Risk Management in Olympic Games: A Case Study of Rio 2016

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Risk Management Business
Report
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TABLE OF CONTENTS
Executive Summary.........................................................................................................................1
Using both the Case Study and your own research, identify and discuss three key risk areas
involving risk management of an Olympic Games project.........................................................2
Informed by risk management concepts and models, summarise a multi-stage risk
management process that is suitable for an Olympic Games project..........................................3
Identify four individual risks, discuss their evaluation and suggest potential mitigation
strategies......................................................................................................................................6
Conclusion.......................................................................................................................................9
References........................................................................................................................................9
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Executive Summary
Olympic Games are considered as the major events that support gathering of people from across
the corners of the world and this requires integration of various resources along with managing
sustainability of an event. Organizers responsible for management of Rio Olympics 2016 are
under the constant pressure of handling uncertainties in terms of risks. In addition to this they are
liable to handle the limitations related to cost and time. Risk Management is an important aspect
of the business especially with increasing interconnectivity and complexity with the issues such
as security, corporate reputation, supply chain management, etc and therefore risks and
mitigation strategies are major concentrations of the report.
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Using both the Case Study and your own research, identify and discuss three key risk areas
involving risk management of an Olympic Games project
Considering the case study of Rio Olympics 2016, number of potential risks has been identified
that influence negatively on its operation at the time of event happenings. Burtonshaw-Gunn,
(2017) stated that Financial risks, health risks and reputation risk, geopolitical risks and
terrorism; environmental and logistics and infrastructure risks, etc are some of the risks that has
been identified by Olympic Games Organizer’s in past.
Such type of risks is essentially to be considered that affects the delivery of the project.
Considering the case study of Olympic Games Project, issues related to health and environment
along with several external factors such as occurrence of unlikely risks lead to delivering of
project with immovable deadline, risks related to budget management, as well as procurement
issues. All such risks are essentially to be identified and are to be paid attention while
undertaking risk management techniques. Olympic Games include number of individual along
with interdependent projects. According to Williams (2017), Project management works
according to the parameters such as quality, time and cost. Delay in delivering in any one of the
element affects management on quality or cost of the project.
For an example, one of the major issues identified from past events such as 2010 South Africa
World Cup that was affected from sudden spread of the Zika virus across South America. In
addition to health issues, there are certain environmental challenges such as water quality that
has adversely affected the health of athletes participating in water sports at the time of Summer
Olympics. According to Haimes (2015), The World Health Organization (WHO) has defined
mass gathering as an event that is attended by large number of people that focuses on planning of
community or nation resources. Olympic Games that are organized across the various corners of
the world increases the risk of transmission of communicable diseases. The Brazilian Ministry of
Health stated that transmission of Zika Virus infected 0.5 million and 1.5 million people in the
year 2015 and therefore organizations like WHO suggested postpone of Games.
Management of risks related to communicable diseases is however very difficult and therefore
WHO strictly recommends to take safety measures so as to prevent themselves from being
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affected from viruses. In addition to this, pregnant women were restricted to attend the Games.
Such type of health issues largely affect the project to deliver on time. Petersen et.al.(2016),
identified that 15 crucial athletes withdrawn from the event because of Zika Threat. This results
into empty venues of Olympic Games 2016.
In addition to this, inappropriate cost estimation is the risk that negatively influences the project
management while handling or managing the grand events like Olympic Games. It has been
identified that hosting of Olympic Games experience overrun of budget which is likely from
100% to 200%. () identified various factors that are associated with extended cost of hosting the
events like Rio 2016 Olympics includes bid process, failure in identification and management of
risk as well as uncontrolled growth related to project specification.
Overrated expectations from the project are also considered as one of the crucial risk that affects
the overall delivering of the project within the time, and cost constraints. Benefits of hosting the
Olympic Games are overrated because local residents think of increasing revenue flows, civic
pride along with urban development. However Olympic Games only generate profit for
organizers, participants, and other investors. For an example, Beijing’s 2008 Olympics generated
overall revenue of $3.6 billion however it has invested the cost of approximately $40 billion.
From several other examples such as London Olympics it has been identified that earnings are
often less then investment and therefore the cost benefit analysis is important for identifying the
overall benefit of investing while hosting the event.
Informed by risk management concepts and models, summarise a multi-stage risk management
process that is suitable for an Olympic Games project
2016 Olympic Games taking place in Rio that requires management of resources and various
sports structures with higher efficiency. For accomplishing the goals, there is greater need of
adopting project management models that support developing structure for games. Limitations of
resources, time and cost as discussed above influence the selection of project management
model. Carayannis et.al.(2015), identified that according to issues faced by past organizers of
Olympic Games, project management maturity model is identified to be beneficial that uses
strategic plans that support enhancing controlling techniques related to project management
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along with sustainability model for managing the environmental and health related risk factors.
Sustainability model works on the basis of economic, environmental, and social performance of
factors while preparing the project. It is essential for organizers to adopt the sustainability
practices at the initial stage of the project. For an example, it is essential for the organizers of Rio
2016 Olympics to develop policies based on sustainable development.
Kerzner, (2019) stated that main objective of maturity model is to provide the framework that
support improving the business result of the organization by assessing the strengths and
weakness of project manager. This includes comparing the project performance with other
projects. Sustainability model on the other hand is considered as three layer risk management
model that suggests that project faces risks at three levels and are interrelated to each other. It
assesses risks such as project risks, market risks and macro level risks. Project level risks include
technology, financials, project design and resources. Market level risks also considers similar
factors but at the market level while project level risks are related to project operations in macro
environmental conditions and therefore it focuses on risks related to economic, political as well
as other financial risks.
In addition to this, Project risk management involves the process related to risk management
planning, risk identification, qualitative and quantitative analysis, responses, along with
monitoring and controlling of project. According to Kerzner and Kerzner, (2017),Risk
Management Planning supports identifying risk bound activities within the project as well as on
how to execute and implement risk management practices as per the activities identified. In
addition to this, it also includes planning of approach for risk management and it is essential to
consider factors such as environmental factors, objective of the project as well as organizational
process assets.
Further classification of risk based on various criteria is another crucial stage of risk
management process that is suitable for an Olympic Games project. According to (Davies
et.al.2017), risk within the Olympic Games project can be classified on the basis of type of risk,
their consequences as well as its influence. Risk within the Olympic Games is advantageous to
be classified on the basis of its impact and it includes environmental risk, industry risk, project
risk as well as company risk. Environmental risk includes social, political and economical risks
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along with physical risk. Physical Environmental includes occurrence of natural phenomenon
which are difficult to mitigate. However with the use of advanced technology, appropriate
measures can be taken in advance with the identification of earthquakes and other harmful events
that affects the time, cost and quality of the overall project.
Social, political and the economical environment risks on the other hand are controllable to some
extent. For an example, government must focus on making policies that support alignment of
environmental aspects with activities undertaken at the Olympic Games. Market risk is
dependent on number of factors and is very difficult to identify measures for controlling it. For
an example, recession highly influences the revenue generation from Olympic Games.
Accoridng to Pheng, (2018), Risk identification is followed after risk management planning.
Risk within the project can be identified with the help of brainstorming or group discussion. Risk
breakdown structure can also be utilised to show the risk groups, risk events, risk categories that
exist at the lowest level. Risk identified within Olympic Games Project can be classified as
internal and external risk. Internal risk includes risks because of event organizers, suppliers,
contractors, etc however external risks such as political, cultural, social, natural and other risks
that delays overall outcome of the project. In context to Olympic Games Project, risks can be
identified easily by observing the instances that has happened or occurred in the past events.
Risk analysis is the approach that supports treating the risk in an individual manner so that
appropriate mitigation strategies or tools and techniques can be implemented for appropriate
outcome of the project. This includes Qualitative and Quantitative analysis. Chapman, (2016)
stated that Qualitative analysis support setting priority of the risks based on the probability of
occurrence and its influence with the project. For an example, it will support assessing financial
risk factors that have influenced the past events so that mitigation strategies can be developed.
The analysis is dependent upon knowledge of the expertise. There exists number of techniques
for undertaking Qualitative analysis that includes Delphi technique, risk register, probability-
impact (P-I) table and brainstorming. Effective qualitative risk assessment includes brief
assessment of the risk, stages within the project where it occurs, factors responsible for
occurrence of risk, relationship of individual risk with other risk factors and how it influence the
entire project.
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Quantitative analysis supports identifying the numerical impact of all the risks on the project.
The approach in comparison with Qualitative analysis has more chances of error because it
includes calculations of all the risk identified. In context to Olympic Games Project, Qualitative
analysis support identifying possible consequences of occurring risk and are defined in
quantified and defined manner in terms of increased time and cost along with reduced
performance and quality of the project. It focuses on using techniques such as sensitivity analysis
and probability analysis.
Sensitivity Analysis is the technique that supports determining risks with major influence on the
project (Stingl and Geraldi, 2017). In other words it supports identifying the components within
the project that affects the outcome of the project. It uses methods like Tornado charts, as well as
Risk-return graphs. The technique is effective in identifying influence on economic return, along
with cost and time factors of the project. Probability Analysis on the other hand uses random
sampling technique that assesses various ranges of variables and identifies the probability
distribution relevant to the variable.
Risk response support bringing out maximum possible output with the help of risk bound
activities that enhances opportunities and minimises threats as per desired objectives. On the
basis of outcomes, risks are prioritised as high, low or medium in terms of their occurrence and
influence. Risk allocation strategies must be identified at the beginning stage of the project.
Important characteristics of risk allocation strategies must be grouped according to the payment
mechanism or organizational structure. Further risk response must consider risk retention, risk
reduction, risk avoidance and risk transfer.
Identify four individual risks, discuss their evaluation and suggest potential mitigation strategies
Host countries often have to deal with number of issues that put negative influence on team
personnel, athletes, along with spectators that are going to attend 2016 Rio Games. These issues
include safety and security concerns, Zika virus, along with environmental conditions.
Zika virus: Sudden spread of Zika virus has forces WHO to take decisions of whether
postponing or continuing the event. Such type of health hazards put negative influence on
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number of visitors and also many of the athletes withdraw their participation from Olympic
Games (Barbara, 2016). This further has affected the revenue generation from the event along
with profitability. In this context, The Rio 2016 Organising Committee associated with Olympic
Games said that visitors visiting for the Olympic Games must be facilitated with free health care
assistance. Further Brazil must be committed to provide medical response teams along with
number of medical units for managing emergency and critical medical situations at the Olympic
facilities. Olympic Games in addition to this face issues of shortage of human resources (health
care workers) which in turn affects the overall quality and cost of project.
Public safety and security: This is the risk factor that is faced by participants and visitors visiting
to Brazil. The Department of State has identified crime as one of the significant threat observed
during the World Cup of 2014 (Halchin and Rollins, 2017). In this context government of Brazil
has undertaken significant changes while improving public safety in recent years. The
government is liable to undertake mitigation strategies for reducing the risk to traveller’s safety.
In this context it has been identified that National Government has plan for mustering the force
with larger number of personnel to ensure security especially for US citizens (Reis et.al.2016).
Environmental sustainability issues: This is one of the major risks experienced by organizers of
Rio 2016 Olympics. This requires planning and designing with the implementation along with
review as well as post event activities to overcome the issues such as public transportation, waste
management, water quality improvement, construction, etc. Regarding these issues organizers in
association with government has focused on minimising waste of water along with pollution that
will occur because of sport activities such as sailing, triathlon, rowing as well as similar events.
This is considered as major concern as it largely affects the health of tourist and athletes.
However there is greater need of adopting mitigation strategies to deal with issues such as
sanitation, water quality, etc.
Social and economic risk: The Brazilian government has win the bid to host 2016 Olympics and
this is one of the biggest opportunity to exhibit social and economic progress which further
reinforce the image of the country in terms of rising power. The country has struggled hard to
address political and economic crises (Bremer, 2016). From the past events, it has been identified
that 8,000 families suffered from removal from their homes for construction of facilities for
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organizing the event of 2014. In this context government has made efforts to make lives of local
communities better by facilitating them with better place to live.
The project to overcome the limitations of time, cost, quality and resources must focus on
developing long term strategies so as to improve long terms sustainability development within
the host country. For an example, organizers must focus on conceptualization, bidding as well as
strategic planning for each phase of the event and this requires specific tools and techniques.
Further Olympic Venues along with infrastructure facilities must be aligned with urban planning
within host region. Sustainability is one of the major concerns while planning for Olympic
Games within the country and therefore it is important for organizers to make efforts for
improving public private partnerships.
Further strategies must be developed to encourage local citizens to be the part of Olympic Games
and also to initiate practices that support sustainable development. It has been identified that
mega events often influence local communities as well as environment in case if they are not
managed appropriately (Boykoff and Mascarenhas, 2016). Therefore it is essential to identify the
factors that put negative effects and must be communicated so as to limit the effects of
economic, environmental and social factors on local communities within host country. It is
highly recommended to organizers to make use of sustainability reporting and monitoring tools
that support measuring the progress of sustainability performance undertaken by Brazilian
Government while organizing the event. In addition to this, there is need of establishing culture
related to continual improvement related to the Olympic Games.
Setting of knowledge transfer programs is beneficial for promoting the Olympic Games. In
addition to this, it is highly recommended to integrate sustainability principles with the
profitability gained by the country. There is further need of maximising benefits while
organizing the event and also minimises the limitations.
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Conclusion
The current report has exhibited wider range of examples along with recommendations regarding
seeking or gaining the opportunities from Olympic Games. Brazilian Government has made
number efforts for implementing sustainable development in the country however there is still
the scope of improvement. It has been identified that public policies along with organizational
strategies are effectively adopting principles related to sustainable development but the major
challenge is to transform concepts into practicality. Further the report has identified number of
benefits and opportunities for the host countries while considering the global challenges related
to competitiveness that support promoting sustainable development.
Olympic Games potentially inspire positive efforts from businesses, local citizens, communities,
and government. Support of all the stakeholders support fulfilling of sustainable objectives by
minimising risks related to health, finances, safety and security, social, economic, etc. In addition
to this, it has been identified that management of Olympic Games needs strong governance and
actively contributes towards promoting sustainable development. This implies modifications in
the nature of Olympic Games that have effectively used major and crucial techniques of risk
management while incorporating principles of sustainability. This has supported investment
benefits for long term and is highly valuable for the efforts.
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References
Books and Journals
 Barbara, V., 2016. Brazil’s Olympic catastrophe.
 Boykoff, J. and Mascarenhas, G., 2016. The olympics, sustainability, and greenwashing:
The Rio 2016 summer games. Capitalism Nature Socialism, 27(2), pp.1-11.
 Bremer, A., 2016. A Cost-Benefit Analysis: The Economic and Social Effects of the Rio
2016 Olympics (Doctoral dissertation).
 Burtonshaw-Gunn, S.A., 2017. Risk and financial management in construction.
Routledge.
 Carayannis, E.G., Sindakis, S. and Walter, C., 2015. Business model innovation as lever
of organizational sustainability. The Journal of Technology Transfer, 40(1), pp.85-104.
 Chapman, R.J., 2016. The rules of project risk management: Implementation guidelines
for major projects. Routledge.
 Davies, A., Dodgson, M., Gann, D. and MacAulay, S., 2017. Five rules for managing
large, complex projects. MIT Sloan Management Review, 59(1), p.73.
 Haimes, Y.Y., 2015. Risk modeling, assessment, and management. John Wiley & Sons.
 Halchin, L.E. and Rollins, J.W., 2017. The 2016 Olympic Games: Health, Security,
Environmental, and Doping Issues. Current Politics and Economics of South and Central
America, 10(2), pp.203-249.
 Kerzner, H. and Kerzner, H.R., 2017. Project management: a systems approach to
planning, scheduling, and controlling. John Wiley & Sons.
 Kerzner, H., 2019. Using the project management maturity model: strategic planning for
project management. Wiley.
 Petersen, E., Wilson, M.E., Touch, S., McCloskey, B., Mwaba, P., Bates, M., Dar, O.,
Mattes, F., Kidd, M., Ippolito, G. and Azhar, E.I., 2016. Rapid spread of Zika virus in the
Americas-implications for public health preparedness for mass gatherings at the 2016
Brazil Olympic Games. International Journal of Infectious Diseases, 44, pp.11-15.
 Pheng, L.S., 2018. Project Risk Management. In Project Management for the Built
Environment (pp. 159-176). Springer, Singapore.
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