Value and Risk Management

This document discusses the concept of value engineering and risk management in construction projects. It explores how to enhance project value at a lower cost and provides insights into the cost breakdown of Citizen M Hotel Development. The document also discusses different scenarios to increase project value through cost-saving and function-emphasizing approaches.

VALUE AND RISK MANAGEMENT

Table of Contents
PART 2............................................................................................................................................5
VALUE ENGINEERING THE DESIGN AT RIBA STAGE 4.....................................................5
RISK................................................................................................................................................1
Strategic risk................................................................................................................................1
Design and construction risk.......................................................................................................3
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10
APPENDIX....................................................................................................................................13
Cost Breakdown of Citizen M Hotel Development...................................................................13

Index of figures
Figure 1Photovoltaic Cladding System.........................................................................................16
Figure 2 Key benefits or features of Triple Glazed window.........................................................17
Figure 3 Foldable Table Mounted to Wall....................................................................................18

Index of tables
Table 1: Rank based on likelihood..................................................................................................4
Table 2: Risk measurement and mapping........................................................................................5
Table 3: Risk matrix........................................................................................................................6

PART 2
VALUE ENGINEERING THE DESIGN AT RIBA STAGE 4
In every construction project, value engineering can be defined as a systematic approach
to enhance project value at lowest possible cost. It promotes substituting various sources i.e.
material, technology and processes with alternative which are available at less cost but give
better results and productivity (Assaf and Al-Hejji, 2006). Thus, the concept highly focuses on
the function or components of the project with the key aim to increase value. Here, value can be
referred as the cost effective ways to produce and perform a work.
After or during the concept design phase, value engineering work should be performed to
enhance the value of the hotel project (Kelly, Male and Graham, 2014).. Therefore, some design
solutions have to be improved and proposed to the Client through the concept&technical design
stages. Value Management Company made some feasibility studies to define the initial cost of
the building and compare it with similar projects. The initial cost estimation provides opportunity
to the Client to decide on appropriate design option and control the budget of the project. For
defining the initial cost of the hotel project BCIS Cost System has been used.
Referring to the scenario, Citizen M Hotel Development Project value can be enhanced
following VE. It will be helpful to improve technical as well as conceptual design of the
construction work to deliver more value. In this, initially, project manager need to estimate cost
and it must be match with the other similar construction projects which helps to create the best
design solution at controlled cost. BCIS (Building Cost Information Service) is the body that
estimate cost for different kind of construction projects and helps in cost planning. Thus, in order
to find out the cost of Citizen M hotel, this system has been taken into consideration.
Project budget
Budget is constructed to know required investment to build Citizen M Southwark Hotel.
The expected cost is compared with the 4 other pioneering hotels that are Travelodge, Shendish
Manor Hotel, Premier Inn Hotel and Robin Hood Airport Hotel. The 4 other hotels -that are
selected from BCIS Cost Plan System- in below Table-2 that have steel structure. Except for the
Shendish hotel they have 4 to 6 floors.

COST
ELEMENTS
Travelodg
e Hotel
Shendis
h
Manor
Hotel
Premie
r Inn
Hotel
Robin
Hood
Airpo
rt
Hotel
Citizen M
Southwark Hotel Averag
e Cost
per m²
Deiffer
ence of
Citizen
M
HotelCost per
m²
Cost
per m²
Cost
per m²
Cost
per m²
Total
Cost
Cost
per
m²
1- Substructure 79 123 94 27 847,829 143 81 177%
2- Superstructure 561 414 442 349 7,866,576 1,32
7 442 301%
3- Internal
Finishes 79 163 116 114 377,514 64 118 54%
4- Fittings 27 185 48 163 295,800 50 106 47%
5- Services 368 452 296 412 2,243,147 412 382 108%
Building Sub-
Total 1,114 1,337 996 1,065 11,630,86
6
1,99
6 1,128 177%
6- External Works 140 79 93 119 471,836 80 108 74%
7- Preliminaries 154 109 99 210 1,075,754 181 143 127%
8- Contingencies 0 10 4 1 0 0 4 0%
9- Design Fees 0 N/A 44 N/A 311,325 53 22 241%
Contract Sum 1,408 1,535 1,236 1,395 13,489,78
1
2,31
0 1,394 166%
As per the table, it is seen that Citizen M Southwark Hotel will require an initial cost of
13,489,781 for the construction at a cost of 2,310/per meter square. However, on the other side,
looking to the other comparable company’s average cost, it is too high, because, for Travelodge,
Shendish, Premier Inn and Robin Hood Airport Hotel determined cost of just 1408/m2, 1535/m2,
1236/m2 and 1395/m2 at an average cost of 1394/m2 only. However, on the other side, SCitizen
M hotel per unit cost is 65.71% greater than mean cost of hotel construction in similar areas.
Considering, subtotal of the building construction work, it is visualized that superstructure
reported very high cost of 1327/m2 while average cost is just 442/m2 only. On the other side,
substructure actual cost is 177% of mean cost, because for Citizen M Hotel, it is found to 143
while taking into account all the comparative hotels, average cost is 81/m2 only.

Figure 1 The proportion of cost of hotel construction project
As per the pie graph, it is seen that 58% of the total investment will be spend on
superstructure work include upward extension and other structural work above the Ground Level
such as beam, floor, wall, roof, column. However, other components such as substructure,
internal finish, fitting, services, external work, preliminaries, design fees and contingencies
accounted for less proportion.
Client requested VSL to develop two different scenarios to enhance value of the project.
The scenario one is based on the cost saving situation, while the function of the project is kept at
same level, the cost of the project is reduced to increase the value through this approach. The
other scenario is based on the function emphasis that the function improvement is done with the
increase in the cost of the project. Here, in order to increase value of the project, there are two
methods that can be used, one is cost saving and another is function emphasizing that are
analyzed here as follows:
Cost saving approach: In current uncertain era, every project manager struggle to
minimize cost and driving maximize efficiency with the key aim of create more value. More
importantly, construction projects of Citizen M Hotel Development require huge investment and
with the change in period, cost of material, labour, equipment and technology may be change.
Besides this as technology advances, new techniques and equipments must be use for designing
and constructing an innovative infrastructure and in hotel, it really matters. In this approach of
VM, developers take measures to cut cost at the same functional level (Frimpong, Oluwoye and

Crawford, 2003). It can be done through using alternative sources or substitutes that are available
at lower rates, removing unnecessary cost elements. Thus, it requires a thorough analysis of the
each and every cost component to examine that which one can be avoided and which factor such
as material and labor can be replaced by substitute at cheaper charges. Here, it must be noticed
that in order to minimize cost, it is necessary to ensure that quality of the work should not be
affected adversely (Walker, 2015).
VSL developed some design solutions to decrease the cost of the building while keep the
function at same level. This is not easy process. It reduces the cost; some of the components has
to be changed or removed. For changing with its substitutes or removing it, all of the details
related with this component have to be known thoroughly and supplied after changing or
removing. Likewise, alternative materials or services can be adopted in place of previous one.
Travelodge
Hotel
Shendish
Manor
Hotel
Premier
Inn
Hotel
Robin
Hood
Airport
Hotel Average
Average
%
allocation
Citizen M
Southwark
Hotel
Citizen
M
allocation
%
Excess
allocation
1- Substructure 309,525 328,986 469,078 104,645 1,212,234 6% 847,829 6% 10%
2-
Superstructure 2,196,920 1,103,045 2,196,065 1,358,513 6,854,543 32% 7,866,576 58% 80%
3- Internal
Finishes 309,705 434,465 577,675 443,203 1,765,048 8% 377,514 3% -66%
4- Fittings 104,896 492,698 239,321 636,416 1,473,331 7% 295,800 2% -68%
5- Services 1,441,958 1,204,472 1,471,123 1,604,926 5,722,479 27% 2,243,147 17% -38%
Building sub-
total 4,363,004 3,563,666 4,953,262 4,147,703 17,027,635 80% 11,630,866 86% 7%
6- External
Works 548,210 209,403 462,623 462,673 1,682,909 8% 471,836 3% -56%
7-
Preliminaries 603,862 291,681 492,248 818,881 2,206,672 10% 1,075,754 8% -23%
8-
Contingencies 0 26,050 21,618 2,500 50,168 0% 0 0% -100%
9- Design Fees 0 0 217,140 0 217,140 1% 311,325 2% 125%
Total 5,515,076 4,090,800 6,146,891 5,431,757 21,184,524 100% 13,489,781 100% 0%
Cost per m2
Travelodge
Hotel
Shendish
Manor
Hotel
Premier
Inn
Hotel
Robin
Hood
Airport
Hotel Average
Citizen M
Southwark
Hotel
Excess
cost
1- Substructure 79 123 94 27 80.75 143 62
2- 561 414 442 349 441.5 1,327 886

Superstructure
3- Internal
Finishes 79 163 116 114 118 64 -54
4- Fittings 27 185 48 163 105.75 50 -56
5- Services 368 452 296 412 382 412 30
Building sub-
total 1,114 1,337 996 1,065 1128 1,996 868
6- External
Works 140 79 93 119 107.75 80 -28
7- Preliminaries 154 109 99 210 143 181 38
8- Contingencies 0 10 4 1 3.75 0 -4
9- Design Fees 0 0 44 0 11 53 42
Total cost 1,408 1,535 1,236 1,395 1393.5 2,310 917
According to the above comparative table, it is clearly visualized that on total cost of
Citizen M Hotel in Southwark is found to 13,489,781 which is above the average hotel
construction cost of 21,184,524 identified taking into consideration other four hotels in the same
area. However, cost per square metre is found to be 2,310/m2 which is 917/m2 higher than
average cost of hotel construction to 1,393.5/m2. As seen in above, VSL recognized that there
are big differences between substructure and design cost of the project and the average cost of 4
other hotel projects but the biggest difference is shown in the superstructure of the building. The
superstructure of the building has the biggest cost of the project; also it has the biggest deviation
from the average costs among the cost elements (Mir and Pinnington, 2014).
As per the allocation percentage to every cost component, it is seen that on an average,
hotelier had allocated 32% on superstructure while in case of Citizen M hotel; it is too high to
58%, 80% more above mean. Thus, it clearly exhibits that developer must focus on cutting cost
over super-structural framework (Harris and McCaffer, 2013). Consider a detailed cost
breakdown of itizn M hotel, it can be seen that under the super-structural work, it had allotted
43% money on frame only at a TC and cost/m2 of 5,842,395 and 985 pound. However,
comparable firms, Travelodge Hotel, Shendish Manor Hotel, Robbing Hotel and Premier Inn
Hotel put only 10%, 2%, 4% and 12% shows considerable deviation. It clearly shows that
Citizen M hotel invested too high on frame, thus, company must focus on taking measures to
control such excessive expenditures (Bak and et.al., 2017). Hotelier must look after the
alternative sources which can be used as a substitute for steel at lower charges to minimize
overall construction cost and gain more value. Thus, post tensioned (PT) slabs can be used as an

alternative material that is similar to reinforcing steel. In this method, engineer arranges cables to
each other in a systematic way to run through the slab center (Messenger and Abtahi, 2017). It is
useful for both smaller like residential and larger projects like bridges, floor and others. In this,
strong and flexible steel wires, called tendons are placed together and embedded with the slab
edge. By stressing the strands, wire can be stretched easily to carry out construction. Fire
resistance, cost-effective, speed, less use of material, robustness and thermal mass are the key
benefits associated with the use of PT slabs instead of steel (Nicholas and Steyn, 2017).
Post-tension system reduces the thickness of the slab and the amount of the steel bar
inside the slab so that the weight of the slab and weight of the building decrease. If you decrease
the total weight of the building, it means that the frame of the building withstands less force.
Therefore, the thickness of the columns and beams also would decrease (Lasnier and Juen,
2017). Likewise, it also helps to reduce the total amount of material that is used in the frame
structure of the building and even you can reduce the size of your foundations or length of the
piles under the foundation. It would create big opportunity to reduce the cost of the building
while the functions stay at same level (Steyn and et.al., 2016).
In addition to this, although design fees shows a great difference between averages cost
of similar hotels and Citizen M. Considering allocation basis, it is just twice to that of mean
allocation and the average fees each square metre is 53 pound, greater by GBP42 to average
cost/m2 of 11. Thus, hotelier must bargain with the architecture to reduce their fees and minimize
total cost of construction.
Function emphasizing approach: As name implies, this approach of value management
focuses on incorporating new and unique functions to increase value of a project. With the
coming of latest technologies, hotel developers can use advanced techniques to bring
improvement in their existing functions. Unlike cost saving approach, this method results in
more expenditure to create innovative design solution. Adding new function in the hotel or
improvement of the existing function requires increase in expenditure so that to produce design
solution for the enhancement of value is easier for the function emphasis approach than the cost
saving approach (Tse, Chow and Su, 2016). Now-a-days, hotel success not only depends upon
quality of services but also impacts by its building infrastructure, uniqueness and design. Thus,
the approach is highly beneficial for the Citizen M Southwark Hotel to use tactics to create more

value by process improvement. However, the benefit of function improvement has to be more
than the increase of the cost to enhance the value.
VSL proposed the use of photovoltaic (PV) panels as a cladding for building facade. PV
is a term that converts light into electricity through the use of semi-conducting materials which is
known as photovoltaic effect. It includes solar panels which consist of multiple solar cells which
produce electric power. Photovoltaic cladding system produces electricity and this can be stored
and used for the energy consumption of the hotel (Polman and et.al., 2016). It decreases the
energy cost of the building. Installation of the photovoltaic panels increases the CAPEX but
through the operational period it will decrease the OPEX. OPEX is the second priority of the
Client while the CAPEX is the third. Photovoltaic panels are environmental system and reduce
the carbon footprint of the project so that this system enhances environmental facet of the
project. It is because; use of solar tracker helps in energy efficiency and maintains ecological
balance with no emission of harmful gases in the environment. If the photovoltaic cladding
systems is used, the facade of the hotel does not need to be cladded with another system. In the
BCIS Cost Plan, it is seen in Table – 3 that item 2E external Walls (Stone composite panels,
Marley Eternit, St Ives block and curtain walling) is costing to £1,005,141. Likewise, at least
20% of this item can be saved. Also, it is known that the use of photovoltaic panels is subsidised
by the UK Government roughly 30%. Because of these reasons, the total cost of the photovoltaic
cladding system can be reduced dramatically and it will not increase CAPEX too much.
Additionally, photovoltaic cladding system supports the thermal insulation of the building and
this causes the decrease in the energy consumption of the building. In below picture, it can be
seen that photovoltaic cladding has nice, aesthetic aspect.

Figure 2 Photovoltaic Cladding System
VSL reviewed the complaints of end users in “booking.com” company internet page.
Customers stated that rooms are so small. As a solution for this complaint, foldable desk can be
installed in the room (it is mounted to the wall). Customers can install it easily when they need
and it can be folded easily when customers do not need it. This small solution can cause a little
bit spaciousness for end users. This can increase CAPEX slightly but it will increase the comfort
of the room also and comfort is the highest priority of the Client. A sample is shown in below
picture in below illustration. The shape, style and aesthetic of it can be improved by designer.
As another solution, tripled glazed system can be used for window. It has several key
strengths that are warm, quite, safety and toughened glasses (Smirnov, Tyutikov and Zakharov,
2017). It will help to use space properly, drive larger efficiency and generate more value for the
project.

Figure 3 Key benefits or features of Triple Glazed window
Triple glazed window (TGW) system comprises multiple features that will assist Citizen
M Hotel developer to improve efficiency that is discussed below:
 Sealed units with argon gas chamber are comparatively heavier than insulator which
blocks noise and cold air.
 Coatings of less-emissivity glass retain heat or keep warmer environment inside the hotel
room (Gorantla, Shaik and Setty, 2017).
 Low iron glass with an outside pane of TGW helps to boost transmission of light that
optimize and gain additional solar heating.
 Warm edge technology made by the use of plastic insulating acts as a barrier to loss heat
 Glazing bead provide security because it helps to prevent the risk of glass removal from
the outside (Smirnov, Tyutikov and Zakharov, 2017.

Figure 4 Foldable Table Mounted to Wall
It will increase both the thermal and sound insulation of the building. It provides a quiet
room for customers to sleep and rest, this is the most important point for comfort. Because of the
thermal insulation, it also decreases the energy consumption of the building. Again, a slight
increase in CAPEX causes a slight decrease in OPEX while it increase comfort facet.

RISK
Strategic risk
Citizen M is a hotel chain which aims at providing affordable luxurious rooms to people.
The organization has been able to provide high quality services and have been able to open 11
hotels worldwide (Ramkumar, Schoenherr and Jenamani, 2016). In order to strengthen its
presence as well as brand image, it is planning to indulge in to hotel development project. The
hotel will improve the services through a luxurious hotel chain. The hotel is open to various
types of risk that can have severe impact on its functioning and development plan.
Assessment of the risk involved in the project helps in making estimation to uncertainty.
In case of Citizen M hotel, the organization is planning to opt for development of hotel chain in
the world. Hence, it is important to analyse the risk so that effective strategies can be developed
so that it can be managed properly. Based upon the factors which are riskier, mitigation strategy
can be planned for the same.
Identification of risk
In current times, risk is an inherent component that exist in every kind of project
regardless their sizes, type and complexity as well. Construction of hotel work is a big size and
also a lengthy project which involves number for risks that is necessary to be judged and
valuated properly for making the correct risk mitigation plan. There are various risks that can be
identified for Citizen M at initial stage of the project. Some of the most important risks that
require immediate mitigation strategies are mentioned below:
 Increase in interest rates: It is one of the major risks that is faced by the development
companies. In order to construct project, hotel developer needs to contact banks for the
purpose of borrowing. Loans are available at some interest rate which may be either fixed or
fluctuate. In fixed interest rate, if market rate goes down in comparison to the charged
interest rate, then, it is obvious that hotelier need to pay higher cost of borrowing. However,
on the other side, in the fluctuating rate of interest, any increase in the prevailing interest
rates of the country can have direct impact on the overall cost of the projects and it will go
up. In that case, it becomes difficult for the organization to meet out its debts and loan
commitments (Shah and et.al., 2017). Thus, it is a financial risk that a hotel construction
project can incur due to volatile interest rate.
1

 Fluctuated construction cost: Construction projects involves high cost to purchase material
like concrete, steel, labor, technology, equipments and other key requirement. Moreover,
construction work takes some years to complete. However, in the current time of uncertainty
in the market, any fluctuation in material, labour and overhead cost of the company can have
direct impact on the development plan of Citizen M. As a result, actual cost goes up beyond
expected managerial forecasts under budget resultant overrun and in the construction cost, it
can arise difficultly for the team to provide the quality of production which was decided at
the time of planning.
 Increase in overall cost of the project: The overall of the project can be affected due to
lack of planning. Further, other changes in the economic factors can also impact the overall
cost of project such as, increase in inflation rate, changes in the laws of taxation, increased
transportation cost etc. It is important to take adequate amount of planning actions while
deciding the overall cost of the project.
 Disputes with the contractors: Construction project is a result of combined efforts of
contractor, subcontractor, developer, architecture work and many others. However, while
planning and designing the project, some situations may be arises where the management
team may not agree with the suggestions being extended by the contractors. Further, in the
situation where the rates decided by the management team are not appropriate as the
contractors view. In that case, dispute with the contractor arises with the management which
may cease construction activities for some duration.
 Non-fulfilment of funding requirements: Since, the investment to construct a range of
hotel is higher; in that case, the organization will get involved in taking funds from various
sources. It can opt for taking loan from banks or any other financial institutions. If adequate
amount of funds is not received by the organizations, then it can hinder functioning of the
project.
 Political risk: The project is exposed to varies political risks such as government
interventions, social events etc. It may lead to overrun of the time involved in completion of
the whole project. It can also lead to decrease in the return from the project due to delay in its
operations (Thakor, 2016). The policies and framework have to be adopted in the way in
which it has been suggested by the government for its smooth functioning.
2

 Currency fluctuation: The project has a significant exposure to this type of risk. It is due to
the fact that Citizen M will have its operations in other countries as well. Any change in the
currency will have direct impact on the amount that has been received by the team in the
home country. It is necessary that the currency of home country remain stronger in order to
generate higher returns.
 New governmental acts or legislations: Changes in the governmental acts and policies can
have direct impact on the overall costing of the project that must have been assigned at the
time of planning. For instance, any alterations in minimum wages act can directly impact the
cost of labour. It will further demand higher investment towards the project as well.
Changing rules in the hotel industry can also affect the project to a great extent.
Assessment of overall risk
The above-mentioned external risk factors will have direct impact on the function of the
project. These are common risks that can cope up in any of the construction business whose
duration of the project is longer. However, any change in these above-mentioned factors can
affect the planning and investment criteria that has been chosen by the project team. It can also
lead to overrun of the total cost of the project. The overall cosy attached to the project is higher.
However, adequate amount of mitigation activities can reduce the risk to the minimum. Hence,
adequate planning by the project team can help in coping up with the its affect. Hence, the
organization must opt for development. Hence, the project must be proceeded with appropriate
amount of planning.
Design and construction risk
The risk in the project on only arises at the initial stage when the planning is done by the
management team, but it also crops up when the project has already been started. Since, Citizen
M is opting for development project and indulged in provided luxurious hotels at affordable
prices to its customers, there can be various risks that can come up at the construction stage of
the business. It can help the company in assessing the risk and then decide mitigation plan for the
same. According to the case of Citizen M., the company is going to develop hotel all across the
globe (Tsang, Lee and Tsui, 2016). The project time is favourable and low interest rates are
prevailing in the market. The investment in the project have been made through bank loan and
taking debt from other financial institutions as well. There are varied risks that can crop up at the
3

time of construction, whose assessment is required to be made by the risk team. Hence, top five
potential risks involved at this stage of the project are as follows:
 Accidental risks: Injuries to the third party or any worker at the time can affect the function
of the project. The team can also be sued for the same. This can be true for the people who
are not familiar to the safety rules and do not opt for adequate amount of safety functions at
the construction site. It can lead to loss of life and property (Zavadskas, Turskis and
Tamošaitiene, 2010).
 Financial risks: It is another important risk to which a construction project is always
exposed to. Any change in the duration of the project or any deviation in the plan prepared
can lead to increase in the overall risk attached to the project during construction. The risk to
the same for Citizen M may be lower as the company already have been able to get finance
from bank and other financial institutions.
 Operational risks: These types of risk are short term and specific. Since, the size of the
project of Citizen M. is large, hence, the overall operational risk indulged in it is also higher.
Some common type of operational risk includes, design, building, leasing of equipment to be
used during construction etc.
 Environmental risks: Some common type of environmental risk, to which Citizen M is
exposed in its project are, occurrence of natural hazard, inadequate changes in weather such
as rain and snowfall etc. It can lead to destruction of material at the construction site.
Moreover, it can drive the project towards overrun of cost and to losses as well.
 Technological risks: Since, the technology and equipment that are used at the construction
site are taken on rent or lease so that the cost to the project can be reduced to the minimum.
However, if any equipment is not arranged by the organization then it can have to buy the
machinery for the project which can overrun the cost. Further, impairment in the machinery
can also delay the process of construction (Cohen, Krishnamoorthy and Wright, 2017).
Ranking of risk based on likelihood:
Table 1: Rank based on likelihood
Potential Risk Likelihood Rank Reason
Operational risks Very Likely 5 This risk can be assessed only
when it occurs. Further, its
4

occurrence can be more than
once in the duration of the
project.
Technological risks Likely 4
Construction requires high
investment for technology. Its
failure can run the company into
losses.
Accidental risk Possible 3
Since, construction work is
dangerous and can lead to loss
of life or serious injury if
appropriate actions for safety
are not taken by the individual
and the entity as well.
Financial risks Unlikely 2
Increase in the duration or
change in the economic
activities of the economy can
lead to overrun of the cost.
Environmental risk Very Unlikely 1
Occurrence of any
environmental hazard can
destroy the construction site. It
that case this risk can prove to
be harmful for the company.
Risk measurement and mapping:
Table 2: Risk measurement and mapping
Potential Risk Impact Rank Potential Consequences
Operational risks Severe 5 It can overrun the cost and duration of
the project.
5

Technological risks
Significant 4 It can increase the cost of project and
Citizen M may not be able to complete
the project at the specified duration.
Accidental risk
Moderate 3 The company can be brought into
litigation which can increase the cost
and duration of the project. It can also
lead to loss of life.
Financial risks Minor 2 It makes the arrangement of finance
difficult for the entity.
Environmental risk Negligible 1 Its occurrence can destroy the
construction site.
Risk Matrix: It is a matrix that is used to determine risk level by taking into account both the
probability and risk likelihood of various risky element of the construction project. It is the
simplest technique of risk measurement and a strong mechanism which is used by the project
managers to increase risk visibility and facilitate decision-making process. For the given project,
taking into account various types of risk i.e. contractual, financial, technological, operational and
others, risk matrix is prepared below to know that which are highly risky component who have
catastrophic impact on the functioning. Such needs to be controlled anyhow even at extra cost to
minimize threats.
Table 3: Risk matrix
IMPACT
Negligence Minor Moderate Significant Severe
1 2 3 4 5
LIKELIHOO
D
Very Likely 5 5 10 15 20 25
Likely 4 4 8 12 16 20
6

Possible 3 3 6 9 12 15
Unlikely 2 2 4 6 8 10
Very
Unlikely 1 1 2 3 4 5
15-25 High Urgent corrective actions required
8-14 Moderate Requires actions in next 2 months
1-7 Low Doesn’t require any corrective actions
Therefore, the risks that falls in high risk area are, operational and technological risk.
Further, accident risk is moderate. In the end, the low risk zone includes, environmental and
financial risk.
Control measures:
It is necessary for the Citizen M hotel to take corrective measures so as to control or
reduce various parts of risk. The incidence of the risks can be reduced to minimum by
implementing mitigation plan in Citizen M. Some of the control measures are as follows:
Operation Risk Management: Operational risk can be managed by assessment of the material
required in advance so that prior arrangements for the working capital can be made. Some of the
measures include the following:
 Adequate amount of transparency in decision making (Djemame and et.al., 2011)
 Defining the responsibilities to the personnel: It is necessary to define roles and
responsibilities of each and every worker clearly so that they will have clear guidance
and can be directed easily towards goals.
 Appropriate procedures to be followed before decision making
 It is also important to regularly and consistently check and monitor the working
practices of the employees. It is because, in the construction project, many-times, it is
seen that lack of control over contractors and sub-contractors work cause delay and
overrun cost. Therefore, strict monitoring is required to assess and examine the work
7

progress. Here in this regards, cost variance and schedule variance needs to be
checked to evaluate that how work is carried out by the workers and helps in taking
corrective measures on time to minimize any delay.
Technological risks: Some of the steps that can be taken by the project team in order to mitigate
the risk is as follows:
 Assessment of requirement of technology beforehand so that arrangements can be
done accordingly.
 To prioritize the requirements and assess the alternative of technology which is not
available.
 To outsource the technology rather than making purchases: Outsourcing is the best
way for acquisition of technologies for the construction of Citizen M Hotel because
business does not need to incur capital expenditures (CAPEX) thus save capital cost
at greater efficiency.
Accidental risk: Some of the common steps that can be taken by citizen M are as follows:
 Following all the health and safety rules and regulations: Safety precautions and
necessary arrangements need to managed properly. Moreover, it must be monitored
regularly to overcome any possible risk occurrence.
 Checking all the electronic instruments weekly and conduct repair and maintenance if
required (Risk Management, 2016).
CONCLUSION
The investigation found that cost saving and function emphasizing are the best approaches
of project management to increase the value of a project and driving more efficient outcome. The
report here, found that photovoltaic system is of best use for the Citizen M to reduce harmful
impact to environment and boost value. Moreover, Triple Glazed window is available to the
constructor which provides more security and other benefits. However, it is suggested to
minimize cost through replacing reinforcing steel through substitute product, named , post
tensioned (PT) slabs. Based on the above report, it can be concluded that, Citizen M, which is a
pioneer to hotel industry is planning to increase its operation by developing another chain of
luxurious hotel in affordable prices. There are various risks that can crop up during the
establishment of new project. Some of them are operational risk, financial risk, technological risk
8

etc. Further, mitigation strategy to the same has been suggested for the entity. Risk matrix is also
been prepared to make the assessment criteria concrete.
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APPENDIX
Cost Breakdown of Citizen M Hotel Development
1 Substructure £847,829 £143 6%
2A Frame £5,842,395 £985 43%
2B Upper Floors £241,080 £41 2%
2C Roof £170,253 £29 1%
2D Stairs £181,490 £31 1%
2E External Walls (Costs include other elements) £1,005,141 £170 7%
2F External Windows and Doors (Costs included in 2E)
2G Internal Walls and Partitions £203,942 £34 1%
2H Internal Doors £222,275 £37 2%
2 Superstructure £7,866,576 £1,327 57%
3A Wall Finishes £76,897 £13 1%
3B Floor Finishes £182,251 £31 1%
3C Ceiling Finishes £118,366 £20 1%
3 Finishes £377,514 £64 3%
4 Fittings and Furnishings £295,800 £50 2%
5A Sanitary Appliances £0 £0
5B Services Equipment £0 £0
5C Disposal Installations £0 £0
5D Water Installations £0 £0
5E Heat Source £0 £0
5F Space Heating and Air Conditioning (Costs include other
elements) £2,194,442 £370 16%
5G Ventilating Systems (Costs included in 5F)
5H Electrical Installations (Costs included in 5F)
5I Fuel Installations £0 £0
5J Lift and Conveyor Installations £183,437 £31 1%
5K Fire and Lightning Protection £0 £0
5L Communications and Security Installations £0 £0
5M Special Installations £0 £0
5N Builder's Work in Connection £65,268 £11
5O Management of the Commissioning of Services £0 £0
5 Services £2,443,147 £412 18%
Building Sub-total £11,830,866 £1,995 86%
6A Site Works £113,328 £19 1%
6B Drainage £125,691 £21 1%
6C External Services £232,817 £39 2%
6D Minor Building Works £0 £0
6E Demolition and Work Outside the Site £0 £0
6 External Works £471,836 £80 3%
7 Preliminaries £1,075,754 £181 8%
8 Contingencies £0 £0
Total (less Design Fees) £13,378,456 £2,256 98%
9 Design Fees £311,325 £53 2%
Total Contract sum £13,689,781 £2,309 100%
ELEMENT Total cost Cost per m² Percentage
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