Assessing The Goals Of The Principal And Agents Will Help Mitigate The Agency Problem

The following short case will give you a good idea of how risks surface in business and project planning and what companies do about it. Consider that you are the Risk Manager as you look at this case, as it will be a good exercise for the time when you will be that Risk Manager!

Contract theory - studies how economic actors can and do construct contractual arrangements, generally in the presence of asymmetric information

Three factors define the success of any project; these are time, cost, and quality (Wysocki and RK 2013: 4). This paper identifies three main facets of project management that were inappropriately implemented, namely; Resourcing, Stakeholder Management, and Risk Management and how their improper implementation led to the violation of the three constraints (i.e. time, cost, and quality).

When the manager of project carried out its work plan should take into consideration the possible risks that may occur within the project. The risk is the possibility that occurs a problem within a project and that may cause some change within the same (Heldman, 2011). It should be noted that not all risks are bad since they can be potential opportunities to make some changes that will improve the overall status of the project. In the same way a risk not taken into account in time can create one problem in the project and can completely change the final performance of the project. The project manager can take several elements to identify the risks. Some elements and documents that can be used to identify risks are: search internal risks of the project, such as resources

Cabinet Departments are the largest organizations with the broadest missions. The leadership is directly accountable to the president, who hires them with permission of the senate and may also fire them if the need ever arises. Executive agencies are operated outside of departments and controlled by varying degrees by the president. So agencies like the CIA and NASA. Regulatory agencies are outside of the president’s control, even though he can sway them in certain directions, they are controlled by a commission and they are agencies like the environmental protection agency. Government corporations seem very similar to private corporations because they are organizations the private sector cannot make money one. These are corporations like AMTRAK and PBS.

The best alternative to a negotiated agreement is what every organization needs to fulfill their wants and needs. This is an advantage because they clench a clear target to which they can match any assigned agreement. The two articles discussed within this paper state two alternative negotiation situations that are compared to my current work setting. The first article involves a United States company named Kennecott during the 1960’s in hopes of a contract renegotiation with the Chilean government. The second case discusses

In order to use this approach, Luke has to take all the stakeholders into account when he makes his decisions. One side of the stakeholders would be Owen and Owen’s neighbors who will be affected by ABC Company’s project. Another side of stakeholders is Luke’s reputation, ABC Company, their employees, investors, the money, time and efforts devoted in the project. In this case, the stakeholders of ABC Company side overweigh the stakeholders of Owen and his neighbors. Therefore, Luke should not inform Owen about his company project. By doing so, the confidentiality of ABC Company’s project will be protected and executed as the original plan. Luke will also be valued highly by his employer. Owen and his neighbors’ property values might decrease as the project launched. However, there is a high chance that Owen might sell his house before the project is executed, since he once mentioned to Luke that he is thinking of selling his house. If Owen decides to sell his house, he will not be affected by ABC Company’s

In the initiation phase of the project, Anderson and Gable, decided to deliberately present false information to the client in regards to the project specification. Therefore, they both knew the risk that they did not have the capability of satisfying the project specification. However, they decided to go through with giving false information in order to win the tender, armed with the intention of negotiating the specification scope with the client halfway down the project. This approach of managing risk should not be accepted and is not recommended as it shows that the management

“Understanding role clarity and task ambiguity” - department and individual objectives are not clear from the beginning and lack of group structure.

In construction projects, mostly the firms (in this case the firms become client) do not have the skills or develop skills inside the firms to undertake the projects due to amount of the projects should be conducted or the complexity of the projects (Reve and Levitt, 1984). Therefore, the economic decision to conduct the projects is to procure them to third parties. However, more commonly the client agonize the final quality of the projects will meet standard requirements. Thus, impacts to involvement of complex contracts of construction procurement.

Construction projects are always unique and risks raise from a number of the different sources. Construction projects are inherently complex and dynamic, and involving multiple feedback processes. A lot of participants – individuals and organizations are actively involved in the construction project, and they interests may be positively or negatively affected as a result of the project execution or project completion. Different participants with different experience and skills usually have different expectations and interests. This naturally creates problems and confusion for even the most experienced project managers and contractors.

In order to perform project risk management effectively, the organization or the department must know the meaning of the risk clearly. With regards to a project, the management must focus on the potential effects on the objectives of the project, for example, cost and time (Loosemore, Raftery and Reilly, 2006). Risk is a vulnerability that really matters; it can influence the objectives of the project

When entering into contract negotiations, the objective of each side is to obtain a contract of greatest benefit to their organization. This desirable outcome never happens by chance; it is always the result of careful planning. A critical part of this planning is understainding the role of power. This includes determining who possesses the power in bargaining, and establishing strrategies to bargain with individiuals who have more power than you. This power is needed to obtain the advantage in negotiating which will increase the liklihood of obtaining the goal (Lewicki, Saunders & Barry, 2011). Once in the heat of negotiation, it can be too late to try to catch-up on planning which failed to occur before the negotiation process began.

In this paper, an extensive literature review is undertaken to evaluate the importance of risk allocation to project stakeholders and discuss current practices. However, the complexity of this topic is beyond the scope of this paper. Hence, the attention is towards the direct participants, even though other stakeholders will also be tangentially mentioned. Also, as PPP is developing fast in the area of project finance and its importance is increasing, I have used it to illustrate some of the points made in the current risk allocation practices.

The completion of any project depends on the execution of various parameters mostly set at the beginning of the project. In order to complete the project to satisfactory levels, the project must be completed within the stipulated timelines, fall within the approximate budget and be of the required quality standards. However, most of the projects are affected by adverse changes and unforeseen events that occur during the execution period. Research shows that the magnitude of change is dependent on the size of the project, with large projects experiencing more uncertainties due to several factors including; planning and design complexity, interest groups having deferring opinions, resource availability, Economic and political climate and statutory regulations, which may necessitate change of plan. Most of the uncertainties are known to occur in the concept phase and if not intervened, they may affect the entire project. The burden falls on the management of such risk as some managers choose to ignore the uncertainties since they call for additional costs. Other inherent risks may go unnoticed and therefore remain unsolved,