6.2 Risk Management
“The best projects show an ability to manage risks more effectively, which, in turn, contributes to positive outcomes, resulting in safer projects, lower costs, and timely completion of projects” (Virginia, 2013, p.266). To ensure the security and success of a project minimising the risks is essential. The ability to identify potential risks, and the management of such when they occur, is crucial to avoiding failure. Before undertaking a project such as Kings Crescent, a risk management plan would be constructed (Flyvbjerg et al, 2003). The strategies used to manage risks must be supported by the head of an organisations management structure to set the project up for success (Virginia, 2013). Risks of turbulence can be categorised in terms of 2 categories: Endogenous Risks - Events occurring within the project organisation such as contractual disagreements or breakdown in partnerships. Exogenous Risks - The occurrence of events as a result of political, economic and social forces out-with the control of management. (Miller and Lessard, 2000, p.22) Many risks associated with major projects were mitigated in the case of Kings Crescent due to the nature of a local-authority led development. Endogenous risks such as disagreements between client and developer were absent with the council in control. Financial risks were reduced as there is no leakage of value to a private developer. The availability of finance was further improved with access to grants and low in-house management costs (UofTDaniels, 2017). The risk involved in funding the 50% affordable housing, was further mitigated by the councils understanding of the housing market in Hackney. Similar developments such the Colville Estate had been completed by the council, selling
private properties for an average cost of £375,000. Projected rental yields could be assessed. The most threatening risks were in the acceptance of planning approval, as highlighted from previous failed attempts at a regeneration proposal. Objections from the existing residents have the potential to delay the project and subsequently adding to the costs. Planning objections included; the phasing of the development favours new private properties not the existing tenants, overshadowing impacting views out of neighbouring buildings, reducing daylight levels and issues of noise during the lengthy construction phase (GLA, 2012). This was managed effectively through community engagement meetings where the criticisms were heard. The project team were able to make amendments and demonstrate value of the compromises necessary. The successful management of the construction process minimised the impact on the existing residents. They were able to stay in their properties during the refurbishments with residents leaving for a few days at most (GLA, 2012). This also saved cost and pressure on housing facilities as they would have to provide alternative housing. A key issue was the need to replace the demolished social housing and comply with the London Plan policy in order to gain the approval of the planning authority (the Mayor). Profits would have to be reinvested into the affordable and social rent housing. By ensuring the quality of construction and material finishes were of a high standard, this reduced the risk of the private sale properties not selling for the required value. The quality of the build resulted in flats selling for up to £2.95 million enabling the successful cross subsidisation of social and affordable housing (Moore, 2018).
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