Project Risk Management

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Abstract

The ability to effectively prepare, prevent and manage key risks forms one of the most important concepts in project management. Understanding risks facilitates the ability of a management team to determine which risks are related and have greater implications to the whole project’s objectivity.

To effectively identify a project’s risks, it would be important to first ascertain possible uncertainties that may arise from the project choice such as influence, decision making and environmental impacts. Identifying risks in a housing project may be ranked on two major benchmarks. First, it would be the assessment of whether the risk will actually occur and second, the holistic impact that it would accrue to the whole project.

Project lifecycle is a term used with reference to the whole project execution. It describes a project from its beginning to completion. To begin with, the initiation phase determines a project’s feasibility and formally authorizes its kick off. Besides, it provides the necessary project description for the participants so as to enhance the flow of events during the project.

Planning provides the required definition for all the activities and also derives the necessary schedules that are to be followed during the project. To effectively manage all risks in a project, all parties and staff involved should be subjected to training on different risks, their mitigation and the need for addressing them as key problems.

In addition, monitoring is very critical as the project progresses to facilitate evaluation of whether the set targets are being met by the project implementers. Moreover, instantaneous analysis of possible considerations for improvement should be executed. As an extension of the monitoring process, further instantaneous assessment is critical in assessing possible emergent risks during the project. Finally, a risk management department or unit would help in coordinating the assessment of different risks in a project.

Introduction

The ability to effectively prepare, prevent and manage key risks forms one of the most important concepts in project management. To effectively manage risk, it is important to first identify possible uncertainties that may arise from the project choice (Toegel & Barsoux 2012, p. 58).

Understanding risks further facilitates the ability to critically understand the interconnected nature of the whole project as well as other uncertainties. This paper seeks to explore how risk may be managed effectively and who should be responsible for this task It uses housing project as an example to analyze the role of project managers in taking full control of their designs and decisions in order to reduce the levels of risk involved.

Identifying risks

Project management is the major determinant of organization’s ability to realize its objectives in different undertakings. Leavy (2010, p. 11) cites that understanding the risks involved provides necessary objectives for a project and generates the most effective models of achieving them.

To effectively identify a project’s risks, it would be important to first ascertain possible uncertainties that may arise from the project choice such as influence, decision making and environmental impacts. In identifying risks, Lucio and Giuliano (2010, p. 173) point out that it is imperative to analyze short and long-term objectives of a project.

In a housing project, a project manager should analyze the objectives of a project before examining possible implications on the resources to be involved for its completion. This is an effective project management approach aimed at curbing cost –related and economic effects risks.

Westerberg and Wincent (2008, p. 51) underscore the importance of identifying risks involved in a project. They highlight the role of project managers in the critical examination of budgetary provision. This is critical in establishing uncertainties on the funding of a project. Notably, this step should also incorporate professionalism and expected efficiencies.

Characterizing threats

Risk characterization facilitates the ability of a project management leadership to determine which risks are related and have greater implications to the whole project’s objectivity. Management theorists point out that it further facilitates the ability to critically understand the interconnected nature of the whole project as well as other risks (Shayne 2011, p. 85). As a result, their categorization would be based on the types of risks before subdividing them to further analysis through ranking.

Identifying risks in a housing project would be ranked on two major benchmarks. Dale (2012) points out that first; it would be the assessment of whether the risk will actually take place. Thereafter, the holistic impact that it would accrue to the whole project is examined.

As a result, ranking would include three levels. First level rank would be the high considerations with extreme risks such as timely finishing and involved costs. Then, the medium rank would include risks with slightly reduced implications such as the market conditions. The low rank would finally involve risks of much less concerns but still with a potential shifting to medium rank if not carefully addressed.

Findings from studies on projects and environmental impacts have pointed towards establishing a system where environmental impact risks are reduced (Sun & Wu 2011, p. 340). In a housing project, in order to facilitate effective realization of the project’s objectives, its risk matrix should address land environmental impact risks.

This should be considered due to the fact that the largest part of the housing would actually be located on land and therefore directly impacting on ecosystem. Addressing possible implications of the project to the environment would be critical in facilitating biodiversity conservation.

Project life cycle

Project lifecycle is a term used with reference to the whole project execution (Putkiranta 2012, p. 343). As a result, it describes a project from its beginning to completion. To begin with, the initiation phase determines the project feasibility and formally authorizes its kick off. Besides, it provides the necessary project description for the participants to enhance flow of events during the project. This phase usually begins earlier than the project kick off.

Then, planning provides the needed definition for all the activities and also derives the necessary schedules that are to be followed during the project. Of greater importance, as Sebestyén and Tóth (2014) point out is that it provides a management plan to be used during the project implementation phase.

The third phase, executing phase, is considered to be one of the most essential stages as it is an outcome of the previous two phases. It involves immediate execution of a project details according to a management plan. Notably, this phase provides the necessary basement for assessing the efficacy of the previous phase one and two.

According to project management scholars (Dale, 2012; Palmer, Dunford& Akin 2009, p. 234), the monitoring and controlling phase is used to monitor the application of all the project activities as well as the predetermined processes. Of greater importance in this stage is the ability to make necessary changes and implement them to enhance achievement of the objectives in a project.

Manzerolle and Smeltzer (2011, p. 330) indicate that this phase is very essential as it facilitates for alignment of the project with new development that can be used to promote achievements of the pre-established objectives. Finally, the closing phase provides the procedure for summing up the project through finalising and concluding the evaluation.

In most of the cases, Liker and Hoseus (2007, p. 232) argue that many projects’ last phase takes place as a major continuation to phase four. The ability to complete the lifecycle of a project effectively acts as a key item in pre-estimating the actual efficacy that will be achieved throughout the whole project.

Project decision making

Effective identification of key decisions in a project acts as a critical planning process in aiding robustness and reducing risks towards achieving a given objective. Piirainen and Lindqvist (2010) draw from the model of utility in decision making to indicate that identifying key decisions would follows a sequence where core activities are conducted before others. Agreeably, identifying key decision paths would be based on stages where activities would first be identified and analyzed as a factor of progression.

This is reflected in Suh et al. (2010, p. 215) perspective on risk management that key decision paths are critical in limiting risks. Such decisions would include mechanisms to address all the uncertainties such as market conditions, designing process and the owners’ organization. Options in this case would involve considerations facilitating timely finishing, increasing the management commitment and effecting the design for completion.

Cohen (2002, p. 53) uses contingency theory to advocates for careful planning in project management to limit loss. The theory calls for analytical outset in making key decisions for guiding a project. In view of the theory, project managers should be able to respond to internal and external forces through effective leadership practices.

This view concurs with the argument posed by Johnson (2002, p. 8) that though many project managers have their own pre-establishes standards in management; they should avoid rigidity by seeking a leadership that is flexible and accommodates new objectives and dynamic standards. This consideration is further echoed by Hopkins (2009, p. 28) who indicates that contingent change factors are especially very crucial in leadership practices.

The book“Crafting strategy that measures up” illustrates how active decisions can be reached by project managers. It points towards use of a decision tree. In it, Ahenkora and Peasah (2011, p. 278) point out that it is one of the best methods of providing cohesive structures that facilitate easier examination of options while facilitating the making of critical choices.

In risk management, the decision tree analysis would be effected in the whole project by considering all the possible alternatives and drawing out lines from the risks. Then, description of each solution and costing would be done to gauge its efficacy compared to others. Numbers involved in the tree analysis would include cost of the option, its probability, and expected efficiency.

Project tools for risk management

As indicated in the lifecycle description, different stages have varying tools that anchor their specific applications. Starting phase demands tools that that have the ability to factor the later processes application and therefore provide the correct platform for their precise fitting into the process. Project charter templates assist the managers to generate the project’s objectives, visions, and generating the possible deliverables at the end of the project (Putkiranta 2012, p. 343).

Business case template tool provides the manager with the correct platform for further evaluating the project to be undertaken, identify the alternatives that can be assimilated, their benefits and associated costs, and identifies the possible risks to be expected during the project.

In addition, the creative-pro office provides the manager with an effective alignment platform for factoring in time, duties to be completed, the team members, and provides a flexible system for enhancing adjustments. In this respect, a manager is able to prepare for a reconnaissance to assess the preparedness of the team to effect the project.

Organizing and planning phases are very critical stages in risk management as they dictate the ability of a project to be effectively implemented in the next phase. Martin, Oliver and Jacquelyn (2010, p.193) indicate that a project plan is used to identify the tasks for the phase, sum up all the efforts required for the phase, and establishing the necessary inter-dependencies. Resources and financial plan tools are employed to determine the required labour, responsibilities, and finances to effect the whole project.

Besides, a resource planning tool is also used to identifyequipment needs to facilitate the different applications during the project. Hertz (2012, p. 6) argues that the tools used during planning and organizing phase should be employed in a mastery mode to enhance later adjustments where needed for further objectivity.

Moreover, a communication plan as a tool is essential in effecting the necessary interlinks between the staff participating in the project, their immediate leaders, and their head offices to enhance cohesion (Winer 2009, p. 108).

As indicated earlier, the execution phase forms the main part of the project and indeed demands more care as it entails direct involvement with the clients and customers. It also forms the basis for assessment and monitoring of a project. Project time management tool is used to enhance a systematic flow of events as established in the management plan (Scott & Krempley 2012, p.18).

Besides, the cost management ensures that the role of all the expenses is maintained within the budget to control the overheads. Change management as a tool is very critical in this phase as it dictates the ability of the project to be adjusted to reflect the immediate requirements of the clients (Putkiranta 2012, p. 343).

Attiany (2014) argues that a project closure forms a major facet as it dictates the efficacy of its application. Whereas many project managers appear to be reluctant by putting less emphasis on the last phase of a project, researchers point out that it is only through effective completion of all the stages that an organization can maintain the necessary budgets, allocate the correct time and predict the demands for the next project with precision.

Procedure closure report assists a project manager to identify the correct criteria for ending the project and plans the necessary handover of periodic reports for documentation (Putkiranta 2012, p. 343). This acts as a major point for linking the project’s outcome with the achieved results.

Besides, it closes the contracts with the suppliers and established agreements to pave way for further assessment. Finally, the post implementation review is used to measure the benefits assimilated from the project in comparison with set goals. Of greater essence this tool assist to generate lessons learnt to enhance future improvements.

Risk management plan

The article “Scenario planning: navigating through today’s uncertain world” by Axson (2011, p. 10) indicates that a project management plan should contain adequate and effective information that can facilitate reduction of risks and anchor achievement of its main objective. To begin with, risk identification information would facilitate easier categorization and ranking.

Besides, quantification of this information would help in further understanding of the impacts extent, severity, probability and response categories. The risk response on the other hand would contain information on possibilities of avoiding the risk, mitigating it or possible means of minimization to make the whole objective realizable. Finally the risk management plan should have an effective control strategy where monitoring and constant reviews are strictly adhered to at all stages of the project execution.

To effectively manage all risks for a project, the following tools and techniques should be employed effectively employed. To begin with, all parties and staff involved should be subjected to training on the different risks, their mitigation and the need for addressing them as key problems.

Training would be very critical in that it would facilitate clearer understanding of risks to all the involved stakeholders. In addition, monitoring would be very critical as the project progresses to facilitate evaluation of whether set targets are being met by the project implementers (Mahaney & Lederer 2011, p. 107).

In addition to that, instantaneous analysis of possible considerations for improvement should also be effected. As an extension of monitoring process, further instantaneous assessment would be critical in assessing possible emergent risks during the project. Finally, a risk management department or unit would help in coordinating the assessment of different risks in the project.

Risk monitoring and control process a housing project would be expected to provide an effective plan on mechanisms of addressing different risks. This according to Janicijevic (2010, p. 103) will be very critical as it would serve as the main guideline for the whole project.

Besides, it will create a platform for key assessments and possible reduction strategies for risks identified for the project. Besides, the process will be expected to meet the set standards of risks reduction and therefore making the key objective of meeting the opening deadline and possible.

Besides, the process will further be expected to operate within the established budgetary allocation in minimizing or addressing all the risks in the project. Finally, this process will be expected to effectively monitor, update, and inform all the stakeholders on the progress during execution.

Managing risks, planning and communication

To effectively meet objectives of a project, Johnson (2002, p. 8) indicates that a risk management plan must be developed. This should include a clear description of the project. Besides, it should include an effective risk identification strategy that covers all areas of project implementation.

Project management analysts argue that an effective project management risk plan should constitute a holistic analysis that would establish its occurrence probability (Scott & Krempley 2012, p. 19). In addition to that, mitigation or a reduction strategy should be incorporated with a final outline for monitoring and control. This according to Gomes and Yasin (2011, p.550) would help mitigate the risks by early identification, effective technological application, and follow-up to facilitate articulation of the established strategies.

Key stakeholders’ contribution to risk management decisions making is very critical to facilitate holistic acceptance of the management alternative decisions assimilated (Cohen 2002, p. 54; Valentine, 2012, p. 47). Therefore, contributions of the stakeholders in management decision making where the risks and their implications would be revealed for deliberations decisions to be reached at is important.

This method as (Waters 2007, p. 1123) points out is considered to be significant in that various contributions would be agreed upon through effective analysis of alternatives aimed at achieving the objective of the project. In addition to that, the media would also be used to relay key results to the public as stakeholders and opinions collected on their viewpoints.

Risk schedule analysis

Risk based schedule according to Hopkins (2009, p. 29) seeks to facilitate effective achievement of already established objectives in risk management. Factors related to time provided for by the project would be a very critical factor in establishing a realistic time frame. By considering the available time, Shayne (2010, p. 94) adds that risk management would be seen as a factor of the project as opposed to an external entity.

Besides, the schedule should also factor the consideration of the available resources for the project. At this point, Markle (2011, p. 290) observer that cost-effectiveness of all the established risk reduction and prevention consideration should be intrinsically considered.

In addition to that, the risk prevention executing personnel and their qualifications should also be considered because they would be the key implementing officers in the project. Finally, existing legislations related to the project for a host country should also be factored to reduce any possible conflict with the established mechanisms to mitigate their effects (Bielski 2005, p. 54).

Given the key description and risks identified in housing project, sensitivity analysis would consider the following key factors. To begin with, the destined time for completion and the opening of the project for use according to the pre-established objectives. This would be very sensitive in that completion within the established time would mean no extra budgetary costs while creating the expected economic opportunities (Scott & Krempley 2012, p.18).

In addition to that, the technology to be employed during the project would further be very crucial establishing the possible time to be taken and all the mechanisms for reducing the risks. Furthermore, the weather during the period of project execution would further be every important in developing the core strategies for onsite operations on.

Notably, with the project region of execution being subject to varied weather conditions, this consideration would facilitate the best selection of machines and equipment that suit the weather. In addition to that, the environment would be a key sensitivity factor to avoid obstructing animals’, human or vehicle movements during and after construction.

Conclusions

The ability to effectively prepare, prevent and manage key risks forms one of the most important concepts in promoting higher levels of productivity. Risks management must be articulated with great care and precision if pre-established objectives are to be achieved. A project manager’s role therefore includes developing a risk management plan. This must be articulated from a holistic point of view with effective involvement and communication with stakeholders at all levels.

This creates the needed cooperation and support.. At all stages, monitoring and evaluation must be executed to facilitate improvement of risk mitigation and identifying possible new ones. In the risk management plan, an executing teams’ mandate should be to ensure that all the involved people are trained on risks mitigation and identification.

This will in turn ensure effective identification of possible risks for the project. In addition, execution of the project will be effected instantaneously while analyzing the effects from the previous risks. This has been emphasized as a strategy to create a threshold for improvements.

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