Question

Nakheel is one of the world’s leading property developers, based in Dubai, United Arab Emirates. Nakheel has a portfolio of projects in Dubai across the residential, retail, hospitality and leisure sectors. Master developments include Palm Jumeirah, The World trade Center, Deira Islands, Jumeirah Islands, Jumeirah Village, Jumeirah Park, Jumeirah Heights, The Gardens, Discovery Gardens, Al Furjan, Warsan Village, Dragon City, International City, Jebel Ali Gardens and Nad Al Sheba. In the first quarter of 2017, Nakheel announced its highest annual net profits in the company’s history: AED4.96 billion in 2016 – a 13 per cent increase on the 2015 net profit of AED4.38 billion. Nakheel generated a net profit of AED955 million for the last quarter of 2016 – up 22 per cent on the AED781 million posted for the same period in 2015. All these happened even when real estate market is on lower side.

Explain how mangers take decision under turbulent conditions (risk and uncertainty) which lead to better utilization of resources

Answer 1

Under situations of risk and uncertainty, good managers employ techniques such as filtering of projects based on criteria such as risk-adjusted returns, the feasibility of projects, resource commitments and expected Net Present Values and then assign weight to each criterion to arrive at a ranking of projects. The projects having lower rank are rejected and only the projects scoring high are selected for further evaluation. These projects are then again stress tested for various scenarios to understand the kind of value these projects will add under adverse economic conditions and only those projects are further taken up for execution which has withstood stress tests successfully.

So using the above mentioned quantitative and qualitative techniques, a manager is able to select projects worth undertaking even under situations of risk and uncertainty. Further post-decision, the whole execution is closely monitored to prevent cost and budget overrun and this enables the project to add value to the organization by increasing profits or enabling the increase in market share or revenues.