4. How could the CCM allocate and mitigate risks?
In addition to allocation, risks can also be mitigated or eliminated. CCM could accomplished this through provisions in the contract documents, or through due diligence performed both before and during the project. Since the financial risk typically results from the work performed by CCM, control over the company and its work force can mitigate or eliminate the risk. The contract provisions canal so will be used with the implementation of specific contract clauses, to ensure that project objectives risks are shared. CCM should have shared the project risk to prevent the demand forecasts risk from being transferred to them. This was evident in the late amendment in project scope which when funded by the private sector through higher tolls, adversely affected demand and overall viability. Vehicle forecasts needed to be recalculated for any material changes to assumed toll levels, to alleviate CCM from assuming all the risk. However, the transfer of financial risk to CMM didn’t free the NSW Government of the political risk associated with the project not meeting expectations. The reputation of NSW Government and the RTA appeared to be harmed as a result of this project. Mitigating the risks can be obtained not only by minimizing the cost of each risk, but also by reducing the total cost of the project’s risks. The risks could be allocated to insurance companies, directly contracted by CCM or indirect by the construction companies. Allocation will reduce most of the risks cost. Also, provisions can be constructed. The provisions can mitigate the financial risk along with due diligence. The financial risk can also be mitigated by the control of the work force. Workers should be elected carefully so that they can meet CCM’s expectations. Apparently the project went wrong because of the vehicles forecasts. 5. Why did the Sydney CCT fail to deliver the projected returns for its investors as of 2006? Although the...
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