Sep 08 Paper 1 Q6 (iv)

[Matthew_Law]

Hi guys,

This questions relates to project risk and mitigation methods:

"A large financial institution has been asked by a consortium to provide significant debt finance for a major project. The consortium proposes to construct and then manage a number of new hotels in a range of developing countries. The target customers for the hotels would be affluent tourists from developed countries."

"Describe significant risks to the consortium’s revenues once construction has been completed. For each risk, explain the actions that could be taken to reduce the chance of the risk occurring."

For 12 marks I know I should generate as much points as I can. But how come in the solutions the examiner listed out points such as

"Terrorism or the fear of terrorism could lead to less overseas travel. Governments and others could improve security arrangements or the consortium could build hotels in countries less prone to unrest."

What is the logic behind using the latter point?

 

[Mark Willder]

Hi guys,

This questions relates to project risk and mitigation methods:

"A large financial institution has been asked by a consortium to provide significant debt finance for a major project. The consortium proposes to construct and then manage a number of new hotels in a range of developing countries. The target customers for the hotels would be affluent tourists from developed countries."

"Describe significant risks to the consortium’s revenues once construction has been completed. For each risk, explain the actions that could be taken to reduce the chance of the risk occurring."

For 12 marks I know I should generate as much points as I can. But how come in the solutions the examiner listed out points such as

"Terrorism or the fear of terrorism could lead to less overseas travel. Governments and others could improve security arrangements or the consortium could build hotels in countries less prone to unrest."

What is the logic behind using the latter point?

Hi Matthew

Yes, it is tricky to see what is meant by "once construction has been completed". What the examiners are saying here is that they are not covering risks of the construction process itself, eg cost of bricks, delays due to bad weather.

However, the risk of terrorism is something that would occur after the hotel is built. But the question says that the hotels are only at the proposal stage at present. So it is not too late to mitigate this risk by choosing different locations.

Good luck with the exams this week.

Mark