Project and Risk Management - Coursework Example

Project and risk management report By Yours Department 14th December Project and risk management report Introduction Success or failure of a project is measured against the triple constraints time, cost and quality. Successful projects, which meet the objectives, determine the health of the enterprise. Each discipline in the project management is seen to address and manage the uncertainty in a project. Whole process of the management involves the identification of risks and managing these risks effectively. Main aim behind risks management is to reduce threats that result into problems and minimize the impacts of those which do occur there. More opportunities can be captured proactively and transferred into a number of positive advantages for the projects. Threats minimization can only occur through the effective management. More problems generate when risks are not properly managed. Risks and project objectives have a close relationship in the project management. Risk process only starts after defining the scope that means objectives at risks. Good project management always remains unnoticed as crisis management that is an obvious danger for the project management. Entire project in turn of receives the interest of the project team. Resolving the crisis has a greater visibility accompanied by the reward from top management. However, effective management avoids such type of crisis throughout the project (Schwalbe, 2014). Decision Making: Collaborative mode adopted by project team yields the high-quality decisions. This type of mod also takes team efforts and a great amount of time. A decision based on the consensus is a discipline problem resolving approach that gives a mutually understandable supportable and explainable decision. Project management teams use the consensus-based approach of resolving the crisis in the project. Ideal results of consensus-based approach always take time and cost for meetings and discussion to reach a consensus for a small item. Most popular approaches of decision making in Project Management include the consensus, subgroup with information, subgroup with buy-in, planning, expert leader and voting. Consensus approach in decision making has been widely used for various risk producing projects. For example, in a wilderness exercise staff has to make a number of survival decisions in response to wilderness conditions. In team, an expert mechanic leader helped the team to decide on his experience in the every condition and teams without an expert tool time to make a decision. However, results of the team without an expert scored more than that team with an expert. Other teams used the consensus against the expert in a team and exceeded their team performance. Commitment in teams without the expert was greater as they collaborated to seek the answers (Baker, 2010). Risk Management For any organization’s future, actions are required, and risks are entailed. For project management, risk management is the starting point. Projects are made up of programs, and risks management in program relies upon the project risk management. Portfolio management is composed of both programs and projects. Project Management Institute (PMI) considers that in line with organization’s strategy, the project is a unique and conceived to manufacture a product that is never taken before. Project objectives are focused for achieving the targets, which involve the risks because team members involved in project development do not have proposed targets. Project risk associated with the conditions or events that produce negative or positive outcomes in achieving at least one objective. Risk is the fourth one knowledge area out of nine areas stated in the Project Management Body Knowledge (PMBOK). Risk identification has been widely researched out by using various tools. A list of risks has been identified for success of projects. However, critical success factors or risks remain to be identified, analyzed and addressed (Santos and Cabral, 2008). Risk can be recognized among the software development and Construction projects regardless of positive or negative impacts and the nature of projects through consideration of occurrence and probability and the magnitude of the consequences. Projects’ performance impacts from the sources of risk in terms of cost, time, and quality. Risk sources include the physical, financial, political, logistics, design, environmental, legal, operation and construction risks. Among the construction industry, risk is recognized as the phenomenon of the identification, analysis and dealing with the risk linked directly to project objectives. Exclusion of risk is not possible and can be effectively managed. In PMBOK, management of risk is a process concerned with the risk management; risk planning, risk identification, risk analysis, monitoring and control on the project. Identification of risks is an early attempt for risk assessment. Risk Identification: Risk identification has an integrative part named as a risk classification with main objective of structuring the diverse risks, which impact the construction projects. As a risk passes through a series of efforts to make classification of sources that enables the project managers for risk prediction. Construction project management faces the serious risks and classification of risks is associated with the methods, which serve purposes of research (Khodier and Mohammad 2014). Risk classification is an essential part in the decision making as it becomes the base of risk identification, assessment and response to risks. However, no standard model for risk classification can guarantee the risk identification of all types of risks in a construction project. In literature, global and elemental types of risks have been categorized. More general risks are covered with the global elements which remain outside of the control of parties in the project while elemental risks associate with the elements in a project such as a revenue and financial risks. Elemental risks are manageable and controllable by the project team. In UK, learned society organizations and public provide the guidance about risk management process. APM has produced the PRAM guide, and HM treasury has its Guide on risk. Risk management process follows the continuous and iterative means, which allow planning to control phases of the project (Kagioglou and Tzortzopoulos, 2010). Iterative process means that new risks become known or evolve during the project execution throughout the life cycle of a project. However, frequency of iteration and participants’ types vary from situation to situation. Risk can be found in any phase of the project. Projects in design phase have a great potential of opportunities as a project is still open, and changes can be easily communicated. Risk avoidance and reductions are significant opportunities like value analysis innovation in design constructibility reviews, materials and construction methods. One the project has entered the construction or development phase, scope of the project in terms of time and cost becomes fixed, because opportunities for time and money decrease as project progresses. Risk register as a tool is used for addressing and documenting project risk throughout the project lifecycle. Risk register keeps the track of changes in risks in reference of new risk identification, addition of new risks through communication of project team members. Initially, a risk register keeps the published estimate of cost and schedule. Full review and update of the risk register is undertaken at every phase of the project development. However, risk classification in the construction project is aimed to include the cost, time and quality of projects. Researchers have used varying techniques of work breakdown structure (WBS), the questionnaire survey in the construction organizations, nature of risks, the influence diagram, and risk factors of the project site, human, material and equipments. For example, risk breakdown involves the categorizing of risk factors based on their sources and impacts on project objectives. It can be categorized in the external, legal and internal risk factors. Furthermore, external risk factors are either uncontrollable/unpredictable or predictable/uncontrollable. Internal risk factors either can be non-technical/controllable or technical/controllable (Rezakhani, 2012). In a research work of Bannerman (2007), three most common approaches were introduced as checklist, Analytical frameworks, and Process models. A checklist approach bases upon the success or risk factors, which are found in the similar other projects. Checklist approach is a low cost and provides quick means of managing the risks to check-off the risk handling in software projects. Literature supports the checklist of more than ten risks but approach has many numbers of problems. Risk perception in software projects changes with the time, between stakeholders and cultures. Analytical framework approach is a comprehensive way of finding the possible potential risk factors in a project. Identification of the source of potential risk factors is a fundamental way used in this approach. Risk of high level includes the expertise, technology, and requirements risks. Process Model provides a complete process with the steps of risk identification, risk analysis, and risk handling. These approaches are specific for the software projects and provide limitation in their applications other than the software industry. Qualitative Risk Analysis High priority risks are qualitatively analyzed for further actions in order to assess the probability of occurrence with their impacts. Project management performance of an organization improves by making focus on the high priority risks. Priority of the identified risk is assessed in reference of their occurrence probability by performing the qualitative risk analysis. Cost, schedule as project constraints also analyzed with the identification of high priority risks. Stakeholders and projects reflect their attitude through assessment of risks (The Institute of Electrical and Electronics Engineers, Inc., 2011). Quantitative Risk Analysis Management and risk analysis techniques are the fundamental part of literature. Process of risk management involves the risk mitigation and risk monitoring steps after the risk identification and risk assessment. Project team under the guidance of project risk manager performs quantitative analysis of Cost and schedule risks. Two values express the risk occurring probability as “High” and “Low” which also cover the range. Cost and schedule impacts are estimated through three points. The three-point estimation shows the “High” (Pessimistic), “Low” (Optimistic) and “Most Likely” values for time and cost. Direct cost is the impact cost that excludes the delay cost. Potential delay in terms of days expresses the schedule delay caused by the risks. Some of the risks do not contain the both schedule and cost impacts. Construction duration of the project gets impact from delivery delay schedule. Probability curve only generates from combining the risk register with the quantification. This probability curve covers the total delay and risks’ costs of the project. Probability Curve Uses Cost Risk Curve The risk cost represents the probability distribution for all risks’ total cost in a risk register of a project. Schedule Risk Analysis The schedule risk analysis is performed by using the simple model of combined delay risks on project completion and critical path. This approach is only advantageous if critical path method (CPM) is not more available. In the case of availability of CPM, the Primavera Risk Analysis tool is entered the delay values risks. Probability curve produces from running the simulation for chosen milestones. However, an expert knowledge can only use this tool. Risk Assessment In construction projects, risk assessment is a serious step for decision making to achieve the project objectives. Main aim of risk assessment is the estimation of the undesired events after they are identified. It involves the quantification of risk factor to risk estimation for project success. A method that utilizes the risk scores for time, quality and cost. It is the simplest approach as compared to previous approaches as it determines the impact of risks on project cost, time and quality and them multiplying these factors to produce a risk score. Severity and probability of each risk models from their impacts. Risk exposures and hazards of all activities generate risk score with the help of software applications. Odimabo and Oduoza (2013) developed a framework for risk assessment in construction projects in the developing countries. Measurement of likelihood of risk occurring events and their impacts is evaluated by the risk events caused from accidents. Quality is another factor that defines risks and their levels in software project development. People quality and process quality combined into total quality of the project. People quality is an important discussion that can be described and measured in details. Staff quality and management quality are further classes of people quality. On the other hands, management quality focuses on the variables like internal management, interaction management, subcontract management, and communication management quality. People quality also concerns the non-administrative staff’s quality that is associated with the project. For the measurement of people quality, researchers use the variables like staff experience, staff training, staff turnover, staff motivation, and experience about programming language (Sarigiannidis and Chatzoglou, 2011). In small construction projects, Hwand et al., (2013) investigated the project quality is impacted by the implementation status, risk management impacts and other barriers in Singapore. It was found that construction companies had their risk management implementation process lower than a good level. Lack of time and budget and low-profit margins are main barriers that need to be addressed to improve the project quality. However, risk management has been perceived as an important factor that improves overall performance in terms of quality, cost, and time for small projects. For a long run, risk management in a small project can bring benefits. Sometimes, construction companies, which produce low-quality projects due to lack of time and cost get financial support from relative government. This support is given in the form of grants or tax rebates. Financial support associated directly with the profit and other costs of risk management implementation. It is an external factor that supports the construction companies to mitigate the risks associated with cost, schedule, and quality of projects. However, organizations can improve the quality by accounting the cost of quality through continuous quality improvement programs. It is achievable not only for customers but also keep it on a lower cost. Generally, cost of quality is the sum of non-conformance and conformance costs, where non-conformance covers the cost of poor quality from service and product failure and conformance cost covers the price paid for the prevention of poor quality. Decision making in project risk management also influences the quality of the project. It is not economical to avoid the quality because it is not abstract, unnecessary characteristics, instrumental and luxurious of the business. Instead, it is a culture, new approach or paradigm, lifestyle for a managerial thinking (Rezian, 2011). Other than mitigate tools and techniques involved in risk management are Avoid, Accept, and Risk Response. In the following section, these types of risk mitigating approaches have been described. Avoid: It entails either change in project management or planning an approach for threats elimination. In a project, if risks have been categorized as overrunning the given schedule, then risk can be avoided by extending the schedule. Risks related with unproven approach or technology may find the approach that has been used before. Transfer: In the transfer approach, responsibility of risk management is transferred to someone else who can manage the risk effectively. Risk transfer involves the payment or premium for person or organization who takes the risk. For government construction projects, contractors work for the government and get a completion bond that ensures the work will be completed in time. Bonding company gets premium from contractor. In case, the contractor fails the bond company will pay for work completion. In this way, default risk transfers from government to bonding organization. In another case, a software house has in-house software developing capability but faces the resources risks (time and cost) associated with the ability or availability to complete the work in time. They can transfer this risk to the contractor for work completion. Operation impacts of risk are not eliminated through work transfer. However, work transfer shifts the financial impacts of a risk or management of work. If hiring organization delivers the late work then, it faces the challenges of late delivery of work. Accept: In the case when scheduled resource is not available, and routine work cannot be completed in availability of other resources. Accept the risk and face the situation when it arises. Developing a contingency plan signifies the accepted approach when a supplier is in the process of negotiation and their contract expires in near. In such situation, risk manager cannot impact the situation and accepts it. Projects utilize the cost and time contingency reserves for accounting the risks and accept the risks. Project management teams know that some of the identified risk can accept occurrence but not all (Snyder, 2013). Risk Response: Risk response strategy has been proposed based on the sensitivity analysis of risk factors. In Practice, risk response in a form of listing the risks and link it in purpose to cope with the estimation of capability of resistance for main risks and develop the strategies of alternative risk response and risk consistent measures. Basic principles of timeless, appropriateness, optimization, consensus agreement and clear responsibility are followed during the strategy formulation. Risk response strategy considerately analyzes of the risk loss, composition and nature of cost needs (Jing et al., 2014). Risk Monitoring Project team ensures that changing and new risks are monitored effectively through the risk response actions. Project risk managers also monitor the new and changing risks continuously. Risk monitoring and control remain effective throughout the lifecycle of a project. New risks, identified risks, and residual risks are tracked under the risk monitoring and control. Effective execution of planned strategies for risk control and monitoring is also ensured. On the maturity of a project, risk list becomes changed because anticipated risks disappear and new risks arise. During the project life cycle, prioritization and risk rating also changes. Status of risks is updated in the risk register through the risk meetings during project execution. Periodically, reviews of project risk repeat in process of risk identification, risk analysis and risk planning. Risk monitoring also checks whether The project risk management team has conducted meetings for risk reviews and updated the risks. Procedures and risk management policies have been followed or not In terms of time and cost, remaining contingency is reserved or not Project risk management team also recommends the following; Contingency plan implementation Risk response strategy alternatively Correct actions Making change in project objectives Project risk management team has review tasks as given in the following: Identify risks, analyze the identified risks, and plan for the response actions to newly added risks and also add them in the risk register Review of risk response actions’ execution and their effective evaluation Re assesses the already existing risks and verify the validity of assumptions and modify them if found necessary Assign the risk owner additional risk response actions Retire those risks, which have deemed their residual impacts on the project or opportunity to impact on the project in terms of cost, quality or schedule has elapsed Risk review team also discusses on any risk for which an effective risk response action has been not carried or impact of that risk is increasing. Risk register should be updated upon any change or addition of new risk (Snyder, 2013). Communication and Accountability Communication with the sponsors and stakeholders project is a crucial factor in the understanding for good risk management in achieving the good outcomes, which are broadly accepted. It helps all stakeholders of a project to understand the trade-offs, which are made in a project to reduce the risk impacts. Communication involves the important component of regular reporting. To avoid the unpleasant surprise, all parties in the project are kept informed about current risks and their management efforts. Project risk manager ensures proper documentation process of risk management and endeavors for a clear audit trail. Most important checkpoints in communication and accountability are communication, accountability, and performance measures. Communication means that current risk register has been properly communicated to team members, stakeholders, and sponsors and also keeping them aware of running status of risks. Accountability means that relevant deputies have signed off on risks that show they have check the review register and agree with the possible extent made by risk management team. Performance measure is to validate the required signatures along with accountability checkpoints dates (Jing et al., 2014). Conclusion In this paper, triple constraints time, cost and quality are described to manage the risks produced from these factors. Risk management has been the focus throughout the paper and strategies to mitigate the impacts of risks. Decision making at an appropriate stage of project execution is the key for reducing the impacts of risks. Consensus approach in decision making is widely used for a number of projects where risk occurrence is greater than other projects. The PMBOK has ranked the risk at fourth position on knowledge area. The PMBOK risk management process involves the risk planning, risk identification, risk analysis, monitoring and control on the project. Risk classification is base for risk identification, assessment and response to risks. Qualitative and quantitative risks analysis has been discussed in terms of cost and time. The CPM is a technique produced from Primavera for quantitative analysis of risks. Risks Response Plan with the risk mitigation strategies of avoiding, accept and transfer provide the ways of either risks elimination or reduction in risk impacts. Effective risk monitoring is also an essential part of the project life cycle as it ensures the control and monitor of risk. Risk register that is a live document throughout the project life cycle is used for keeping the track record of risk meetings, risks identified and risks update. 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