Project Risk Management in the 21st Century

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Abstract

Subject: Project Risk Management

The era of information technology has brought numerous opportunities, yet has also posed a variety of threats of the wellbeing of companies and the success of their projects.

Importance: Facilitating Safety in Global Environment

Seeing that recent IT innovations may affect not only the security of the companys information, but also its financial stability, a detailed study outlining the key approaches towards risk management is required.

Objectives

The paper aims at:

Locating basic project management risks in the 21^st century;
Analyzing the existing strategies for project risk management;
Identifying the key threats to project risk management.

Methods: A combination of a qualitative and a quantitative approach will be used to analyze the relationship between the key variables.

Expected Outcomes: It is expected that the study will shed some light on the current approaches towards project risk management, their strengths and weaknesses, and displays the major problems in risk management and the key threats to the organizations wellbeing.

Introduction

Promoting safety within organizational setting is a crucial task that company managers must complete in order to maintain the financial, legal, social, political and economic safety of the stakeholders involved at decent levels. A range of strategies created for addressing the key threats to the project and its members have been designed over the past few decades.

Known under the umbrella term of project risk management, the specified strategies allow at minimizing the threats involved and increasing the profitability of a certain campaign. Project risk management is traditionally defined as the process of navigating among the key risks and addressing them in a manner as efficient and expeditious as possible (Taylor et al. 19) and preventing the possible issues (Raydugin 20).

Project Risks and the Related Issues

It should be noted that creating and managing a project is fraught with numerous risks. Traditionally, these risks are split into two key categories, i.e., the internal risks, which can be controlled by the organization, and the external one, which are an integral part of a specific markets environment.

Particularly, the former incorporate organizational issues (i.e., leadership problems, concerns related to governance, organizational behavior issues, financial and quality assurance) and the factors related to the security of the project (financial, informational and legal ones, to be more specific).

Particularly, the data security issue deserves to be mentioned first. As it has been stressed above, the era of information technology has opened a gateway to new opportunities for project managers, yet has also unleashed a variety of threats to the project data, such as cyber attacks. The issues related to data management can also be split into two key categories, i.e., the internal and the external ones. The former involve the risk of failing to identify relevant information and put it to use for the benefit of the project.

In other words, data conversion and migration is traditionally referred to as the key risk related to internal information flow management. The external information management risks, in their turn, incorporate the threats of data being stolen from the project managers and used by competitors.

Key Elements of Project Risk Management

Traditionally, the Project Risk Management (PRM) is split into risk identification, assessment and control. However, a closer look at the process of managing risks within an organization will reveal that the process contains five basic stages. Particularly, the processes of strategy and planning, location of the key risks, a combination of a qualitative and a quantitative analysis of the issues identified, response planning and the control of the implementation (also referred to as the monitoring, or supervision, stage) must be mentioned.

Planning. Planning presupposes that a general evaluation of the companys measures towards risks are assessed and tested.

Risks location. The key obstacles that a company may face and the damage that it may take are identified.

Quantitative and qualitative analysis. The risks are evaluated and the assessment outcomes are quantified so that the connection between the key variables could be obvious.

Responsive planning. The specified stage allows for defining the measures for addressing the existing risks, such as choosing a more reliable source for retrieving the companys inventory, reconsidering the costs for the inbound and outbound logistics, etc.

Monitoring and control. Even though the above-mentioned stages help prevent the key risks that may impede the project, the latter still needs to be supervised in order to make sure that no outside factors may possibly jeopardize it. This is the point, at which monitoring factors in as the means of facilitating complete safety. The monitoring process may occur as a series of audits for checking the projects efficacy.

Tools for Project Control: Analysis

Apart from identifying the related risks and fighting them, a project manager must also provide a project control, i.e., incorporate various preventive strategies that will block any possible risks from occurring to a project. Seeing that nowadays the focus of PRM must be on not only the organizational issues, but also on the communicational ones, i.e., the process of data transfer, digital tools have to be incorporated into the overall strategy along with the traditional ones.

Risk breakdown structure

Although the specified tool cannot be considered the ultimate strategy for eliminating risks, the risks classification process carried out with the help of the risks breakdown structure (RBS) delivers stellar results. RBS helps split the existing risks into several categories depending on their severity.

As far as the key benefits of the specified tool are concerned, one must mention the fact that it is used widely in IT areas. As a rule, the RBS strategy presupposes that the risks associated with the project are split into several categories according to the area that they may possibly affect.

A recent study conducted to evaluate the efficacy of RBS in the environment of an IT company has delivered the following outcomes: The results clearly identified the planning process group as the main factor related to risk at the IT company; it was responsible for more than half (153 assignments, representing 51%) of the items assigned (Holzmann and Spiegler 541). In other words, the RBS approach helps identify the risks related to online data transfer and, therefore, prevent possible cyber attacks on the project database.

Risk profile

Creating a risk profile is another method of evaluating the risks faced by an organization and managing them in a timely and efficient manner. Defined as a qualitative analysis of the risks that the key stakeholders may face in the process of project implementation, the specified approach can be considered rather efficient in identifying the possible risks.

However, the specified strategy does not facilitate the process of risk classification, as it does not imply any taxonomy. The above-mentioned feature of the risk profile approach can be viewed as a major drawback.

Probability impact matrix

Allowing for the evaluation of the probability of a certain scenario occurrence, the Probability Impact Matrix (PIM) is a powerful tool that needs to be used along with other models for risk assessment. Using PIM allows for evaluating the severity of specific risks; offering a taxonomy for labeling risks (i.e., micro, small, medium and large (Vanecek and Kubecova 122)), which is crucial for managing project risks.

Indeed, the specified approach offers the project manager enough flexibility in terms of scheduling the processes for addressing the risks in question by ranging them from the least to the most sever ones.

Key Types of Project Risk Management

The risks that the participants of a specific project may face can be approached from several angles. Consequently, three key types of project management are typically identified based on the frequency of checks and the project schedule.

Day-to-day risk management. In case a project requires regular updates and the information flow is very rapid, day-to-day checks are run so that every single member could catch up with the progress made.

Stage gate reviews. In the scenarios that do not require a daily update on the progress, stage gate reviews are used as the key tool for making sure that the project goals are met in a timely and orderly fashion.

Aggregated risk reviews. Aggregated risk reviews are the checks that are run to achieve the projects key objectives (Fishcer et al. 270). Being similar to stage gate reviews, aggregated risk assessments do not allow for an evaluation of each risk spritely and only provide an overview of the current issues in general.

Based on the descriptions provided above, stage gate reviews seem to be the most adequate risk management strategy to adopt for maintaining the safety of a project. The above-mentioned type of project risk management does not put the members under a consistent strain making them check data too often, yet it also helps deal with the risks in a timely fashion and even prevent them, whereas aggregated risk reviews can only be used for managing a specific problem triggered by an increase in risks.

Project Risk Management and Leadership Issues

Leadership and project risk management

It should be noted that the choice of an appropriate project risk management strategy depends on the leadership style adopted in an organization. More importantly, the success of the project risk management process hinges on the leadership approach that the head of an organization adopts. Particularly, the fact that a project risk management leader needs to inspire, coach, reward and punish the project members, delegate roles and responsibilities and led by example (Sunindijo, Hadikusumo and Ogunlana 169).

Key leadership styles and their effect on project risk management

As it has been stressed above, a project leader must have impressive communication and negotiation skills I order to manage the process properly and make sure that it should occur smoothly. Consequently, the concept of emotional intelligence (Sunindijo, Hadikusumo and Ogunlana 166) should be integrated into the leadership strategy.

Particularly, the person managing project management risks and the related issues must be aware of the moods and attitudes within a team, as well as the possible conflicts brewing between the members and the avenues for addressing these conflicts.

Herein the significance of transformative approach as the key leadership style for project risk management lies (Gil and Tether 419). Designed to address conflicts within a team in general, the specified strategy allows for not only understanding both the emotional and the materialistic needs of the staff members better, but also motivate them by providing appropriate incentives and rewards.

Addressing the Communication Aspect

While technology innovations play a crucial part in defining project risks, the information flow is also influenced heavily by the so-called human factor. In other words, interpersonal communication analysis and improvement is just as important for addressing the risks of a certain project as the issue of digital security. Therefore, a stronger emphasis must be put on promoting openness and honesty among the staff members.

There is no secret that the process of data sharing is often taken with a grain of salt by project members. While admitting the possibility of working in a team, many people tend to feel very personal about the effort that they make in order to contribute to the project.

By sharing data, they may feel that their input is passed unnoticed and, therefore, becomes unappreciated. As a result, project members may withhold certain data from the rest of the participants. The specified behavior can be changed by stressing the significance of a collective input and introducing incentives for the whole team.

Technology and Loopholes in Safety

As it has been stressed above, when it comes too defining the security of the project data, the problems regarding the digital data management stand out in q quite obvious manner. Because of the activities of hackers, a range of organizations have to withstand regular cyber attacks on their databases. As a result, the need to update the security of the companys digital data emerges.

In order to improve the process of digital data management for a specific project, the manager will have to consider the concept of CIA, i.e., confidentiality, integrity and availability. To be more exact, the project manager will have to make sure that no unauthorized users are capable of accessing or altering the information, as well as that each of the project members has the right to change the information and add new bits of data to the project database.

Conclusion: Safety Promotion

There is no need to stress that the safety of data in general and the security of the information concerning the project, as well as its participants, is the key concern of project managers in the 21^st century. Because of the emergence of a variety of tools that help break digital security tools and retrieve project data, the necessity to enhance security has become the top priority of project managers worldwide.

The abundance of issues to be addressed in the process of security enhancement can also be viewed as one of the major obstacles for contemporary projects and the greatest issues for project managers to address.

Risks taxonomy and the means of evaluating the threats that a project and its members may face, therefore, becomes the key concern, which can be dealt with by using the tools such as the risk profile, the PIM, and the RBS. It should be noted, though, that each of the strategies has its problems and that none should be used alone; consequently, an incorporation of several approaches for identifying risks is desirable.

Additionally, an elaborate strategy for managing risks has to be created. For these purposes, a combination of the tools such as the introduction of an appropriate leadership style and the design of an appropriate communication strategy that prevents from any major conflicts to occur within the workplace needs to be considered.

Even though eliminating the possibility of misunderstanding and information mismanagement is hardly possible, driving the chances for these misunderstandings to occur to the minimum becomes an opportunity once the project manager adopts the appropriate leadership strategy.

Managing a project is a difficult task that requires adoption of complex measure. However, an elaborate leadership strategy and the reconsideration of data management along with the enhancement of quality assurance will help manage even the most complicated projects. Thus, reducing project risks becomes quite viable for an efficient manager.

Works Cited

Fishcer, Katrin, Katja Leidel, Alexander Riemann and Hans Wilhelm Alfen. An Integrated Risk Management System (IRMs) for PPP Projects. Journal of Financial Management of Property and Construction, 15.3 (2011): 260282.

Gil, Nuno and Bruce Tether. Project Risk Management and Design Flexibility: Analysing a Case and Conditions of Complementarity. Research Policy, 40.3 (2011): 415428.

Holzmann, Vered and Israel Spiegler. Developing Risk Breakdown Structure for Information Technology Organizations. International Journal of Project Management 29.5 (2011): 537546.

Raydugin, Yuri. Project Risk Management: Essential Methods for Project Teams and Decision Makers. New York, NY: John Wiley & Sons, 2013.

Sunindijo, Riza Yosia, Hadikusumo and Ogunlana. Emotional Intelligence and Leadership Styles in Construction Project Management. Journal of Management in Engineering 23.4 (2007): 166170.

Taylor, Hazel, Edward Artman and Jill P. Woelfer. Information Technology Project Risk Management: Bridging the Gap between Research and Practice. Journal of Information Technology 27.1 (2012): 1734.

Vanecek, Drahos and Jana Kubecova. Some Aspects of Operational Risks at Enterprises of Czech Republic. Actual Problems in Economics, 165.1 (2015): 119130.

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