A radical approach to risk in project financial management

In construction, the organisation's structure, activities, functions and the environment under which they operate have become highly complex. Despite significant improvement in the sophistication of business analytical tools, the increasing level of uncertainty has placed risk management in the forefront of business activity. However, there is no clear-cut recipe for risk management. Organisational attitude toward risk varies from one extreme to another. It appears that the general recommendation is that risk should be contained and uncertainties minimised. In this paper the concept of risk is considered from a different perspective. It is argued that while all efforts to minimise uncertainties are justified, business risk should also be considered as an instrument for gaining advantage. The paper examines the above contemplation within the context of project financial management and its relation to an organisation's corporate financial objectives. A forecasting model, developed by the author, is used to apply the above notion to a case-example, as a scenario, to a real past school project. The results suggest that a proactive approach to project financial management can yield benefits to all parties involved in the project.