Free Management Essays - Risk is a complex and vital topic which has been discussed for decades and risk management is a dynamic
Introduction and literature review
Risk is a complex and vital topic which has been discussed for decades and risk management is a dynamic and well established discipline forming a core part in organizational strategic management. Therefore, a good understanding of risk is critical for generating an analysis about the ways it can be controlled and in order to find the most effective method of this control. In general risk is seen as uncertainty associated with a future outcome or event (Banks, 2004). Historically, risk management was concentrated on removing or reducing the possibility of failure or unexpected performance (Chapman & Ward, 1997). With this definition of risk we can begin to outline its importance to the life cycles of projects. From this perspective Chapman and Ward (1997) argue that risk management is about creative thinking and capturing opportunities requiring effective information flows and cooperation among staff by reducing their fears over associated with risks.
It is vital to consider the definition of a project which project risks and uncertainty are directly associated with. According to Turner (1992) a project is considered as an endeavour in which human, material and financial resource are organised in a particular way to undertake a unique scope of work of given specification within constraints of cost and time so as to achieve beneficial change through the completion of certain objectives. This definition stresses the need for an organization to draw on a variety of resources in order to achieve organisational objectives. It also allows for the inherent uncertainty within objectives which requires effective risk management tools to minimize the possibility of loss. Additionally, the basic questions in this process are identified as the six Ws, who, why, what, which way, wherewithal and when (Chapman & Ward, 1997). Morris and Hough (1987) additionally stress the importance of setting clear objectives for projects.
Risk management processes are usually motivated by the large scale use of new and untested technologies while executing major projects, (Shtub & Bard, Globerson, 2005). A broad definition of project risk is the implications of the existence of significant uncertainty about the level of project performance. It is argued that the essential role of risk management is about improving project performance via systematic identification, evaluation and management of project-related risks (Artto, 1997). Additionally effective risk management should be present at the design of the project in this sense risk management should be proactive not reactive (Banks, 2004). Reactive risk management will consist of a panic element to some extent whereas in contrast proactive risk management seeks to develop both basic plans and incident plans, (Chapman & Ward, 1997). Therefore it is arguably essential that risk management should be prepared for as early as possible. For example where there are several project related interested parties it is advisable to identify and plan for manageable risks during design and planning through attempting to define what is to be done, how, when, by whom and what is the cost. Furthermore tight costs or time limits are believed to be a major contribution in increasing the risks thus further highlighting the importance of planning (Kliem & Ludin, 1997).
Risks can be any factor affecting the performance of projects and risks arise when the effects are both significant and main on the project outcome. So Kliem & Ludin, (1997) hold that due to the nature of project risks effective management should be planned in the earliest stage of a project when uncertainty is the greatest. This is because inappropriately defined or unclear objectives in the project are themselves a risk. However it is impossible to prepare against all risks in every project so the ideal way is to institute the right management structure at the right time so that the risks of failure are minimal and chance for success is higher (Hartman, 1997). He argues that in order to achieve project goals efficiently and effectively risk management must be in place to identify and institute the most appropriate project management process.
During the 1980s project risk management became a well defined area in project management literature. In the discussion of risk management at that time quantitative risk analysis was emphasized (Artto, 1997). Quantitative risk analysis today focuses on the usage of software and team work support, (Maupetit, Palo, Kuvaja, Belli & Isokaanta, 1997). In addition the focus in risk management currently is to develop processes that enable effective team working and the use of organizational experience and training when planning risk management and risk responses (Reitan & Hauge, 1997). This project seeks to explore then the life cycle of a project through reference to team experience in order to identify problems and develop solutions to these problems.
Research questions:
1. To assess the effectiveness of early implementation and design of risk management processes within the organisational context.
The earlier a RMP structure is in the better. However, implementing RMP earlier in the project life cycle in general can be more difficult (Andersen, Grude & Haug, 1999).As a project is still at the planning level the objectives that organization wants to achieve are less well defined. A less well-defined project means appropriate documentation is harder to come by and alternative interpretations of what is involved may not be resolvable. However implementing RMP earlier in the project life cycle is in general much more useful if it is done effectively (Banks, 2004). There are fundamental improvements in the project plan process, risks can be calculated in the initial project stage and the interested parties are able to assess their ability to deal with risks. The general characteristics of RMP being implemented earlier in the project life cycle is that it will be less quantitative, less formal, less tactical, more strategic, more creative, and more concerned with the identification and capture of opportunities.
In contrast, implementing RMP late in a project lie cycle gives rise to somewhat different difficulties, without any compensating benefits. In this context, early warnings are preferable to late recognition that targets are incompatible or unachievable. If the ownership is not clear the client’s risk can be an opportunity for the contractor. In addition, the trend towards partnering and other forms of contracting which facilitate cooperative working is another trend with difficulties.
2. Exploring innovative features of organisational project risk management of benefit to future project management cycles within the organisation.
According to the Project Management Institute’s definition risk management is related to four processes: risk identification, risk estimation, risk response development and risk control. In general, risk management literature defines risk management in a similar manner, therefore formal risk management processes should be applied at all stages in the project life cycle (Doherty, 2000). The risk management process and how it should be organized in a project or in a project organization will also be a focal point for project design and implementation in the future. A conclusion can be drawn that the emphasis of the risk management development of in the future should consider the different organisational contexts and the nature of projects. Westney (1992) argues that small projects in a big company may maintain potentially key influences on the main projects which generate risks. As a result the most effective way of risk management might be one which considers the proportionate aspects of a project of the projects as well as the nature in the product life cycle in order to respond the risks effectively.
Methodology
This project intends to make use of both qualitative and quantitative tools of investigation. This ensures that research questions are subject to triangulation, or investigation from a number of points to enhance our claims to veracity. The research aims to be of practical use to the organisation and reflecting the research questions aims to utilise an action research model as well as highlight the problematic aspects of risk management which have a critical bearing on the performance of the department in attaining project outcomes. By adopting an action research platform allied with a case study approach which incorporates the participants into the research process it is hoped that an effective and workable solution to these problems can be devised, (Costello, 2003, Yin, 2003).
The methodology of this project can then be divided into three stages matching with the stages for the planned project under investigation within the organisation. This longitudinal element allows for a holistic investigation into the process of project management within the organisation with the aim being for weaknesses and strengths to be identified across the entire life cycle of the project.
1. Design
Here it is envisaged that a combination of observational methods conducted during planning meetings and interviews with project managers will give an insight into the organisational response to the implementation of a risk management plan.
Critical also to this stage will be reviewing and collating the documentary ‘trail’ involved in the design process of the project, (Prior, 2003). Matching expectations at the beginning of the project with actual outcomes at the end will serve to provide revealing data into the efficacy of proactive against reactive RMP.
The types of questions to be addressed by interviews would seek to assess the ability to identify risks within the teams, processes through which risk management is delegated and the way in which plans are drawn up to deal with identified risks. Also investigated here would be the process of defining project objectives within the department.
2. Implementation
During this phase it its foreseen that both interviews and observations will again be used. These will serve to generate data about the conduct of the project as well as process of response to any risks which emerge during the life cycle of the project.
Observation of team meetings will seek to assess how risks previously identified are being managed and also how new risks emerging during the project life cycle are handled. Do the existing systems respond well or are new measures quickly developed to deal with these. How has the team kept to the project plan and how are changes to the plan handled?
In interviews it is expected that questions would seek to draw out the experiences of those involved in implementing the project and risk management processes. What are the communication channels involved, how do they operate and what are the problematic aspects of these communication channels.
3. Appraisal
A questionnaire will be given at the completion of the project in order to gain a ‘lessons learned’ picture from those participants about the RMP involved in the project. In depth interviews with a selection of respondents will aim to further investigate their opinions. Data here and feedback from participants will then be used in order to construct a model of RMP of utility to those who may be involved in future project within the organisational context. Dissemination of the results of this stage to the participants will it is then hoped generate additional feedback related to those elements of the RMP which were strong or weak and lead to the proposing of changes or retentions for RMPs within future projects, (Bryman and Bell, 2003).
The primary limitation of this methodology relates to time, considering the time scale for the completion of the research it is necessary that a project with a specific life cycle which allows for an appraisal period after its completion be used for the purposes of the research.
Additionally it can be argued that major problems with participant bias can exist in this type of research. It will therefore be necessary to gain the trust of the participants in the researcher and the research process both to nullify any fears they might have over the content of the project and reduce any performance measurement bias associated with research of this type. In this aspect then an inclusive and participative environment within which the research can be conducted is vital, (Cooper and Schindler, 2003).
Conclusion
To conclude it is hoped that this research will highlight the processes involved in the design and implementation of risk management controls. However critically it is also envisaged that an insight into the experience of those involved in these processes can be used through a cyclical means of refining the models used and thus allow for novel and innovative methods of risk management to be explored and devised, (Gill and Johnson, 2002).
It is further hoped that the model involved in this research and the lessons learned in particular would be of further use in a broader context in investigating problematic aspects of project management within other organisations.
References
Aetto, K. (1997) Fifteen years of project risk management applications: Where are we going? in Kahkonen, K. & Artto, K. (eds) Managing Risks in Projects, St Edmundsbury Press Ltd, Suffolk. UK
Andersen, E., Grude, K, & Haug, T. (1999) Goal Directed Project Management, Kogan Page Limited, UK.
Banks, E. (2004) Alternative Risk Transfer: Integrated Risk Management Through Insurance, Reinsurance, and the Capital Markets, John Wiley & Sons Ltd, UK.
Bryman, A. and Bell, E. (2003) Business Research Methods, Oxford University Press, Oxford UK
Chapman, C. & Ward, S. (1997) Project Risk Management: Process, Techniques and Insights, John Wiley & Sons Ltd, UK.
Cooper, D. R. and Schindler, P. S. (2003) Business Research Methods, McGraw Hill, Boston USA
Costello, P. J. M. (2003) Action Research, Continuum, London UK
Doherty, N. (2000) Integrated Risk Management, McGraw-Hill, New York. USA
Gill, J. and Johnson P. (2002) Research Methods for Managers, Sage, London UK
Hartman, F. (1997) Proactive Risk Management-Myth or Reality?, in Kahkonen, K. & Artto, K. (eds) Managing Risks in Projects, St Edmundsbury Press Ltd, Suffolk. UK
Kliem, R. & Ludin, I. (1997) Reducing Project Risk, Gower Publishing Limited, UK.
Morris, P. & Hough, G. (1987) The Anatomy of Major Projects, John Wiley & Sons Ltd, UK.
Prior, L. (2003) Using Documents in Social Research, Sage, London UK
Shtub, A. & Bard, J. & Globerson,S (2005) Project Management: Process, Methodologies and Economics, Pearson Prentice Hall, USA.
Turner, J. (1992) The Handbook of Project Based Management: Improving Processes for Achieving Your Strategic Objectives, McGraw-Hill, New York. USA
Yin, R. K. (2003) Case Study Research: Design and Methods, Sage, Thousand Oaks USA
