Shubham-Ganguly ERM Assignment

Enterprise Risk Management
Assignment
Submitted to:
Dr. Suresh Mony
Submitted by:
Shubham Ganguly(B054)
NarseeMonjee Institute of Management Studies

Bengaluru
1. Land Costs- The Nawapur site was on private land and EIL needed to
negotiate with each landowner. The land acquisition part of a project
generally takes about four to five months and comprises several rounds of
negotiations. The speeding up of this process meant that the villagers could
gauge the desperation of EIL in clinching the deal. Consequently, the land
prices went up. EIL estimated that it had to finally settle for prices which
were about 30-35 per cent more than the normal rates. The total land cost was
about Rs 15 million for 300 acres. The potential for land cost increases to
about 345 million.
2. Weak Project Control Structure
A comparison of the bar chart of the Installation Head (Exhibit 13), BDO
(Exhibit 14), along with the actual progress in the Nawapur Project Progress
Report (Exhibit 18) reveals interesting information as given in Table 1. It is
observed from Table 1 that there are substantial differences in information
being maintained in the Head Office (Installation Head), the Division Office
(BDO, Vadodara) and the Project Office at Nawapur, which is a pointer to the
manner in which the project is controlled and monitored. These differences
should not have occurred given that an ERP system is in operation and
networked between all the offices. This means that the information is rarely
updated or validated on field. It appears that the reporting and controlling
systems have not been designed to support the multi-project teams, where
each project has a very short lifecycle. This poses the risk of lack of
coordination and a failure in one component or division can lead to domino
effect on all other components.
3. Land Acquisition Problem
Calculating the earliest and the latest start and completion times in Table 2,
using the data in Exhibit 15 and 16, we find that activities 1 (land acquisition
process), 2 (micro siting and planning), 6 (tower delivery), 8 (machine erection),
10 (pre-commissioning of WEC), 12 (VCB and 11 KV line charging), and 13
(commissioning) lie on the critical path. It is evident from above that the land
acquisition process holds a vital key to the entire project delivery. If not done
properly, it can impact the project as a whole
4. Transportation Problem
Other than land acquisition, the other critical components of the project are
transportation of components and erection of WECs. Transportation of over-
dimensional consignment components, such as WECs, involves coordination
with the State Road Department, which might involve strengthening of bridges
or even construction of diversions at times. Here again, a detailed planning is
required in advance to survey the condition of roads, bridges, culverts, under-
bridges, etc., to determine the route to be taken or the type of trucks that can be
used. This might also require transportation of components in dismantled
condition which in turn would require setting up of component assembly works
at the site itself. These aspects become all the more important since most of the
high potential wind energy sites are located at remote and inaccessible areas far
from human habitation
5. PROJECT TIME-Project timing for nawapur project is e June end to 30th

September. In this time, there is monsoon seasone . So it is a difficult to work
in heavy rain fall and high wind. If the project is not finished at sep. end,
client will be losing half depreciation, tax benefit and wind power benefit.
6. PROJECT COST-
The cost of the nawapur project is 600 million Rs. If project is not finished
within time period, client will be investing more money for extra working day
to finish. Due to this company suffer financial loss.
7. HUMAN RESOURCES
HR management in projects is a systematic exercise involving HR
estimation at the planning stage, hiring/deploying the project team during
execution, and motivating and managing the team which is a monitoring
and control process. HR planning appears to be inadequate at Enercon.
The organization of the project team is not conducive for effective and
efficient project management. Two glaring omissions are the absence of
procurement coordinator reporting to the project manager and a crane
specialist at site. HR planning should also be appropriately linked with
other areas like time, risk, and procurement. In this regard, if proper
planning had been carried out as outlined in earlier paragraphs, the
necessity of two erection crews for using two cranes simultaneously
would have appeared almost mandatory. HR planning for the site project
team should have been carried out accordingly. Also agitation with
farmers, which happens primarily because of aggressive land acquisition
or for whatever reason , needs to be effectively dealt with as it poses a
serious threat to the social position as well as social image of the brand.
8. PROCUREMENT MANAGEMENT
Continuous availability of 220 tonne crane, during the erection period, is

the key to maintaining the schedules. On the positive side, Enercon did
try to take care of the potential risk by contracting most of the 220 tonnes
capacity cranes (4 out of 7 in India) available in the market on lease/hire.
But,this is clearly not enough and the procurement policy of the company
is questionable considering the Own vs Hire trade-off analysis carried out
in Exhibit-6. The Exhibit shows that the payback on the capital
investment of Rs 32 million on the 220 tonne crane is 3.9 years and IRR
is 20 per cent. This indicates that it makes business sense to own at least
one 220 tonne crane. Considering that Enercon has successfully
implemented projects and should have accumulated adequate cash
surplus, a proactive decision to purchase 220 tonne crane before the start
of the project would have been in order.
9. OPERATION MANAGEMENT
Various operation happen in this company like land acquisition , land
identification , maintenance of WECs site , commissioning of WEC ,
interfacing with regulatory authority for required permission, preparing
approach roads, construction of WEC, erection of WEC. So company has
to manage all these operations and risk of operational inefficiencies and
lag times will result .
10. INVENTORY SYSTEM & STORAGE MANAGEMENT

Various part of WEC like blades, towers, WEC foundation parts, is
difficult to sore and managed at project site. So taking step for inventory
management is necessary for company.
11.FORCASTING
There is necessity to forecast the period the monsoon or heavy rain at the
project site. So company focused on weather condition. There is a
necessity to forecast the sales of WECs in India as it incurs a risk of
underproduction and overproduction.
12.MANUFACTURING DEPARTMENT
Manufacturing department is responsible for manufacturing and
managing WECs blades, WECs tower, WECs .They also export this
machine to Germany and all over the world. So it is difficult to
manufacture all required WECs.
13. SUPPY CHAIN MANAGEMENT

Manufacturing department at Daman manufactured and managed WECs
blades, WECs tower, WECs. Then they supplied this equipment to the
various project sites in India. They used trucks for loading of their
equipments. So it is very difficult to manage all supplied materials at right
time. Risk of idle time and increased cost increases
14. FINANCIAL MANAGEMENT

The cost of the Newapur project is 600 million Rs. If project is not
finished within time period, client will be investing more money for extra
working day to finish. Due to this company suffer financial loss. Due to
the less time, it is possible to less NPV obtain which affect on EILs
valuation. There is one alternative to purchase 220 tones cranes for
company which is helpful in future. All cost regarding new 220 tones
crane purchase will be compensate in three years. Increased cost and
decreased valuation results.

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Enterprise Risk Management

NarseeMonjee Institute of Management Studies

2. Weak Project Control Structure

5. PROJECT TIME-Project timing for nawapur project is e June end to 30th

Continuous availability of 220 tonne crane, during the erection period, is

10. INVENTORY SYSTEM & STORAGE MANAGEMENT

13. SUPPY CHAIN MANAGEMENT

14. FINANCIAL MANAGEMENT

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