The paper "The Requirement of Special Purpose Vehicle within a Project " is a perfect example of a management case study. Project management requires efficient and accurate planning so as to meet the needs of the project. There are many projects which fail almost immediately after they start due to poor planning which may lead to inadequate resources. When the planning stage is done well, the right amounts of resources are made available and there are higher chances of the project succeeding. A special purpose vehicle project may need a lot of analysis so as to determine the right choice among the available options.
In a project management team, the leader should have a clear budget discussed by the rest of the managers so as to have the right financing before the project starts. Sustainability is considered and the earned value methodology can be used to manage the operations. Management control systems, balanced scorecard, and other strategic management skills are used to make sure that the expected results have been achieved. Overview of a Special Purpose Vehicle A special purpose vehicle or special purpose entity is a term used to protect and ensure a smooth flow of subsidiaries in a company.
The main reason why the SPV is used is to make sure that the mother company is secure from the adverse occurrences in the subsidiary, for example, in case of a bankruptcy. One of the well-known cases where it had a negative effect is in the case of Enron which collapsed in 2001. Since that time, many countries and companies have discouraged it and fear its repercussions (Blossom, 2015). However, a recent introduction of its use in India has encouraged more people to reconsider its use. Strengths of a Special Purpose Vehicle The powers of the special purpose vehicle usually follow the purpose for which it was created.
In a case where the project that was to be managed is cancelled, it fails or completed successfully, then the special purpose entity is terminated immediately. The main strength is that it ensures the intended projects are well funded and will not have financial hiccups. The vehicle is expected to operate independently and it can even have a separate office where the documents of the project are kept and managed.
The office holds the data about the shareholder's agreement, a period of the project, and participants among other details (Blossom, 2015). Managing the separate entity may require an extra team or a part of the existing management team. Literature Review Past research shows that companies may affect the subsidiaries when they go bankrupt. The use of the SVP helps in making sure that the chances are reduced. The opposite is also true in that when the SVP is used, the mother company is left standing even in case the project or subsidiary falls.
By transferring assets and funds to the special purpose entity, the business takes care of such adverse cases (Wan & Sidoti, 2016). The legal form adopted can be a limited partnership, a limited liability, or a corporation. Enron, a company that went bankrupt in 2001, is one of the companies which used special purpose vehicles which highly contributed to its failure (Klee & Butler, 2002). There are two different types of balance sheet operations, which are off-balance and on-balance.
Enron used many off-balance operations, and there are many cases whereby special purpose vehicles can apply and offer good management tools.
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