Application of Value and Risk Management in United Arab Emirates Construction Sector - Term Paper Example

Application of Value and Risk Management in UAE Construction Sector Application of Value and Risk Management in UAE Construction Sector Introduction This report provides of a comprehensive analysis and relevant assessment of value and risk management and its application in the UAE’s construction sector. The author of this report presents a brief overview of the concepts of value management risk management and then applies these concepts in UAE’s construction sector’s context. Value Management Value management is an integrated process which feeds the requirement of customers’ needs and wants. It is a process of maintaining established value or derived value of a firm, a project or a system respectively. Evaluation of value management process means estimation of what is required and how to achieve it in terms of cost and time perspective (Kannegiesser, 2008). According to Barton (2002) Value management is an integrated process which involves decision makers, stake holders, specialists, planners and other works men to bring value in systems, processes and respective products and services of a firm (Kazi, 2005, p. 254). Application of integrated value management process depends upon the value of a project. This may also include the level of risk involved in its system. A value persistently hides market excellence within its norms and so as the risk which needs to be covered up for achieving the market and business objectives (Kazi, 2005). Risk Management Risk management is sub merged process of value management which entirely goes side by side with the overall value management system. In any project like a construction or architecture project there are certainly some risks and hazards involved. Risk management is an assessment, evaluation and control of such hazards to vitally achieve the value based targets of the project. The sub objectives of a value based risk management system are cost and time, which are definite to be achieved to meet the overall value objective (Edwards, 1995). Today both Value and Risk Management are tools of modern application. Whether it is a service organization or an engineering manufacturing organization like construction builder, identify such effective tools to give direction to their systems, projects and working elements (Edwards, 1995). With grounds of engineering, such organizations also include value and risk assessment as part of their technique, because without such tools they are unable to meet desired business objectives (Kamara et al., 2006). Today there are many construction organizations like in UAE which identify Value and Risk management as drivers of their business. To achieve market goals and preset value objectives they withdraw tools of effective value and risk management to correspond to their market predictions, trends and expectations (Edwards, 1995). Overview UAE being a central business hub of Middle-East has brought a big market expansion of construction business in the region. There are big time investments made every year in the construction sector, which is from European market region and the Arab world. Though the UAE market is wide enough to invite investors but still it holds a primeval risk for both internal and external business intruders. Competition is up to the mark and so as the risk for which UAE firms require specialists to make their business succeed on the highest business level. According to review period (2007-2011), UAE construction sector has grown a lot in terms of value and expansion. With an annual growth rate of 6.11%, the market has shown its utter importance in the entire Middle-East region where the Government has taken leading steps to strengthen the construction sector. When on one side the demand is excessive, the risk also floats on the highest level of new business holders in the region, especially those which are with less repute and recognition in the market (Oryx, 2010). In recent times it has been seen that UAE construction firms do give importance to latest risk and value assessment techniques but do not adapt them on 100 % basis (Jalbani, 2010). Abu Dhabi is the highest region of investment containing 54% of investment in the construction sector. The city is present with competition and so as the risk for which there are certain challenges the strategists have to face at the time of managing projects (Oryx, 2010). The urge is there to adapt value and risk management techniques, as the market is extensively present with risk and business streams are frequently relying on traditional principles to control the risk factor (Corby, 2010). In UAE the projects are usually on short term basis, which contain a highest proportion of uncertainty due to lack of time and strategies to endorse. For new comers it is an opportunity in the region because the pool of risk is profound and so as its scope which is extensively broad in terms of assessment, control and monitoring activities. New comers like civil engineers, architecture engineers or trainee construction engineers hold chances to excel in the UAE construction sector. They get involved in the field by specializing in subjects like scaffolding, cementing, or coating to gain access in respective functioning areas (Gorgenländer, 2011, p.25). In construction projects especially in UAE, risk management means management of risk of overall project components or functioning areas. These could be tangible components like facilities, materials, machines or intangible components like capital, equity or value of the project (Bu-Qammaz, 2007). For an exclusive market like UAE where construction firms are large in number, the strategists if manage project components can minimize risk and retrieve project value in return for the long term basis. The need is just to deploy two types of persons, planners and executors. Specialized planners are able to meet intangible risks like risk of downgraded equity or value and specialized executors holding professional degrees, are able to meet tangible risks like risk of deteriorated facilities, materials or machineries respectively (Gorgenländer, 2011, p. 25). Abu Dhabi being the hub of UAE’s construction business holds a lot of distinctions for specialist people in the construction sector, especially for those who are able to apply engineering principles with methods of risk and value management. There are three main areas in which people get specialized to compete in the UAE market concern. Specialists in these subjects are an asset for UAE construction firms, who wanted to stay in the market and excel in terms of extended value and recognition. Here is a brief view of how specialists facilitate UAE construction firms and how they play a decisive role in succeeding in UAE construction sector: CPM (Construction Project Management) in UAE In UAE there are different segments of construction management and engineering. Each segment is a deriver of risk and value to improvise overall components of a construction project. The segments include real estate developer, project manager, design and supervision consultants, design-build contractor, material contractors, material suppliers who assess and mange the components of a construction project (Chitkara, 2002). Construction project management is a specialized program offered to specialized working personnel. He could be an engineer or a construction work man who is experienced in managing real time construction projects like bridge building, or architectural mapping. In UAE there are several firms which recruit CPM personnel in their respective real time projects. This is to utilize latest techniques of a specialist for effective risk monitoring and control purposes. A construction project manager is capable to work in segments of project management, architectural design and supervision, and construction engineering etc. All of such subjects hold a paramount importance in value assessment and risk management tool, because they hold awareness for the specialist to grab extensive knowledge on the project, which is helpful in terms of cost calculation and so as the risk at the time of operation (Brunn, 2011). According to (VME, 2012), UAE construction market has shown an intense figure of competition, for which firms are trying hard to cut off expenditures by concentrating more on construction projection management services. Whether it is construction of a high rise building, a skyscraper, a multiplex, a shopping complex, or a truss bridge, which are common in UAE construction business, construction project managers are viably important for UAE business firms. The task is to manage risk of cost and risk of devaluation of resources, which are often found in large multinational construction firms in UAE. In this regard firms hire specialists of “construction project management”, who are experienced in upgrading a civil engineering project and eliminating risk factors at the right time of engineering operation (Chitkara, 2002). CPM specialists are well aware of the risk factor, and know that if it is not addressed at the right time can become a major cause of influence (Gorgenländer, 2011). They adapt strategic planning techniques to manage project constraints and high value risk at the same time. Being project managers, CPM experts are well organized and hold advance planning and strategizing methods. With the latest software application like Primavera, CPM experts integrate constraints to evaluate them on risk factors. This is to devise a plan which is effective in terms of cost and time and decisive on long term project basis. CPM experts quantify variables on project management software, which is based on PDCA (Plan, Do, Check and Act) activity (Chitkara, 2002). This is to support extensive risk planning and management, in order to bring sufficient risk control on the project cycle (Gorgenländer, 2011). To manage big budget projects like in UAE, where there is high investment influence and influence of environmental politics, there are three phases of planning from where construction project managers have to cope up. The first phase is of planning in which CPM experts take high value decisions corresponding to trends of the market. The second phase is of scheduling, in which the experts plot activities and variables of the project on the software to underline which of the activities are more important with respect to time (Gorgenländer, 2011). The third phase is of controlling, in which managers set monitoring systems to control risk factors and factors exceeding cost limit. All of the three phases are applicable in lead time construction projects, especially in UAE market segment, where there is not much time for project managers to proceed and bring effective outcomes in quick manner(Chitkara, 2002). Construction project managers are well experienced and hold much of the knowledge of a construction building project, for which they are considered as good trend analyzers. All of this has brought experts to attention especially in the UAE market segment, where there is a lot of competition involved in the market stream. According to (VME, 2012), there are a large number of UAE projects like Danet Abu Dhabi, Ghantoot Green city, Nebra aviation city, or Masdar city where expertise of construction project management are deployed as workmen. Several CPM specialists are hired on the annual basis to work on such lead time construction projects. In UAE, CPM experts are famous because of their planning capability. They are well organizers of resources and material at the time of a project operation. Cost analysis, risk analysis and market analysis are fundamental subjects of CPM experts, which they bring in application to manage a big budget construction project. Firms like Arcan PMS (A UAE based firm), hire CPM experts to deliver services in office commercial projects, industrial projects or hotel construction projects etc. On the latest Arcan PMS has deployed construction project managers on different projects like Camel milk factory, DHL central logistics center, Fiobco Factory, Lootah warehouses or Porsche Showroom and Service Center etc (Arcan PMS, 2012). The experts’ capability is project management under the constraints of risk and value at the same time of a project (Arcan PMS, 2012). With extensive risk analysis, construction project managers analyze economical, technological, environmental, political, sociological or cultural factors. This makes them aware of the project’s strengths, weaknesses, threats and opportunities, which is supportive in terms of attaining future forecast. UAE construction managers are futuristic in risk assessment, because they are lined up with big time construction projects, upholding parallel time risks for the future operation (Gorgenländer, 2011). Assessment is a basic part of risk assessment that guides construction project managers throughout the lead time construction building projects. The assessment is based on both intrinsic and extrinsic SWOT analysis for analyzing both internal and external risk factors. Planning, scheduling and controlling all come out together and applied on each level of a civil engineering project by a CPM expert (Gorgenländer, 2011). In UAE Construction Project Managers are valued because of their dual capability of being engineers and so as managers. They hold a profound knowledge of construction projects and have a tendency to apply their knowledge and experience in calculating risk in accurate means. UAE firms give a lot importance to CPM experts because of their accuracy and precision, and because of their excellence in risk management and evaluation. With conducting in-depth analysis UAE CPM analysts are able to set value of a project, which is to give a direction to the project and mark a level to get achieved on the completion of the project (Ali, 2008). Future Application UAE being a global leader in the construction sector holds a big opportunity for the application of Value and Risk management principles in the future. Being a hub of construction eventually makes UAE a place of risk and competition too. Firms call it a threat but for specialists who are strong in VRM application, call it an opportunity which is definitely true for the long term basis. With support of the Arab World and from European corners, UAE is about to settle a large of multinationals who are going to invest in construction projects. More multinationals in the region means more construction projects which will grow chances of recruiting specialists on the field (Raftery, 2006). Without value and risk management principles, firms cannot survive especially the newly intruded in the region. So it is definite to say that future will grow opportunities for VRM application in the entire UAE region instead of getting declined (Kazim, 2012). Conclusion UAE is one of the largest construction markets in the entire Middle-east coast. On annual basis there are big time investments coming up from Europe and the Arab world. With such huge market place of construction, UAE holds a lot of risk too especially for new business intruders which are new in terms of repute and recognition (Loosemore, 2003). The competition is high and so as the risk for which it gets hard for UAE firms to stabilize their value in terms of customer and with respect to business in the region. Value and Risk management are two significant tools which is required in the region. In premium construction projects which are mostly on short term basis hold a lot of risk which needs to be managed at the time of operation (Raftery, 2006). For such a reason experts of CPM are recruited on the annual basis. They give premium construction projects a success because of their risk assessment and value management capabilities (Kazi, 2005). Holding knowledge of engineering and management, experts are able to minimize risk that includes risk of cost, risk of resources, material and project failure etc (Raftery, 2006). This leads out UAE construction firms to perform deliberate in the market and become stable to compete in highest competitive stream (Raftery, 2006). Reference List Ali, J., 2008. Project Information Memorandum. Research Report. Dubai: Gulfstream. Brunn, S., 2011. Engineering Earth: The Impacts of Megaengineering Projects. New York: Springer. Bu-Qammaz, A., 2007. 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