Causes of Risks in Projects, Types of Risks - Coursework Example

ASPECTS OF PROJECT MANAGEMENT Name Date Table of Contents Table of Contents 1 Introduction 2 Causes of risks in a project 2 Types of risks in a Project 3 Scheduling risk 4 Resource risk 4 Technology Risk 5 Scope Risk 6 How to minimize risks using good project management practice 7 Risk management 8 Conclusion 10 References 10 Introduction Every undertaking in business has an element of risk involved in it. No matter the size of the business activity, there is an element of risk which should be analysed then weighed against the rewards that are potentially attainable. To become effective, an organization should identify those risks to take and the risks that should be avoided. A risk, therefore, is the probability of damage, liability, loss or any other negative outcome that is caused by either external or internal weaknesses, and can be avoided through anticipatory actions (BusinessDictionary.com, 2015). This paper thus sets out to critically analyse the causes of risks in projects, the types of risks that occur and the ways in which the risks can be minimized using good project management practices. Causes of risks in a project A risk is an event of the future that may or may not happen. In case, it does occur it will have a bearing on the project quality, budget, scope or schedule. If it occurs, it may result in one or more impacts. All the activities in a project bear with them an element of risk which could affect the project for better or worse (Newton, 2015, p. 9). Risks comprise of both threats and opportunities that project managers need to assess. In a project, risks are caused by several factors. Some include, Costs. Estimation of the costs of materials can be a risk in a project. If the project team planned to purchase a material at a particular cost and time and then it is not realized, it become costly and a challenge to the project because you have to wait for this particular item for longer time (Scheinin, 2004, p. 3). Another source of risk in a project is the material and equipment use. This type of risk usually arises due to the failure of the required components to be delivered on time, failure of the equipment and also due to limited access to the development environment (Dwevedi, 2012). The scope and schedule of the project may also become other risk factors in a project. The schedule of the project becomes a risk factor in the project if you fail to get the required hardware or software as planned. The scope of the project is a risk as it is concerned with the work that is covered and that which is not yet covered. It is a greater risk in case the main important element of the project is missed. This will hugely escalate the cost of the project (Dwevedi, 2012). Quality and customers are other major sources of risks in a project. The deliverables of the project should be able to meet the required quality and the implied customer specifications. Failure to meet these will lead to other devastating effects on the different aspects of the project. Other causes of risk factors in the project include poor communication, poor planning, uncertainty, lack of proper documentation and lack of proper knowledge management (BrainReactions.net, 2007). Types of risks in a Project As the project goes through different life cycles, it encounters different risks. Some of the risks have the potential of causing a devastating effect on the project while others can be used as opportunity ventures so as to escalate the project to a better level. Most of the opportunities bear with them some level of uncertainty that must be harnessed to realize the opportunity inherent. The major duty of the project manager is to ensure that the risks are maintained at minimal standards so that they do not ruin the project. The major risks involved in the project include; scope risk, scheduling risk, resource risk and technology risk. Scheduling risk Scheduling risk involves the failure of the project to proceed as planned or scheduled. The failure usually arises as a result of several reasons in the process of the project. Some of the reasons include natural calamities and other factors, delays to get the deliveries from the external suppliers and vendors, errors in the estimation and approximation and long waiting times in the acquisition of different parts. (Viswanathan, 2012). For example, the project implementers cannot begin their work before the policy makers and analysts give a go-ahead. In case there are delays from the policy makers and analysts, it will eventually lead to failure of the scheduled tasks and responsibilities. This leads to a scheduling risk in the project (Kerzner, 2013, p.32). In the project implementation, all the commercial products should be obtained as per the stipulated times so as to avoid the commercial risks. Also, the product to be launched to the final users should also be done at the right time so as to avoid this commercial risk among the final users (Fleming & Koppelman, 2000, p.40). Projects usually require different approvals and red tapes such as financial approval. The approvals usually slow down the project and thus become a risk in the project due to a failure of different activities to work as per the deadlines (Gore, 1993, p.12). Projects always overlap to different boundaries hence the need to obtain consent from other authorities. It is a risk if an influence is required to obtain infrastructure, inputs or cooperation from different authorities. This will also impact the schedule of the project. To reduce the risks that are associated with scheduling, tools such as Work Breakdown Structure (WBS) and RACI matrix (Responsibilities, Accountabilities, Consulting, and Information) and also Gantt charts can be of much importance to help in scheduling different project activities. Resource risk The resource risk usually arises from personnel and staff related issues, and different logistical functions that involve outsourcing of different activities and services. Usually big projects involve a large number of employees. Managing the different employees’ issues that arise is the key to success in any project. It is important to manage people effectively so as to ensure coherence and continuity among the employees. When there are frequent movements of people in and out of the project activity, there are high likely chances of the disruption in the activity and also disruption in the continuity of the project. To bring in a new employee at a later stage of the project can greatly slow down the project activities (Duncan, 1996, p24). The specific skills that are required for the continuity of the project should be maintained at all costs. Skills such as website development and designer skills in HTML are all inherent skills needed for successful completion of the project. Funds used in the project implementation could also be another risk factor in the project. If a project relies on external funding, lack of adequate funding could prove to be a threat if the external funders face a challenge in their financial systems. A failure of the external funders could lead the project to come to a halt or pause that will lead to a subsequent scheduling risk in the project (Flyvbjerg, 2006, p.38). Another avenue for great risk is the procurement. There is a great possibility that the vendors will not deliver all the required materials according to the terms of the contract. There is also a risk that a proposal acceptable to the project will not be easy to come by (Akintoye & MacLeod, 1997, p.68). Technology Risk The technology risk is a risk that arises out of the defects of both the software and hardware. It may also occur as a result of the failure of the underlying operational service platform (Schwalbe, 2009, p13). The feasibility and flexibility of the design and architecture are key components to the success of the project. Poor quality is a huge risk that needs to be assessed to facilitate the success of the project. There is also a risk in the components of the technology used in case they turn out to be low quality (Mar, 2013). There are other major technology components such stability, scalability, security, usability, availability, extensibility and stability all of which may become risk factors to determine the quality of the project. It is inevitable to identify the specific risks in all the components. The technology used in the project implementation should be in synchronization with the systems, processes, culture and knowledge of the employees and environment (Taylor, 2003, p.23). If there is need to integrate the project into a business process there is a huge risk that the process will be corrupted and disrupted and will bring a huge impact on the business. The technology used in the project has an influence on the quality of decision made. Ambiguous, slow and low-quality decisions are all common risks that are likely to be faced (Boehm, 1989, p.15). When designing the project, the final users should be the main focus. User acceptance is a great risk if the perspectives of the final users are not put into consideration. There is a chance that the final users of the project may reject it. If the users reject the product it becomes a complete failure hence this is a major risk that should be considered (Davis, Bagozzi & Warshaw, 1989, p.53). Scope Risk The scope risk usually arises as a result of other intertwined factors depending on other risks and risk factors. The scope risk usually occurs due to scope creep, change in dependencies, integration issues, and hardware and software defects (Viswanathan, 2012). The scope creep become a risk factor because as the project increases in complexity, the clients keep on adding different requirements while other developers begin gold plating. The quality of estimates in the project, dependencies, and scope management all determine scope risk. If the project budget is solely a guess, it becomes a risk during the actualization of the budget (Turner, 2014, p.43). During the project life cycle, change management is crucial so as not to affect the project implementation. A continuous process in the flow of complex change can increase the complexity of the project and may even jeer it off the course. Constant changes in the project may lead to forming a perception that the project has failed because time and budget keep on being added to the project (Pellegrinelli, 1997, p.26). In the scope of the project, inconsistent, wavering or weak executive commitment usually pose the biggest risk in the project (Forsberg, Mooz & Cotterman, 2005). Stakeholders that do not cooperate or those with the negative attitude towards a particular project may bring in hurdles along the scope of the project. There could also arise conflict among stakeholders and thus altering the scope of the project hence posing as a risk to the project (Achterkamp & Vos, 2008, p.73). The resources and team in the project could pose as a risk to the project. If the expertise required for the operation of the project is lacking among the team members or due to inexperience, it will call for training of the team members. Training will change the scope of the project and the finances to be used in the process. This may pose a great risk to the project (Pinto, 2007, p.34). How to minimize risks using good project management practice To effectively manage risks in a project, the project team will be required to have Risk Management Plan (RMP). The plan outlines how the different project activities will be performed. In the plan, the risks are documented, identified, analysed and prioritized. The plan also establishes how the project will react to symptoms of risk and the triggers, how to track the risks throughout the project lifecycle, who is responsible for managing different kinds of risks and the plans on how to managed or mitigated. The process of obtaining the relevant information to execute the RMP effectively include risk identification, risk analysis, risk response planning and risk monitoring, controlling and reporting (Center for Disease Control, 2006, p. 3). Best practices refer to the sound procedures and ways that can be implemented so as to alleviate and cut-off risks before or at the onset. The best practices for risk management include; Risk management Identify early: this involves identifying the risks as early as possible in the project life cycle. The risks are then documented in the project charter, their hazardous potential communicated early to different stakeholders and sponsors. Continuously identify; do a continuous identification and re-evaluation of the risks involved in the project. Analyse the risks; do an analysis to the potential impact of the identified risks. Repeatedly continue with the analysis of the throughout the project life cycle, make updates and communicate the relevant changes to the stakeholders involved (Raftery, 2003, p.37). Reprioritize; as you continue with the analysis of risks throughout the project life cycle, reprioritize the risks according to the potential project impact it has and adjust effectively according to the changing events of the project. Define and plan; do a definition of the strengths of the risks and thresholds, strategies for mitigation and contingency plans. The information would be more detailed depending on the probability of occurrence and the impact it has on the project goals. Communicate; make communications much regular as possible. Communicate to different stakeholders regarding the status of risk and the overall project risk. Seek feedback from the members of the project concerning the known risk and the status of the unknown risk. Make the risk information available to most of the project members and store the log in a place where the majority of the members can access it (Larson & Gray, 2011, p31). This allows the members of the project team to obtain the information required. Update and educate; update the risk management log regularly both formally and informally. Also educate the all the stakeholders and the project team members, encourage them to be proactive in identifying the risk, communicating and mitigating the risk. In addition to ways to minimize the risks, there are effective ways of risk management. The following diagram outlines an effective way in which project managers can use to effectively manage risks in a project. The guidelines are interrelated and each succeed and precede each other in a continuous diagrammatic manner as illustrated below, Conclusion In conclusion, risks are meant to occur in different undertakings of projects. The risks have the potential to totally change the scope, the schedule, the technology invested in the project and even the project plans and time-frames. Due to the changes, the budget and funds allocated to the project are interfered and altered to meet the changing project needs. All the stakeholders must be involved in the change management in the scope of the project. All the risks must be put to containment in the course of the project. All the risks must be analysed and documented in order to make the project managers abreast with all the information regarding all the risks involved in the project. The best solution is to ensure that the risks don’t make the project to jeer off its scope. The risks should be maintained at the least possible level. References Achterkamp, M. C., & Vos, J. F. (2008). Investigating the use of the stakeholder notion in project management literature, a meta-analysis. International Journal of Project Management, 26(7), 749-757. Akintoye, A. S., & MacLeod, M. J. (1997). Risk analysis and management in construction. International journal of project management, 15(1), 31-38. BrainReactions.net, 2007. 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