Case Study On Risk Management Of One State-owned Company's Participation In PPP Project

In recent years,with government intervention becoming more frequent,the demand for traditional real estate assets keeps diminishing.This paper analyzes the impact from the market change by conducting a case study on a state-owned construction enterprise(“Ent.A”)which is an incumbent in the stated industry facing both decreased growth and margin during the fiscal year 2015 and 2016.While the market growth for traditional real estate industry slows down,a new operating mode starts to emerge,known as PPP(Public Private Partnership)mode which is preferred and adopted by several recent government's infrastructure projects.With the PPP mode being expected to be widely applied,the landscape of real estate industry already starts to change,which will create more growth opportunities for financially distressed companies to realign resources and to re-pivot operation to meet the requirements under the PPP mode.Ent.A is proactive and exemplary at adopting the PPP mode.As of June 2017,after operating under PPP mode,Ent.A won seven construction contracts,with value totaled over 8 billion RMB.Ent.A's PPP mode adoption is still under exploring stage,therefore,more discussion and assessment around the internal operation and the external environment becomes crucial to evaluate its operation efficacy and to identify existing and emerging risks,which ultimately provides insights on Ent.A's strategic decision.This paper provided the detailed assessment of Ent.A's operation through collecting,researching and analyzing Ent A's internal documents,federal and local policies,and interviews with Ent.A's managerial personnel in charge of projects under PPP mode.Utilizing SWOT analysis,this paper provided an in-depth review of Ent.A's strength,weakness,opportunities,and threats for its operation under the PPP framework and discussed appropriate strategies and corresponding actions,and eventually proved the necessity and feasibility of Ent A's venture on operating under PPP mode..This paper included four sub-case studies on Ent.A's projects under implementation stage to give overviews on organization structure,operation procedure,contracts,and covenants.By analyzing the projects' specialties and financial performances,this paper discussed the associated risks for operating under the PPP mode in detail.Though risk identification and risk assessment,with the purpose of maximizing profitability while maintaining ethical practices,this paper recommended corresponding risk mitigation strategies through co-operation with the ultimate goal of achieving risk/portfolio diversification.From decision making and operation perspectives,this paper develops a set of strategies for participating projects under PPP mode,major covenants negotiation and draft,execution,and recommends project selection.This paper provides a set of recommendations on company's strategy and corresponding action items.This paper aims to provide guidance for companies plan to participate in projects under the PPP mode and extend its usage for broader application.