GTS Case
Was the financial downturn of Husky Air a problem that the GTS team could have foreseen and avoided?
Often times, predicting financial hardships or economic downturns can be difficult given the uncertain nature of business activity. Economic downturns can occur unexpected due to unforeseen circumstances. These circumstances can vary from civil unrest in certain regions of the world, to political uncertainty, to outright war. Each of these events due to globalization has an impact on business. What affects one area of the world now has more profound implications on other areas of the world. In the case of Husky air however, GTS should have done a credit analysis to ascertain the company's ability to pay off the project in full. The airline industry in particular has many headwinds that are easily seen by partners and suppliers. GTS through proper analysis could have foreseen these economic headwinds well in advance of signing the contract. For instance, the airline industry is a commodity product based primarily on price. Therefore, company cost controls are very important within the overall scope of the business. A review of the companies financial statements may have aided in this process. In addition, an analysis of the competitors within the industry may have indicated Husky Air's position relative to those in the market. These pieces of information could then be used to help formulate a general opinion regarding Husky Airs ability to repay its obligations during economic stress.
Can all risks to a project be identified and managed?
Not all project risks can be managed. The nature of risk is that it is often uncertain. Therefore, unforeseen risks often occur. However, many risks associate with a project can be reduced or mitigated. For example, monthly payments would allow a steady cash flow stream to GTS while also help alleviate the financial burden of a one time payment on Husky Air. In addition, plans regarding the scope and scale of a project can help mitigate the instances of delay or going over budget. Incentives also have a profound role with risk. Incentives could be used to help achieve a desired result will abating the influences of risk. Incentives that encourage projects to be completed prior to the deadline will help reduce the risk associated with going over budget.
In addition to identifying threats, why should project stakeholders also look for opportunities?
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