Critical Success Factors
According to Zakari et al., critical success factors (CSFs) are essential in providing an understanding of best practices to increase the success rates of projects. One major issue that affects small and medium-sized organisations is the lack of adequate resources to facilitate investment in various project aspects. Therefore the organisations should be strategic to ensure that they invest in critical areas that will provide the highest impact of the project(Zakari,2016). Hence the definition that Critical success factors are the essential aspects of projects where positive results are necessary for an organisation to meet its objectives. In the following article we evaluate various crucial elements of success including financial management of large projects, integrated risk management process, Fuzzy Earn value management, project delay economics and successive cost estimation. It is critical to note that poor financial management strategies can have adverse effects on projects success hence the need to implement effective and varied financial management strategies to address numerous potential risks.
The integrated Risk Management process
Project assessment strategies including risk management have been identified as one of the leading causes of issues in projects. The majority of the project owner’s public and private alike fail to anticipate the challenges associated with projects. Similarly, the contractors also do not conduct a risk assessment before undertaking projects. An issue that results in numerous problems once the plans have started. Project risk management enables both the project owner and the contractor to anticipate a wide variety of risks as well as develop strategies to respond to those risks adequately.
Most importantly to note is that risk management strategies are aligned with project management. Project management strategies facilitate effective communication, risk management, resource management, and time management among others. As previously stated, teamwork is crucial as a project included various teams with individual goals. In the article “Integrated Risk Management process for building projects,” the researchers focus on developing integrated risk analysis methods with the capabilities of identifying various risks in projects from inception to completing. It is apparent that despite projects takin off successfully, they may encounter challenges and indeed risks along the way. The integrated risk management system evaluates the projects cautiously, identifying potential risks as the project progresses on its course. The most common approach to risk management is anticipating project risk before the project commences; thus when additional risks arise in the course of the project; the administration is caught off-guard. Through integrated risk management, the management anticipates risks all through the life of the project.
Financial Management of Large projects
Large projects pose a significant risk due to their size. Also, the amount of financial resources is often high as large sums of money are required to cater to various aspects of the project. In risk management, one of the areas that risk managers consider is the financial management of resources. It is critical to note that large projects may be divided into phases and may include numerous parties including contractors and subcontractors. Thus creating a challenge in the management of financial resources. At the beginning of the projects, budgets and schedules are designed to assist in tracking financial resources. As despite the existence of the budgets and schedules, large projects ran the risk of surpassing proposed budgets thus the need for additional investment(Irimia,2015).
Organisations that undated large projects have a vision and expectation that on the completion of the project they will receive a return on their investment. Hence the ROI of the project must be profitable for an organisation. The risk manager is in charge of identifying and managing various potential risks. Similarly, the large projects the risk manager is expected to identify potential hazards in budgets as well as make provisions for risks by securing additional resources for contingencies. It is apparent from the article “Financial management of large projects: A gap” that large projects are seldom valued. As a result, organisations encounter numerous issues including a negative ROI and stalling of projects. Project managers are recommended to liaise with various project stakeholders including the risk management team to develop and implement effective financial management strategies in mega projects. It is also apparent that despite the issue of financial management in large projects is a matter of great concern; limited research has been undertaken to determine the underlying problems as well as develop practical solutions.
Fuzzy extended earn value management
In project management EVM (Earned Value management) is applied as a useful technique in monitoring progress in projects as opposed to applying observation techniques to determine tasks completed. As a result, EVM is implemented with two main objectives in mind namely; encouraging the implementation of active schedule and cost management techniques. Secondly, it assists clients in relying on timely and accurate information in determining the status of contracts. It is apparent that despite the popularity of EVM in project risk management the technique lacks various features which are critical in making the method more effective. In the article “Fuzzy extended earn value management” the researches evaluate multiple elements associated with financial management in the implementation of project cost control systems. As a result, the findings of the study revealed that standard EMV methods fail in their ability to determine the value of money in terms of time, uncertainty in contactor cash flows as well as delays in payments by clients. The proposed EMV model applies fuzzy sets to address conditions that are currently categorised as uncertain in most projects. The model attempts to apply EVM theories in evaluating and controlling financial performance as well as provide revised estimates for projects that are uncertain. It is apparent from the various case studies involved in the research that Fuzzy EVM is a useful technique in addressing numerous issues that are created as a result of uncertainty. The elimination of change in projects ensures that an organisation and the project managers are prepared to solve the problems that may result in project failure(M. Salari,2014). Therefore the application of Fuzzy EVM acts as an effective risk management strategy.
Project delay economics
Projects are often scheduled as they are expected to take a stipulated amount of time to be completed. In a scenario whereby a project is delayed for various factors, the value of the project decreases as the ROI is affected. In cases where the contractors have caused project delays, they are required to pay the client a stipulated amount to cater for the losses incurred by the client due to the delays — therefore asserting the financial impact on project delays. In project risk management, the project manager must develop an anticipated completion date. Three completion dates are presented including the earliest completion date, critical completion date and completion date. The range date of the three completion dates is perceived as the safest time to complete the project without resulting losses(Bell,2011). Thus supporting the augment that time is money and needs to be managed effectively. It is critical that projects are completed between the time limit presented to ensure that the value of the project is not compromised.
Successive cost estimation – successful budgeting of significant projects
Financial management is a significant aspect of project management, hence the need for organisations to apply various financial management strategies. Financial estimates are often used in creating project budgets. As a result, the projections are made while considering multiple factors. There are various tools and techniques applied in cost estimation and more often than not the organisation’s cost estimates are close to the actual cost. In developing cost estimate one method would be useful, is the use of secondary forms of data. There are numerous projects undertaken by, and it would be highly beneficial for an organisation to use the actual cost of successful projects. Through the analysis of various successful project cost estimates, an organisation can identify the initial cost estimates and actual cost estimates. Also, the organisation can understand why the changes in cost occurred and how they can be eliminated and addressed to ensure successful completion of projects. Successive cost estimation is an effective manner to create more realistic cost estimates, hence decreasing the risk of the project failing due to reduced cost estimates. Also, successive cost estimation can be applied in various stages of the project to enable effective financial management(Ole.et.al,2015). For instance, if there was a deficit created in one phase of the project manager can readjust cost estimates in the following stages to ensure that there adequate resources to complete the project.
It is apparent that integrated risk management involves the application of numerous risk management strategies. It is also noted that financial management is a make or break issue in project management as poor management of financial resources could fail to complete projects as well as increase the overall cost of the project hence reducing the expected ROI of the project. It is critical to note that a multidimensional approach that considers numerous factors increases the success rate of projects.
Irimia-Dieguez, A.I, Medina-Lopez, C., Alfalla-Luque, R. (2015).Financial Management of Large Projects: A Research Gap. Elsevier, Academic World Research and Education Center doi: 10.1016/S2212-5671(15)00495-5.
Zakari.et al (2016). Critical Success Factors for Projects in the space sector. The journal of modern project management.
Bell, Randall (2011).Project Delay in Economics. The Appraisal Journal.
Ole Jonny Klakegga, Steen Lichtenberg(2015).Successive cost estimation – successful budgeting of significant projects. Elsevier. Procedia – Social and Behavioral Sciences 226 ( 2016 ) 176 – 183.