Business Process Management - Term Paper Example

? Stakeholder management and risk management Contents Contents 2 Theories: stakeholder management and risk management 3 Analysis and evaluation of real examples of large scale projects 5 References 7 Theories: stakeholder management and risk management Stakeholder management is a technique by which the organization is able to fulfil its strategic objectives through managing the expectations of the stakeholders of the company. The process of stakeholder management involves managing the external as well as the internal stakeholders of the company in order to bring them into a common platform for achieving the goals of the company. The stakeholder management approach depends on the analysis of information obtained at different stages during the stages of stakeholder identification and stakeholder engagement. The stakeholder identification includes listing of the external and internal stakeholders who are associated with the mega project and then categorizing the stakeholders according to their roles, influence and impact on the large project. After analyzing the group of stakeholders, a stakeholder matrix is formed in which the stakeholders are positioned based on their relative importance for the large project that they are associated with. Followed by the formation of stakeholder matrix, stakeholder engagement is crucial in order to discuss the objectives and goals of the organization. The expectations of the stakeholders are also discussed in the meeting and a common goal is arrived to which all the stakeholders need to abide. The expectations of the stakeholders are discussed and the nature of communication to be maintained with the stakeholders is also agreed upon during the process (Kerzner and Belack, 2010, p.47). The approach of stakeholder management maintains all the protocols of the large scale project in terms of security, confidentiality, etc. There are three types of approach for stakeholder management, namely the strategic approach, multi-fiduciary approach and the synthesis approach. The strategic approach considers the stakeholders as factors for consideration of allocation of profits. The multi-fiduciary approach for stakeholder management indicates that the organization has fiduciary responsibilities towards its stakeholders. The synthesis approach to stakeholder management considers the ethical responsibilities to the stakeholders apart from the fiduciary responsibilities. Risk management is a process of identification, assessment, categorization and prioritization of risks and then adopt suitable strategies for allocation of resources in order to monitor, control and mitigate the impacts of risk exposures. Risk management approaches are adopted in order to minimize the impacts of uncertain events which could interrupt or cause stoppage or considerable loss in the operations of large scale projects. Risk management takes into account the exposures to the financial markets, credit policies, legal risk, operational risk and any other event that is unpredictable or uncertain in the course of large projects. The various approaches to risk management in large scale projects include avoiding the risk, reducing the impact of risk exposure, transferring the risk to another party or even accepting some or all of the probable impacts of a certain risk exposure (Handlechner, 2008, p.37). In case of avoidance of the risk, some of the resources or objectives of the large scale project may need to be compromises. The risk avoidance approach is taken when the impact of such risk on the large scale project nullifies the value of the project. In most large scale projects, the risk mitigation approach is followed with a view that there is a risk return trade off for the project. Lowering the amount of risk to the tolerable limit of the project would help large projects to be executed with a profitable balance between the associated risks and the potential returns (Conrow, 2003, p.58). The third approach for the management of risk is the method of transferring the risk to another party. By transferring the risk at a certain cost, the large project gets the cushion of saving itself from the risk exposure. Several financial institutions undertake the risk of large projects by charging a certain amount for incurring the risk. The final option for managing the risk is to accept part of all of the consequences of the risk exposure (Jolly, 2003, p.81). This approach is adopted by the large scale projects when the opportunity cost of incurring the risk is much higher as compared to the exposure of risk. Analysis and evaluation of real examples of large scale projects The real example of large scale projects which carry risk exposure and scope of stakeholder management and risk management is the expansion of Kuwait International Airports. The expansion of Kuwait International Airport is a mega project that involves contribution and subsequent expectations from the external as well as the internal stakeholders. The internal stakeholders in the expansion of the Kuwait International Airports are the management body of the Kuwait airport and the employees who work in the operations of the airport. The external stakeholders are the customers, government, suppliers, creditors, etc who supports the operations of the Kuwait International Airport. The expansion of the Kuwait International airport is in line with the common objectives of the management and the demand of the customers as the airport has risen as one of the busiest international airports in the Middle-East within a short period of time. The increase in the number of customers passing through the terminals has led the management body to decide in favour of expansion of the airports in order to accommodate the increase in air traffic. The large project thus involves strategic approach to stakeholder management and risk management (Greiman, 2013, p.39). The stakeholder management in the mega project of expansion of Kuwait International Airport involved identification of the various stakeholders at the first step. The execution of the project required necessary sanction from the government. The employees needed to get aligned with the objectives of the project as they were the front line work force responsible for implementation of the project. The information on the expansion of the project need to be advertised for the awareness of the passenger and the customer response to the expansion of the airport was very crucial for the management body. The management body also needed to select the suppliers and the creditors in the course of project execution so that the external stakeholders understand the objectives of the management. The roles and responsibilities of the various stakeholders would need to be analyzed in order to position them in the stakeholder matrix. The stakeholder matrix includes the stakeholders in accordance with the degree of impact of the various stakeholders on the large scale project. The management body would need to engage with the stakeholders in a meeting whereby the objective and goals of the management and the expectation of the various stakeholders like the government representatives, customers or the passengers, suppliers and the creditors, etc. are discussed and a common goal is designed for the managing diverse stakeholder expectations (Jeston and Nelis, 2008, p.72). The method of information flow on the operation of the project also needs to be finalized in order to reduce any chances of communication gap. The strategic approach to stakeholder management takes into consideration the allocation of profits to the various stakeholders in the ratio of their existing stakes in the project. The multi-fiduciary approach to stakeholder management needs the management body to fulfil fiduciary obligations to the stakeholders. An adoption of the synthesis approach would mean that the management body would take up ethical responsibilities to the stakeholders apart from the fiduciary responsibilities (Chinyio and Olomolaiye, 2009, p82). The large scale project of the expansion of Kuwait International Airport also needs to take into account the risk management approach for the project. The project being executed over a period of time takes into account various factors of uncertainty including the financial risk, credit risk, operational risk, political risk, legal risk, etc. The financial risk includes sufficiency of funds borrowed for the execution of the project. The cost incurred for the project and the income from the project are matched in order to determine the net present value of the project (Garland, 2009, p.52). The estimated cash flows from the project could pose financial risk in case of excessive initial cash outlay. The credit risk is involved from the perspective of repayment demand of the credits offered by the suppliers. The operational risk arises from the risk of completing the work of project expansion within a specific deadline. The other areas of risk include natural calamities, political disturbance and technological failures that have an underlying root of uncertainty (Orr 2007, p.59). One of the risk management approaches includes avoiding the source of risk like not entering into credit relationship with specific suppliers. This stance is taken by the management body when the impact of the risk nullifies the value of the project. The management body could also adopt the approach of reducing the effect of the risk exposure in order to strike a balance between the risk and the return of the project (Khatta, 2008, p.63). The airports authority may also enter into contract with the financial institutions for transferring part of the financial or credit risk. The last risk management approach for the airports authority would be to accept part or all of the risk associated with the project. This option would be feasible if the airports authority envisages that the opportunity cost of accepting the risk and foresees a higher project value in lieu of accepting the risk. Thus the approaches to stakeholder management and risk management are appreciated in context to the real life projects of large scale. References Greiman, V. A. 2013. Megaproject Management: Lessons on Risk and Project Management from the Big Dig. John Wiley & Sons; USA. Kerzner, H. R. and Belack, C. 2010. Managing Complex Projects. John Wiley & Sons; USA. Jeston, J. and Nelis, J. 2008. Business Process Management: Practical Guidelines to Successful Implementations. Routledge; USA. Chinyio, E. and Olomolaiye, P. 2009. Construction Stakeholder Management. John Wiley & Sons; USA. Garland, R. 2009. Project Governance: A Practical Guide to Effective Project Decision Making. Kogan Page Publishers; USA. Orr, A. 2007. Advanced Project Management: A Complete Guide to the Key Processes, Models and Techniques. Kogan Page Publishers; USA. Khatta, R. S. 2008. Risk Management. Global India Publications; New Delhi. Handlechner, M. 2008. Risk Management. GRIN Verlag; Germany. Conrow, E. H. 2003. Effective Risk Management: Some Keys to Success. AIAA; America. Jolly, A. 2003. Managing Business Risk. Kogan Page Publishers; USA. Read More