“If you don’t know where to go, you can’t know the way how to go there” (Anonymous)
In the western idea, the meaning of the word “risk” is linked to a negative concept; to get exposed to danger. In Chinese, the word “risk” is created by two ideograms, of these the first means “danger” and the second means “opportunity”. This is the way I look at the investments. Any investor is strongly linked to these two meanings, and any investment is such just because at any risk is linked an opportunity. The biggest the risk, the highest is the expected return of the investment. The role of a manager is to find the correct trade-off between risk and opportunity the stakeholders are expecting, and then to work on the project in order to achieve this goal.
A project is a set of ordered actions aimed at obtaining specific results, within the established limits of time and resources.
The guide at strategic level for the growth of a company requires:
- the Idea (vision), at the top, of what will be or should be the company in the future;
- the consent and adherence (commitment), to the managing structure of the organization, the strategic goal (mission) and on the general direction that the organization should follow in the future;
- the documentation of the major objectives and the main strategies for achieving the strategic goal;
- the planning and implementation of specific programs and projects, for the execution of the agreed strategy and for the achievement of their goals.
The vision indicate where we want to go. The strategies set out how to go there.
The Investor creates the Vision, and the Sponsor Board of any project defines the strategies in order to achieve this Vision.
The Development Manager works on a operative level, to implement the vision. He is the linking ring between strategic and operative words. Budget, Time Schedule and Cash Flow are the controlling tools used to check the achievement of the goals defined in the Business Plan, and rule the resources at disposition for any project.
The Project Manager works at strategic level in order to implement the Vision.
Project management has two objectives:
- ensure that the projects are consistent with the strategic objectives and their risks are acceptable
- carry out the planning, control and management of each project according to criteria of effectiveness and efficiency.
Project management is conceptually based on three elements:
- responsibility clearly identified for the integration of contributions to the project
- planning and project control with prediction and integrative function of individual contributions
- establishment, management and operation of the project team as a place of integration of individual contributions to the project
Appropriate assistance to the success of a project can only be achieved when each participant understands what others are doing, and how, and when plans and deadlines which are complementary are properly integrated by methods of management shared by all, and according to a common terminology.
It is important not to forget that the concept of risk consists of two elements combined: the first refers to the concept of exposure to possible deviations from the expected results; the second is the concept of opportunity.
The risk is an integral part of every project. If there were no risk, there would be no opportunity exploitable by an Investor.
It is the risk to justify a gain to the developer. This is in fact connected to the cost of money to the developer. If there were no risks in a project, then over time all become investors with the result that profit margins would adjust to what is the return of Treasury Bills, which have a fixed interest rate risk “0” . All other types of investment, to be worth to be undertaken, should lead to a gain greater than that given by the TB. This surplus is strongly linked to β index, which assesses the risk inherent in the very nature of the project and the financial structure of the body that is carrying out (on the basis of this index will also evaluate the financial values of the society in question).
So, risks are not to be taken as excuse “a priori” for a project manager for the unpredictability of a project, as these are an integral part of each project and is one of the fundamental tasks of the project manager to predict risks where possible and address them.
Vision, Mission, Budget, Time Schedule and Cash Flow. Elaborated and approved. Once an Investor has these instruments he devotes to the control of the project and can work properly on funding and real implementation of the Project itself.