Risk Management Application - Research Paper Example

FAMILY HONG FIRST Jialiang URN: 13367390 PROGRAMME: Business Management MODULE BUSINESS PROJECT MANAGEMENT DATE: 19 Dec 2014 WORD COUNT: 4693 TURNITIN SCORE: Table of contents Introduction 3 Project management 4 Merits and demerits in the project management 5 Success factors in projects 7 Control project progress 7 Project risk management 10 References 24 Introduction The international conference on “launching strategy of a new product” that was planned and reported to the sales and management persons is a new project that has to been organised well so that it can be realized effectively. There is need to develop a risk management plan in the early stages of planning to ensure the intended project leads to improvement of the project’s success as well as performance that is suitable. For the project success, it is essential to identify and categorize any potential risk then evaluate them in the end (Ward & Chapman 2003, pp.97–105). This paper will focus on the relationship that exists between the organisational project and the risk management application. In addition, the paper will also discuss the importance of risk management system implementation to achieving the objectives of the project. The paper mainly focuses on the project management and project risk management. The first part of the report discusses what project management is and the merits and demerits of the project management. It also highlights the success factors in the project and the project progress control. The second part of the report focusses on the projects risk management and the role of the success in the project. Finally, the final section of the report gives a clear description of the project, which is the international conference organisation and its alignment to risk and project management in projects (Kutsch & Hall 2010, pp.245–255). The project chosen for analysis is in the field of construction, there is a risk management process that will encompass all the phases of a lifecycle of constructing an infrastructure. The construction of footpath along major roads in the cities was chosen to ease pedestrian’s movement. Project management Definition A project is a temporary activity that is designed specifically to produce products that are unique, services or results. Projects do have definite beginnings and ending time. They operate within a particular scope and resources. Projects are unique activities since they are not done on a routine operation, but they are on precise sets of operations that are precisely meant to accomplish particular individual goals (Tesch et al. 2007, pp.61–69). Therefore, project management is the application of skills, tools, knowledge and techniques to the activities of the project to meeting the requirements of the project. The realization of project management is through integration and application of the process of project management of initiation, planning, execution, monitoring, and closing phases. Project management is competency that is strategic for any organisation, and this helps the project’s result achieve the set goals of the business to enhance its competitive advantage in the market. The knowledge of project management concentrates on several areas of integration, cost, human resources, quality, scope, procurement, risk management and time. The initiating phase of the risk management process is the first stage where the management defines and approves the project. Declaration of the work that is to be done or any sponsor given contract is the only input to this phase, the initiating phase output is a charter and a preliminary scope of the project statement (Raz & Michael 2001, pp.101–109). The planning phase inputs are the outputs of the initiating phase. The inputs in this phase include the project charter and the preliminary scope of the project statement. In this phase, the project objectives are refined by the project team and then involve in planning the steps to be taken to achieving the objectives of the project. The management plan of the project is the output of this phase of the process. In the executive phase, the team uses the project management plan as an input in this phase. Project deliverables, changes, preventive actions and information about the project performance are the outputs in this phase of the project (Kwak & Stoddard 2004, pp.915–920). The phases and controlling are responsible for keeping the project in order confirming that the project is within time and budget while producing the deliverables that are intended. After the creation of all project deliverables, the closing phase of the project then provides the customer with the deliverables. Merits and demerits in the project management Assessment and monitoring of the project management steps have come up with important methods for planned projects evaluation. Project managers can quickly determine whether a new project is likely to be successful basing on the project reporting from the past as well as insights that are gained from the project teams who are experienced in the area (Teller & Kock 2013. pp.817–829). The management of projects has made projects teams in organisations to work smarter and not harder. Following the steps of project management allowing the focus on a single goal to providing a process that compels saving of both time and money. The well-organised procedure helps in encouraging communication and team working towards achieving goals in a very short time. Any deviation in the objectives may have significant effects on the outcome of the project. Therefore, the project managers are required to monitor the individual team members’ progress and the group project to ensure that the project activities and tasks are done consistently with the goals and the objectives of the project. The project management can make use of milestones to track the progress and ensure that the progress of the project matches with the original project objectives (Cervone 2006, pp.256–262). When timescales estimation is not correct, or the team members fail to use time effectively and techniques of time management in the project the entire project is likely to go over the scheduled timeline. Precise time duration for tasks and activities for the unit of work needed to complete the project is important in the calculation of timescales for the project milestones. In order to manage timescales, the project managers make use of tools such as Gant charts to ensure the project is maintained within the schedule stipulated. Success factors in projects Paying attention to the criteria used in determining a projects success is important. The success of the project involves achieving and determining the objectives of the project. This is only possible using cleared objectives and target gains that are measurable. The factors of success in a project only depend on the achieved objectives and identification but also on the level of meeting all the customers, sponsors, stakeholders, and team expectations. The creation of strategic advantage in the project should be as a result of the success factors for the deliverables of the project in terms of the scope of the project. The success of the project finally aims at reaching the critical factors of success. Project managers have the responsibility of clarifying all the objectives of the project, execute professional project management, identify as well as careful management of the risks. Additionally, they practice methodological procedures, control critical interfaces, assure deliverables are in the right quality, communicate with all involved parties meaningfully and help the team responsible for the project implementation reach high motivational level (de Bakker et al. 2010, pp.493–503). Control project progress Project process can be influenced by several factors. Therefore, it is important for manager of the project to control the project progress and check the changes context in the course of the plan. In any case, if this is neglected, the project is likely to drift away from the planned course and eventually lead to frustrations. The project managers should, therefore, pay great attention to the indicators, extent, causes and the direction of the project pathway in order to any changes and deviations in the project. This will help the manager be prepared for any changes and be able to approach it with effective and suitable measures for correcting the deviation. Appraising Project Management The project of construction of the footpath utilized the theoretical model of project development process save for some few modifications done to create the project’s specifics of time, budget, and resources. There were both formal and informal processes that were employed in the construction process thereby conforming to the notion of infrastructure construction processes having a rather informal business analysis process. However, there were certain level of subjectivity in the project management process. However, the estimation of the accuracy in the cost approximation remained rather objective when compared to modifications of costs or the actual estimation. This is also experienced in the project’s forecasting techniques. This project recognized the high cost of the infrastructure construction process and therefore a very important cost awareness and reduction role was adopted to reduce the high cost of the project. This was in line with the necessity for objectivity which was also achieved by combining different techniques such as the application of historical figures and cross functional approach. In some situations, cross functional approach was used from time to time. The combination of approaches in this project is seen as its success factor as it is huge enough to allow for different methodologies to be utilized while derived their advantages and reducing the project’s cost, resources and capabilities required for successful completion. The launch of the project was the toughest phase as it appeared to be a very general and broad project. The breakdown of the tasks, roles and major parts of the project was the first step into getting a clear idea of the project’s expectations. The project’s goal was also an important point of consideration in this project. With such a huge project, the understanding of the desired outcomes was very important in order to drive the project towards the finish line. Alignment of task and roles towards the finish line was therefore crucial through setting up a criteria for the project’s completion. Other important factors in this project include the delineation of the different component tasks of the project. Due to the many number of component task and players in the projects, detailed delineation of what is expected of the players was a success factor in the completion of the project. The players were selected after breaking down the project and thereby assigning the different tasks into different persons. This project also utilized the services of different external players and therefore identified the need for a staged timelines to check the progress of the different project components so that the different stages can work properly even with the interplay of roles between the internal and external project players. Project risk management Project risk management is best summarized in a project management triangle. In the triangle, the three most important factors include time, resource, and quality. Commonly referred to as the triple constraints each factor of the project management triangle can be influenced by any form of risk (Raz et al. 2002, pp.101–109). (Figure 1: Project Management Triangle) Risk management process Risk management is a systematic application of the policies, practices and procedures of management to the task of context establishment, identifying, analyzing, assessing, treating, monitoring and communicating. The process of risk management becomes even more applicable and important if a business decide to try something new in the market such as launching of new product. Risk management process helps managers to identify and address the risks that are likely facing the business or the project being undertaken. In doing this, the managers do increase the chances of the project successfully achieving its stated objectives. The process of risk management involves • Identifying the risks that are surrounding the activities of the project methodologically • Assessing the chances of an event taking place • Understanding on how events can be responded to • Putting adequate systems in place to deal with the consequences of risks • Effectively monitoring the risk management approaches and controls for the project The importance of risk management process • Improves the process of making decision, prioritization, and planning of projects • Helps to efficiently allocation of resources and capital • Helps the management be able to anticipate what is likely to go wrong, minimize the fire-fighting incidences that the project will have to face and prevent a loss of finance and disaster from occurring • Improves the probability that the business plan will be delivered within the estimated timeline and budget The process of risk management is also vital in describing the steps the managers need to take to be able to identify, monitor and control any chances of risk. Risk In general, risk is defined as the effect of uncertainty on a particular project and objectives of the organisation. It can also be seen as a condition where there is an existence of a quantified dispersion in the possible outcomes from the project activity. Risk can also be a future event that is uncertain and could have an influence in the achievement of the strategic, financial, and operational objectives of the organisation (Patterson & Neailey 2002, pp.365–374). It is imperative to note that all projects do have risks. All the risks facing the project can ultimately be handled, and some may disappear, some may develop into problems that require immediate attention while other may escalate into crises that lead to the destruction of the project. The aim of risk management is ensuring the risks do not go beyond the level of destroying the project. Managing the risk is through for steps according to the plan of risk management and this include; identification of the risk, quantification of the risk, risk response and monitoring and controlling the risk (Kwan & Leung 2011, pp.635–648). Managing risk Every project faces risk that presents threats to the ultimate success of the project. Risk management the practices of using process, methods, and tools for risk management. The management of risks focuses on the identification of what can go wrong during the project accomplishing, evaluating the risks that should be dealt with immediately, and implementing adequate strategies to with the risk. It is, therefore, important for projects to identify the likely risks to face them so that they can get ready and have more measures to dealing with the risks that are cost-effective. It is not a one –off exercise in managing the risks and dealing with different forms of risks. For the success of the approaches in risk management, continuous monitoring and reviews are crucial to achieving the success. Continuous monitoring ensures risks are identified correctly, assessed and appropriate controls put in place. This is the best ways learning and making adequate improvements in the process of risk management (Marcelino-Sádaba et al. 2014, pp.327–340). Identifying the risks Risk identification in any project should be the first and most important step to be taken in the process of risk management. In addition, all the participants in the projects should, therefore, be encouraged to be keen and identify any risk or potential of a developing risk. The process of identifying risks entails determination of which risk may affect the objectives of the projects and putting down their specific characteristics. This requires the project knowledge as well as developing a sound understanding of the strategic and objectives of the operations including factors that are vital for the success of the project, threats and opportunities that may be related to the achievement of the project objectives. Identification of risks needs to be approached in methodical ways to ensure identification of all activities that are significant within the project and all the risk factors that are coming from the defined activities. How to identify risk factors in a project Risk factors are situations that may lead to one or more potential risks in a project. The risk factors do not cause an organisation to miss a product, its schedule or the target resource. Nonetheless, a risk factor increases the likelihood of something happening that will make the organisation lose one. The organisation should begin managing the risks at the outset of its projects and continue doing so throughout its performance. At each point during the implementation of the projects, the organisation identifies risks through the recognition of any potential risk during the process. All projects do progress through four life cycle phases that include start of the project, preparing and organising, actual work activities and closure of the project. Each of the phases of project progress presents its risk factor to the project during the process. Therefore, the team responsible for managing the project must identify any potential risk factor that might arise during the evolution of the project (Management 2003, pp. 487-984). Quantification of risk Risks need to be quantified using two dimensions that are the graph XY and the risk portfolio. The impact of the risk on the project needs to be assessed and evaluated for any potential damage it can have on the project and its probability of occurring need to be assessed too. Methods and risk response plans After the organisation of all potential and likely risks using the quantitative and qualitative risk analysis, the responsibility of determining the best ways to deal with the risks lies on the hands of project manager and the management team of the project. The responses planned for the risks must be in line to the significance of the risk, cost effective, realistic within the context of the project, all parties involved concurs with it, and finally it should be timely. The team identifies and recognises all the risks that are involved through the establishment of a risk management plan and a register for risks. These two are used as inputs to figuring out the best response to tackling the risks. Risk register is used to show the causes of various risks, the risk owners, symptoms and warning signs and the rating or the list of priorities of the project risks. The risk management components include the responsibilities and roles, timing for risk analysis and reviews definitions. The project management team should periodically review the risk management plans. There are four strategies employed in dealing with the threats and risks that influences negatively on the objectives of the projects. They include avoiding, transferring, mitigating and accepting. The latter can also be used in negative as well as positive risks or opportunities (Carbone & Tippett 2004, pp.28–35). Risk avoidance This is done through changing the plan of the project by eliminating the risk of the situation that leads to the risks. It is done to protect the objective of the project from its likely impact or to relax the relevant objectives. These can be through the reduction of specification requirements, reduction of the scope and extension of the schedule. The most avoidance radical strategy is shutting down the entire project completely. Transfer of risk The transfer of risk means that some or all the negative impacts are shifted to the third party who carries the impact of the risk and the ownership of the response to the risk. This strategy does not eliminate it. It is the most effective when dealing with the risk exposure of finance. It involves payment of premium risk to the party that acquires the risk as the use of insurance, bonds on performance, guarantees, and warranties (Ward 2003, pp.97–105). Risk mitigation A control process helps in stopping the risk before it occurs, making effect and bringing it to acceptable level. Taking actions early is usually effective as oppose to repairing the damage after the risk has occurred causing damages to the project. The cost of mitigation should be appropriate checking in mind the likely impact and the risk probability (Atkinson et al. 2006, pp.687–698). Risk acceptance The acceptance of risk is commonly adopted since it is rare to see all the threats facing a project eliminated. Acceptance shows that there is no possibility of identifying decision to making changes to the plan of the project that can be able to deal with the risk. This risk acceptance strategy can be employed when dealing with both positive and negative risks. Acceptance takes place in two different forms. Passive acceptance requires no action except documenting the strategy. The project team deals with the risks the moment they occur. When the impact of the risk is not of great importance then the acceptance can be said to be passive. In the case of active risk acceptance, the response establishes an allowance or reserve that includes the amount of time, resources or money to help account for the risks that are known. The allowance is determined by the impacts then computed at levels or risk exposure that are acceptable and the risks that have been accepted. The development of plan contingency is to respond to the risks that come up during the project. Planning helps in reducing the cost incurred for an action in case the risk occurs during the project implementation. The triggers that cause risks such as the intermediate milestones that are missing need to be defined, tracked and identified (Zwikael & Ahn 2011, pp.25–37). Outputs to risk management and control They include; Corrective action This entails all the activities that help in bringing the expected performance back in track with the plans of the project. This stage involves carrying out the plan-entailing contingency or workaround. Workaround plans compose the responses that are unplanned to solve the risks that are emerging that were not accepted or identified previously. Project change requests Changing the risks responses as described in the project plan frequently is required when implementing the workaround and the contingency plans. This helps in knowing the flow of the process and the loop in the feedback (PMI 2009, pp. 123-542). Updates to risk response plan This documents all the risks that occur in the course of the project. On the other hand, the risks that did occur should also be noted and closed out in the plan of risk response. It is vital to keeping this plan up-to-date since it becomes a permanent addition to records of the project and eventually adding up to the lesson learned. Risk database This is like a repository used in collecting, maintaining and analyzing data. It is used in the process of risk management. The maintenance of this database is critical for the records of the project. Updates to risk identification checklist The checklist is a very useful tool since its updates help in the management of risks of future project Risk monitoring Effective risk management requires a report and the structure of the review to ensure risks are identified effectively and assessed, and that controls and responses that are appropriate are in place. Regular audits of policies and the standard compliance are carried out, and the performance is reviewed in order to identify any opportunity for improvement. This is the last step to identifying nay changes within the progress of the project. To achieving the project objectives, it is better to have regular reviews. These include identifying outstanding actions, probability and impact of risks, removal of risks that have been passed and identification of new risk (Gabel 2010, pp. 12-45). Paris organisation of an international conference in France Project identification The international conference on launching strategy of a new product to the management and sales persons took place at the Regina hotel in Paris France. The conference started at 900 a.m. on 1 October in 2012. The aim purpose of the project was to present employees who are determined on the organisations new product strategy while launching. The four leading managers did the presentation of the strategy and the specifications in details to the employees. A hundred participants who comprised mainly employees from global subsidiaries all over the world were invited during the launch. The organisation of this conference started six months earlier and was organised by three members from the project management conference team. The members of the project team acted in accordance to a schedule that was determined and provided a process that was fluent (Hoyt et al. 2010, pp.147–159). Classified the project International conference in Paris was characterized as an organisational project. This type of project helps organisation to meet the challenges it may encounter in the future, the strategy used in launching a new product. The objectives of this conference were derived directly from strategies of the corporate and the factors of success. PROJECT APPRAISAL Justification of the project The project chosen is in the field of construction, there is a risk management process that will encompass all the phases of a lifecycle of constructing an infrastructure. The construction of footpath along major roads in the cities was chosen to ease pedestrian’s movement Project risk The major risks that will be expected in this project include inadequacy of funds, technicalities of building the footpaths, corruption that may arise from the tendering process of the construction materials and political interference. These aspects will be presented in a project analysis log frame matrix for a focused appreciation of the main linkage and feature. Feasibility study A feasibility study will be carried out during project appraisal period to justify and establish the relevant dimensions of the project. These dimensions include aspect such as technical design, environmental compliance, financial and economic viability and social viability the legal framework that encompasses civil construction. The main aim as to why a feasibility study is to be conducted is because of the following aspects; 1. Administrative viability of the project 2. Framework of policies and detailed objectives of a project 3. Technicalities of the project 4. Financial and economic feasibility of the project 5. Social aspects in areas surrounding environment 6. How much the project is demanded by the beneficiaries Results that will be obtained from the feasibility study will influence decisions that will enhance either to commit or omit the scarce resources that are available for this project. The analytical tool that will be used to analyze the feasibility study will be production possibility curve. PPC is important in terms of underscoring the efficient allocation scarce human and financial resources. Project appraisal process main aim is to determine whether the project is to be adopted or to be rejected. In this regard the major questions raised are concerns resulting from the appropriateness of the objective of the project, scope, size and implementation time scale. Based on justification of the project analyses of technical, economic, social and financial aspects will be considered. Technical analysis Tis will be aimed to ensure that the source of the project proposal, such as the viability studies undertaken before the proposal has involved the relevant authority. Technical issues will also determine whether the problem needed to be resolved has been clearly state. Economic analysis The main reason as to why the issue of economic resources arises in the construction of the footpaths is due to the fact that project requires huge funding, the main funding is from the local authority which is very bureaucratic. Cost Benefit Analysis (CBA) is conducted to establish that the project is economically viable. Financial analysis This construction should be made in such a way that the funding will be from an external source, the major fund would be loans from that the local authority will borrow. Environmental analysis Construction project requires and are involved to large extent compliance with local environment authorities. The major aspects that the projects will have to comply with include occupational safety of the users. Conclusion As the activities of the conference were directed and completed, the event and the risk factors were continuously being monitored to determine whether the trigger events had occurred and whether the risk was a reality. Basing on the trigger events that were recognised during the analysis of the risks and the process of mitigation, the project team then enacted contingency plans that were deemed suitable for the situation. The mitigation activities that are in use in daily operations were authorized and directed by the team responsible for the project. The contingency plans that were initiated were then added to the work plan of the project that was tracked and reported alongside all the other activities of the project. Management of risk is a continuous process that is continuous throughout the projects life. Continuous process of identifying the risks, assessing, planning for the newly identified risks, monitoring the conditions of trigger and the contingency plans as well as the risk reporting was considered on a regular basis by the team responsible for the project. References Cervone , H. Frank , 2006. Project risk management. OCLC Systems & Services, 22, pp.256–262. Atkinson, R., Crawford, L. & Ward, S., 2006. Fundamental uncertainties in projects and the scope of project management. International Journal of Project Management, 24, pp.687–698. De Bakker, K., Boonstra, A. & Wortmann, H., 2010. Does risk management contribute to IT project success? A meta-analysis of empirical evidence. International Journal of Project Management, 28, pp.493–503. Carbone, T.A. & Tippett, D.D., 2004. Project Risk Management Using the Project Risk FMEA. Engineering Management Journal, 16, pp.28–35. Gabel, M., 2010. 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