Value Management Practice - Essay Example

Project Management-Scenario Assignment Introduction Risks are part of our every day lives as well as part of operations of private and public organizations. Risk in an organizational concept may be defined as a negative and in rare cases positive deviation from the expected outcome due to uncertainty effects on objectives of the company. It is a critical issue in management and must be dealt with effectively and competently otherwise, it might be the of a company’s downfall. Thus every organization must ensure that they incorporate risk assessment into their project management processes for achievement of corporate objectives and to maintain profits and competitiveness. Measure of the extent to which a company’s benefits are achieved is known as value and this should be at optimum cost. As a manager of the battery manufacturing company, Bart Erry Ltd, I would employ risk management and assessment for evaluation of risks in order to take remedial actions in line with achieving these benefits and minimising loss of value to hazards and uncertainties. Risk Profile Risk profile is a defined set of risks that an organization is exposed to and describes when a risk should be considered acceptable as well as how the risk is affecting decisions of the organization and corporate strategy (Woodhead, 2001)1. Risk profiling involves outlining the risks according to priority and can be developed during risk analysis and used for the management of these risks. It enables the company to measure the likelihood of the threats occurring and the extent of disruption that can be caused by each type of risk. Profiling hence involves identification and quantification of risks where identification is simply finding or recognizing a particular risk that could affect the organization in achieving its goals. While in quantification the identified risks are evaluated and a data developed to help in outlining a disaster recovery plan. The battery manufacturing company, Bart Erry Ltd are currently facing a number of risks such as legal suit may be filed against them by the local community because of the chemical effluent which found its way into the river and killed fish. They also face relocation from their current location by the government. They as well face health hazard risk not only to the local community but to the company too because they may also depend on water from the contaminated river for several uses. The company may also face destruction of property by the angry local fishing community whom have been affected because the effluent from the company caused the death of fish that they depend on for livelihood. Furthermore, the company sale are low and the company is at risk of losing its shareholders due to introduction of cheap similar product in the market by another company as the shareholders feel that they will not get any value for their investments (Dallas, 2006)2. It is therefore necessary to outline the risks and arrange them according to the level of importance and take appropriate actions against them in order for the company achieve its value. The most critical risk here that should be given priority is the health hazard risks because chemical effluents finding their way into the river and even causing death of fish that was in the river is a great environmental concern that can cause legal battle with environmentalists. This risk can be classified as high just like the economic risk of sales going down (SAVE, 2007)3. However the risk of destruction of property and relocation is quite low since the company employs a number of locals who fear that they will loose their jobs if they cause commotion and also since the local authority are barred by the law from forcefully relocating the plant. In order to manage these risks and make appropriate decisions on how they can be prevented from causing damage to the company, a quantitative assessment of the risks by determining the probability of occurrence is best achieved by the use of a risk register. A risk register is a form of management tool that is commonly used in organisational and project risk assessment, and allows the organization to determine and understand its risk profile. It includes information about the risk such as the risk type or category, the risk probability, description of the risk, impact, risk owner, counter-measures, status of the risk and so on depending on the type of assessment the organization is doing (Vose, 2002)4. Risk Register for Bart Erry Ltd. Risk Category Description Probability (in %) Impact Counter-measures Environmental Discharge of effluent into the river Pluwer 60-70 Causes death of fish and lose of livelihood for the local fishing community Ensure there are no leaks from the storage tanks. Clean the river so as to get rid of the chemical contamination. Competitive Presence of cheap products from other companies in the market 50-60 Low sales, loss of revenue and company might end up losing a section of customers to the cheap products Produce distinct high quality products which even if expensive people will still buy. This will create an identity of quality for the company. Carry out advertising and strategies to improve sales Legal The community or environmentalists may file legal suit as a result of contaminated river Pluwer 40-50 Environmental pollution causing death of fish and contamination of the river also used for domestic purposes. Bad reputation and negative publicity. Apologize to the affected local community and offer financial compensation to the fishing community. Economic The company faces loss of value as a result of low sales 30-40 This might stall the operations of the company causing downfall Counter check on prices with regards to cost of production and if possible, effect a reduction Competitive Competition from another company selling cheaper products 50-60 Results in low sales and lack of competitive advantage over other companies. Evaluate and assess the assets of the company that can be utilized to gain competitive advantage Political The local authority are thinking of relocating the firm because of environmental concerns 20-30 The company might relocate to a location where there is no infrastructure unlike the current location Convince the local authority that the spill was a mistake that will not be allowed to happen again. Social The company engaging in issues that negatively touches on emotions of the stakeholders like killing the local fishing industry. 20-30 Damages the reputation of the company. Get involved in community development activities that will help the company gain trust and confidence of the public Technological Risk due to faulty equipments and machines 35-45 Cause loss of materials, in this case, leakage of chemical which contaminated the river Acquire new equipments and ensure constant maintenance of the company’s equipments, machines and all the tangible assets owned by the company Preparation of a disaster recovery plan against some possible hazards Disaster recovery plan is a fundamental component that every company should have to help in normal continuation or its business continuity. The Bart Erry Ltd thus has to develop a disaster recovery plan as well so as minimize risks and the degree of damage when a risk occur (Cooper et al, 2005)5. As a manager of the Bart Erry, it is my responsibility to appoint a crisis management team to develop a project with strategies on disaster recovery plan. Steps The first step in disaster recovery plan is identification and assessment of the risks that are likely to occur. In Bart Erry Ltd, two environmental hazard risks are likely to occur which are discharge of effluent into the nearby Pluwer River and discharge of harmful fumes from the industry into the atmosphere which if inhaled by individuals might cause harm. The technological hazards that are likely to occur are accidents caused by machines and loss of material or products caused by unmaintained equipments and machines. environmental hazards are of high probability with a great impact because they affects not only the company but the local community as well while the technological risks are of medium probability but with high impact too (Pickford, 2001)6. Environmental hazards have many impacts including legal suits, demonstrations by the local community, pollution of the environment and eviction while technological risks cause loss of material thus value, pollution of the environment and accidents cause physical injury. The next step in disaster recovery plan is the contingency planning which is basically identifying strategies for recovery or business continuity and finding solution to the identified risks. This will entail training of the team on how to approach and respond to disaster when it occurs and prevention measures (Loosemore et al, 2006)7. The Bart Erry Ltd crisis management team will be trained on first aid and emergency basics so that in case of machine accident, first aid will be given immediately. Some of the prevention measure include urging the employees to read machine manuals before using them and observe all precaution measures. The team will also be responsible for ensuring that all the machines are frequently calibrated and serviced and all equipments are in good shape (Dell’Isola, 1997)8. They have to ensure that environmental policies are observed in the company and no harmful fumes released to the atmosphere, this can be achieved by constructing fume chambers. The team will be also trained on the immediate responses that should be given for the risks to minimize the effects of the disaster. These include first aid response, having chemicals that can be put in the river to neutralize the effect of the chemicals, apologizing to the surrounding community and offering financial support to the affected people and finally having maintenance rectify problems with the machines and equipments. After training the disaster recovery plan or business continuity is implemented and tested. This can be done by carrying out a drill crisis to check if the crisis management team is ready and can effectively manage a disaster. The disaster recovery plan is then maintained and continually reviewed or updated to ensure that it is up to date with the changes in company’s processes and procedures. Value Chain Value chain analysis is the identification of assets, activities (inputs and outputs) and resources that the company has and uses to increase its value and competitive advantage. These activities can be primary or supportive activities where primary are those involved in direct production while supportive are indirectly involved (Woodhead, 2001)9. Michael Porter in his value chain model describes activities in five categories, “inbound logistics, operations, outbound logistics, marketing and sales and services” (Porter, 1985)10. Inbound logistics involves the handling of raw materials from receiving, warehousing to releasing these materials to the required manufacturing processes. Outbound logistics on the other hand is concerned with finished goods which involves storage and distribution. Operations of a company are the processes performed to convert raw materials into finished products. Market and sales entails identification of customers’ requirements, popularization of the product and moving the goods while services are the support given to customers after buying the product (Thiry, 1997)11. For a detailed chain analysis, first the resources or activities of the Bart Erry have to be identified. These include human resource, infrastructure, technology development and procurement. The Bart Erry Ltd has infrastructural advantage because it is located near roads and rail thus easy transportation of raw materials as well as finished products. This can be utilized to gain competitive advantage and improve the performance of the company since they can receive raw materials faster and more efficiently and their goods reach customers much faster and on time (Younker, 2003)12. The company has also been in existence in the location for 20 years and this means that they have gained a lot of loyal customers and good reputation. This can be used to gain confidence of the customers and retain them even if other companies threaten their operations by selling cheaper products. The company must invest in modern technologies and keep on upgrading as the processes and technologies change with time. This can be done by identifying a task force to research and on technologies that can be used to improve performance of the company and produce high quality tiles. For example they the company can adopt high automated process of battery manufacture to produce high quality battery much faster (Kelly & Male, 1994)13. Procurement involves purchase of machines, materials and supplies and if done efficiently, helps the company to achieve its goals and add value. This can be achieved by ensuring that the orders are made on time and contracts given to trustworthy and reliable individuals who will be able to deliver the inputs of required quality at the right time. This will enable production to be carried out efficiently and achieve the targets and objectives of the plant thus achieving high performance. Human resource is a vital part of the company because this is where the skills and the workforce of an organization are. To improve productivity, the employees must work under a favourable environment. The human resource department should ensure that employees are trained and well equipped in their areas of expertise. In addition, they should be given good treatment and care so as to improve their morale in work and thus productivity; these range from benefits, compensations, time off and retreats. The effectiveness of an employee leads to efficient production processes and this result in improved performance of the company enabling it to achieve competitive advantage. Bibliography Cooper, D., Grey, S., Raymond, G. and Walker, P. (2005): Project Risk management Guidelines: Managing Risks in Large and Complex Procurements. Dallas, M.F. (2006). Value & Risk Management, Blackwell Publishing. Dell’Isola, A (1997) Value Engineering: Practical Applications for Design, Construction, Maintenance and Operations, RS Means Company Loosemore, M, Raftery, J. Reilly, C. & Higgon, D. (2006). Risk Management in Projects. Pickford, J. (2001). Mastering Risk. Prentice Hall. Porter, M. E., (1985). Competitive Advantage. New York.: The Free Press. SAVE (2007). SAVE International Value Standard, SAVE international Thiry, M. (1997). Value Management Practice. Project Management Institute. Vose, D. (2002). Risk Analysis. A Quantitative Guide. Wiley. Younker, D.L. (2003) Value Engineering: Analysis and Methodology, Marcel Dekker Kelly, J. & Male , S.(1994) Value Management in Design and construction: The Economic Management of Projects, Taylor & Francis Woodhead, R.M. & Dow, C. G. (2001). Value Management: Improving Capabilities. Thomas Telford Read More