A study on the impact of Risk management strategies on the sustainability of projects A case study of rural based water projects in Machakos county

A study on the impact of Risk management strategies on the sustainability of projects A case study of rural based water projects in Machakos county

By

GLADYS NDINDA MWANZA

August, 2015.

• BACKGROUND OF THE STUDY

Sustaining of projects is a major challenge in developing countries. Several projects that have been implemented with large sums of money tend to experience serious challenges of sustainability. The issue has become a major concern for most donors such as the African Development Bank, the World Bank, and USAID, the Asian Development Bank, the African Union and the Economic Community of West African states. organizations that proactively identify and manage risks tend to be in a better position to seize opportunities,Kerzner,(2009). This applies to managing sustainable development opportunities and risks, which include environmental, social, and economic issues. Integrating sustainable development opportunities and risks into an existing framework and strategy should allow for a better understanding of their relationship to an organization’s business goals and other activities. A good measure of whether sustainable development is embedded into organizational operations and general good management is the extent to which an organization among other factors such as being accustomed to social and environmental sensitivities and recognizing opportunities for improving its financial performance inteligently manages risks. As a strategy towards poverty reduction in many developing countries, efforts such as allocation of Social Development Funds, Constituency Development Funds and donor funds to facilitate initiation of income generating projects for the target communities have been evidently adopted. Interested stakeholders such as Non-governmental organizations, Churches, government and individual of good will have come up with seemingly healthy ideas.

It however seems that the problem of poverty still continues to exist as majority of these projects cease to exist immediately the source of funds are pulled out,(Bigio, 2009).One of the major challenges of rural based water projects is that of limited sustainability Thioune, (2003)  (where the present context for strategy development is one of isolated groups and individuals) or completely lack of sustainability (where stakeholder isolation within strategy development process is likely to be the norm for the foreseeable future).The features of sustainability in projects as noted by Danilov,( 2009) are categorized into ;Social indicators referring to the quality of amenities and facilities in place for human rehabitation, level of education, health and safety standards for example longevity prospects,child birth and child mortality up to age of five years .Ecological indicators which include protection of the atmosphere as indicated by greenhouse emissions, measures of preventing desertification, and deforestation, rational land use, maintenance of biodiversity, ecologically safe managements of radioactive waste and sewage. Economic indicators refer to financial resources and mechanisms, per capital GDP index, consumption patterns including energy use and cooperation transfer of environmental sound technologies .Institutional indicators: Intended to reflect on one hand state of policies on sustainable development and on other hand involvement of key population strata in the development process. It includes such issues as presence of national programs for transition, implementation of global accords on sustainable development and numbers of internet users per a thousand people.

Sustainability challenges as indicated by Bigio, (2009) include lack of sustainability maintenance culture , poor community participation, management problems, poor project goals , more

preference to provision of local quick jobs at the expense of employee competence and environmental issues.

In the context of project management, risk management entails, planning how risk was managed in the particular project, assigning a risk officer, maintaining live project risk database, creating anonymous risk reporting channel, preparing mitigation plans for risks that are chosen to be mitigated and summarizing planned and faced risks. The importance of risk management ranges from attaining sustainable project that consequently reduces poverty levels through increased income to the community. The strategies for risk management as indicted by Marks, (2007) include, Risk avoidance; failing to carry out an activity that could carry risk, Risk reduction or “optimization” involves reducing the severity of the loss or the likelihood of the loss from occurring, Risk sharing with another party the burden of loss or the benefit of gain, from a risk.’ and the measures to reduce a risk and risk retention is accepting the loss, or benefit of gain, from a risk when it occurs. Though hardly emphasized, the relationship between risk management strategies and sustainability of rural based water projects cannot be overlooked thus creating the need to undertake this study.

While studies on strategies for project sustainability have mentioned various causes of project sustainability, the relationship between risk management strategies and sustainability of projects is hardly emphasized by majority of authors. According to Douglas, (2009) Risk management is the identification, assessment, and prioritization of risks (defined in ISO 31000 as the effect of

uncertainty on objectives, whether positive or negative) followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities. Risks can arise from uncertainty in financial markets, project failures (at any phase in development, production, or sustainment life-cycles), legal liabilities, credi.............