This case aims to analyze risk management practices of Millennium Development International (MDI) and suggest enhancements based on a theoretical framework derived from the literature while considering the implications to its organizational structure. Al-Shamiyah project in Makkah, Saudi Arabia, is used as an example to illustrate the practices of MDI. Due to a high level of risk associated with large-scale development projects, it is argued that the traditional risk management approach is not convenient to the context of these projects. Each large-scale project has a high level of uniqueness that renders benchmarks generated out of previous projects obsolete. Hence, a reactive risk management approach is being promoted. For the purpose of optimizing this approach, engaging necessary experts and securing the presence of key decision makers in the process, the formulated system defines key milestones at which risks need to be assessed and proper decisions need to be taken.
TopSetting The Stage
As risk identification is the initial step in risk management, understanding risks and their categories is essential to come up with an effective risk management system. As no references were found on risks related to the whole process of development management, other relevant bodies of literature were investigated, namely, literature focusing on the construction part of development, sustainability and private public partnership. The identified list of risks was organized along the three risk environments that were found to be applicable in the context of large scale development projects, namely, project environment, external environment and institutional arrangement. However, little was found on how to mitigate these risks. Hence, this represents a gap in literature to be covered. Risks at the project environment level include market, financial, technological, management, technical and operational risks (Datta& Mukherjee, 2001; Dey, 2009; Gil, 2009; Perera, Dhanasinghe, &Rameezdeen, 2009; Siebert, 1987). At the level of the external environment, the risks include political, social, environmental and economic risks (Datta& Mukherjee, 2001; Dey, 2009; Gil, 2009; Lehtonen, 2004; Perera, Dhanasinghe, &Rameezdeen, 2009; Senge&Carstedt, 2001; Senge, Lichtenstein, Kaeufer, Bradbury, & Carroll, 2007; Siebert, 1987). Risks at the level of institutional arrangement include opposition of interest, multidisciplinary nature of projects under discussion, political conflicts, lack of approvals facilitation and over optimism (Vanmarrewijk, Clegg, Pitsis, &Veenswijk, 2008, Koppenjan&Enserink, 2009, Sagalyn, 2007, Zhang, 2005). The identified list of risks was used to analyze the case study and reveal faced risks and challenges that are illustrated in the following section.