technology

-Extensive previous building application

-little or no testing required

-Some previous building or site application

-Some proof of testing needed

-Little or no previous building or site application

-extensive proof of principle testing needed

-complexity of the engineering process

Safety

Workers' health and safety integrated with job planning.

Low understanding of the existing hazards associated with the  construction of the new office

Integrated worker health and safety approach not implemented

Funding

Underestimation of the budget

Detailed estimate but not yet validated

Existing economic situations such as interest rates, exchange rates and inflation affect prices of the construction materials

Legal Requirements

Few legal requirements

Complex legal requirements

Financial risk is the possibility that shareholders will lose money if they invest in a company that is characterized by debts. This usually occurs if the company’s cash flow proves inadequate to meet its financial obligations. The following are ways in which Mile High Bikes can mitigate its financial risks:
- Selling of the inventory and current assets. It is an undeniable fact that the easiest way to raise funds is to sell current assets. This is because current assets can be liquidated in one year or less. Through this, Mile High Bikes will raise enough funds to meet its financial obligations.
- Issue stock. Mile High Bikes should issue its shares to the market through the Initial Public Offer. This will enable the company to raise a lot of funds from the public and even increase the number of owners of the company.
- Request longer terms from suppliers. This will ensure that the debt obligations are met.
- Shorten payment terms with customers.
- Pay off debts with additional cash raise. The more Mile High Bikes pays off its debts the less its financial risk.

Risk

Management

Market risk

Current market conditions and trends pose a greater risk to new firms like NewPharm Ltd and this may make it difficult for the firm to gain customer momentum

Performing a market analysis. This will help determine the market potential for the products

Financial risk

Financial risks can ruin the development of the firm

Proper financial planning and determining if the products are strong enough to support the financial requirements of the business.

Management risk

Ineffective management can hurt the quality of production

The hiring of the highly competent and experienced management team

Principal amount: $130 million

Technology risk

Probability %

Amount of loss

Expected value

Medium

8

35%=$45.5 million

$3.64 million

low

15

15%=$19.5 million

$2.925 million

Probability

Impact

Insignificant

Marginal

Moderate

Serious

Critical

Definitely

Likely

Financial risk, quality risk

Materials risk, labour risk

Possible

Capability risk

Occasional

Unlikely

Marketing risk