ASSIGNMENT –II

Project Management And Finance

Submitted by: M Udaya Kumar

Bharathi Heat Exchangers Ltd. is into building quality industrial boilers since 1974. By 1990, it
was the second-largest boiler manufacturer in India. The company had 750 employees on rolls. 
 
 During the 1980s, the company's profits increased significantly. The success of the company
was attributed to its single product line (boilers) with standardized design. During this time, the
company concentrated on improving its existing model rather than developing new models or
new products. By the late 1980s, the company gained expertise in manufacturing boilers. The
company was able to build and deliver advanced boilers to its clients within their budget and on
time. Overwhelmed by their expertise in building boilers, the company was extremely
complacent and felt that this successful trend would continue. But the company's financial
statements in 1991 showed decreasing profits due to the sharp decline in orders for boilers.
Problems began when the company's clients began demanding boilers as per their specifications.
Although the company had the technical expertise to build boilers according to customer
specifications, it incurred losses due to cost and schedule overruns. These losses were mainly due
to the management's inability to plan and estimate the costs of manufacturing boilers according
to the new designs given by the clients.
 
 This made the company search for alternate ways of managing its projects. At a quarterly review
meeting, the company's CEO, Rajeev Dutta(Dutta), said, "We can no longer manage the
activities in the company using traditional management practices. It is high time we consider
every client's order as a separate project." He also commented that, "Managers should understand
that managing projects require a completely new set of tools and skills. The need of the hour is
project management." But, the senior managers who were with the company from its inception
felt otherwise. Ashok Singhal (Singhal), one of the senior managers, felt that there was no
difference between a project and a process. He said that the functional approach used to manage
processes, which had proved effective for 20 years, would be good enough to handle the new
projects also.
QUESTION:
Whether CEO’s or Senior Manager's statement is correct? Justify your answer with
complete detail.
ANSWER:
CEO’s statement is correct

JUSTIFICATION:

Since as per Senior Manager’s statement the functional approach used to manage processes,
which had proved effective for 20 years but this process also showed decreasing profits when
clients began demanding boilers as per their specifications.

As per the company's CEO, Rajeev Dutta statement the project team should consider every
client's order as a separate project. The vision of the project, its purpose, and direction should be
based on the clients demand to increase the profits. The project manager should work with the
project team to define the tasks which need to be undertaken to complete the project separately.

CEO also stated that “Managers should understand that managing projects require a completely
new set of tools and skills”. It is true, to fulfil the client's demands as per their specifications new
set of tools, and skills required. Doing the same thing the same way will get the same results. If
what is offered never changes, neither will the clients. New skills add to the value provided to
clients and the marketability of the business. For every new credential earned, a business has a
new marketing tool and can offer greater incentives to clients who use them. This can help
motivate an individual to seek greater challenges. It can help broaden the scope of available
clients. 
QUESTION-2
Cordova Research Group spent more than 30 years conducting pure and applied
research for a variety of external customers. With the reduction, however, in
R&D funding, Cordova decided that the survival of the firm would be based upon becoming a
manufacturing firm as well as performing R&D. The R&D culture was close to informal project
management with the majority of the personnel holding advanced degrees in technical
disciplines. To enter the manufacturing arena would require hiring hundreds of new employees,
mostly non-degreed. 

QUESTIONS
i . What strategic problems must be solved?
Ans.
1. To raise funds for starting the manufacturing firm.
2. To hiring skilled technicians because initially to run the firm we need skilled ones.
3. To Achieving profits which can be used for R&D funding.
ii. What project management problems must be solved'?
Ans. 
1. To get a proper project to manage both manufacturing firms and R&D.
2. To get investment opportunities.
3. To achieve sufficient market size and scope.
4. To check the availability of requisite natural suitable for processing and manufacture.
iii. What time frame is reasonable'?
 Ans. Time frame of fourteen working days in a month.
iv. If excellence can be achieved, would it occur most likely using formal or informal
project management? 
Ans. Since this approach has planning and execution therefore the project will achieve its
excellence by formal project management.
 QUESTION-3
Prima Industries Ltd. was a medium-sized Indian company operating in a mature market for
about a decade. It had fully functional departments like, operations, quality assurance/quality
control, product development, sales and marketing, engineering and maintenance, warehousing
and distribution, and finance and IT. The company had business units in various sites, some own
and some leased. The company used state-of-the-art process plant with modern equipment.
Sometimes Prima hired or leased equipment. It availed various services from a number of
contractors in the areas of transport, maintenance, storage, wholesale distribution, advertising,
accounting and audit. 
 
 In the wake of liberalization of Indian markets and increasing competition, the company was
exposed to various risks arising from changing technology, vibrant markets and uncertain
external environment. In this context, the board and executive management planned to develop
and implement a risk management program throughout the organization.
QUESTION:
How to eliminate the risk, and what are risks associated with this process.
Ans.
To eliminate risk all the employees were informed about the objectives/goals of the risk
management program. A risk advisor was hired to develop the company's risk profile. He
interviewed managers and employees from various departments to get a wide-ranging view of
the organization's risk exposures and other weak spots or pitfalls in its present risk control
system. The advisor, at this stage, mainly concentrated on preparing a 'risk register' listing
various business and operational risks. All these risks were documented after being ranked
depending on their severity.
A risk management steering committee (it was planned that once the risk management system
was in place the steering committee would be in charge of its operation) comprising relevant
personnel was set up to establish priorities for the risks listed in the risk register. These risks
were prioritized based on qualitative assessment and rating scores. The risk prioritizing involved
the following steps.
• Each risk was assigned a weight (score) by the committee in terms of their relative importance
to the company.
• The weighted average score of each risk exposure was calculated.
• The cost associated with each risk exposure to the organization was calculated.
• The cost-benefit of each risk response was calculated. Then a relative priority is assigned.
A future action plan for managing the organization's risk was devised depending on the risk
priorities and cost-benefits of various risk responses. The list of necessary tasks, schedules,
resources and costs required to implement the risk management plan was prepared.
The implementation of the risk management program was left to the managers of the business
units. Every unit was given a list of risk management tasks. The audit team studied the progress
and submitted its findings to the relevant units to enable them to know where they stood in
implementing the risk management program.
A reporting system was put in place to monitor and communicate the progress of the risk
management process to various parties involved in it. The managers of the units were informed
immediately about any product defect, litigation, or schedule creep. The quarterly performance
reports were submitted to the top management with the loss, risk, and audit results related to all
the departments/business units.