A Detailed Financial Reporting and Risk Analysis for Business Projects

This report offers a detailed financial risk analysis, examining both external and internal factors that can impact business projects. The analysis begins with an overview of external factors, including legal, social, political, technological, economic, environmental, and logistical risks, providing descriptions of each risk and their potential impact. The report then transitions to internal factors, such as lack of coordination, lack of consensus, miscommunication, and the risk of strikes, offering insights into their potential consequences. For each risk, the report includes a risk level assessment and discusses mitigation strategies to minimize potential negative effects. The report concludes with a summary of findings, emphasizing the importance of proactive risk management for successful project outcomes. The report also provides a case study of Balfour Beatty and its risk management strategies.

Financial Reporting

TABLE OF CONTENTS
Risk analysis....................................................................................................................................1
External factors...........................................................................................................................1
Internal factors............................................................................................................................9
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

Risk analysis
External factors
Serial
number
Risk incurred
by
Risk
description
Risk level Mitigation Risk after
mitigation
1 Legal and
ethical risk
In UK under
Building act
1984 multiples
rules and
regulations are
prepared which
need to be
followed while
constructing a
building
(Wang, Zou,
and Li, 2016).
As per
guidelines
every company
that is
operating in
construction
industry must
follow rules
related to
workmanship,
adequate
materials,
structure,
waterproofing
and
4 Project manager
before starting any
construction project
must gather
information about
rules and
regulations. Many
times, it happened
that new rules are
prepared but
manager is not
aware of it and
make a mistake.
Ultimately,
Government
department take
action against
business firm.
There must be a
separate team
whose main work
must be to identify
rules and
regulations and
accordingly made
recommendation to
the project manager
1
1

weatherisation,
fire safety and
means of
escape, sound
isolation,
ventilation,
safe (potable)
water,
protection
from falling,
drainage,
sanitary
facilities,
accessibility
and facilities
for the
disabled,
electrical
safety, security
of a building,
and high-speed
broadband
infrastructure
(Malekitabar
and et.al.,
2016). In case
firm failed to
take action,
strict action is
taken against it
in the UK.
in respect to
operating entire
construction
project.
2

2 Social risk Many time
local people
object
construction of
building on
specific area.
Number of
cases are
observed
where business
firm pay
people to
vacant land
they own but
due to some
reasons
conflict arises
between firm
and people
(Jarkas and
Haupt, 2015).
In such cases
at end
Government
intervene
which directly
affect firm
interest.
3
In order to mitigate
social risk project
manager must
identify any reason
due to which local
people can oppose
implementation of
the project. For
example suppose
there are trees in
the land area where
building is
proposed to build
then local residents
may oppose it
(Dzhandzhugazova,
and et.al., 2015
(Dzhandzhugazova,
E.A. and et.al.,
2015). In such kind
of situation
alternative option
can be selected like
cropping of new
plant in nearby area
so that people
opposition can be
controlled. Thus,
project manager
must try to identify
factors due to
1
3

which people may
oppose project so
that action can be
taken on time to
handle such kind of
situation in easy
and effective way.
3 Political risk There are
number of
Government
departments
that operate
within a city
(Wang, 2015).
When any
business firm
intend to
construct a
building, it
need to obtain
clearance from
4 In order to mitigate
such kind of risk
before choosing
any location project
manager must
contact with the
Government
department officers
and must identify
reasons due to
which building can
be or not
constructed in
specific geographic
2
4

multiple
departments.
For example, if
there is
proposal to
construct
building
nearby to
forest area then
Forest
department
may not give
clearance
because
construction of
building lead
to increase in
pollution in
forest area
which may
lead to extinct
of varied
unique species.
Thus, due to
such kind of
reasons some
of Government
department
does not give
clearance for
building
area. On the basis
of information firm
can choose better
location for
building
construction
(Hwang., Zhao and
Yu,, 2016).
5

construction.
4 Technological
risk
Technology
risk is also one
of the external
factor that
need to be
considered by
the project
manager
(Burtonshaw-
Gunn, 2017).
If firm is
making use of
outdated
technology
then project
may stretch to
long time
period and cost
may increase
2 It can be observed
that in respect to
construction
industry technology
does not change at
rapid pace and due
to this reason, there
is not much risk on
this front.
However, project
manager must time
to time identify
new approaches
that are used for
building
construction so that
efficiency can be
improved
(Kvorning, Hasle
and Christensen,
2015).
1
5 Economical
risk
Economical
risk is one of
the highest
risky external
factors. In
many
construction
project banks
agree to
4 In order to mitigate
such kind of risk
business firm can
follow consortium
finance approach
under which
multiple banks
altogether finance a
specific project and
1
6

finance project
on varied
stages of
development
but due to cash
crunch they
further deny
from financing
a project
(Fang, Zhao
and Zhang,
2016). Such
kind of things
lead to delay in
performance of
the project and
elevation in
cost.
they altogether
review project
before financing it.
In this approach
risk is less for
banks and due to
this reason, they
easily finance
project.
6 Environmental
risk
Such kind of
factor must
also be taken
in to account
and under this
project must
not be started
in rainy
seasons etc.
4 In order to avoid
risk project must be
commence after
elimination of
environment risk
and must be
completed as soon
as possible so that
project can be
completed
successfully
without any
problem.
2
7

7 Logistical risk Logistical risk
may come in
existence due
to bitterness in
relation with
supplier
(Williams,
2016).
3
In order to avoid
such kind of
problems firm must
establish contact
with multiple
suppliers and
through them must
purchase products
time to time. So
that if any suppliers
do not supply
product or not able
to supply required
items due to some
reasons then in that
case firm operation
will not delayed.
1
8 Inflation of
tax
Some time
Government
increase tax
because of
which
suddenly cash
outflow burden
increase on the
business firm.
2 Project manager in
advance put
sufficient amount
aside so that
whenever required
it can be used in
such kind of
situation. relevant
planning lead to
smooth
performance of
1
8

business
operations.
9 Highest
interest rate
Highest
interest rate
affects firm net
cash inflow.
Many time
central bank
increase
interest rate
due to which
loan become
dearer and
firms have to
pay more
interest then
before. This
lead to
additional cash
outflow.
4 In order to mitigate
risk firm must take
loan at fixed
interest rate so that
if central bank
change interest rate
cost of debt for the
firm remain same
(Wu and et.al.,
2015). Apart from
this, investment can
be made on
derivative
instruments and by
doing loss faced on
bank loan can be
offset from the gain
made on the
derivative
instruments.
1
Internal factors
Serial
number
Risk incurred Risk description Risk
level
Mitigation Risk after
mitigation
1 Lack of
coordination
Many times,
between
employees there is 4 In order to
mitigate such
kind of risk 2 9

lack of
coordination and
due to this reason
conflicts happened
among them and
this lead to delay
in the project. It
can be said that
such kind of
incidents lead to
decline in
efficiency and
effectiveness of the
employees (Kliem.
and Ludin, 2019).
Lack of clarity of
roles and
responsibility and
employee’s
behaviour are the
main reasons
behind less
coordination
among employees.
chain of
authority and
responsibility
must be
clearly defined
so that one can
not make an
excuse and
perform all
responsibilities
in proper
manner. Apart
from this, in
order to
mitigate risk
time to time
meeting can be
organized by
the project
manager so
that on time
action can be
taken before
any problem
start develop
on large scale.
10